American Economic to Promote Annuity Company to MassMutual for $3.5 Billion

American Monetary Group Inc. AFG -.37% on Wednesday claimed it agreed to offer its annuity…

American Monetary Group Inc.

AFG -.37%

on Wednesday claimed it agreed to offer its annuity business to Massachusetts Mutual Life Insurance plan Co. in a $3.5 billion dollars offer.

The acquisition will provide new strategies for the huge Springfield, Mass., firm, a single of the nation’s oldest everyday living insurers, to offer its products and solutions. MassMutual has extensive had a person of the largest fleets of career brokers in the U.S., and the offer will include opportunities to promote by financial institutions, independent broker dealers and independent agents, analysts explained.

American Money said the transaction will mark its exit from the marketplace for mounted and indexed annuities, which are common retirement products and solutions with conservative savers. It will concentrate far more tightly on its property-and-casualty insurance policies operations.

The Cincinnati-dependent insurance provider is the most current U.S. insurance company to divest annuity functions, as ultralow desire rates force companies’ abilities to receive wholesome earnings on the product or service line.

The transaction is the 3rd existence-insurance policies-industry transaction in a 7 days and one particular of several about a ten years of frenzied industrywide activity, as insurers have been narrowing their target and divesting product or service strains, considerably of it motivated by the small interest-fee ecosystem. Insurers spend customers’ rates till desired to pay claims, so low costs make numerous solutions complicated to profitably offer.

The fixed and indexed annuities bought by American Money are roughly akin to lender certificates of deposit. The pandemic has harm profits at quite a few companies, for the reason that annuities frequently are bought in an previous-fashioned way: Insurance plan brokers sit down with probable buyers in face-to-confront discussions.

MassMutual is generating a wager that annuities will go on to be popular with conservative consumers. The organization is owned by its policyholders and is non publicly traded, so it has extra leeway than some publicly traded insurers to sell solutions that are out of favor with Wall Avenue investors and analysts.

This offer is diverse from quite a few of the earlier kinds industrywide since numerous of the purchasers have been non-public-fairness, asset-management and other forms of monetary firms scooping up blocks of life-insurance policies guidelines and annuities, and even complete operating models.

In numerous bargains involving these kinds of fiscal potential buyers, the newcomers goal to profit from investment decision-administration fees and by savvy investments of the premiums compensated by shoppers. MassMutual is a unusual so-identified as strategic purchaser in this heady deal exercise.

Analysts reported MassMutual, a single of the nation’s economically strongest insurers, has sufficient methods to fund the order.

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

American Fairness Expense Lifestyle Keeping Co.

in a joint transaction with

Athene Holding Ltd.

Less than that proposed offer, MassMutual would have obtained American Equity’s insurance subsidiaries and all of its workforce, makes and distribution arrangements.

But American Fairness nixed the offer.

Underneath the phrases of the new pact, MassMutual will receive Wonderful American Everyday living Insurance Co. and its two insurance policies subsidiaries, Annuity Traders Daily life Insurance coverage Co. and Manhattan Nationwide Lifestyle Insurance policies Co., the corporations said. Fantastic American Everyday living will operate as an impartial subsidiary of MassMutual.

Prior to completion of the offer, American Money will receive about $500 million in serious-estate-similar partnerships and directly owned actual estate from Good American Everyday living Insurance policies, it reported. American Money explained it “expects to figure out an after-tax obtain on the sale of $620 million to $690 million” upon closing.

Create to Leslie Scism at [email protected]

Corrections & Amplifications
Massachusetts Mutual Lifestyle Insurance coverage Co. is based in Springfield, Mass. An previously edition of this article improperly stated it was based in Boston.

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