Pan-American Life acquires Encova’s life insurance affiliate

New Orleans-based Pan-American Life Insurance group, recently named as one of the best managed companies by Deloitte Private and the Wall Street Journal, said it has acquired the life insurance arm of Encova Mutual Insurance Group of Columbus, Ohio.

"PALIC and Encova Life were in discussions for a number of months," said José S. Suquet, chairman of the board and CEO of Pan-American Life Insurance Group. "Encova was looking to refocus on its P&C business and we recognized that the addition of Encova Life’s business would complement and further strengthen PALIC’s Mutual Trust Life Solutions (MTLS) division."

"The acquisition will add approximately $60 million in revenues, $600 million in total assets, $38 million in insurance premiums and 82,000 covered lives to PALIC’s U.S. life insurance business, further enhancing PALIC’s U.S. scale, reach and investment portfolio," Suquet said, adding, "Upon closing, Pan-American Life Insurance Group (PALIG), the parent company of PALIC, will have more than $1.8 billion in revenues, assets of $6.9 billion and nearly $1.55 billion in life insurance premiums.”

Pan-American is a 110-year-old provider of life, accident, and health insurance, operating in 49 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and throughout Latin America and the Caribbean. It employs more than 2,100 people and covers more than 7 million policyholders.

Company executives said the Encova purchase was consistent with its business strategy.

Acquisition aligned with 'U.S. growth strategy'

“This acquisition is aligned with our U.S. growth strategy and demonstrates our commitment to the U.S. market and to our whole life business,” said José Suquet, Pan-American’s chairman and CEO.

The transaction was unanimously approved by both company boards of directors last week and is expected to close by the end of the year.

“We have had strong success in our property and casualty operations as evidenced by our recent AM Best upgrade, and we want to focus exclusively on leveraging this recent P&C success.” said Encova Insurance President and CEO TJ Obrokta Jr. “We remain committed to our agency partners, and we will help ensure this transition to Pan-American Life is a smooth process for our life agents and policyholders.”

Although all Encova Life policies will be assumed by Pan-American, the company said current policyholders should notice no changes to product terms or features.

Encova is super-regional carrier ranked in the top 20 mutual insurance companies in the U.S., and employs more than more 1,100 associates writing in 28 states and Washington, D.C. Its premiums total in excess of $1 billion, a surplus in excess of $1.96 billion and assets in excess of $4.8 billion. The group markets insurance solutions through more than 2,000 independent agencies in the Midwest, Northeast and South.

Acquisition could spark industry trend

The acquisition/merger could spark an industry trend, say some analysts. After a record-breaking 2021, transaction volumes collapsed, falling 27% in 2022 from the previous year, and values plummeted 69%, according to a Deloitte analysis.

Continuing economic uncertainty, accelerating inflation, and rising capital costs put a lot of insurance company merger plans on the back burner. But with the Federal Reserve slacking off on its aggressive rate hikes, the pendulum may swing, Deloitte said.

“When rates settle, we expect to see companies begin deploying capital for acquisitions,” said the recent Deloitte report. “ M&A activity will happen, but with subdued frequency and at lower prices compared to the higher valuations in 2021.”

The report said it expects the insurance brokerage to be the first sector to recover, given its high deal volume and appeal to private equity investors.

“The fact that private equity interest waned only slightly last year suggests that financial buyers view brokerage positively despite rising interest rates and believe that longer-term growth will offset any increase in deal cost,” Deloitte said. “In the interim, however, brokerage appears to be influenced by insurance M&A softness overall.”

Nevertheless, Deloitte predicts the insurance M&A market will recover fully this year or early next.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].