By Arthur D. Postal
WASHINGTON – New York Life and John Hancock today announced two deals that will allow them to focus on areas they would like to grow.
Under the deal, New York Life will acquire life insurance policies with a face value of $25 billion.
In return, New York Life will sell its retirement plan business to John Hancock, excluding its stable value business.
When the deal closes, which is expected to happen in the first half of 2015, it will focus New York Life on a “select group of complementary businesses: life insurance and annuities, which are core to our mission and areas where we are a clear market leader; and third-party retail and institutional asset management, which provides earnings diversification and supports our dividend to policyholders,” Ted Mathas, New York Life chairman and CEO, said.
In turn, the deal will “accelerates Manulife's growth strategy for wealth and asset management businesses around the world,” according to Donald Guloien, president and CEO of Manulife. John Hancock is a unit of Manulife Financial Corp. of Canada.
New York Life is the largest mutual life insurance company in the United States.
The deal will allow it to acquire through reinsurance 60 percent of John Hancock Financial’s “closed block,” comprised primarily of participating whole life insurance. The block of 1.3 million policies was closed in connection with John Hancock’s demutualization in 2000, and includes more than $11 billion in liabilities. Through a reinsurance arrangement, New York Life will assume $7 billion of those liabilities.
Through a reinsurance arrangement, New York Life will assume $7 billion of those liabilities. The policies have a face amount of more than $25 billion.
The other part of the deal involves sale by New York Life Investment Management of its sell New York Life Retirement Plan Services (RPS) business to John Hancock. John Hancock will then merge RPS with John Hancock Retirement Plan Services. The combined business will cover 55,000 retirement plans across the country. The retirement accounts of more than 2.5 million are involved.
New York Life’s stable value business, which is backed by the company’s financial strength and investment expertise, will remain at New York Life as a unit of its Institutional Annuities unit.
“Concentrating on these areas will strengthen our ability to serve the needs of millions of Americans, now and decades into the future, who rely on us to help them achieve their financial goals and enjoy a comfortable and secure retirement,” Mathas said.
Guloien justified the deal by explaining that, “Manulife is a major player in the pensions business in Canada, the United States, Hong Kong and Indonesia.”
He said the deal is consistent with Manulife’s recently announced acquisition of Standard Life's Canadian operations. Guloien said it will “significantly increase our retirement plans business overall."
"When completed, these transactions will each accelerate our strategy to grow our wealth and asset management businesses around the world."
Craig Bromley, president of John Hancock, said the “enhanced capabilities of the combined RPS businesses advance John Hancock's continued leadership in helping Americans enjoy a better, financially secure retirement.”
He added that another justification for the transaction was that exchanging a portion of John Hancock's in-force closed block life insurance policies for New York Life's RPS business “redirects capital to a higher growth, less capital intensive, higher return business."
Completion of the deal is subject to receipt of applicable regulatory approvals and other customary closing conditions. Terms of the transactions were not disclosed.
Arthur D. Postal has covered regulatory and legislative issues for more than 30 years in Washington, D.C. He can be reached at [email protected].
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