Merger pace slow for U.S. life insurers in 2010

U.S. life carriers had a fairly small appetite for mergers and acquisitions in 2010, with much of the activity taking place in AIG’s shedding of its foreign life insurance subsidiaries.
There were 20 announced deals last year, down from 22 in 2009. In contrast, between 2000 and 2009, there was an annual average of 49 transactions, according to a report from Conning Research.
However, the value of the deals climbed, as the aggregate announced value of the mergers was $23.8 billion, up from $840 million in 2009.
The spinoffs of American International Group Inc.’s life operations, specifically its November sale of American Life Insurance Co. to MetLife Inc. and of AIG Star Life Insurance Co. and AIG Edison Life Insurance Co. to Prudential Financial Inc. The volume of both deals made up the lion’s share of M&A activity from U.S.-based carriers: The AIG Star and Edison deal snagged about $4.8 billion, while the Alico deal cost MetLife about $16.2 billion.
Other deals included ACE Ltd.’s purchase of New York Life Insurance Co.’s Hong Kong and Korea life insurance business.
Last year, a number of insurers also shed underperforming life insurance units in an attempt to focus on their core products, according to Conning. For instance, The Royal Bank of Canada sold off Liberty Life Insurance Co. to Athene Holdings Ltd. for $628 million. In another case, Old Mutual PLC sold its U.S. life insurance business to Harbinger Capital Partners for $350 million.
So far in 2011, many of the announced purchases of life carriers involved operations in Asia, including a the sale of AIG’s Nan Shan Life Insurance Co. to Ruen Chen Investment Holding Co. for $2.16 billion.
M&A activity overall for U.S.-based insurers was much rosier, as the overall number of deals in the U.S. rose to 436 in 2010, up 36% over 2009, and the reported value climbed by 224% to $46.5 billion. Merger activity involving distribution units drove much of the activity, with 243 transactions taking place last year. In total, some 436 transactions involving a U.S. company took place. “Specialty underwriting units were a strong focus for activity, as were specialty distribution groups,” said Stephan Christiansen, director of research at Conning.
An improved economy, plus carriers’ being flush with cash in 2010, helped push much of the sales activity, according to Conning Research.