Venerable Holdings has agreed to reinsure $12 billion of legacy variable annuity business from Equitable Financial Life Insurance Company.
As part of the transaction, Venerable will also acquire Corporate Solutions Life Reinsurance Company, a Delaware domiciled variable annuity reinsurance company that has been in run-off since 2002.
Overall, the deal will more than double Venerable’s general account assets from $11 billion to $24 billion with reinsured business growing to over $46 billion in separate account value.
“This transaction represents a significant milestone for Venerable as we further establish ourselves as the partner of choice for insurers in the variable annuity space,” said David Marcinek, Chairman of Venerable.
“Our conservative investment approach, strong capitalization, focus on operating efficiency and deep expertise in managing risk has positioned us for this transaction while successfully handling increased volatility and challenging market conditions,”
“As we work to close this transaction, our team remains focused on building on this momentum and capitalizing on opportunities for further growth.”
Corporate Solutions Life Re primarily reinsures third-party variable annuity guaranteed minimum death benefit (GMDB) and guaranteed minimum income benefit (GMIB) riders with approximately $7 billion and $2 billion of underlying account value respectively.
Upon completing the transaction, Venerable plans to reposition all existing business into the Corporate Solutions Life Re entity to improve its liquidity position and enable several operating efficiencies.
The deal will also generate $1.2 billion of value for Equitable Holdings, including an expected $800 million capital release, a positive ceding commission and consideration for Corporate Solutions Life Re totalling $300 million, and $100 million in tax benefits.
“We are pleased to enter into this reinsurance transaction with Venerable, an organization with a risk management approach that is aligned with our own,” said Mark Pearson, President and Chief Executive Officer of Equitable Holdings.
“This landmark deal validates the significant value of our inforce portfolio and strengthens our ability to focus on value accretive businesses.”
Patrick Lusk, Venerable’s CEO, also commented: “Today’s announcement is a testament to our performance and state-of-the-art scalable operating platform and confirms Venerable’s long-term growth strategy. We are excited about the opportunities ahead and look forward to quickly realizing the benefits of this transaction.”
The deal is expected to close in the second quarter of 2021, after which Venerable will remain in West Chester, Pennsylvania, with additional operations in Des Moines, Iowa. A small team supporting Corporate Solutions Life Re will also transition from Equitable to Venerable
Barclays is serving as financial advisor, and Sidley Austin LLP is serving as legal counsel to Venerable.
Meanwhile, Goldman Sachs & Co. LLC is serving as lead financial advisor and Ardea Partners LP as co-advisor to Equitable, and Willkie Farr & Gallagher LLP is acting as legal counsel.