Ireland-based XL group has agreed to sell its life reinsurance arm, XL Life Reinsurance, to GreyCastle Holdings for $570m in cash, as the insurer looks to free up capital for a share buyback scheme.
"This transaction meaningfully reduces the risk profile of the company, which gives us additional flexibility to pursue capital management initiatives, including an expectation of buying back an additional $300m of shares in 2014 over amounts previously contemplated," said XL chief financial officer and executive vice president, Peter Porrino.
At completion, XL Life Reinsurance will reinsure the majority of XL's life reinsurance business via 100% quota share reinsurance.
This transaction covers a substantial portion of XL's life reinsurance reserves. XL announced the run-off of its life reinsurance business in 2009.
"While complex, as driven by the nature of our life reinsurance businesses and our objective of maximising value for XL shareholders, the real benefit of this transaction is clear and simple: XL has now dealt with the vast majority of its life reinsurance business, and has thereby taken another strong step forward in its drive to deliver top-quintile return on equity and book value growth from its core property and casualty operations," said XL chief executive officer, Mike McGavick.
XL said it will book a $580m loss on the deal, which is expected to close in the second quarter of 2014, subject to regulatory approval.
A.M. Best has reviewed the transaction and has concluded that there is no impact to the ratings.
A.M. Best has given a financial strength rating of A (Excellent) and the outlook for the FSR is stable.