The Goldman Sachs Group Inc. announced that it has agreed to acquire the variable life insurance and variable annuity business of Allmerica Financial Corp.

The transaction, which includes Allmerica’s wholly owned life insurance subsidiary, Allmerica Financial Life Insurance and Annuity Company, is expected to close later this year, subject to the normal regulatory approvals.

Goldman Sachs is projected to pay approximately US$275 million in cash upfront, and an estimated US$70 million over three years, for the firm. The final purchase price will be determined at closing and is subject to adjustments to reflect changes in equity market levels, implied equity market volatility, interest rates, capital levels and the performance of the business through closing.

The variable life insurance and variable annuity business, which is no longer open to new policies, represents a total of approximately $11 billion in assets and some 200,000 policyholders. “This transaction is a good example of our firm using its expertise to deliver a solution to a company with a non-core life insurance business,” said Allan Levine, managing director and head of Goldman Sachs’ Reinsurance business, adding “The addition of this acquisition to our existing reinsurance business will enhance our ability to help life insurance companies looking to manage risk and free up capital from their closed or inforce businesses.”

In connection with the acquisition, Allmerica Investment Trust, a roughly US$3 billion mutual fund complex owned by Allmerica, will be merged with Goldman Sachs Variable Insurance Trust, subject to regulatory and policyholder approvals.