Insurers to Favor Deals Over Buybacks, Deloitte Says
The largest insurers may turn to markets outside the U.S. for deals, as MetLife Inc. did last year when it acquired Chilean pension provider AFP Provida SA, Lukan said. Mid-sized firms are moving toward transactions after ignoring them during the financial crisis, he said.
"Some organizations allowed their corporate-development capabilities to atrophy," he said. "We are definitely seeing multiple mid-sized life and annuity players looking to rebuild capabilities."
Deloitte said deals may be constrained by increasing regulatory scrutiny. Benjamin Lawsky, New York's financial services regulator, required protections for policyholders before approving the Guggenheim and Apollo deals. Apollo's insurer won support from the Iowa regulator after saying it would hold extra reserves.
"Regulators have expressed concern that private-equity firms typically have a shorter-term business model than do traditional carriers," Deloitte said. "One critical question going forward is whether these capital market buyers may reconsider their recent attraction to the annuities industry."