Manulife Acquires New York Life’s Retirement Plan Services Business
December 24, 2014 by Rick Cornejo, managing editor, BestWeek: rick.cornejo@ambest.com
TORONTO – John Hancock Financial, the U.S. division of Canada’s Manulife Financial Corp., is acquiring the retirement plan services business of New York Life Insurance Co.
Manulife said the move will boost John Hancock’s expansion in the mid-case and large-case retirement plan markets, and increase plan assets under administration by 60% to $135 billion.
Manulife said the deal will accelerate its growth strategy wealth and asset management businesses around the world and complements recent investments in similar businesses in Canada and Asia. It also adds scale and new capabilities to its retirement plan services business in the United States, it said in a statement. Terms of the deal were not disclosed. The transaction is expected to close in the first half of 2015.
“Manulife is a major player in the pensions business in Canada, the United States, Hong Kong and Indonesia. This transaction, similar to our recently announced acquisition of Standard Life’s Canadian operations, will significantly increase our retirement plans business overall,” Donald Guloien, Manulife president and chief executive officer, said in a statement. “When completed, these transactions will each accelerate our strategy to grow our wealth and asset management businesses around the world.”In September, U.K.-based financial services group Standard Life plc said it will sell its Canadian business to Manufacturers Life Insurance Co. for C$4 billion (US$3.67 billion) (Best’s News Service, Sept. 4, 2014). The sale involved Standard Life Financial Inc., which provides long-term savings and retirement, individual and group insurance business in Canada; and investment manager Standard Life Investments Inc.
In the New York Life deal, John Hancock will gain 55,000 retirement plans and 2.5 million plan participants. The combined business will create a top-15 provider of retirement plan services in the mid-case plan market, the company said, and solidify its leading position in the small-case market, as measured by assets under administration.
Under the agreement, New York Life has also agreed to assume, by way of reinsurance, 60% of John Hancock’s in-force participating life insurance closed block, which was written prior to John Hancock’s demutualization in 2000, according to a company statement. John Hancock President Craig Bromley said in a statement “exchanging a portion of John Hancock’s in-force closed block life insurance policies for New York Life’s RPS business redirects capital to a higher growth, less capital-intensive, higher return business.”
The block of 1.3 million policies was closed in connection with John Hancock’s demutualization in 2000, and includes more than $11 billion in liabilities, according to a statement from New York Life. Through a reinsurance arrangement, New York Life will assume $7 billion of those liabilities. The policies have a face amount of more than $25 billion.
The reinsurance agreement with John Hancock is part of New York Life’s strategy to grow its core book of individual life insurance business, New York Life said.
John Hancock will continue to service the policies and there will be no change in contract terms or policyholder benefits as a result of the reinsurance.
Manulife’s third-quarter profit rose 6.7%, but profit was hurt by a charge of C$69 million (US$60.9 million) on increasing reserves after an annual review of actuarial assumptions (Best’s News Service, Nov. 13, 2014). There were unfavorable changes to its lapse assumptions and updates to criteria for fixed-income funds used in valuing the guarantees of its segregated funds, Manulife said in a statement. Net income attributed to shareholders increased to C$1.1 billion. Results benefited from C$370 million in investments.
John Hancock Life & Health Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior). New York Life currently has a rating of A++ (Superior).
