TIAA Asked StanCorp To Bid

The sale "is a difficult but important move for TIAA," says Bertram Scott, TIAA's executive vice president. "We believe we are doing what is best for both the company and our customers."

StanCorp gets most of its own revenue from group life insurance and group long-term disability insurance, while TIAA-CREF is best known as a retirement plan for teachers and college professors.

Standard & Poor's, New York, put out a commentary suggesting the TIAA group insurance deal should be good for both companies, because group life and disability products are so much more important to StanCorp than they have been to TIAA.

"Standard is much better positioned to manage the business more profitably, based on scale of operations and management skill," S&P says. "Standard acquired a similar size block of individual disability business from Minnesota Life Insurance Company with favorable experience to date."

The main risks will be the challenge of integrating the TIAA operations and the possibility that other, future acquisitions could cause problems, S&P says.

StanCorp currently holds no debt and has a very strong level of risk-based capital, but it will take on debt equal to 17% of total capital to finance the TIAA deal, S&P reports.

StanCorp is making the acquisition through a reinsurance transaction, but it's using reinsurance mainly to keep Standard from having to re-write all the TIAA policies, Tozer says.