RGA Agrees to Retrocede Part of Individual US Life Business to Pacific Life
December 30, 2014 by Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com
ST. LOUIS – Reinsurance Group of America will retrocede part of its individual life business in the United States to retrocession operations of the Pacific Life Insurance Co.
Term and permanent individual life policies written by U.S. insurers and assumed by RGA primarily between 1999 and 2014 comprise the block of business to be retroceded. RGA will retrocede about $200 billion of in-force individual life reinsured amount at risk. The transaction has an effective date of Oct. 1, 2014.
RGA estimates the transaction will release about $200 million in capital; cut premiums in the U.S. traditional segment by $450 million; and will be accretive with redeployment of capital.
RGA President and Chief Executive Officer Greig Woodring said the retrocession agreement demonstrates the company’s commitment to manage capital efficiently and effectively. “As part of our broader capital management plans, we expect that the capital freed up from this transaction can be redeployed to achieve a higher return over time,” he said in a statement. “We continue to see good organic growth opportunities and have selectively used excess capital for in-force blocks, including two recently announced transactions in the U.S. life and annuity sector.”
RGA made other transactions in 2014. In October, RGA agreed to buy Aurora National Life Assurance Co., purchasing $200 million of Swiss Re’s stock in Aurora to do so. Aurora, a wholly owned life insurance subsidiary of Swiss Re and part of Swiss Re’s Admin Re business in the United States, had about 82,000 policies in force and $2.7 billion in policyholder liabilities at the time of the deal (Best’s News Service, Oct. 21, 2014).
Earlier this year, two Voya Financial Inc. subsidiaries agreed to transfer via reinsurance an in-force block of 170,000 level term life insurance policies covering $100 billion of in-force life insurance to the RGA Reinsurance Co. RGA would deploy between $100 million and $120 million to support the new block of business, which could add $10 million to annual after-tax operating income in 2015 (Best’s News Service, Aug. 15, 2014).
RGA is among the world’s largest global life reinsurance companies, providing clients with reinsurance in individual life, individual living benefits, group, health, financial solutions, facultative underwriting and product development.
On the afternoon of Dec. 30, RGA shares (NYSE: RGA) were trading at $89.10, up 1.01% from the previous close.
Companies of the Reinsurance Group of America Reinsurance Co. have current Best’s Financial Strength Ratings of A+ (Superior). Pacific Life Insurance Co. has a current Best’s Financial Strength Rating of A+ (Superior).
