Achieving growth - a case study
Admin Re® allows insurers to release capital to seize new opportunities. In 2011, Admin Re® acquired around 300,000 policies and GBP 1.6 billion in assets from American Life Insurance Company.
Success in the re/insurance business means managing risk and using capital intelligently. And if an insurer decides that its capital could be put to better use elsewhere than in servicing some of its in-force life businesses, the challenge then is to find the right buyer for those businesses: someone who can offer the right price and the right commitment to the policyholders. When these in-force life books come up for sale, they attract interest from specialised closed-book buyers which includes Swiss Re with its Admin Re® business and Private Equity Funds.
In 2010, MetLife, one of the world’s largest life insurers, bought American Life Insurance (Alico) from AIG for USD 16.2 billion. The acquisition extended MetLife’s operations to more than 60 countries and 90 million customers. It quickly became apparent, though, that this involved substantial duplication in the combined business in the UK, so MetLife began exploratory talks with Swiss Re about divesting some of its portfolios. “The decision to sell Alico’s closed life book in the UK was highly strategic for MetLife,” explains Frank O’Neill, Swiss Re’s client executive for MetLife. “Our challenge was to structure a deal that would achieve their goals as well as ours.”
There is no such thing as a simple closed book transaction. To begin with, the term covers several different types of transactions: The selling company can divest one of its closed, in-force life books or its life companies, or it can outsource administration of the policies and buy reinsurance for the portfolios. Every portfolio is structured differently, requiring thorough due diligence to value the portfolio, the underlying assets and the associated risks. Deals can involve complex IT issues, since the portfolios are often administered using different systems and software. And there’s a human resources element, as Graham Singleton, Head of Admin Re® UK, explains: “In some transactions, we also take over the employees who are the primary point of contact with policyholders.”
This complexity certainly applied in MetLife’s case. The book of business it wanted to sell was not a self-contained company, but rather a selection of five different legacy portfolios, administered on five different IT systems.
MetLife needed all of these issues handled effectively – Admin Re® was the obvious choice. “I think Admin Re® was particularly well placed to do this deal,” says Kieran Rose, Head of Origination and Structuring for Admin Re®. “We not only have a successful track record in completing more than fifty such transactions since 1998, but we also offer the full palette of support, from Swiss Re’s financial strength to its broad industry know-how.”
To read more on how Admin Re® is achieving growth, please visit our business report site.