(Updates with CFO comment on buybacks in fourth paragraph.)
May 1 (Bloomberg) -- XL Group Plc reached a deal to sell a life reinsurance business for $570 million in cash as Chief Executive Officer Mike McGavick seeks to simplify the company and free up capital for share buybacks.
The buyer is GreyCastle Holdings Ltd., a newly formed company in Bermuda whose shareholders include family offices and university endowments, according to a statement today from Dublin-based XL.
XL is among property-casualty insurers that have been divesting life obligations as low interest rates pressure returns on funds held to back policies. Allstate Corp. agreed last year to sell an annuity business to Resolution Life Holdings Inc., and Hartford Financial Services Group Inc. reached a deal in 2012 to divest its individual life unit.
“This transaction meaningfully reduces the risk profile of the company, which gives us additional flexibility to pursue capital management initiatives” such as the planned buyback of $300 million in shares beyond what XL previously expected, Chief Financial Officer Peter Porrino said in the statement.
XL said it will book a $580 million loss on the deal, which it expects to complete this quarter. Citigroup Inc. and JPMorgan Chase & Co. are XL’s bankers on the deal, and the legal advisers are Clifford Chance LLP and Skadden, Arps, Slate, Meagher & Flom LLP, according to the statement.
--With assistance from Craig Giammona in New York.