Manulife Financial Selling Life Retrocession Business to Pacific Life
July 20, 2011 by Fran Matso Lysiak
| Copyright: | (c) 2011 A.M. Best Company, Inc. |
| Source: | A.M. Best Company, Inc. |
| Wordcount: | 370 |
Manulife Financial Corp. plans to sell its life retrocession business to the U.S.-based Pacific Life Insurance Co. due to more “restrictive” Canadian regulatory requirements, according to Manulife’s chief executive officer.
The sale, which will result in an after-tax gain of about C$275 million (US$288.2 million) for Manulife, needs regulatory approvals and is expected to close during the third quarter. Its life retrocession business assumes risk from life reinsurers, and has net life insurance in-force of US$106 billion.
CEO Donald Guloien cited more restrictive Canadian regulatory requirements for the business that means a buyer in another jurisdiction could operate this business with less capital. Manulife declined to comment beyond the statement.
“The life retrocession business does not align with Manulife’s strategy because of changes in the life reinsurance market going forward,” said Guloien in a statement. “Although this business is profitable, it does not have a growth profile acceptable to us.”
Tennyson Oyler, a spokesman for the California-based Pacific Life, said in an email the deal allows Pacific Life to gain access to a large block of mortality-based business “without adding significant risk concentration, and one of Pacific Life’s greatest strengths is the understanding of mortality risk.”
The Toronto-based Manulife (TSX/NYSE/PSE: MFC) also operates in the United States through its Boston-based John Hancock Financial Services subsidiary, and in Asia.
A.M. Best Co. in December downgraded the issuer credit ratings to aa- from aa and affirmed the financial strength rating of A+ (Superior) of Manufacturers Life Insurance Co., John Hancock Life Insurance Co. (USA) and JHUSA’s subsidiaries, John Hancock Life Insurance Company of New York and John Hancock Life & Health Insurance Co (BestWire, Dec. 2, 2010).
When completed, Manulife said the life retrocession transaction is expected to increase the minimum continuing capital and surplus requirement ratio of Manufacturers Life Insurance Co., its main operating subsidiary, by about 6 percentage points.
Last month, A.M. Best Co. revised the outlook to stable from negative and affirmed the financial strength rating of A+ (Superior) and issuer credit ratings of aa- of Pacific Life Insurance Co., and its wholly owned subsidiary, Pacific Life & Annuity Co., together referred to as Pacific Life (BestWire, June 28, 2011).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
