Reinsurance Group of America, Incorporated (RGA) has announced an agreement with Pacific Life Insurance Company as per which it will take reinsurance cover from the latter on its block of U.S. individual life business.
“Retrocession” refers to the practice of reinsurance by reinsurers. Similar to reinsurance, retrocession also aims to reduce risk and the liability burden of the initial reinsurer by spreading out the risk to other reinsurance companies. Retrocession protection acts as a defense against massive shock losses, limiting the amount that the initial reinsurer would have to pay from their own balance sheets.
The block of business that Reinsurance Group will retrocede consists of term and permanent individual life policies reinsured by the company primarily between 1999 and 2004. Via the agreement, the company will retrocede approximately $200 billion of in-force individual life reinsured amount at risk. The transaction has already been put into effect since Oct 1, 2014.
The transaction will free up $200 million of capital and reduce annual premiums in the U.S. traditional segment by approximately $450 million. The company plans to utilize these funds in other growth avenues.
Earlier in the month, the company undertook another step to unlock capital by securitizing its U.S. life insurance block of business. The company is adopting these measures to deploy capital as it sees attractive organic growth opportunities ahead.
Reinsurance Group carries a Zacks Rank #3 (Hold).
Players worth considering include Lincoln National Corp. (LNC), StanCorp Financial Group Inc. (SFG) and Protective Life Corp. (PL). All these stocks carry a Zacks Rank #2(Buy).
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