5 February 2014

US pension and life market on cusp of flurry of M&A

Conditions are ripe for a wave of M&A in the US life and pensions market, as life players grow their footprint and multi-line re/insurers reduce their life operations to concentrate on P&C business.

That is the word from John Coughlin, CEO of Safe Harbor Re, who tells Bermuda:Re that he anticipates a “new wave of buy-outs in the US life and pensions market”. He says that a number of players are gearing up to transact, with several large M&A deals having taken place in recent years.

“There is likely to be more combined companies opting to focus on their core business, with a resulting sell off of certain life divisions”, says Coughlin. “And transaction pricing should improve with the combination of rising interest rates and strengthening equity markets. These factors wedded to the wave of interest from private equity and new entrants into the US from both the UK and possibly Japan, should make for a robust M&A enviroment”

Market conditions are likely to help, with Coughlin bullish about the market. “Demographics in the US give cause for positivity. In the annuity space, the baby boomer generation is retiring, meaning that there will be 80 million people retiring over the next ten years”. This represents a significant opportunity for the life and annuity sector, he says, particularly as pension schemes in the US look for buy-out and buy-in solutions to solve funding obligations.

Safe Harbor Re will be one of those companies looking to ride the coming wave and Coughlin is confident that the company will continue to strengthen its offering in the market.

“We will continue to pursue synergies with primary companies and distribution, as well as product design and innovation. And we anticipate primary players seeking out our capital support as they look to grow their business”.