Kansas City Life’s purchase of Grange Life reflects larger industry trends toward life insurance mergers and acquisitions.
After announcing its acquisition of Grange Life Insurance from Grange Mutual Casualty for $77.2 million, Kansas City Life told the Kansas City Business Journal that the merger could boost its annual life insurance premium targets by more than 50% — up from the $179.9 million in net premiums in 2017.
The deal, which involves Kansas City Life acquiring all outstanding stock in Grange Life, is expected to close by the end of the third quarter. With Grange Life headquartered in Columbus, Ohio, the Ohio Department of Insurance will review the transaction and have final say on its approval.
Deal Gets High Marks
After the deal was announced, rating agency A.M. Best reaffirmed its financial strength rating of “A” on Kansas City Life. The firm noted the increased distribution platform and cross-selling opportunities the acquisition of Grange Life affords Kansas City Life. Although Kansas City Life would take an initial hit to its risk-adjusted capitalization base as it acquires the new company, the life insurer would recoup any losses over time as the integration of Grange Life is expected to add to its earnings. Additionally, A.M. Best pointed out that Kansas City Life has successfully incorporated other companies into its operations as well.
Executive Vice President of Kansas City Life Walter Bixby will be overseeing the acquisition. The firm also announced that after the deal is finalized, Grange Life President Theresa Mason will continue in her current role. The company’s headquarters will remain in Columbus, Ohio.
Based in Kansas City, Missouri, and founded in 1895, Kansas City Life sells life insurance and annuities in 49 states and the District of Columbia. Grange Life operates in Georgia, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and Wisconsin via a network of independent agents who will continue to service and distribute Grange Life and Kansas City Life products.
Active Year for M&As
So far, 2018 has been an active year for insurance M&As, particularly in the life and annuity space. Private equity outfit Cornell Capital recently snapped up the the runoff life and annuity business of The Hartford — Talcott Resolution — for over $2 billion. That deal marked another in a series of life and annuity business buys by private equity that included Blackstone’s acquisition of fixed annuity provider Fidelity & Guaranty Life last year, and Apollo Global Management’s more recent takeover of Voya Financial’s closed book of variable, individual fixed, and fixed indexed annuities.
Not all insurance M&As have centered on life insurance, though. In March, The Hartford agreed to acquire the renewal rights of Foremost Insurance Co.’s small business policies from Farmers Exchanges. Earlier this year, AIG inked an agreement to acquire Bermuda-based reinsurer Validus Holdings for $5.56 billion.
This M&A activity may once again vault the U.S. into the lead among all regions for insurance transactions in 2018. Last year, Clyde & Co reported 176 M&As within the U.S. insurance industry, elevating it to the top spot globally.
For insurance agents who do business with companies involved in M&As, it’s vital to ensure that acquiring companies have the financial strength and operational expertise to continue to service the policies they’ve sold to their clients. You’ll likely want to do research into transactions like Kansas City Life’s so that you can answer questions your clients may have about any changes they can expect in their coverage.