Annuity and Life (Holdings) Ltd. has announced plans to transfer most responsibility for its remaining life and annuity reinsurance treaties over to units of Wilton Re Holdings Ltd.[@@]
Annuity & Life Re, Hamilton, Bermuda, has been struggling for years to overcome problems with many of its major reinsurance arrangements by unwinding its business.
The new deal calls for subsidiaries of Wilton Re, Hamilton, Bermuda, to assume responsibility for the treaties through novation arrangements or 100% coinsurance arrangements, according to Annuity & Life Re.
Once the deal closes, Annuity & Life Re subsidiaries will pay Wilton Re’s subsidiary a settlement of about $92 million, Annuity & Life Re says.
The settlement amount will consist of $33 million in Annuity & Life Re cash along with assets held by cedents in connection with certain reinsurance treaties, Annuity & Life Re says.
Consummation of the deal is subject to approval by shareholders and Annuity & Life Re’s retrocessionaires. So far, holders of about 27% of Annuity & Life Re’s common stock already have indicated that they will vote in favor of the transaction, the company says.
The company notes that it continues to look for other “strategic alternatives to attempt to maximize its economic value.” Options could include a merger, sale, joint venture or other comparable transaction, the company says. But, under some conditions, Annuity & Life Re might have to pay Wilton Re a $500,000 break-up fee if it decides to go with another suitor.
Annuity & Life Re notes that it will continue to exist as a corporation if it succeeds at completing the Wilton Re deal and that the remaining corporation will continue to have a book value of about $1.70 to $1.84 per common share.
Annuity & Life Re would continue to be responsible for some obligations, such as obligations transferred to other reinsurers. If the other reinsurers are unable or unwilling to pay valid claims, Annuity & Life Re would have to pay the claims, the company says.
Annuity & Life Re “also has continuing obligations under employment agreements with certain of its employees, including obligations to make severance payments under certain circumstances,” the company says.