XL Life Ltd., a subsidiary of XL Group plc XL has reinsured a block of U.S. Term Life treaties to a subsidiary of Reinsurance Group of America, Incorporated RGA. The transaction encompasses reinsuring about $22 billion of life insurance in force, involving about 290,000 policies. XL Group estimates incurring a loss of $34 million due to the transaction.
The agreement covers all U.S. Term Life reinsurance policy reserves apart from ceding 80% of the remaining life reinsurance premiums of the unsold portion of XL Life Reinsurance (SAC) Ltd., the life reinsurance subsidiary of XL Group that the company divested. The divestment followed XL Group’s heightened focus on its property and casualty business.
Per the deal, Reinsurance Group will also oversee the business on behalf of XL Group but for a short period of time.
While this transaction is in line with Reinsurance Group’s strategy to ensure prudent use of its capital by acquiring run-off life insurance blocks, XL Group will benefit by minimizing risks related to its run-off life exposures. XL Group had about $258 million in policy benefit reserves relating to this block of business as of Sep 30, 2015. This action further validates the company’s intention to strengthen its core property and casualty operations.
XL Group posted a dismal third-quarter 2015 with the bottom line missing estimates and declining year over year on higher integration costs and catastrophe losses. Nonetheless, the company remains focused on ramping up its growth profile via various strategic initiatives. Expanding the capabilities of the monoline equipment breakdown insurance by XL Catlin's North America Property business and bracing up to insure yachts of all sizes are some recent initiatives by the company.
XL Group presently carries a Zacks Rank #5 (Strong Sell). Some better-ranked property and casualty insurers are Cincinnati Financial Corp. CINF and RLI Corp. RLI. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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