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CEO: Lincoln National not looking to ride insurance M&A 'rodeo'

Written by Jasir Jawaid

Lincoln National Corp. President and CEO Dennis Glass, speaking on an earnings call July 30, labeled the recent wave of M&A in the nonbank financial services and insurance industries a "rodeo" and said that his company would rather prefer selling new products.

According to SNL data, the tally for sales of U.S.- and/or Bermuda-based insurance companies, brokers and agencies announced since the start of July now stands at approximately $125.39 billion, up from about $123.19 billion as of July 24 thanks to China Minsheng Investment Corp. Ltd.'s pending acquisition of Sirius International Insurance Group Ltd., which was announced July 27. Among the recent activity, Meiji Yasuda Life Insurance Co.'s agreed to acquire StanCorp Financial Group Inc. in a $5 billion transaction that has stood out among several analysts for its relatively high valuation.

Glass noted during the call's question-and-answer session that the returns that companies are being bought at are "probably mid-single-digit." He said the discount rates seem to be 7% to 8% for buying businesses when one can put new business up at 12% to 14% or repurchase common stock at 12% to 14%. This is a "pretty huge impediment for Lincoln to be doing transactions," he said.

"When you find businesses at 8% and you can sell your new product at 12% to 14%, I think at Lincoln, we choose selling new product at 12% to 14%," Glass concluded.

This article was published by S&P Global Market Intelligence on the S&P Capital IQ Pro platform.


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