Scottish Re Group Limited, a global life reinsurance specialist, announced that it has agreed to acquire the individual life reinsurance business of ING Re. The transaction is expected to close by the end of the year.
“Scottish Re and ING Re have complementary, broadly diversified books of traditional life reinsurance business with minimal overlap,” said the bulletin. “This transformational transaction will allow Scottish Re to further increase its new business production while also giving Scottish Re the opportunity to further enhance its operational infrastructure and achieve economies of scale.
“This acquisition expands Scottish Re’s North American platform, making it the 3rd largest life reinsurer by volume of U.S. life reinsurance in-force. Following the acquisition, Scottish Re will have approximately $1 trillion of face amount of life reinsurance in-force, $8.8 billion in assets, $2.1 billion in revenues, and a capital base of approximately $1.3 billion.
“Scottish Re and ING have agreed that ING will transfer the assets and reinsure the liabilities of all of its U.S. individual life reinsurance business to Scottish Re through a co-insurance transaction. Pursuant to the reinsurance agreement, ING will transfer to Scottish Re assets equal to reserves of approximately $800 million and pay Scottish Re a ceding commission of $560 million. These assets will be held in trusts to secure the reserve obligations of the business.
“Additionally, ING will transfer certain operating assets associated with the business. Scottish Re will assume the obligations of the business, including client service, administration and claims payments. All future business after the closing of the transaction will be written by Scottish Re, on terms and conditions consistent with Scottish Re’s existing business.
“The business being transferred consists of traditional mortality business, which in the life reinsurance industry requires collateral to satisfy the reserve requirements of Regulations XXX and AXXX. As part of the transaction, ING will further provide collateral support for all current and future XXX and AXXX reserves for the duration of the business. Scottish Re will pay ING a facility fee for such collateral support until alternative collateral solutions are put in place to relieve ING of this obligation.
“In addition to the assets to be transferred by ING Re, Scottish Re will raise an additional $230 million in new capital, which will satisfy the capital requirements for the acquired business. This new capital includes $180 million to be provided by The Cypress Group, a New York private equity firm, and an additional $50 million of trust-preferred securities. Scottish Re management anticipates that the acquisition pro forma for the new capital will be immediately accretive to Scottish Re’s return on equity and earnings per share upon closing.”
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