Hannover R?ckversicherung A.G. has agreed to acquire a block of U.S. individual life reinsurance business from affiliates of Scottish Re Group Ltd. through a reinsurance and asset purchase deal.
Hannover Re, Hannover, Germany, says it also will be getting the assets that back the ING business, Scottish Re policy administration systems, and other assets supporting the U.S. mortality reinsurance business.
“Hannover Re will also employ part of Scottish Re’s staff, thus ensuring operational continuity and a transfer of know-how, Hannover Re says.
Scottish Re, Hamilton, Bermuda, originally acquired the ING business from a unit of ING Groep N.V., Amsterdam, through a reinsurance transaction that took effect Dec. 31, 2004.
The business should generate about $1.2 billion in premium revenue this year, according to Hannover Re.
Hannover Re and Scottish Re are hoping to complete the deal by March 31.
Hannover Re Chief Executive Wilhelm Zeller is calling the deal a “transformational step” for the company’s life reinsurance ambitions.
“It contributes a large block of business in force, together with industry-leading capabilities in mortality research, pricing, underwriting and reinsurance administration which will substantially increase our presence and earnings from the U.S. mortality risk market,” Zeller says in a statement.
The deal could make Hannover Re one of the five leading players in the U.S. life reinsurance market, according to analysts at Standard & Poor’s Ratings Services, New York.
Hannover Re could “achieve a 10% to 15% share of the mortality risk market over the medium term compared with its current market share of about 1%,” the S&P analysts write.
The acquired business will have “a modest positive impact on Hannover Re’s earnings over the medium term but new business may emerge, thereby further enhancing Hannover Re’s earnings power in the life segment,” the analysts write.
Scottish Re, Hamilton, Bermuda, says it had originally planned to sell its entire North American business but “following the historic disruption in the financial markets in late September, it was unable to consummate such a transaction.”
To “find ways to address its acute capital, liquidity and collateral needs and to allay concerns of its regulators, Scottish Re pursued the sale of a specific block of individual life reinsurance in its North America segment,” the company says.
Hannover Re has “very strong liquidity and capital adequacy,” and the Scottish Re deal is not expected to lead to material credit risk, S&P analysts write.