As part of the transaction, Venerable will also acquire Corporate Solutions Life Re from the financial services firm
Venerable has agreed to reinsure nearly $12bn of legacy variable annuity business from New York-based financial services firm Equitable.
Additionally, Venerable will acquire Corporate Solutions Life Reinsurance (Corporate Solutions Life Re), which is Equitable’s runoff variable annuity reinsurance entity, for nearly $300m and around $100m in tax benefits.
The reinsurance transaction will provide nearly $1.2bn of value for Equitable on a statutory basis. This includes an expected capital release of $800m and a positive ceding commission.
Equitable said that the deal speeds up its strategic measures to de-risk its balance sheet and move towards less capital-intensive businesses.
Equitable president and CEO Mark Pearson said: “This reinsurance agreement not only strengthens our balance sheet but also reinforces the benefits of Equitable’s economic risk management.
“This transaction accelerates the unlocking of economic value and allows us to return capital to shareholders. We remain committed to delivering long-term value and continuing our long-established program of prudent risk management.”
Venerable more than doubles assets through the deal
Through the deal, Venerable will be more than double its general account assets from $11bn to $24bn with reinsured business growing to more than $46bn in separate account value.
The US-based company owns and manages legacy variable annuity business that are acquired from other entities.
Venerable chairman David Marcinek said: “This transaction represents a significant milestone for Venerable as we further establish ourselves as the partner of choice for insurers in the variable annuity space.
“Our conservative investment approach, strong capitalization, focus on operating efficiency and deep expertise in managing risk has positioned us for this transaction while successfully handling increased volatility and challenging market conditions.”
The legacy variable annuity policies, that are part of the deal, were sold by Equitable between 2006 and 2008.
As per the terms of the transaction, AllianceBernstein will be retained by Venerable as the preferred investment manager for the associated general account assets.
On the other hand, the preferred asset manager for Venerable’s existing book of business will be Voya Investment Management.
The deal, which is subject to the necessary regulatory approvals and meeting of other customary closing conditions, is likely to be completed in the second quarter of next year.
Equitable revealed that it is also in talks to buy a stake of 9.9% in Venerable’s parent holding company, VA Capital, which will be subject to reaching an agreement on the investment terms.