Who’s Next?

It seems that whenever a sizeable deal is announced in the life insurance business, the first question almost always asked is: Who’s next?

Such was the case when Lincoln National and Jefferson-Pilot announced they were getting together earlier this month in what was billed a merger of equals, although Lincoln was buying out Jeff-Pilot.

But we’ll get to who’s next later.

This deal was generally greeted positively and as something that each of these companies needed to do for a variety of reasons. There were a number of debunkers as well, however.

The companies plan to combine their operations under the Lincoln Financial Corp. name and I’m sure that many of the details of the combined operation will be worked out along the way, if they haven’t already been.

But as more of these deals get done, I find that as a longtime observer of the business I have mixed feelings about consolidation.

On the one hand, I realize that consolidation exerts a strong pressure on smaller or mid-size companies in an age where the industry is seeing a relatively small number of insurers turn into Brobdingnagian corporations. Not only are these companies then positioned to tower over their smaller brethren in the business and push their weight around, but they are also in better shape to compete with behemoths in the banking and securities worlds.

On the other hand, in many of the deals where one company gobbles up another, the gobblee’s identity is usually subsumed into the gobbler’s. And what happens in these cases is that a well-known brand (something that is part of the history of the business) is gone forever.

I hope this doesn’t happen with the parties in the Lincoln/Jeff-Pilot deal. We know the Lincoln name is going to stick around, but I’d hate to see a fine brand like Jefferson-Pilot consigned to oblivion instead of continuing to flourish (albeit as part of a now larger corporation).

Happily, there have been some recent exceptions to this pattern and I think they make my point. Take the Manulife/John Hancock deal. Manulife wisely, I believe, realized the power of the Hancock brand and kept it alive and well.

Same goes for Metropolitan and New England Financial. And AIG and American General.

In all these cases the acquirers knew the strength of the brands they were buying and kept them going strong.

When Lincoln and Jefferson-Pilot announced their deal, the who’s next question came up with a relatively short list of candidates (after all, so many candidates have already been snapped up). On that short list: Nationwide Financial Services, Principal Financial Group, and Protective Life Corp.

Meanwhile, the list of prospective acquirers hovering in the background grows: Metropolitan, Prudential, AXA, Manufacturers, Sun Life.

It’s interesting how many of these potential acquirers were once mutual companies. Proponents used to argue when a demutualization was proposed that it would allow a company to use stock to make acquisitions and grow.

Sure looks like they were right.

Steve Piontek

Editor-in-Chief