OREANDA-NEWS. American Financial Group, Inc. (NYSE: AFG) announced today the completion of the sale of United Teacher Associates Insurance Company and Continental General Insurance Company, the legal entities containing substantially all of its run-off long-term care insurance business, to HC2 Holdings, Inc. (“HC2”) (NYSE MKT: HCHC) for approximately $15 million of proceeds. In addition, AFG may also receive up to $13 million of additional proceeds from HC2 in the future based on the release of certain statutory reserves of the legal entities sold by AFG. In connection with obtaining regulatory approval for the transaction, AFG agreed to provide up to an aggregate of $35 million of capital support for the insurance companies, on an as-needed basis to maintain specified surplus levels, subject to immediate reimbursement by HC2; this agreement expires five years after closing. In exchange for this agreement, AFG received warrants to purchase two million shares of HC2 common stock.

In the first quarter of 2015, AFG recorded an after-tax non-core loss of $105 million in connection with this transaction; an additional after-tax non-core loss of up to $10 million may be recorded after closing, reflecting updated valuations of expected proceeds to be received and net assets disposed.

Due to a significant tax benefit from the sale, AFG expects to receive total after-tax proceeds of $110 to $115 million from the transaction (including the tax benefit but before any potential future proceeds).

With the completion of this sale, AFG has divested substantially all of its long-term care business (96% as measured by net statutory reserves as of November 30, 2015), and will retain only a small block of 1,700 polices totaling approximately $33 million of reserves.

Philip Falcone, HC2’s Chairman, President and Chief Executive Officer said: “We are thrilled to close this transaction with American Financial Group and to begin building our insurance platform. We believe this acquisition provides a strong base on which to grow our insurance vertical and also offers further diversification for HC2.”

Craig Lindner, AFG’s Co-Chief Executive Officer stated: “The disposition of substantially all of our long-term care business allows us to provide continued focus on our annuity business, where we are a leading provider of fixed and fixed-indexed annuities in the financial institutions and retail markets. Furthermore, completion of the sale is expected to create between $110 and $115 million of excess capital for AFG by mid-2016 (due to the timing of tax benefits to be received), in addition to the $700 million of excess capital reported at September 30, 2015. We are confident that the sale will enable us to redeploy capital, increase earnings and returns, and create long-term value for our shareholders.”