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August 30, 2011updated 13 Apr 2017 8:48am

Pacific Life thinks big in life retrocession market

In a deal that will make it North Americas biggest provider of life retrocession insurance, US insurer Pacific Life Corporations Pacific Life Re unit is to acquire Canadian insurer Manulife Financials life retrocession business unit, Manulife Life Retrocession, for an unspecified amount.

By LII editorial

In a deal that will make it North America’s biggest provider of life retrocession insurance, US insurer Pacific Life Corporation’s Pacific Life Re unit is to acquire Canadian insurer Manulife Financial’s life retrocession business unit, Manulife Life Retrocession, for an unspecified amount.

The acquisition of Manulife Life Retrocession will bring with it a portfolio of about $106bn of individual life reinsurance by face value. This will give Pacific Life Re a market share of about 41% in North America after the deal.

Pacific Life Re, noted Pacific Life chairman, president and CEO James T Morris, has operated since 2002 and is focused on providing life reinsurance solutions and support to insurance clients in the UK, Ireland and Asia. Manulife Life Retrocession has offices in Toronto, Boston, Barbados and Cologne.

Explaining the rationale behind Manulife’s decision to sell Manulife Life Retrocession, the Canadian insurer’s CEO Donald Guloien said: “The life retrocession business does not align with Manulife’s strategy because of changes in the life reinsurance market. Although this business is profitable, it does not have a growth profile acceptable to us.”

Guloien continued that because of the more restrictive regulatory requirements for life retrocession business that have been introduced in Canada, an insurer in another jurisdiction will be able to operate the business with less capital.

“The transaction releases capital which will be reinvested in higher growth businesses or to reduce leverage [debt to equity level],” Guloien said.

Manulife anticipates that the transaction will result in an after-tax gain of about C$275m ($287m).

Pacific Life reported total revenue of $5.6bn in 2010, up 7.7% from $5.2bn in 2009, while net income increased by 26.2% to $530m. Total assets at the end of 2010 stood at $116bn.

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