American Money to Promote Annuity Business enterprise to MassMutual for $3.5 Billion

American Financial Group Inc.

AFG -1.01{23996c8f5258275f450f40d5a867c22ad72c04895f28059581bc525cc6cb4bd0}

on Wednesday mentioned it agreed to sell its annuity enterprise to Massachusetts Mutual Lifestyle Insurance policies Co. in a $3.5 billion hard cash offer.

The acquisition will produce new methods for the big Springfield, Mass., corporation, one particular of the nation’s oldest lifetime insurers, to market its items. MassMutual has prolonged experienced a single of the biggest fleets of vocation brokers in the U.S., and the offer will include opportunities to market by banking companies, unbiased broker dealers and impartial agents, analysts explained.

American Economic mentioned the transaction will mark its exit from the sector for set and indexed annuities, which are popular retirement items with conservative savers. It will concentrate a lot more tightly on its home-and-casualty insurance functions.

The Cincinnati-based insurance provider is the newest U.S. insurer to divest annuity operations, as ultralow interest charges force companies’ skills to make healthy gains on the item line.

The transaction is the 3rd life-coverage-industry transaction in a 7 days and just one of quite a few about a 10 years of frenzied industrywide action, as insurers have been narrowing their aim and divesting item lines, substantially of it motivated by the reduced fascination-level ecosystem. Insurers spend customers’ premiums right until desired to pay back promises, so very low prices make several solutions tough to profitably provide.

The fixed and indexed annuities marketed by American Money are roughly akin to lender certificates of deposit. The pandemic has harm sales at several firms, simply because annuities frequently are marketed in an outdated-fashioned way: Insurance agents sit down with potential customers in face-to-facial area discussions.

MassMutual is making a guess that annuities will go on to be common with conservative shoppers. The business is owned by its policyholders and is non publicly traded, so it has far more leeway than some publicly traded insurers to promote solutions that are out of favor with Wall Road investors and analysts.

This deal is unique from quite a few of the earlier types industrywide because lots of of the prospective buyers have been non-public-fairness, asset-management and other sorts of economical companies scooping up blocks of daily life-insurance coverage policies and annuities, and even entire running units.

In a lot of discounts involving this sort of money purchasers, the newcomers intention to profit from investment decision-management costs and by savvy investments of the rates paid out by prospects. MassMutual is a rare so-termed strategic customer in this heady deal action.

Analysts explained MassMutual, a single of the nation’s economically strongest insurers, has sufficient sources to fund the buy.

The offer follows an unsuccessful work in October by MassMutual to acquire

American Fairness Investment Daily life Holding Co.

in a joint transaction with

Athene Keeping Ltd.

Under that proposed offer, MassMutual would have acquired American Equity’s insurance plan subsidiaries and all of its workforce, brand names and distribution arrangements.

But American Equity nixed the offer.

Underneath the phrases of the new pact, MassMutual will purchase Great American Existence Insurance Co. and its two insurance subsidiaries, Annuity Investors Life Insurance policies Co. and Manhattan Nationwide Lifestyle Insurance coverage Co., the businesses stated. Great American Everyday living will run as an impartial subsidiary of MassMutual.

Prior to completion of the offer, American Financial will acquire about $500 million in genuine-estate-linked partnerships and specifically owned genuine estate from Great American Lifetime Insurance, it said. American Economic said it “expects to figure out an after-tax obtain on the sale of $620 million to $690 million” on closing.

Write to Leslie Scism at [email protected]

Corrections & Amplifications
Massachusetts Mutual Existence Insurance policies Co. is centered in Springfield, Mass. An before edition of this report incorrectly claimed it was centered in Boston.

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Appeared in the January 28, 2021, print edition as ‘MassMutual Acquires Annuities Business enterprise.’

Rachel C. Carpenter

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