(Bloomberg) — Mergers and acquisitions may pick up for companies that are seeking to unload blocks of long-term care insurance (LTCI), said Patrick Fels, a banker at Goldman Sachs Group Inc.
“It’s an area where it’s just ripe for M&A activity if things could just fall into place,” Fels said Monday during a panel on dealmaking at the American Council of Life Insurers’ (ACLI’s) annual conference in Chicago. While there are more companies seeking to exit long-term care insurance than to enter, more buyers are emerging, he said.
Nassau Reinsurance Group Holdings LP, which was formed this year with backing from private-equity firm Golden Gate Capital, is among firms looking to take on obligations from other insurers. Nassau announced last week that it was acquiring units from Universal American Corp. HC2 Holdings Inc., led by Philip Falcone, said in April that it agreed to buy an LTCI business from American Financial Group Inc.
See also: What does that Harbinger LTCI deal mean?
Universal Chief Executive Officer Richard Barasch said in an Oct. 8 statement that “while this transaction will generate a loss, it allows us to exit the long-term care business, as well as other non-strategic business lines, and will free up additional capital.”
LTCI policies pay for home health aides or residence in nursing homes. The industry has been burned by higher-than-expected costs and low returns on investment portfolios.
Fels didn’t identify companies that he considers possible buyers or sellers of blocks of long-term care coverage.
—With assistance from Christie Boyden in New York.