"Do we want to pick up that distribution force, that book of business, customers we don't have?" are questions insurers are asking themselves about potential deals, said Bill Chrnelich, a partner with PriceWaterhouseCoopers LLP and one of the authors of a report on the outlook for the insurance industry. "If it is core to the business, it will be core regardless of what happens with regulation."
Insurers are concerned over the potential for new federal regulation that could raise their tax rates or make it more complicated to launch new products and raise scrutiny of executive pay. But the lure for doing a big strategic deal and the availability of capital will outweigh those concerns for insurers, though it could give pause to noninsurance company buyers interested in a purely financial deal.
"With credit markets beginning to open up, the opportunity for larger, stronger players is ample," he said.
MetLife Inc. is one insurer that has said it is on the lookout for acquisitions, including potentially some international life insurance operations of the struggling American International Group Inc. In a conference call Monday, MetLife Chief Executive C. Robert Henrikson said his company is "wide open" to doing deals, if they immediately boost the company's earnings.
Chrnelich said insurers dislike the current "uncertainty" in the regulatory environment and are divided over whether they favor the proposal for a new federal office of insurance to be formed in addition to the existing state regulatory system.
One area where insurers are cautious is the issue of executive compensation.
"Most boards will be cognizant of the perception of overpaying executives and will not want to be seen as being too generous," he said. "The message from Washington is pretty clear."