Has the COVID-19 pandemic changed life insurers’ appetite for acquisitions?

Meny Grauman, a financial analyst with Scotia Capital, asked CEOs this question in a conference call following the announcement of the Q2 2020 financial results. For two insurers, the pandemic has made M&As less attractive.

Sun Life keeping options open

Sun Life Financial CEO Dean Connor says that his company will continue to discuss possible acquisitions. “We have a capital position that puts us in a good place to consider M&A opportunities. We don’t have to do M&A. We have good organic growth opportunities, as you see coming through these quarterly earnings results.”

The effects of the pandemic and its economic impacts will be factored in if another acquisition opportunity arises. “We want to make sure our capital position remains strong,” Connor says.

Does the same reasoning apply to investments in tech firms, as Sun Life did in Maxwell Health and Dialogue? Yes, Connor says, but a filter will apply.

“For tech investments, the first filter is, does it help accelerate our core business, does it help deliver on the purpose of the company? And I think you’d say in the case of Dialogue and the case of Maxwell, it ticks those boxes,” he explains.

As examples, he says that US-based Maxwell Health is winning business and giving employees more lines of coverage. He was also quick to point out that nearly 500,000 Canadians signed up with Dialogue in Q2 2020, notably because Sun Life is promoting it intensely.

Manulife managing without mergers

Manulife President and CEO Roy Gori says his company is fortunate because it does not need M&As to achieve its medium-term growth objectives. “We believe that there are sufficient organic opportunities through the distribution of our business to deliver those goals,” he said during a conference call with financial analysts to discuss Q2 2020 results.

Gori is not ruling out acquisitions completely, but he is “setting a very high bar” for M&A expectations and goals. An acquisition would have to be closely tied to the insurer’s strategy, he said.

He gave recent examples of transactions with bancassurance. In addition, he describes the extension of Manulife’s partnership with Danamon, in Indonesia, as “something that gives us further strength in that market and further growth opportunities.”