Swiss Re’s Admin Re unit offloads U.S. life insurer Aurora

Reinsurance company Swiss Re has further rationalised its life focused Admin Re business unit with the announcement of the sale of its U.S. subsidiary Aurora National Life Assurance Company to Reinsurance Group of America (RGA).

RGA has agreed to acquire 100% of the shares of Aurora National Life Assurance Company, a wholly owned life insurance subsidiary of Swiss Re. Aurora was part of the U.S. business retained by Admin Re following the sale of its U.S. Admin Re holding company, Reassure America Life Insurance Company, (REALIC) to Jackson National Life Insurance Co in September 2012.

The sale of Aurora, involving approximately 82,000 life insurance policies in force and $2.7 billion of policyholder liabilities, is expected to close in early 2015 and is subject to regulatory approval.

Aurora’s underlying business consists of approximately two-thirds annuities, primarily payout annuities, and one-third interest-sensitive life products. Aurora has not written significant new business in over 20 years, according to RGA.

Admin Re is one of Swiss Re’s three core business units. It focuses on acquiring blocks of in-force life and health insurance business, aiming to give a diversified stream of income to Swiss Re and generate substantial cash for the reinsurance group.

John R. Dacey, Swiss Re’s Group Chief Strategy Officer and Chairman of Admin Re, commented; “This transaction is an important step in Swiss Re’s strategy to redeploy capital to areas where we see growth opportunities and which deliver attractive shareholder returns. Admin Re® will continue to focus on the UK, where we have developed a solid pipeline of potential acquisitions and successfully signed a transaction with HSBC earlier this year.”

“We are pleased to announce this transaction which follows our strategy to deploy capital into attractive, closed block opportunities,” said Scott Cochran, Executive Vice President, Global Acquisitions at RGA. “This opportunity demonstrates our ability to leverage our deep knowledge of the U.S. market while expanding RGA’s closed block capabilities.”

Swiss Re’s Admin Re unit has been focused on growing its UK life insurance portfolio, with a major deal announced earlier this year when it reinsured 400,000 individual and group pension and related annuity policies with GBP£4.2 billion in unit-linked assets from HSBC Life (UK) Ltd.

The U.S. life and annuity market is clearly not attractive to Swiss Re at this time and its Admin Re unit has now offloaded most all of its U.S. liabilities. This freed up capital could be put to work in the other UK focused transactions and acquisitions that Dacey mentions above.

Swiss Re had been seeking third-party capital support for its Admin Re business in the past, but with the sale of the U.S. operations and taking into account current reinsurance market conditions, as well as Swiss Re’s clear change in tone towards ILS and alternative capital in the last two years, this may no longer be a target for the firm. Swiss Re, likely having ample capital to help it grow Admin Re, may look to the Admin Re business more as a source of profit for itself, rather than seeking to share that with other investors.