Will MetLife add to the recent wave of M&As in the annuity business with the sale of its bulk annuity line in the U.K.? A report out of London, citing unnamed sources, says the insurance giant is considering dealing MetLife Assurance Ltd., which provides bulk annuity and pension risk management services.
MetLife declined to elaborate on the report. “MetLife continually evaluates its businesses to ensure that we are best positioned to achieve our objectives, deliver superior customer service, support long-term business growth and operate effectively and efficiently. We do not comment on market rumors or speculation,” said Meghan Lantier, a spokesperson for MetLife, in statement emailed to LifeHealthPro.com.
If the deal goes through, it would mark one more significant sale in a recent string of mergers and acquisitions in the annuity space. Private equity outfits, in particular, have been snapping up fixed indexed annuity lines. In December, Athene Holding Ltd. agreed to acquire Aviva USA from parent company Aviva PLC of England for $1.8 billion. That followed its buy of Presidential Life Corp. for $415 million.
Another active private equity player has been Guggenheim Partners, which in recent months has agreed to buy Industrial Alliance Insurance and Financial Services Inc., a Canadian insurer, for $800 million, in addition to the annuity business of Sun Life Financial Inc. for $1.35 billion. The latter deal was noteworthy in that Guggenheim took over a variable annuity block of business. Most of the prior deals have focused on fixed indexed annuities.
Even Warren Buffet got into the annuity takeover spree when Berkshire Hathaway Life Insurance Co. announced a deal to assume Cigna’s variable annuity business, which is in run-off mode.
Annuity insurers are facing the double headwinds of persistent low interest rates that squeeze profit margins and increased regulation on both sides of the Atlantic. Particularly hard hit have been equity-market sensitive variable annuities, which have seen their sales decline as fixed indexed annuities have gained.
Nearly a year ago, MetLife revealed plans to scale back sales of what it termed “capital intensive products” like variable annuities.
Earlier this month, when MetLife released its most recent earnings report, Steven A. Kandarian, chairman, president and CEO, stated the company was moving away from “less capital intensive products” and growing its presence in emerging markets.
For all of 2012, MetLife’s operating earnings hit $5.7 billion, or $5.28 per share, up 22 percent over 2011. By region, earnings growth rose 24 percent in the Americas, 18 percent in Asia and 8 percent in EMEA.
In the Americas, variable annuity sales reached $17.7 billion for all of 2012, which, the company noted, was in line with its target of between $17.5 billion and $18.5 billion.