Citi, Wells, BB&T among Likeliest Buyers of Big Insurance Companies

Article excerpt

Who wants to marry an insurance underwriter?

With the passage of the financial services reform law, and more recently ING Group's bid for Aetna, the prospect of banks and insurance companies heading down the aisle takes on a new immediacy.

Notwithstanding the bid for Aetna -- and despite the apparent availability of a number of other large insurers -- most banking companies are hesitating to declare themselves interested in acquiring one. And none has taken the plunge.

But a small number of banking companies -- including Citigroup Inc., Wells Fargo & Co., and BB&T Corp. -- may be more open to the idea. And more could follow if financial stocks rebound or if banks determine that distribution can be improved by buying underwriting capabilities, industry observers and financial services executives said.

The conventional wisdom on banks' buying insurers has swung wildly in the months since the passage of the reform law. Initially, such mergers were touted as one of the likeliest outcomes of the new law. But soon thereafter, as banking companies took stock of their shares' weak standing -- and of insurers' shares' weaker standing -- they lost interest.

"Nothing's happening now," said Sean J. Ryan, an analyst with Byrne, Ryan & Co. in White Plains, N.Y. "Virtually all activity is contingent on a rebound in share prices," he said.

John M. Wepler, vice president of mergers and acquisition services at Marsh Berry & Co. of Concord, Ohio, said, "We don't know of banks other than the gorillas that are interested in acquiring the underwriting component."

Still, it's worth taking a look at some of the gorillas, and others, that might now be mulling making such a play.

For one thing, there are the European players, such as ING, ABN Amro NV, and Amsterdam-based Aegon NV. Industry observers generally see these as the likeliest near-term buyers of U.S. insurance companies partly because such companies already combine banking and insurance. Their expertise makes them better bidders than U.S. banking companies and their size gives them an advantage over many U.S. insurers.

If you're a big European insurer and you want to be in one of the largest insurance markets in the world, "you're going to want to buy U.S. life insurance companies," said Robert A. Lee, an insurance analyst with PaineWebber Inc. of New York.

Outside Europe the pickings get slimmer.

One obvious possibility is Citigroup, said Mr. Ryan of Byrne, Ryan. "You may not actually need a dramatic move in the stocks to make Citi a plausible near-term buyer. But for the rest of the woeful bank industry, you're going to have to wait and see," he said.

Raphael Soifer, a former banking analyst with Brown Brothers Harriman & Co. in New York, agreed that Citigroup is in a different position than any other U.S. banking company. That's because Citigroup already owns a large life insurance company and a property casualty insurer and anything they were to buy could be folded into those holdings.

"I think there's every chance in the world, given the right price and the right situation, that Citi will be buying insurance companies," Mr. Soifer said, adding that it would have to be large in order to be worth the company's effort.

A spokeswoman for Citigroup did not return calls seeking comment.

Meanwhile, a spokesman for Wells Fargo said the company would be interested in buying an insurer only if doing so increased its distribution capabilities.

"We do not have an immediate need to acquire a large insurance company but we continue to explore opportunities that first of all would benefit our shareholders and second, enable us to expand our distribution network for selling insurance products," he said. …