Last week, the principal subsidiary of Protective Life Corporation (PL) – Protective Life Insurance Company, announced a deal to acquire MONY Life insurance Company ("MONY") and reinsure an in-force book of life insurance policies of MONY Life Insurance Company of America ("MLOA") from certain subsidiaries of AXA Group (AXAHY).
The transaction will culminate on Oct 1, 2013 pending regulatory approval. The total purchase consideration equates to approximately $1.06 billion inclusive of statutory capital and surplus of approximately $303 million. Protective Life is expected to make a total capital investment worth $ 1.09 billion and the deal will be subject to post-closing adjustments.
The majority of the transaction will be funded from the excess capital of Protective. Nevertheless, the company will also issue a modest amount of debt to finance the deal, consistent with its 30% financial leverage standard. We expect the strong capital position of the company to support the greater part of the transaction.
Post the acquisition, Protective will access the existing workforce and administrative platform of MONY in Syracuse NY, currently used by AXA to serve MONY and the in-scope MLOA policies as well as AXA Business Services. However, there will be no change in the terms of the policies for policyholders under MONY and MLOA.
Protective Life will acquire MONY to expand its portfolio, thereby bolstering revenues going forward. The acquisition is expected to be accretive to Protective’s earnings in the upcoming period. It is expected to aid earnings by 10 to 15 cents in 2013, 55 to 65 cents in 2014 and to a further 65 to 75 cents in 2015 excluding, integration and transition costs.
MONY will transfer subsidiaries namely MLOA, U.S. Financial Life Insurance Company, MONY International Holdings LLC and MONY Financial Services Inc. to another subsidiary of AXA before the closing of the deal. These subsidiaries of MONY do not come under the purview of the acquisition agreement of Protective.
Following the announcement to buy MONY, credit rating agency A.M. Best Co. has declared that they are keeping their ratings on PL and its subsidiary Protective Life unchanged.
However on closing, the rating agency will review the company’s integration plans and impact on its risk adjusted capital and consequently its operating performance.
Protective currently caries a Zacks Rank #2 (Buy). Other insurers, Lincoln National Corporation (LNC) and StanCorp Financial Group Inc. (SFG) also share the same Zacks Rank.
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