Equitable Holdings today said it has agreed to reinsure 75% of its in-force individual life insurance policies with Reinsurance Group of America.
The deal would include a mix of policies backed by $32 billion in reserves. Equitable would continue to administer the policyholder relationships and provide customer support.
For Equitable, completing the deal would free about $2 billion in capital. The company plans to invest $1.8 billion of the proceeds in its own asset management affiliate, AllianceBernstein.
Equitable would continue to write "select" term life insurance and variable universal life insurance products for its Equitable Advisors arm, and its advisors would continue to help clients buy life insurance from Equitable and outside insurers, Mark Pearson, the company's chief executive officer, said during a conference call the company held to discuss the deal with securities analysts.
Equitable and RGA hope to close on the deal by the middle of the year.
What it means: The U.S. individual life market is a tough market. Clients who want to use life insurance to protect their families against mortality risk or fund estate plans may end up having fewer options.
The players: Equitable Holdings is a New York-based company that owns several life insurance companies and controls a 62% stake in AllianceBernstein, an asset manager that ended 2024 with $792 billion in assets under management.
Equitable companies have been writing individual life insurance in the United States since 1859, and Equitable has maintained archives featuring documents and copies of documents related to life insurance policies it sold to historic figures such as Thomas Edison and Theodore Roosevelt.
RGA is a Chesterfield, Missouri-based company that sells what amounts to insurance for insurance companies.
Insurers can use reinsurers to protect business they like or to dispose of much of the day-to-day responsibility for blocks of policies that are no longer of interest. Insurers retain the ultimate responsibility for making sure claims are paid even if they make deals with reinsurers.
The block: About 57% of the $32 billion in reserves backing the policies RGA would reinsure are in Equitable's general account, and about 43% of the reserves are in the policyholders' separate accounts.
Roughly 55% of the reserves are tied to variable universal life insurance policies. About 17% of the reserves are tied to whole life and term life policies, 12% to universal life policies with secondary guarantees, 9% to traditional universal life and 7% to indexed universal life.
The deal: The completion of the reinsurance transaction is subject to approval by the New York Department of Financial Services, the Arizona Department of Insurance and Financial Institutions and the Missouri Department of Commerce & Insurance, as well as the Bermuda Monetary Authority.
If regulators impose a "burdensome condition," as defined in the transaction agreement, or getting approvals takes too long, Equitable or RGA could walk away from the deal.
Equitable wants to use part of the deal proceeds to buy some of the 38% of AllianceBernstein now owned by other parties and part to buy back shares of its own stock.
AllianceBernstein is a publicly traded limited partnership, rather than a stock company, and ownership interests in the company are called "units," rather than shares of stock.
Equitable is offering to buy 46 million AllianceBernstein holding units for $38.50 per unit.
The thinking: Equitable has been writing individual life insurance since 1859, but today, the U.S. individual life market "is dominated by mutual insurers who have a lower cost of capital and lower target return thresholds," Pearson said.
The individual life products Equitable sells are capital-intensive, have high distribution costs and expose the company to volatility related to mortality and policyholder behavior, Pearson said.
Equitable is also a relatively small player in the individual life market, and RGA is in a better position to manage the block of policies and handle the volatility, Pearson said.
The benefits business: Equitable has put its individual life business in the same business unit that sells employee benefits products.
One analyst asked Equitable executives about the benefits business.
"No further comments on employee benefits at this stage," Pearson said. "It's not involved in this transaction."
Credit: New York Stock Exchange
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