UnumProvident Corp., the largest U.S. disability insurer, announced the signing of definitive agreements for a series of strategic transactions designed to more closely focus its operations on its core businesses and increase its financial flexibility.
The primary transaction involves the signing of an agreement under which an affiliate of Swiss Re Life & Health America Inc. will reinsure UnumProvident’s in-force individual life insurance and corporate-owned life insurance blocks of business. In addition, the company will sell its inactive subsidiary, Provident National Assurance Company, to Allstate Life Insurance Company.
It has also made an agreement with Max Re Ltd. to reinsure a portion of its long duration group long-term disability claims. These transactions are expected to close by the end of 2000.
In announcing these transactions, UnumProvident Chairman, President and Chief Executive Officer, J. Harold Chandler said, “These transactions are another step in our process of continuing to sharpen our business focus, strengthen our balance sheet, increase our financial flexibility, and provide a strong base to support the needs of our industry-leading businesses. The net effect of these transactions will significantly strengthen our insurance subsidiary capital ratios while lowering our holding company leverage.”
Under the terms of one of the agreements, Reassure America Life Insurance Company, a Swiss Re affiliate, will reinsure on a 100 percent indemnity coinsurance basis substantially all of the individual life insurance and corporate-owned life insurance policies written by UnumProvident’s insurance subsidiaries, as well as a small block of individually underwritten group life insurance. Reassure America will also assume responsibility for the administration of the policies on a phased-in basis over the course of the next year.
The agreement covers approximately 240,000 policies with statutory policy reserves at June 30, 2000 of approximately $3.4 billion and annualized statutory premiums of approximately $180 million. The agreements will be effective as of July 1, 2000 and are subject to certain regulatory approvals.
This transaction does not include the company’s core group life or voluntary benefits life insurance businesses, both significant growth areas for UnumProvident. Separately, UnumProvident and Max Re Ltd. have entered into an agreement whereby Max Re will reinsure the long duration long-term disability claims (those claims incurred prior to January 1, 1996) of The Paul Revere Life Insurance Company, a UnumProvident subsidiary.
This transaction impacts approximately $195 million of statutory reserves and is expected to close in the third quarter of 2000 with an effective date of January 1, 2000. While details of the specific transactions were not disclosed, the Company estimates that the net impact of these transactions releases or generates in excess of $550 million of statutory capital for its various insurance subsidiaries and holding company.
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