Great-West Lifeco announced Jan. 24 that its Colorado-based subsidiary, Great-West Life & Annuity Insurance Company (GWL&A), will sell, via reinsurance, “substantially all of its individual life insurance and annuity business” to Protective Life Insurance Company.
GWL underlines that “the business being sold is conducted in the United States and the transaction does not affect the life insurance businesses conducted in Canada or elsewhere by Great-West Lifeco.”
After-tax transaction value of approximately C$1.6 billion
Lifeco estimates that the transaction will result in an after-tax transaction value of approximately C$1.6 billion. “The value includes a significant positive ceding commission to our U.S. entities and a capital release of approximately US$400 million (C$530 million),” says the company.
The business being sold, marketed under the Great-West Financial brand, includes bank-owned and corporate-owned life insurance, single premium life insurance, individual annuities, and closed block life insurance and annuities. This business contributed approximately C$120 million to Lifeco’s net earnings for the first three quarters of 2018.
Focusing on U.S. retirement and asset management markets
"This transaction allows us to focus on the retirement and asset management markets in the U.S.," said Paul Mahon, President and Chief Executive Officer, Great-West Lifeco. "We continually evaluate capital deployment opportunities at Great-West Lifeco. 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 of the sale."
GWL&A will retain a small block of participating life insurance policies which will be administered by Protective following the close of the transaction. GWL&A's retirement and investment management divisions, Empower Retirement and Great-West Investments, are not affected by this transaction.
The transaction is expected to close in the first half of 2019, subject to regulatory and customary closing conditions. Great-West Lifeco expects to recognize at closing an IFRS book value loss related to this transaction of approximately US$70 million (C$93 million) and transaction costs of US$57 million (C$76 million).