AIG, Voya discuss $10-billion merger, but deal reportedly fell apart over price.
Although its rumored takeover of Voya Financial Inc. fell apart, American International Group Inc. may still be in the hunt for mergers and acquisitions. Bloomberg reported that the proposed $10 billion deal was scuttled in November when the sides failed to agree on the price.
Nevertheless, AIG’s reported interest in the M&A market suggests that the insurance giant is ready to expand again after its slow emergence from last decade’s financial crisis. As Bloomberg reported, the company has shed roughly $100 billion in assets since 2008 to pay back a government bailout and streamline operations. The firm received a significant boost in September when federal regulators stopped labeling it as a systemically important financial institution.
AIG CEO Brian Duperreault, who joined the company last year, has publicly stated his intention to pursue strategic deals. “I want us to be better balanced and have more diversification on earnings stream,” Duperreault told analysts in a November conference call. He identified life insurance, international markets, personal lines, and small- to middle-market U.S. firms as ideal sectors for expansion.
Despite the failure of the Voya deal, AIG may still eye other acquisitions. A column in The Washington Post listed Hartford Financial Services Group, Inc., CNA Financial Corp., QBE Insurance Group Ltd., RSA Insurance Group, PLC, and The Hanover Insurance Group, Inc. as potential M&A partners for the company. Since the price of AIG stock still rose following the deal’s collapse, the Post speculated that the company’s shareholders would prefer growth through acquisitions rather than stock buybacks.
Voya, meanwhile, has actively sold some of its assets in recent months. In December, it sold its closed variable, individual fixed, and fixed indexed annuity lines to a group of investors led by affiliates of Apollo Global Management, LLC, Crestview Partners, and Reverence Capital Partners. The Washington Post suggested that divesting this volatile business line could revive merger talks with AIG or other entities, including Principal Financial Group Inc., Lincoln National Corp., and Manulife Financial Corp.
At the time of the annuity deal, Voya stated that it would shift its focus to “higher-growth, higher-return, capital-light retirement, investment management and employee benefits businesses.” On the day it announced the annuity sale to Apollo, Voya agreed to a $19 billion reinsurance deal with Athene Holding, Ltd. for its fixed and fixed indexed annuity liabilities.
An Active Year Ahead
With AIG seemingly on the lookout for acquisitions, 2018 could turn out to be an active year for insurance M&As, following a trend that began last year. A survey by Willis Towers Watson and Mergermarket revealed that while the insurance industry saw fewer M&As in 2017, the value of those deals rose. In the first half of 2017 alone, 11 deals worth more than $500 million were completed, compared to 14 for all of 2016.
Late last year, CVS and Aetna agreed to merge in a $67.5 billion deal currently pending review by federal regulators. If approved, the union would be the largest merger in the history of the U.S. healthcare industry.
Aetna was involved in another significant insurance deal when it agreed to sell its group life and disability insurance lines to The Hartford for $1.45 billion in cash in October. Over the summer, financial holding company Markel Corp. expanded its presence in the insurance space with its $919 million purchase of State National Companies, Inc.