Variable annuity blocks: Deal activity

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Overview

In the last few months, we have seen several large insurance companies divest their variable annuity blocks and expect this trend to continue through 2018 and beyond. The recently announced sales by the Hartford and Voya, along with Metlife’s spinoff of the Brighthouse business, and AXA US’s planned IPO in 2Q 2018 are just the beginning of what we see as a trend that is similar to the fixed annuities divestitures that took place between 2011 and 2015. In most of these divestitures, the announcements were well received and sellers were rewarded via significant increases in their market capitalization. These events have not gone unnoticed by industry executives.

Investors now perceive an opportunity to acquire these legacy blocks and transition them out of a publicly-traded, short-term-earnings focused entities and run them off as privately held entities away from the scrutiny of public shareholders and the analyst community. Furthermore, investors see an opportunity to consolidate these legacy blocks in order to reduce the per-policy costs of administering these regulated products. This could lead to an increase in the overall profitability of these runoff businesses as a whole.

variable annuity deals

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John Marra

Insurance Deals Leader, PwC US

Mark Friedman

Partner, Deals Practice, PwC US

Simpa Baiye

Director, Life Actuarial Services, PwC US

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