Lincoln National, New York Life, Principal Financial Group, Prudential Retirement and Nationwide are insurers that might be the most likely interested buyers of the defined contribution record-keeping business of Hartford Financial Services, according to DC experts.
The buyer also could be a company whose DC business focuses on small and midsize markets, the experts said.
“It's a game of scale,” said one investment banker with experience in the DC business, who asked not to be identified. He suggested that potential buyers would be within $10 billion to $20 billion — higher or lower — of the $52.3 billion in record-keeping assets identified by Hartford Financial Services, when it announced Wednesdayits intention to sell the business.
The investment banker's list of “maybes” includes Lincoln National, New York Life, Principal and Nationwide, although he emphasized he had no specific knowledge of these companies' interests.
“Logic says it would be another insurance company,” said another investment banker with knowledge of the DC arena, adding that a prospective buyer would have to be comfortable working in smaller markets. The banker also requested anonymity. A company that had the experience and infrastructure to deal with adviser-sold products would be a more likely choice, he said.
“Record keeping in the mid- to small market doesn't make much money,” the investment banker said. “It's a tough, tough business.”
This investment banker's list of possible acquirers includes Nationwide, Prudential and Principal. He suggested other interested buyers could be Wells Fargo or Charles Schwab. He said he has no knowledge of any firm's interest in Hartford's DC business.
A potential buyer would be “an organization that has investment management capabilities and a brand, and that wants to expand its presence in the mid- to small markets,” said David Bauer, a partner at Casey Quirk, who declined to speculate on potential acquirers.
One longtime observer of the DC business suggested The Hartford might try to sell its DC business in pieces — the record-keeping platform separately from the investment-only component.
He agreed with the investment bankers that insurers — such as Nationwide, Prudential and Lincoln National — would be logical candidates. Companies with middle-market expertise like Charles Schwab or Great-West Retirement Services might be interested, but companies with large-market clients wouldn't be attracted, he added.
“A firm that would be interested would need vertical integration with a strong retail presence like a rollover business,” he said.
John Hancock or Great-West might be acquirers, said an executive at an investment advisory firm specializing in DC plans with assets of $10 million to $100 million. “It would probably be easier for an insurance company” to acquire Hartford's DC business, he said.
Sarah Lazarus, a spokeswoman for New York Life, said her company doesn't respond to “market speculation.”
Leslie Ingberg, a spokeswoman for Wells Fargo, said her company had no comment on Hartford's DC business. “Generally speaking, we're open to opportunities,” she said.
“We do not comment on speculation and market rumor,” said Jaime Naig, a spokeswoman for Principal Financial Group.
Josh Stoffregen, a spokesman for Prudential Financial, parent of Prudential Retirement, said his company had no comment.
Representatives of the other companies could not be reached for comment or did not comment by press time.
