Protective Life Acquires MONY Life and Reinsures Closed Life Book for $1.06 Billion
October 3, 2013 by Fran Lysiak
BIRMINGHAM, Ala. – Protective Life Insurance Co. has completed its acquisition of MONY Life Insurance Co. and has reinsured certain policies of MONY Life Insurance Company of America for a total price of $1.06 billion.
In April, Protective Life, a unit of Protective Life Corp. (NYSE: PL) announced it would buy MONY Life Insurance, a subsidiary of France’s Axa S.A., and would reinsure an in-force, closed book of life policies written by MONY Life Insurance Company of America. The book’s policies were written by MONY Life Insurance Company of America, a subsidiary of MONY Life, primarily before 2004, according to Axa.
The purchase price for MONY was $686 million, Protective Life said in a statement. The ceding commission for the reinsurance of the MONY Life Insurance Company of America business business was $370 million.
In the United States, Axa’s major life insurance company unit is New York-based Axa Financial. Axa Financial acquired MONY Group Inc. and its subsidiaries for about $1.5 billion in 2004. After the acquisition, most new business was written from other Axa Financial subsidiaries and MONY/MONY Life Insurance Company of America were effectively placed in run-off, except some new business at MONY Life Insurance Company of America, which is excluded from this transaction, Axa previously said (Best’s News Service, April 11, 2013).
Axa is getting rid of a run-off mortality book primarily underwritten before 2004, with $10.5 billion in statutory liabilities as of year-end 2012. The book includes 560,000 whole life, term life, variable universal life and universal life policies, and 61,000 annuity contracts. MONY Life Insurance Company of America will continue to write new business and keep part of the transaction proceeds (Best’s News Service, April 11, 2013).
The block of policies we have acquired in the transaction “should produce immediate accretion to both our return on equity and earnings per share and provide a solid stream of earnings for many years to come,” said John D. Johns, chairman, president and chief executive officer of Protective Life Corp., in a statement
Protective Life plans to service the acquired business through the workforce and administrative platform in Syracuse, N.Y. that Axa previously used to service the business.
After closing, Axa previously said it expects a capital loss of less than 100 million euros ($130 million), which will be accounted for in net income. The transaction allows Axa to free up capital invested in closed portfolios “to improve our financial flexibility,” Henri de Castries, chairman and chief executive officer of France’s Axa, previously said in a statement (Best’s News Service, April 11, 2013).
Protective Life Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior).
On the morning of Oct. 3, Protective Life Corp.’s stock was trading at $43.38 a share, down 0.25% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
