AIG shows appetite for large M&A deals: Reports
January 17, 2018 by Steve Evans
Insurance giant American International Group (AIG) has reportedly regained its appetite for large mergers & acquisitions (M&A) deals, with a significant war chest of billions ready to put to work, since new CEO Brian Duperreault came on board.
Bloomberg first reported that AIG had been in the running to acquire U.S. life insurance specialists Voya Financial, but terms could not be reached.
The price mooted for that acquisition was greater than $10 billion, it is said, and analysts at Credit Suisse have estimated that AIG could have as much as $6 billion or $7 billion of excess capital ready to put into M&A deals, while more could be raised for a double-digit or larger transaction by the time it was ready to be consummated.
Voya has since entered into an agreement with Athene Holdings and private equity owner Apollo which saw Athene reinsure about $19 billion of Voya’s fixed and fixed indexed annuity liabilities.
But the analysts believe that makes Voya an even more attractive proposition for an acquisition, so don’t rule out another try from Duperreault’s AIG.
Ryan Tunis, an analyst at Credit Suisse wrote, “AIG’s reported interest in VOYA shows that AIG is as willing to do major M&A to strengthen its life business which is currently about 50% of earnings. VOYA would strengthen AIG’s position in US individual retirement, give AIG an employee benefits stop loss business and investment management business. More importantly, it would add earnings with P&C-like cash flow conversion (90-100%) to the consumer business at AIG that’s currently easier to value.”
A stronger life business and strengthened investment management could add both diversification and greater efficiency to the AIG business model, relieving some pressure on its personal and commercial lines property focus and even releasing more potential in those established sides of the business due to a better diversification mix.
Bloomberg suggested that the news that AIG had been seriously looking at Voya means the insurer is back in the market for large-scale M&A deals.
Duperreault has made it very clear since taking over the helm at AIG that he would be interested to grow the company through strategic acquisitions, a change in direction from the down-sizing AIG has suffered over a number of years.
Morgan Stanley analysts notes that de-emphasizing the property and casualty business by adding greater diversification into life insurance could be a solid move for the insurer and is one of the goals of the management.
AIG had sold around $100 billion of assets in its downsizing, but these reports and Duperreault’s ambitions suggest that growth will be the next move for the insurance major.
