Irish Life owner Great-West takes on assets of £875 million

Great-West Lifeco Inc, Canada’s second-biggest life insurer, struck a deal to add £875 million of assets as it takes on annuity risk from Equitable Life Assurance Society in the UK.

The Canada Life unit is acquiring about 31,000 policies, Winnipeg, Manitoba-based Great-West said on Tuesday in a statement. The liabilities have the same value as the assets, and no payment is being made, Marlene Klassen, a spokeswoman for Great- West, said in an email.

Great-West chief executive Paul Mahon has been expanding in Europe, including in the UK where the market has been disrupted by the scrapping of rules last year that had required retirees to buy insurers’ annuities with pension funds.

The company in 2013 bought Irish Life Group Ltd for about $1.7 billion. The Equitable transaction “complements our ongoing UK strategy,” Mahon said in the statement. “We continue to look for opportunities to grow our overall UK business, and in particular, to respond to the changes in pension legislation.”

Unsuccessful investments

Equitable Life almost collapsed in 2000 following unsuccessful investments and policy guarantees. The company said in a separate statement on Tuesday that the transfer is in the long-term interests of its policyholders.

Great-West, majority-owned by the billionaire Desmarais family, is rated A+ by Standard and Poor’s. Annuities generally guarantee customers a stream of payments over time.

Insurers’ risks on the contracts can climb if clients live longer than expected or interest rates fall, limiting the income that can be made on funds that are set aside to eventually pay claims. Companies buying such policies are betting they can more profitably manage the assets and endure market fluctuations.

Great-West, which has about $900 billion in assets under administration, in 2006 reached a deal to buy 130,000 policies from Equitable.

Mahon’s company slipped 0.7 per cent to $35.30 at 10:29am in Toronto, narrowing its gain since December 31st to about 5.1 per cent. –(Bloomberg)