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Dai-Ichi’s Protective to buy Genworth term life insurance blocks

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(Bloomberg) — Protective Life Corp. is already making good on a pledge to help its new owner, Japan’s Dai-Ichi Life Insurance Co., grow in the U.S.

On Wednesday, the Birmingham, Alabama-based insurer said it agreed to buy blocks of term-lifepolicies from Genworth Financial Inc. for about $661 million through a reinsurance transaction.

The deal is expected to be completed in the first quarter. Dai-Ichi bought Protective earlier this year for $5.5 billion as it looked overseas for growth. Japanese insurers have struggled to expand as a shrinking population at home erodes demand in the domestic market.

“The blocks we are acquiring from Genworth are exactly what we typically look for in an acquisition opportunity,” Protective Chief Executive Officer John D. Johns said in the statement. “We are seeing good acquisition opportunities in the market, and we are confident that our proven, industry-leading acquisition capabilities provide a solid platform for continued strong growth.”

Genworth, which has declined about 46 percent this year, had initially wanted to sell an entire life-insurance business. CEO Tom McInerney said in August that the Richmond, Virginia- based company would abandon that approach because it could hurt credit ratings, earnings and diversification.

Life Insurance

Genworth said in a separate statement Wednesday that it will continue to service the blocks of policies, which represent about $108.7 billion of term life insurance in force backed by approximately $2.3 billion of statutory reserves as of June 30. While the Protective Life deal will bolster Genworth’s capital, the company said it expects to post a third-quarter loss on the sale of $275 million to $325 million.

McInerney’s struggles to strengthen the life unit intensified in late 2014 when the parent company’s credit grade was cut to junk by Standard & Poor’s because of the losses on long-term care insurance. That pushed potential customers to higher-rated rivals, and helped convince McInerney to scale back.

“We are not a leader,” in the industry, McInerney said in an April conference call with analysts. “There are 850 life companies that compete for life and annuity business. So it clearly puts pressure on all of us in the marketplace in terms of returns. And then we have a particular issue in that, relative to some of the other top life-annuity players, our ratings are lower.”

Mortgage Business

McInerney is focusing on mortgage insurance, which helps guard lenders against losses when borrowers default. He is also seeking to turn around the long-term care insurer, which covers policyholders’ costs for home-health aides and nursing home stays and was overwhelmed by higher-than-expected costs. The CEO has sought to improve that unit by winning permission from state regulators to charge more for coverage.

Genworth has sold other assets in recent years, including a wealth-management business, a tax- and accounting-adviser unit and stakes in its Australian and Canadian mortgage insurers. Goldman Sachs Group Inc. advised Genworth on the Protective Life deal.

–With assistance from Katherine Chiglinsky in New York and Doni Bloomfield in Boston.