On June 29, RGA Reinsurance Company, a subsidiary of Reinsurance Group of America (RGA), entered into a binding letter of intent with John Hancock Life Insurance Company.
The letter states that RGA Re and John Hancock will enter into a coinsurance agreement whereby RGA Re will reinsure, on an indemnity basis, a 90 percent quota share of a block of John Hancock's fixed deferred annuity business.
Under the agreement effective 1 April, RGA Re will receive approximately $5.4 billion in invested assets, primarily investment grade fixed income securities and commercial mortgage loans.
This amount represents the initial reinsurance premium and other amounts payable by John Hancock to RGA Re. RGA Re will reinsure John Hancock for 90 percent of death benefits, withdrawals, surrenders and other benefits related to the annuities covered under the agreement.
RGA Re's obligations to John Hancock under the agreement will be secured by assets in a trust maintained for the benefit of John Hancock. John Hancock will remain the direct insurer of the annuities and will manage the business subject to standards agreed.
To support the business underlying the agreement, RGA expects to invest approximately $350 million of capital from existing resources. Given the spread-based nature of the reinsured fixed deferred annuities, the transaction is expected to be immediately accretive to the Company's consolidated earnings per share, beginning in the quarter ending June 30, 2012.