MassMutual enters into definitive agreement for Empower Retirement to acquire its retirement plan business
MassMutual announced on Tuesday that its retirement plan business is being acquired by Colorado-based Empower Retirement.
Based on the terms of the definitive agreement and subject to regulatory approvals, Empower will acquire the retirement plan business of MassMutual in a reinsurance transaction for a ceding commission of $2.35 billion. In addition, the balance sheet of the transferred business would be supported by $1 billion of required capital when combined with Empower’s existing U.S. business.
In a joint statement the companies said the acquisition will capitalize on both firms’ expertise, provide technological excellence and deep product capabilities, and create scale to the benefit of retirement plan participants and their employers.
“In Empower, we are pleased to have found a strong, long-term home for MassMutual’s retirement plan business, and believe this transaction will greatly benefit our policy owners and customers as we invest in our future growth and accelerate progress on our strategy,” said Roger Crandall, MassMutual Chairman, President and CEO. “This includes strengthening our leading position in the U.S. protection and accumulation industry by expanding our wealth management and distribution capabilities; investing in our global asset management, insurance and institutional businesses; and delivering a seamless digital experience — all to help millions more secure their future and protect the ones they love.”
According to a MassMutual spokesperson the proposed transaction will enhance MassMutual’s financial position and allow the company to:
- Provide a strong, long-term home for MassMutual’s retirement plan business;
- Result in a material increase to MassMutual’s strong capital position and help reduce equity market and interest rate exposure;
- Allow us to continue to invest in our future growth and accelerate progress on our long-term strategy, which includes strengthening our leading position in the U.S. protection and accumulation industry by expanding our wealth management and distribution capabilities; investing in our global asset management, insurance and institutional businesses; and delivering a seamless digital experience
- Create strategic partnership opportunities with Empower.
The MassMutual retirement plan business has grown substantially over the past decade, with the number of participants served doubling to over 2.5 million and assets under management more than quadrupling from $34 billion to over $160 billion.
“Empower is taking the next step toward addressing the complex and evolving needs of millions of workers and retirees through the combination of expertise, talent and business scale being created,” said Edmund F. Murphy III, president and CEO of Empower Retirement. “Together, Empower and MassMutual connect a broad spectrum of strength and experience with a shared focus on the customer. We are excited about the opportunity to reach new customers and serve even more Americans on their journey toward creating a secure retirement.”
Empower is the second-largest retirement plan recordkeeper by total participants in the U.S., is expected to close the deal by the fall of 2020 and will increase Empower’s participant base to more than 12.2 million.