Prudential to buy US life business from Swiss Re

Financial services giant Prudential is to get its hands on Reassure American Life Insurance Company (REALIC) through the acquisition of its US holding company from Swiss Re.

Jackson National Life Insurance, an indirect wholly-owned subsidiary of Prudential, on Wednesday entered into an agreement to buy SRLC America Holding Corp for $621m (£398m) in cash, financed from its own resources. SRLC is a life insurance business working within the US division of the insurance titan Swiss Re's Admin Re.

Through this transaction, Prudential has highlighted the acquisition of REALIC, "which since 1995 has completed a significant number of transactions through stock acquisitions and reinsurance arrangements and has acquired a diverse portfolio of traditional US life business."

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The acquisition will be earnings accretive to Prudential immediate and will see Jackson take on £6.7bn of assets and around 1.5m policies. SRLC derives its earnings from seasoned, long-duration cash flows generated principally from term life, whole life and basic universal life products.

"This bolt-on acquisition is in-line with our strategy and is a great opportunity to increase the scale of our life business. It is a capital efficient transaction that will produce an attractive IRR (internal rate of return) and payback period commensurate with what we achieve organically on writing new business," said President and Chief Executive Officer of Jackson Mike Wells.

"It helps diversify Jackson's earnings by increasing the amount of income we generate from underwriting activities thereby enhancing the quality of our earnings and our ability to remit more cash to the group," he said.

The embedded value of the acquired business at June 30th 2012 is estimated to be £865m.

BC