Distribution with scale has potential to grow industry, panel says

WASHINGTON, D.C. – The long-term impact of private equity on the distribution of insurance products to Americans who desperately need them remains to be seen. But efficiencies of scale and delivery are very much on the table.

In late 2021, the investment firm Silver Lake made a $1.2 billion investment in Integrity Marketing Group. The Dallas-based independent marketing organization boasts a partner network of over 550,000 agents and advisors that made over $22 billion in new sales in 2022.

Adam Karol is a managing director at Silver Lake, and serves on the board of directors at Integrity. On Tuesday, he served as a panelist for a session titled, "The Changing Landscape of Distribution: Consolidation, Aggregators and Independent Brokerage Platforms" at the LIMRA and LOMA 2023 Annual Conference.

He spoke about the potential for efficiencies in the life insurance and annuity deliver markets.

"For agents one of the things we focused a lot on frankly, is making younger agents really productive," Karol explained. "You can pre-populate forms in areas like Medicare Advantage, where you have around 30-plus plans that might be available to any given individual. How do you figure out how to reduce the scope of what's recommended to a patient to make that discussion more relevant?"

A big market

There are about 11,000 people daily who are aging into Medicare eligibility, Karol said, which "provides a springboard to sell lots of things." Sales numbers from recent quarters show annuities are selling plenty. Life insurance policy counts are up, while premium is down.

Bryan Hodgens, corporate vice president, distribution and annuities, member benefits, LIMRA and LOMA, shared several slides of data to level set the discussion. For starters, distribution is widening to include bigger sales of non-life insurance products:

And producers are being more productive, as research shows:

But it is the pace of acquisitions that is changing the life insurance industry, many of them by private equity firms eager to apply their investment touch to the piles of policyholder cash insurers possess.

The private equity hunt for insurance assets involves the biggest names on Wall Street. In a 2021 deal, Global Atlantic Financial Group was acquired by global investment company KKR & Co. for $4.4 billion.

Other huge deals saw Apollo combining with Athene and Blackstone buying a 9.9% chunk on AIG’s Life & Retirement business as part of an ongoing, longer-term relationship.

Private-equity money has been a huge driver of broker general agency and independent marketing agency merger and acquisition activity, LIMRA found:

Scale has advantages

The panel included Bruce Donaldson, president and CEO of Simplicity Group. Along with other marketing giants like Integrity and AmeriLife, Simplicity continues to gobble up market share. Simplicity has 66 acquisitions to date. But it's not the company focus, Donaldson said.

"We are not in the business of [mergers and acquisition]," he said. "We're in the business of providing products and planning. But we have grown by acquisition, maybe not as aggressively as some of the others, but we're building a real operating platform."

But scale definitely has its advantages when it comes to distributing retirement products, Karol said.

"When you have scale, it provides you a lot of dollars to reinvest," he explained. "That reinvestment does a couple things. The first is that from a consumer point of view, truly build the channel experience, where you have many channels to get out, promote your brand and acquire customers, build awareness."

Secondly, helping agents acquire leads is transformed.

"Those then come in to agents that if they have the right data and technology, lead-quoting tools, workflow, it allows them to be productive," Karol said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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