Protective Life buying MONY Life Insurance as part of $1.06B deal with AXA

Protective Life Insurance Co. agreed with certain units of AXA to acquire MONY Life Insurance Co. and reinsure certain policies of MONY Life Insurance Co. of America.

Assuming an Oct. 1 closing date, the purchase price should be about $1.06 billion, or [euro]820 million, including statutory capital and surplus of about $303 million. Protective Life Corp.'s capital investment is estimated at about $1.09 billion. The deal is subject to customary post-closing adjustments.

MONY Life Insurance Co. will transfer units that are not being sold to Protective to another of AXA's subsidiaries. These units are MONY Life Insurance Co. of America, U.S. Financial Life Insurance Co., MONY International Holdings LLC and MONY Financial Services Inc.

The disposal by AXA includes a run-off mortality book primarily underwritten before 2004, with $10.5 billion, or [euro]8.0 billion, of statutory liabilities as of year-end 2012. The book comprises approximately 560,000 whole life, term life, variable universal life and universal life policies and includes 61,000 annuity contracts and 42,000 accident and health and other policies.

MONY Life Insurance Co. of America will continue to be used to write new business and will retain part of the transaction proceeds to fund its future growth.

"This transaction allows us to further grow our US business where we have been achieving good momentum while freeing up capital invested in closed portfolios to improve our financial flexibility and enable additional investment in high growth markets and businesses," AXA Chairman and CEO Henri de Castries said in an April 10 release.

The estimated impact on AXA expected after the closing includes exceptional capital loss of less than [euro]100 million, which will be accounted for in net income, including a reduction in intangible assets of about [euro]400 million. The deal should add 3 points to the Solvency I ratio, which was 233% at Dec. 31, 2012, and 4 points to the economic solvency ratio, which was 206% at year-end 2012. There will be a negative 1-point impact on debt gearing, which was 26% at Dec. 31, 2012.

The transaction is expected to contribute 10 cents to 15 cents to Protective's fully diluted earnings per share in 2013; 55 cents to 65 cents per fully diluted share in 2014; and 65 cents to 75 cents per fully diluted share in 2015, net of integration and transition costs.

"This large, high quality, seasoned book of business presents one of the most attractive acquisition opportunities we have seen in many years," Protective Chairman, President and CEO John Johns said in another release. "This book of business, comprised primarily of life insurance policies written prior to 2004, has a limited array of product and equity market guarantees and should produce a steady and predictable stream of earnings for many years to come."

Protective intends to service the acquired business through the Syracuse, N.Y., staff and administrative platform that AXA uses. The benefits provided through the acquired policies will not be affected by the deal.

Willkie Farr & Gallagher LLP and Barclays Plc served as advisers to Protective, with Barclays' David Schieldrop acting as the lead banker. PricewaterhouseCoopers LLP was the tax adviser for the transaction.

Morgan Stanley's team of Gavin McFarland and Tamas Glanz in New York, and Guillaume Gabaix and Julien Weber in Paris advised AXA Financial Inc. on the deal. The company's legal adviser was Debevoise & Plimpton LLP.