April 11 Protective Life Corp agreed to
buy a portfolio of old policies from French insurer AXA SA's
U.S. business for $1.1 billion, with the aim of
squeezing more value out of them.
Birmingham, Alabama-based Protective Life said the deal with
Axa's Mony Life Insurance Company should produce a steady income
stream and increase earnings per share. Most of the policies are
life insurance written before 2004.
AXA, which bought Mony in 2004 for $1.5 billion, will take a
capital loss of below 100 million euros ($131 million), in part
attributable to the difference between what it paid for the
business initially and what it is being sold for now.
Last month, people familiar with the situation said
Protective Life was the leading candidate to buy U.S. life
insurance assets from Axa, which has been expanding into
emerging markets while scaling back its presence in North
America after years of underperformance in that region.
AXA said on Thursday it would continue to use Mony Life to
write new business in the United States.
"This transaction allows us to further grow our US 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," AXA Chief Executive Henri de Castries
said in a statement.
AXA shares were up 1.2 percent at 0838 GMT, outperforming
the European insurance sector, which was up 0.4 percent.
The transaction values the portfolio at 0.7 times its book
value, a premium to AXA's own book value, a Paris-based analyst
said. AXA trades at 0.6 times book, according to Thomson Reuters
"All in all I would expect a small positive reaction because
the market has concerns about (AXA's) leverage," the analyst
said, noting that the French insurer borrows at higher yields
than larger German rival Allianz.
Including a capital surplus of $303 million, the total
investment by Protective Life is about $1.09 billion, the
It expects the deal to add between $0.10 and $0.15 to its
earnings per share in 2013 and between $0.55 and $0.65 per share
Protective Life shares closed up 2 percent at $35.59 on the
New York Stock Exchange on Wednesday, prior to the announcement.
Willkie Farr & Gallagher LLP and Barclays PLC were financial
advisers to Protective Life.