Merger pace slow for life insurers in 2010

U.S. life insurers had a fairly small appetite for mergers and acquisitions last year, with much of the activity encompassed in AIG's shedding of its foreign life insurance subsidiaries
SEP 16, 2011
U.S. life insurers had a fairly small appetite for mergers and acquisitions last year, with much of the activity encompassed in AIG's shedding of its foreign life insurance subsidiaries. There were 20 announced deals, down from 22 in 2009. By contrast, between 2000 and 2009, there was an annual average of 49 transactions, according to a report from Conning & Co. 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. Volume from 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., made up the lion's share of M&A activity from U.S.-based insurers. The AIG Star and Edison deal was valued at 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 this year, many of the announced purchases of life insurers involved operations in Asia.

DISTRIBUTION UNITS

M&A activity overall for U.S.-based insurers was much rosier, as the number of deals in the United States rose to 436 last year, up 36% from 2009, and the reported value climbed 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 insurers' being flush with cash last year, helped push much of the sales activity, according to Conning. E-mail Darla Mercado at [email protected].

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