Equitable Holdings has entered 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 contracts backed by approximately $4 billion in assets of general account and $6 billion of separate account value.
In a statement, Equitable Holdings said the transaction completes a series of steps it has taken to mitigate redundant statutory reserves associated with Reg. 213 by the end of 2022.
Manu Sareen, Co-Chairman and Head of Institutional Markets for Global Atlantic, said: “Equitable’s financial, risk and counterparty objectives align well with our ability to manage both spread-based liabilities and the costs for a complete and attractive solution. We are delighted to bring our execution experience, strong balance sheet and risk management capabilities to another premier provider of retirement products, extending our experience in delivering premier reinsurance solutions. order.
The transaction is expected to result in a positive disposal fee of approximately $1.1 billion for Equitable Financial, which the company will use to fund the remainder of the Reg. 213 redundant reserves, securing future cash flows. It also includes policies with the highest guaranteed general account credit rates of 3%.
Under terms of the agreement, Equitable Financial Life Insurance Company will transfer approximately $3 billion in general account assets under management to First Allmerica Financial Life Insurance Company. Equitable will retain management and administration of the separate account policies and funds, which will be assigned on a modified coinsurance basis. The transaction 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 diversified block of annuities totaling $4 billion in March. With this agreement, Global Atlantic further strengthens its position as a leading reinsurance franchise in the annuity and life insurance market, having reinsured approximately $80 billion in assets since its inception in 2004.
Equitable said there will be a limited impact on Group Retirement’s operating profit of $10 million to $15 million per year. Goldman Sachs & Co. LLC is acting as sole financial advisor, with Willkie Farr & Gallagher LLP acting as legal advisor to Equitable in connection with this transaction. Wells Fargo Securities, LLC is acting as financial advisor and Debevoise & Plimpton LLP is acting as legal advisor to Global Atlantic in connection with this transaction.
