New Life and Annuity Deals May Be Complicated

Salem said he believes that concerns about life insurance company reserves for products such as long-term care insurance, variable annuities with minimum benefits guarantees, and life insurance policies with certain types of benefits guarantees have made traditional deals involving one large life insurance company acquiring another big life insurance company rare.

In recent years, he said, the buyers have been trying to use deals to cope with the difficulty of increasing size through organic growth, and to cope with advances in technology and other changes.

In many cases, Salem said, the sellers have been making deals to dispose of subsidiaries or blocks of business that are no longer core to their operations.

Life insurers have probably already made most of the deals that involve attractive, non-core units and blocks of business that are easy to separate from the parent companies, Salem said.

The deals in the pipeline now are more complicated, Salem said.

Another speaker, Chad Stogel, a vice president at Spectrum Asset Management Inc., said during a separate life sector session that efforts to transfer long-term care insurance risk could be especially challenging.

The ceding commissions for selling a whole block of long-term care insurance are "through the roof," Stogel said.

Stogel said he could picture reinsurers doing LTCI deals that would involve just a limited slice of LTCI risk, such as reinsurance for a block's interest rate risk.

— Read Investors Helping Life Insurers Shift to Pension Transfer Market: Analyst, on ThinkAdvisor.

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