Axa SA, Europe’s second-largest insurer, agreed to sell a U.S. unit and transfer certain obligations to Protective Life Corp. for $1.06 billion (820 million euros).
Axa is selling Mony Life Insurance Co. to Birmingham, Alabama-based Protective, which will reinsure some life policies, the companies said today in separate statements. Axa said it will still offer life insurance and retirement products in the U.S. and the agreement doesn’t include the Mony distribution network.
Axa, led by Chief Executive Officer Henri De Castries, had been seeking a deal to sell some U.S. life obligations to free capital. The company has sought to expand in Asia and other emerging markets as a slow European economy and low bond yields weigh on profits.
“This transaction allows us to further grow our U.S. business where we have been achieving good momentum while freeing up capital invested in closed portfolios to improve our financial flexibility and enable additional investment in high-growth markets and businesses,” de Castries said in a statement from Paris-based Axa.
Axa rose 1.6 percent to 13.93 euros in Paris trading. The stock has gained 4.3 percent this year, less than the 7.3 percent increase in the 28-company Bloomberg Europe 500 Insurance Index. Protective advanced 3.3 percent to $36.77 at 12:47 p.m. in New York.
The obligations Protective is assuming “are largely tied to the regulatory closed block, set up in 1998 when Mony demutualized,” Standard & Poor’s wrote in a report today affirming the insurer’s credit ratings. “Regulatory requirements for these closed blocks are generally conservative. We assume that this block will perform favorably.”
Axa acquired Mony Group in 2004 for about $1.5 billion to expand in the U.S. The Protective deal, which includes about 560,000 life-insurance policies and 61,000 annuity contracts, primarily transfers coverage sold prior to 2004, Axa said. After acquiring Mony, Axa sold most insurance out of other subsidiaries.
Protective said it will service the business it acquired using the existing workforce and administrative platform in Syracuse, New York. The transaction, expected to close in the second half of the year, will probably boost Protective’s earnings by 10 cents to 15 cents per share in 2013, and by 55 cents to 65 cents in 2014, the U.S. insurer said.
“This large, high-quality, seasoned book of business presents one of the most attractive acquisition opportunities we have seen in many years,” Protective CEO John Johns said in a statement.
Cigna Corp. reached a $2.2 billion deal with Warren Buffett’s Berkshire Hathaway Inc. in February to cut liabilities tied to death benefits. Sun Life Financial Inc. agreed to sell its U.S. annuity business in a $1.35 billion deal in December as CEO Dean Connor worked to reduce risk.
Morgan Stanley and Debevoise & Plimpton LLP advised Axa, Lauren Day, an Axa spokeswoman, wrote in an e-mail. Barclays Plc and Willkie Farr & Gallagher LLP advised Protective, and PricewaterhouseCoopers LLP provided tax guidance.