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Foresters selling US annuity unit that was once 'important part' of strategy

A stand-alone entity that previously accounted for most of the U.S. annuity business of the Independent Order of Foresters will come under new ownership for the second time in a decade.

The Toronto-based organization announced Oct. 17 that it had agreed to sell Foresters Life Insurance & Annuity Co., a New York-based entity it owned for fewer than nine years, to Nassau Life Insurance Co. for an undisclosed amount.

The International Order of Foresters, which provides financial solutions to members and clients in Canada, the U.K. and the U.S. under the Foresters Financial brand, positioned the sale as the final stage of the exit of its North American asset management business and a turn to focus on core life insurance operations. The organization primarily operates in the domestic life market, targeting underserved customers in the mass- and middle-markets, through the United States Branch of the Independent Order of Foresters.

In 2011, the organization acquired the former First Investors Life Insurance Co. and a group of affiliates that included a broker/dealer, investment adviser and transfer agent, as part of an effort to broaden and deepen its U.S. presence. Upon announcing a planned rebranding of the First Investors organization four years later, Foresters Financial described the business as "an important part of our long-term strategy for sustainable growth in North America."

This April, however, Foresters Financial announced separate definitive agreements to sell assets related to its U.S. asset management business as well as its U.S. broker/dealer and advisory businesses. It also agreed to sell its Canadian asset management business in a transaction disclosed in May.

The Foresters Financial U.S. branch ranked among the largest domestic fraternal benefit societies in 2018, ranking No. 5 in direct business volume behind Thrivent Financial for Lutherans, Knights of Columbus, Modern Woodmen of America and Woodmen of the World Life Insurance Society. Life insurance accounted for $561.1 million of its $567.6 million in total direct premiums and considerations during the year. Individual annuities accounted for only 0.1% of its direct business volume for the year as compared with 51% for all fraternal benefit societies on a combined basis. Foresters Life, meanwhile, obtained $216.5 million of its $285.6 million in 2018 direct premiums and considerations from single-premium ordinary individual annuities.

Though Foresters Life's annuity business surged in 2018 from the $146.2 million in premiums it generated in 2017, recent results show a sharp downturn in production. Second-quarter premiums tumbled 56.2% to $24 million in that business line, which represented the company's lowest quarterly total in six years. Direct life premiums at the U.S. branch, meanwhile, slipped to $266.7 million in the first half of the year from $268.9 million a year prior.

Foresters Financial confirmed in a statement that it agreed to suspend sales of certain products, including annuities, in connection with the sale of its U.S. broker/dealer to Cetera Financial Group Inc., a deal that included its captive salesforce.

At year-end 2018, Foresters Life said it offered 11 distinct products: interest-sensitive whole life; fixed-premium and limited-payment variable whole life; term life; single-premium variable life; flexible-premium adjustable variable life; a single-premium fixed deferred annuity; an immediate annuity called First Advantage for Income; a variable deferred annuity and variable deferred bonus annuity marketed under the "First Choice" name; and single- and periodic-payment deferred income annuities.

Foresters Life's assets of $2.70 billion as of June 30 were split between its general and separate accounts. The company's capital and surplus totaled $78.8 million on that date.

Nassau Life, the proposed acquirer of Foresters Life, had $11.89 billion in admitted assets and $496.6 million in surplus as of June 30. The Golden Gate Capital-backed Nassau Reinsurance Group Holdings LP in 2016 acquired the company, which operated at the time as Phoenix Life Insurance Co. It provides insurance, reinsurance, distribution and asset management services.

The combination of the U.S.-domiciled Nassau Life companies and Foresters Life would have $21.19 billion in assets on a pro forma basis using June 30 data and $93.82 billion of life insurance in-force based on year-end 2018 results prior to the impact of reinsurance. The Nassau Life companies ceded business to a combination of affiliated and unaffiliated reinsurers. Foresters Life's largest ceding relationships in 2018 were with Swiss Re Life & Health America Inc. and subsidiaries of Reinsurance Group of America Inc. and Lincoln National Corp. under years-old treaties.