Merger to Create 7th-Largest Insurance Firm

CNA Financial Corp. agreed to buy Continental Corp. for $1.1 billion, a deal that would create the nation’s seventh-largest insurance group, the companies announced Tuesday.

Continental stockholders would receive $20 a share in cash--a 43% premium over Tuesday’s $14 closing price on the New York Stock Exchange.

CNA Financial is 84%-owned by Loews Corp., a key company of the Tisch family of New York, which also holds a substantial stake in television network CBS. Laurence Tisch serves as chairman of both Loews and CBS.

“We see opportunities to apply both companies’ experience in improving efficiencies, and this should reduce costs,” said Dennis Chookaszian, chairman of CNA Insurance Cos.

“In addition, the insurance expertise of CNA and Continental can be further leveraged though the agents and brokers of both organizations,” he said.

CNA Insurance Cos., the operating unit of CNA Financial Corp., is the 12th-largest insurance organization in the United States and the sixth-largest property-casualty insurer.

It had revenue of $11 billion last year and assets of $41.9 billion.

Continental Corp., based in New York, is the 11th-largest property-casualty company and had revenue of $5 billion last year and assets of $16 billion.

The companies said both their boards have approved the transaction. Shareholder approval is also required. The acquisition may be funded with long-term debt or may include a combination of long-term debt and equity.

In conjunction with the deal, CNA would invest another $275 million. The money would replace funds that Insurance Partners had committed under a previous agreement with Continental.

CNA Financial stock closed at $63, off 37.5 cents on the New York Stock Exchange.