XL Insurance (Bermuda) has signed a definitive agreement to divest its wholly-owned subsidiary, XL Life Reinsurance (XLLR), to GreyCastle Holdings, in a cash deal valued at $570m.
Following completion of the transaction, XLLR will reinsure the majority of XL’s life reinsurance business using 100% quota share reinsurance.
XL, which announced the run-off of its life reinsurance business during 2009, said this transaction covers a substantial portion of XL’s life reinsurance reserves.
XL CEO Mike McGavick said while complex, as driven by the nature of its life reinsurance businesses and the company’s objective of maximizing value for XL shareholders, the real benefit of this transaction is clear and simple.
He further added that the company has now dealt with the vast majority of its life reinsurance business, and has thereby taken another strong step forward in its drive to deliver top-quintile return on equity and book value growth from its core property and casualty operations.
Post-transaction, XL will retain nearly $438m of reserves related to disability, accident and health policies and US term assurance in its Life operations segment and will record reinsurance recoverable from XLLR of $4.4bn.
XL had total US GAAP policy benefit reserves relating to its life operations of approximately $4.8bn, at 31 March 2014.
XL executive vice president and CFO Peter Porrino commented: "This transaction meaningfully reduces the risk profile of the Company, which gives us additional flexibility to pursue capital management initiatives, including an expectation of buying back an additional $300 million of shares in 2014 over amounts previously contemplated."
Following the receipt of regulatory approvals as well as satisfying customary closing conditions, the transaction is expected to conclude during the second quarter of 2014.
Citigroup and JP Morgan Securities were appointed to act as the financial advisors and Clifford Chance and Skadden, Arps, Slate, Meagher & Flom served as legal counsel for XL in this transaction.
Image: XL Group agrees to divest life reinsurance subsidiary for $570m in cash. Photo courtesy of: adamr/freedigitalphotos.net.