Empower Retirement shook up the retirement plan market today by agreeing to provide a total of $3.35 billion in ceding commissions and extra capital for the Massachusetts Mutual Life Insurance Company retirement plan business.
Empower — a Greenwood Village, Colorado-based arm of Great-West Lifeco of Winnipeg, Manitoba — is on track to acquire $167 billion in assets, 2.5 million plan participants, and about 2,000 employees.
MassMutual is on track to come away from the deal with about $2.35 billion in extra cash.
- Links to MassMutual deal resources, including a recording of a conference call, are available here.
- A news article about the deal is available here.
Roger Crandall, the chief executive officer of the Springfield, Massachusetts-based mutual life insurer, said in a comment about the deal that MassMutual is pleased to have found a strong, long-term home for the retirement business.
MassMutual believes “this transaction will greatly benefit our policyowners and customers as we invest in our future growth and accelerate progress on our strategy,” Crandall said.
Here are five possible implications of the deal, for financial professionals in the individual life and annuity markets.
1. In spite of low interest rates and investment market turmoil, some companies might still be OK with being in the individual annuity market.
Crandall, for example, said that MassMutual’s strategy “includes strengthening our leading position in the U.S. protection and accumulation industry by expanding our wealth management and distribution capabilities; investing in our global asset management, insurance and institutional businesses; and delivering a seamless digital experience.”
Those goals seem to be compatible with offering annuities and similar products.
On the other hand: Crandall didn’t actually use the word “annuity.”
2. Retirement plan provides might be OK with the idea of being in the individual annuity market.
Empower executives pointed out that the company recently paid $1 billion for Personal Capital, a company that offers automated investment advice services for individuals.
The MassMutual retirement plan business deal should help Empower use Personal Capital tools to grow the individual retirement account rollover business and “expand retail cross-sell capabilities,” according to Empower’s deal conference call slidedeck.