Pacific Life said the portfolio of approximately $106 billion of individual life reinsurance face amount will make it the leading individual life retrocessionaire in North America, with an approximate 41% share of the market. "The businesses of reinsurance and retrocession are not new to Pacific Life," said James T. Morris, Pacific Life's chairman, president and CEO. "Pacific Life Re, a subsidiary of Pacific Life, is focused on providing life reinsurance solutions and support to insurance clients in the U.K., Ireland, and Asia. Additionally, Pacific Life's Life Insurance Division has been in the life retrocession business since 2002."
The transaction, when completed, is expected to increase the Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of Manulife's key operating subsidiary, The Manufacturers Life Insurance Company, by approximately six percentage points. This MCCSR ratio was 243 percent as of March 31, 2011.
Manulife's Life Retrocession business has approximately 90 employees in offices in Toronto, Boston, Barbados and Cologne. The unit assumes risk from life reinsurers and has net life insurance in-force of $106 billion.
"The Life Retrocession business does not align with Manulife's strategy because of changes in the life reinsurance market going forward," said Donald Guloien, CEO. "Although this business is profitable, it does not have a growth profile acceptable to us. Also, as a result of more restrictive Canadian regulatory requirements for this business, a buyer in another jurisdiction can operate this business with less capital. The transaction releases capital which will be reinvested in higher growth businesses or to reduce leverage.”
This transaction does not impact Manulife's other Reinsurance business units, which focus on Property and Casualty Retrocession and International Employee Benefits Management. "Our remaining Reinsurance businesses provide good earnings profiles and are not impacted by the Life Retrocession sale,” Guloien said. “We remain committed to these businesses."
The transaction is subject to standard closing conditions including receipt of regulatory approvals and is expected to close during the third quarter 2011.
