Equitable Holdings has gone into a reinsurance agreement with Global Atlantic subsidiary First Allmerica Financial Life Insurance Company to reinsure a 50% quota share of pre-2009 Group Retirement VA contracts supported by approximately $4bn of general account assets and $6bn of separate account value.
In a statement, Equitable Holdings said the transaction completes a series of actions it has taken to mitigate redundant statutory reserves associated with Reg. 213 by year end 2022.
Manu Sareen, co-president and head of institutional markets for Global Atlantic, said: “Equitable’s financial, risk and counterparty objectives aligned well with our ability to manage both spread and fee-based liabilities for an attractive, comprehensive solution. We are excited to put our execution experience, strong balance sheet and risk management capabilities to work with another premier blue-chip provider of retirement products, extending our track record of providing best in class reinsurance solutions.”
The transaction is expected to result in a positive ceding commission of approximately $1.1bn to Equitable Financial which the company will use to fund the remaining Reg. 213 redundant reserves, securing future cash flows. It also includes policies with the highest guaranteed general account crediting rates of 3%.
Under the terms of the agreement, Equitable Financial Life Insurance Company will transfer approximately $3bn in general account assets under management to First Allmerica Financial Life Insurance Company. Equitable will retain servicing and administration of the policies and separate account funds, which will be ceded on a modified coinsurance basis. The deal is expected to close during the fourth quarter, subject to satisfaction or waiver of customary closing conditions, including receipt of regulatory approvals.
This transaction also marks Global Atlantic’s second block reinsurance transaction in 2022, having reinsured a diverse block of annuities totaling $4 billion in March. With this deal, Global Atlantic further advances its position as a leading reinsurance franchise in the annuity and life insurance marketplace, having reinsured approximately $80 billion of assets since its inception in 2004.
Equitable said there will be limited impact to Group Retirement operating earnings of $10-15m earnings per annum. Goldman Sachs & Co. LLC is serving as sole financial advisor with Willkie Farr & Gallagher LLP acting as legal counsel to Equitable in connection with this transaction. Wells Fargo Securities, LLC is serving as financial advisor and Debevoise & Plimpton LLP is acting as legal counsel to Global Atlantic in connection with this transaction.