The UK’s biggest insurer by market capitalisation, Prudential is in a deal with Swiss Re to purchase part of the latter’s US life assurance business for £398m in cash.
The deal would be carried out through Prudential’s subsidiary, Jackson National Life Insurance and is likely to contribute £100m to Jackson’s earnings in the first year of ownership.
In a statement, Jackson chief executive Mike Wells said that the deal "helps diversify Jackson’s earnings by increasing the amount of income we generate from underwriting activities."
As part of the terms of the deal, Prudential will acquire £6.7bn of assets and nearly 1.5m policies, while $621m in cash will be paid to Swiss Re and a $300m pre-closing dividend.
The Swiss reinsurer’s chief executive Michel Liès said the sale would strengthen the group’s return on equity, earnings per share and economic net worth growth, however, would also lead to a $860m loss in its second quarter.
The deal is likely to complete in the third quarter of 2012.
Recently, Prudential reported a first-quarter net loss for its financial services business at $988m or $2.09 per share, compared to net income of $539m or $1.10 per share during the same period in 2011.