While life insurance analysts ponder the long-term implications of the MetLife-Travelers marriage announced earlier this month, the question for many people is, whats next?
John Nigh, insurance mergers and acquisition specialist for Tillinghast, says the primary motivation in the next round of consolidation will come from medium-sized companies who realize they dont have the scale needed to make the necessary investments in technology “or more broadly speaking, to compete on a qualitative basis.
“I would say they will be the proactive partners in these transactions in that they will be seeking to be taken over,” Nigh says.
But he does not rule out mergers of equals.
“In fact, there are three medium-sized companies now who are engaged in merger talks,” Nigh says, but declining to get specific.
Late last year UBS put out a research report which indicated that the companies most often mentioned in any discussion of possible takeover targetsNationwide, Lincoln and Jefferson-Pilotwould instead be more likely to join together in a merger of equals in some combination for various reasons.
For example, according to the UBS report: Greensboro, N.C.-based Jefferson-Pilots high valuation and its management preference for independence would seem to preclude a takeover; Philadelphia-based Lincolns strength in the upscale individual life and variable annuities market appears redundant with the operations of the potential global acquirers such as AIG or Manulife; and Columbus, Ohio-based Nationwide Financial Services mutual company parentage could be a stumbling block.
Media representatives for all three companies declined to comment on any possible merger talks.
And dont look for any overseas giants to repeat the 1990s trend of grabbing U.S. life operations. “We do not expect any near-term life blockbuster deals with U.S.-domiciled companies as targets,” the UBS report states.
The Europeans have not viewed the acquisition wave of the 90s that put Transamerica, ReliaStar and Aetnas life operations under the ownership of Aegon and ING as a success, according to the report. U.S. operations of other companies such as Allianz and Zurich have either been divested or scaled back, the report notes.
And what of those life insurance operations that are not core to their owners strategic vision?