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MassMutual Closes $3.5B Great American Life Deal

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What You Need to Know

  • MassMutual likes Great American's products and distribution network.
  • Great American's 600 employees will continue to work out of their current offices, in Cincinnati.
  • MassMutual may now be the fourth biggest U.S. life and annuity issuer, in terms of net admitted assets.

Massachusetts Mutual Life Insurance Co. has closed on a $3.5 billion deal for Great American Life Insurance Co. and four Great American Life affiliates.

MassMutual already was the seventh biggest U.S. life and annuity issuer, based on net admitted asset figures compiled by Moody’s Investors Service.

The Springfield, Massachusetts-based insurer ended 2020 with about $313 billion in net admitted assets, and Great American Life had about $39 billion in assets.

Great-American Life is a major issuer of fixed and non-variable indexed annuities, and it makes about half of its annuity sales through banks.

MassMutual is now the fourth biggest life and annuity issuer. It ranks second, after New York Life Insurance Co., among companies that continue to express a strong interest in selling a wide range of individual life insurance and annuity products in the United States.

Like New York Life, MassMutual is a mutual insurer, meaning that it’s owned by its own policyholders, not by public stockholders.

For financial professionals and their clients, the deal could mean that the life and annuity market will be shaped more by companies that think in terms of how everything will look in 50 years, and less in terms of how everything will look next quarter.

The History

Great American is a Cincinnati-based offshoot of a company that came to life in 1872, as German American Insurance Co. The New York-based company changed its name to Great American Insurance Co. in 1918, in response to World War I.

The property and casualty company formed a life insurance subsidiary, Great American Life, in 1961.

National General Corp., a conglomerate, acquired Great American and Great American Life in 1968 and moved the companies’ home office to Los Angeles.

Carl Lindner Jr., a Cincinnati-based businessman, acquired control over National General Corp. and its insurance operations in 1973. He then merged the companies into American Financial Corp. and focused American Financial on the sale of insurance.

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American Financial now trades on the New York Stock Exchange, as American Financial Group Inc.

The parent company continues to have a large P&C insurance operation, but executives hinted for months that they were trying to make a deal for the life business.

New accounting rules make the financial performance of life and annuity operations look more volatile, by requiring publicly traded U.S. issuers to put ups and downs in the estimated value of assets in net earnings. The rules have pushed some U.S. issuers to put life and annuity businesses in the hands of mutual insurers, private equity companies, or other companies that face less concern about quarter-to-quarter shifts in net earnings.

American Financial and MassMutual announced MassMutual’s agreement to acquire Great American Life in January.

The Deal

MassMutual paid $3.5 billion in cash for Great American Life. The buyer agreed to hire about 600 Great American Life employees and keep them in offices in Cincinnati, with Mark Muething, the current president, continuing to lead the business.

The Future

Roger Crandall, the CEO of MassMutual, said in a comment about the deal that it will help MassMutual reach more people.

“This acquisition immediately broadens our product offerings, further diversifies our distribution capabilities, and generates additional earnings,” Crandall said.

Analysts’ Views

Analysts at S&P Global Ratings said in an assessment of the deal that the rating agency has some concern about Great American Life’s focus on the fixed and non-variable indexed annuity markets.

Aggressive competition and low interest rates on bonds and other fixed-income investments are hurting non-variable indexed annuity sales, the analysts said.

But the analysts predicted that Great American will benefit from support from MassMutual.

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