MassMutual to buy Great American Life Insurance

The deal will reinforce MassMutual’s focus on its retail annuities business. Last year, the company sold its defined-contribution record-keeping business to Empower Retirement via a reinsurance transaction with a ceding commission of $2.35 billion.

Massachusetts Mutual Life Insurance Co. is snapping up another major annuity provider, Great American Life Insurance Company, for $3.5 billion, the company announced Wednesday.

Cincinnati-based Great American was the 13th biggest fixed annuities seller during the first three quarters of 2020, at about $2.4 billion, also making it the 20th biggest seller of annuities overall, according to data from Limra’s Secure Retirement Institute. The company, which is wholly owned by American Financial Group, provides fixed and fixed indexed annuities.

The deal appears to reinforce MassMutual’s focus on its retail annuities business. Last year, the company sold its defined-contribution record-keeping business to Empower Retirement via a reinsurance transaction with a ceding commission of $2.35 billion. At the time the deal was announced, MassMutual’s DC business represented about $167 billion in assets among 26,000 employer plans and 2.5 million participants.

The Great American Life Insurance sale is expected to close during the second quarter, MassMutual stated in its announcement.

MassMutual was the fourth-leading fixed annuities seller during the first three quarters of 2020, at about $5.9 billion, and the ninth-biggest annuities seller overall, according to the Secure Retirement Institute.

“This acquisition is an excellent strategic fit for MassMutual that will broaden our product offerings, expand our distribution and generate additional earnings, allowing us to build a true lifetime income franchise and deliver ongoing value to our policyowners and customers,” MassMutual CEO Roger Crandall wrote in the announcement.

Great American Life president Mark Muething will continue to lead the firm as an independent subsidiary of MassMutual. The company, which has about 600 employees, will remain based in Cincinnati. The firm’s insurance broker-dealer unit, Great American Advisors, has 10 employees, according to its latest Form ADV filing.

“This transaction presents an excellent opportunity for Great American Life and MassMutual to be one of the leading providers of traditional fixed and indexed annuities in major distribution channels and markets,” American Financial Group co-CEO S. Craig Lindner wrote in the announcement.

Amid prolonged low interest rates and a volatile stock market, sales of fixed indexed annuities plummeted by about 30% in 2020 compared to 2019 sales, according to date from the Secure Retirement Institute. But demand for traditional fixed deferred annuities surprisingly increased during the fourth quarter, pulling full-year sales ahead of 2019.

The Great American Insurance acquisition follows another deal recently announced by MassMutual. In December, the company indicated it will pick up Stone Ridge Asset Management’s registered broker-dealer and the associated RIA fintech service, Flourish. That deal is expected to close during the first quarter, according to the announcement.