Great-West Lifeco subsidiary Empower Retirement has reached a definitive agreement to acquire the retirement services business of Massachusetts Mutual Life Insurance Company, strengthening Empower's position as the second largest player in the U.S. retirement market.
The transaction expands Empower's reach to more than 12.2 million retirement plan participants and assets to US$834 billion on behalf of 67,000 plans.
Based on the terms of the agreement, and subject to regulatory approvals, Empower will acquire the retirement services business of MassMutual for a total transaction value of about US$3.35 billion (C$4.4 billion). The value includes a reinsurance ceding commission of US$2.35 billion and US$1.0 billion of required capital to support the business. The transaction is expected to close in the fourth quarter of 2020.
MassMutual has 26,000 plans
The MassMutual retirement services business is made up of 26,000 plans with about 2.5 million participants and US$167 billion in assets. It includes diversified capabilities across all plan types with significant presence in the small-medium corporate market segment.
The transaction presents meaningful expense and revenue synergy opportunities and is expected to be highly accretive to Great West Life’s earnings.
Purchase is “an excellent strategic fit”
"This transaction is an excellent strategic fit and directly aligns with Lifeco's long-term plans for growth and scale in the U.S. retirement market," said Paul Mahon, president and CEO, Great-West Lifeco. “It also positions Empower as a growth engine and significant contributor to Great-West Lifeco's value creation objectives."
This transaction increases the synergy potential of Empower's recently announced acquisition of Personal Capital, a hybrid wealth manager, across a larger combined business.
Empower expects to incur one-time integration expenses of US$125 million and deal expenses of US$55 million. The integration is expected to be completed within 18 months following closing.
