A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa-” of MONY Life Insurance Company (MONY) (Syracuse, NY). The outlook assigned to both ratings is stable.
The ratings were placed under review in April 2013, following the announcement that Protective Life Insurance Company, a direct subsidiary of Protective Life Corporation (Protective) (headquartered in Birmingham, AL)(NYSE:PL) was acquiring MONY from certain subsidiaries of AXA S.A. (France). The transaction closed on October 1, 2013. MONY consists primarily of a closed book of life insurance business, and it no longer markets new policies.
A.M. Best notes that the MONY acquisition is consistent with Protective’s business model of complementing organic growth with select acquisitions. Protective has a long history of successfully acquiring and integrating blocks of business, and A.M. Best expects MONY to remain well capitalized throughout its managed run off.
The all-cash deal represents an aggregate purchase price of approximately $1.06 billion and includes the stock purchase of MONY and the coinsurance of part of the book of business of its former affiliate, MONY Life Insurance Company of America. Protective will utilize only a modest amount of debt to fund the purchase, maintaining its financial leverage in the 30% range (incorporating some equity credit for existing hybrids). The majority of the financing will be sourced from excess capital, supplemented by a Regulation XXX reserve financing of business unrelated to MONY. Although Protective’s risk-adjusted capital ratios are expected to decline, A.M. Best believes the transaction itself will not have a significant impact on the long-term financial strength of the organization.A.M. Best believes MONY is well positioned at its current rating level. Negative rating actions could result from a material decline in MONY’s risk-adjusted capitalization or a decline in its overall strategic importance to Protective.