Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Behavioral Finance

Annuity Issuers Size Up Benefits M&A Market

Your article was successfully shared with the contacts you provided.

Executives at three big U.S. annuity issuers are open to acquiring group benefits businesses but believe recent deal prices have been high.

The executives — at Lincoln Financial, MetLife Inc. and Prudential Financial Inc. — talked about the idea of making a deal last week, during conference calls with securities analysts. 

(Related on ThinkAdvisor: Stifel ‘Will Always Look at Good Deals’: CEO)

The companies held the calls to go over first-quarter earnings reports. Each of the companies posted a recording of its call in the investor relations section on its website.

Dennis Glass, chief executive officer of Radnor, Pennsylvania-based Lincoln Financial, and Randy Freitag, the company’s chief financial officer, gave the most detailed answers to questions about potential deals.

Lincoln Financial executives said the effects of low interest rates on interest-sensitive products, such as many types of life and annuity products, makes the idea of acquiring businesses with insurance products driven by mainly by morbidity and mortality risk attractive.

Lincoln Financial now gets about 25% of its earnings from those sorts of products, such as group life plans and group dental plans, and would like to increase the share of earnings coming from those sorts of products to 33%, the executives said.

Glass said he’d heard “a couple of rumors about certain companies divesting noncore businesses.”

Today, however, “there’s not much that we’re seeing that fits what we’re interested in,” Glass said.

Freitag gave figures implying that, if Lincoln Financial was interested in making a deal, it might be able to pay up to about $1.8 billion for the right target.

Stephen Pelletier, the chief operating officer in charge of Prudential’s U.S. businesses, says Prudential has the strength to be an acquirer but generally prefers to expand through organic growth.

The group benefits business is an attractive business, Pelletier said.

Some of the recent group market deals have taken place at “fairly full valuation, shall we say,” Pelletier said.

Prudential will take a disciplined approach to how it values any deal opportunities, Pelletier said.

John Hele, chief financial officer of New York-based MetLife, said MetLife has capital it could use to make a deal and could get additional capital from the markets.

Any deals would have to make sense strategically and earn more than their cost of capital, Hele said.

“Please remember that we do acquisitions of a larger size,” Hele said, referring to two past MetLife deals with values over $10 billion. 

— Read Platform Partners and Hilb Complete Benefits Deals on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.