Deutsche Bank Names Top Life Insurance Buyout Target

A new report by Deutsche Bank analyst Yaron Kinar looks at the potential for M&A deals in the life insurance industry. Despite recent consolidation in the managed care and property and casualty (P&C) space, Kinar believes that the current environment in the life insurance industry is not a favorable one for large acquisitions.

No big deals in the works
While small-scale deals such as selective purchasing of legacy blocks and acquisitions of asset management businesses remain possible, Kinar believes that the overall life insurance M&A environment will remain quiet for the most part. Kinar sees no large-scale buyouts of core life insurance businesses on the horizon any time soon.

According to the report, the highest probability of M&A activity among life insurers in the near term lies in foreign companies looking for small-cap buyout opportunities in the $2-3 billion market cap range.

Uncertain environment
Kinar mentions uncertainty over new regulatory capital requirements as one major reason why large life insurers such as Metlife Inc MET, Prudential Financial Inc PRU and Lincoln National Corp LNC, will continue to be conservative with acquisitions for the time being.

“We believe that domestic carriers have neither the appetite nor the capital for transformative deals, as they are unlikely to pursue capital raises for such opportunities,” Kinar writes.

Outlook
Although U.S. insurers might not be looking to acquire at this time, the report names StanCorp Financial Group Inc SFG as the most likely target for an international buyout.

Deutsche Bank currently has a Buy rating on MetLife and Hold ratings on StanCorp, Prudential and Lincoln National.