Global life and health reinsurance entity Reinsurance Group of America, Incorporated ( RGA ) shares are trading higher in premarket on Monday.

The company has reached an agreement with Equitable Holdings, Inc. ( EQH ) to reinsure a wide range of life insurance products.

Under the terms of the deal, RGA is reinsuring 75% of Equitable’s in-force life insurance liabilities. The block includes approximately $18 billion of general account reserves and $14 billion of separate account reserves.

This deal is set up to allow RGA to invest $1.5 billion in capital at the closing. It is expected to generate returns within RGA’s projected range, while also providing a notable increase in the company’s adjusted operating earnings per share.

Furthermore, the agreement expands RGA’s partnership with Equitable across various sectors, including underwriting, product creation, distribution, and investment management.

“This partnership is an example of our capacity to provide creative solutions and technical expertise that support both sides of the balance sheet, and it is a prime example of how the execution of our Creation Re strategy can address our clients’ current and future needs,” said Executive Vice President, Head of the Americas, RGA, Ron Herrmann.

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The deal is expected to contribute around $70 million to adjusted operating income before taxes in 2025. This amount is anticipated to increase to between $160 million and $170 million in 2026, eventually stabilizing at around $200 million each year thereafter.

“Our strong financial position enables us to capitalize on this opportunity with Equitable, and the transaction is expected to meaningfully contribute to RGA’s earnings per share, with anticipated attractive returns on capital,” said Executive Vice President, Chief Financial Officer, RGA, Axel André.

RGA intends to fund the transaction with surplus capital and, if necessary, proceeds from debt financing, contingent on market conditions. The transaction is set to close in mid-2025, pending regulatory approval and other customary closing conditions.

The deal is expected to create more than $2 billion in value for Equitable Holdings ( EQH ), encompassing a favorable ceding commission and the release of capital.

Also, Equitable plans to execute $500 million of incremental share repurchases, above the company’s 60-70% payout ratio target, following the close of the transaction.

Additionally, Equitable announced its intention to increase its ownership stake in AB through a tender offer to purchase up to $1.8 billion of units of AllianceBernstein Holding L.P. ( AB )

Price Action: RGA shares are trading higher by 3.55% at $196.11 in premarket at the last check Monday.

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