Item 1.01
Entry into a Material Definitive Agreement.
On January 18, 2018, Protective Life Insurance Company (
Protective Life
), a wholly owned subsidiary of Protective Life Corporation (
Protective
), and for the limited purposes set forth therein, Protective, entered into a Master Transaction Agreement (the
Master Transaction Agreement
) with Liberty Mutual Insurance Company (
LMIC
), Liberty Mutual Fire Insurance Company (
LMFIC
and together with LMIC,
Sellers
), for the limited purposes set forth therein, Liberty Mutual Group Inc. (
Liberty
), The Lincoln National Life Insurance Company (
Lincoln Life
), and for the limited purposes set forth therein, Lincoln National Corporation (
Lincoln
), pursuant to which Lincoln Life will acquire Libertys Group Benefits Business (the
Group Business
) and Individual Life and Annuity Business (the
Life Business
) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (the
Company
) for total cash consideration of approximately $3.3 billion (the
Transaction
). Additionally, pursuant to the Master Transaction Agreement, the Company, Protective Life and Protective Life and Annuity Insurance Company (
PLAIC
), a wholly owned subsidiary of Protective Life, agreed to enter into reinsurance agreements (the
Reinsurance Agreements
) and related ancillary documents at the closing of the Transaction. On the terms and subject to the conditions of the Reinsurance Agreements, the Company will cede to Protective Life and PLAIC, effective as of the closing of the Transaction, substantially all of the insurance policies relating to the Life Business. The aggregate statutory reserves of the Company to be ceded to Protective Life and PLAIC as of the closing of the Transaction are expected to be approximately $13.0 billion. To support its obligations under the Reinsurance Agreements, Protective Life and PLAIC will each establish a trust account for the benefit of Lincoln Life.
The Transaction is subject to the satisfaction or waiver of customary closing conditions, including regulatory approvals and the execution of the Reinsurance Agreements and related ancillary documents. The Master Transaction Agreement and other transaction documents contain certain customary representations and warranties made by each of the parties, and certain customary covenants regarding the Company, the Group Business and the Life Business, and provide for indemnification, among other things, for breaches of those representations, warranties and covenants.
Entry into the Reinsurance Agreements represents an estimated capital investment by Protective Life of approximately $1.17 billion.
The foregoing description of the Master Transaction Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Master Transaction Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The Master Transaction Agreement has been included as an exhibit to this report to provide investors with information regarding its terms and conditions. It is not intended to provide any other factual information about the parties or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Master Transaction Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Master Transaction Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk among the parties to the Master Transaction Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Master Transaction Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Master Transaction Agreement, which subsequent information may or may not be fully reflected in Protectives public disclosures.