Protective Life Credit Ratings Reviewed After $1.2B Great-West Deal

The credit ratings of Protective Life Corp. and its insurance subsidiaries remain unchanged following the announcement that it has entered into a reinsurance agreement to acquire approximately $20 billion of life and annuity liabilities of insurance subsidiaries of Great-West Lifeco, AM Best said.

Under the terms of the agreement, Protective, whose ultimate parent is Dai-ichi Life Holdings, Inc., will enter into a reinsurance agreement with Great-West for a seasoned block of life and annuity business, using a combination of excess capital, debt and a capital contribution from Dai-ichi Life Holdings, Inc., to fund the transaction.

The acquisition is part of Protective’s core business strategy as an acquirer of life insurance blocks and adds balance to Protective’s recently acquired annuity block from Liberty Life Assurance Company of Boston as the liabilities are primarily universal life and whole life, including a large block of corporate-owned and bank-owned life insurance, and a moderate amount of annuities.

While the impact to Protective’s balance sheet is material given the size of the acquired blocks, AM Best notes that risk-adjusted capitalization will remain supportive of Protective’s current ratings. AM Best expects the acquisition to add diversification and scale to Protective’s existing acquired blocks with a moderate overall increase to operating earnings.

Financial leverage and interest coverage are expected to remain within AM Best’s expectations for the current rating levels. The transaction is expected to close in the second quarter of 2019, pending regulatory approval and other customary closing conditions.

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