Great-West Sells U.S. Insurance Unit in $1.2 Billion Deal

(Bloomberg) -- Great-West Lifeco Inc. agreed to sell its U.S. individual life insurance and annuity business to Dai-ichi Life Holdings Inc.’s Protective Life Corp. in a deal valued at C$1.6 billion ($1.2 billion).

The transaction value includes a capital release of about $400 million, the Winnipeg, Manitoba-based insurer said Thursday in a statement. Great-West expects a book-value loss of $70 million, and $57 million of transaction costs. The business transferred includes bank-owned and corporate-owned life insurance, single premium life insurance, individual annuities and closed block life insurance and annuities.

“This transaction allows us to focus on the retirement and asset-management markets in the U.S.,” Great-West Lifeco Chief Executive Officer Paul Mahon said in the statement. “With the strengthened capital position resulting from this transaction, we will also consider other capital-management activities, including potential share repurchases, to mitigate the earnings impact from the sale.”

The insurer said that its Colorado-based Great-West Life & Annuity Insurance Co. will keep a small block of participating life insurance policies that will be administered by Protective Life after the deal’s completion, expected by mid-year.

“The transaction is positive to the extent that it involves the exit of non-core (low return, low growth) operations that will yield C$1.6 billion of deployable cash,” National Bank Financial analyst Gabriel Dechaine wrote in a note. “On the other hand, the transaction reduces GWO’s earnings by 5 percent” and “results in a small book-value hit.”

Shares of Great-West fell 4.8 percent to C$27.90, their biggest decline since May 2017.

Bloomberg News reported in November that Great-West was looking to sell its Individual Markets business in the U.S. Insurers have been steadily selling blocks of annuities or striking reinsurance deals to unload such policies, which individuals buy to guarantee a steady stream of income after retiring. Insurers want to offload policies with generous payments written before the financial crisis.

Great-West’s Canadian rival Manulife Financial Corp. announced reinsurance transactions in November tied to some of its U.S. annuities to free up C$1 billion of capital from the legacy businesses. Private equity firms and insurers such as Athene Holding Ltd. and Resolution Re, which specialize in managing complex, long-term liabilities, have been willing buyers.

Protective Life, acquired by Japan’s Dai-ichi Life in 2015, has a history of striking deals for businesses and blocks of policies. The company bought a term-life business from Genworth Financial Inc. in 2016 and struck a deal with Axa SA in 2013.

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