NU Online News Service, July 22, 2003,5:14 p.m. EDT – An analyst at UBS Investment Securities, New York, has been wondering might happen if MetLife Inc., New York acquired UnumProvident Corp., Chattanooga, Tenn., or if Prudential Financial Inc., Newark, N.J., acquired John Hancock Financial Services Inc., Boston.
The analyst, Andrew Kligerman, does not claim to have evidence that either deal is in the works, but he speculates that acquiring UnumProvident would be “substantially accretive” to MetLife’s earnings, return on equity and book value.
UnumProvident was the top group long-term disability writer in the first half of 2001, with a 29% market share, according to JHA Inc., Portland, Maine.
If MetLife and UnumProvident mated, UnumProvident’s past problems with low group insurance prices and weak group products reserves could carry risks for MetLife, Kligerman writes in a commentary discussing the hypothetical deal.
“Unum’s in-force group and individual disability policies have contributed to poor underwriting results in the past,” Kligerman writes. “For example, Unum management reported during its [first quarter 2003] earnings conference call that its individual disability and group long-term disability claims experience have performed below expectations for the past several quarters.”
If MetLife did buy Unum, “the same concerns that currently weigh down Unum might apply to Met,” Kligerman warns.
Kligerman is even more skeptical about the prospects for a Prudential/Hancock deal.
The Boston Globe published articles in late June about the possibility that the companies might make a deal. The media later published follow-up reports suggesting that the deal had fallen through.
Kligerman notes that both Prudential and Hancock have large investment-management units that manufacture and distribute retail funds and manage institutional funds.
“With about $163 billion in retail and third-party institutional assets under management, Prudential is already one of the top five domestic asset managers, while JHF with about $55 billion in [assets under management], ranks in the top 50,” Kligerman says.
Completing a deal would save the combined company at least $130 million by 2004, Kligerman predicts.
But Kligerman questions what Prudential would get out of a Hancock acquisition.
“Aside from possibly its long-term care insurance franchise, we do not think [John Hancock] offers much more value-added than the potential for cost savings and increased scale, given its commodity product and distribution mix,” Kligerman writes.