Pacific Life Insurance Company has agreed to buy a life retrocession business with $106 billion in individual life reinsurance face amounts from Manulife Financial Corp.
Reinsurance is a form of insurance for insurers; a retrocession agreement is a kind of insurance arrangement for a reinsurer.
Pacific Life, Newport Beach, Calif., says its proposed deal with Manulife, Toronto (TSX:MFC), would give Pacific Life a 41% share of the North American individual life retrocession market.
Pacific Life hopes to complete the deal by Sept. 30.
The price of the deal was not disclosed, but Pacific Life says “virtually all employees” from Manulife’s life retrocession business unit have been offered jobs at Pacific Life.”
Pacific Life plans to keep the Manulife retrocession offices in Toronto and Boston, Pacific Life says.
David Howell, the London-based chief executive officer of Pacific Life Re, would oversee the newly acquired retrocession operations, Pacific Life says.
Pacific Life Re provides reinsurance for insurers in the United Kingdom, Ireland and Asia, and Pacific Life has been a retrocessionaire since 2002.
Acquiring the Manulife retrocession business will help Pacific Life diversify its risk profile and business platforms, Pacific Life Chairman James Morris says in a statement.
Colin Devine and Priya Mehrotra, securities analysts at Citigroup Global Markets Inc., New York, says the announcement is “not transformational” for Manulife “but encouraging.”
The North American life retrocession unit is not core to Manulife’s earnings or operating strategy and adds volatility, the analysts say.
The analysts are predicting the transaction will lead to an after-tax gain of about $265 million in U.S. currency for Manulife.