Grange Mutual Casualty Co.'s pending sale of its life insurance subsidiary to Kansas City Life Insurance Co. is not the first time a group primarily focused on the property and casualty business has made such a divestiture, and it is unlikely to be the last.
S&P Global Market Intelligence has 37 cross-sector groups under coverage that generated direct P&C premiums written of $1 billion or more in 2017 while also generating some amount of direct life insurance premiums. Twenty of those groups, including Grange Insurance, produced less than $500 million in direct life business during the year. For a different combination of 20 groups, their life businesses contributed less than 10% of their consolidated direct premiums across the two sectors. There are also several life-focused cross-sector groups with smaller P&C operations, though not to the same extent as the inverse.
Factors such as a lack of scale and a desire to focus on core operations have driven carriers to discontinue multiline strategies over the years. And the list of P&C-focused groups with a smaller presence in the life business already shrunk earlier in 2018 by at least two with United Fire Group Inc.'s March completion of its sale of United Life Insurance Co. and Liberty Mutual Holding Co. Inc.'s May divestiture of Liberty Life Assurance Co. of Boston.
Grange Insurance presented the sale of Grange Life Insurance Co. in the best possible light, weeks away from the subsidiary's 50th anniversary of its formal commencement of business on July 1, 1968. An executive said in a release that he was excited about the opportunities the transaction will create for its customers and independent agents.
United Fire positioned the United Life deal in a similar way as the divestiture followed a period of 55 years during which the life unit had been part of the organization. President and CEO Randy Ramlo, writing in his annual letter to shareholders, characterized the decision to sell United Life as "one of the most difficult we've ever had to make."
Liberty Mutual Chairman and CEO David Long also described the decision to sell Liberty Life during a February conference call as having been "difficult," but he said that the deal allows his company to fully focus on its core P&C business. For the life company's employees, he added, it enables them to "become a key strategic component of an organization that specializes in life and benefits."
Other smaller P&C-focused groups have also divested life subsidiaries in the past few years, including Pharmacists Mutual Insurance Co. That company, which sold RX Life Insurance Co. in October 2017, said that its decision followed "several years of insufficient financial return" from that subsidiary.
The ranks of P&C-focused companies with smaller life subsidiaries includes a wide range of companies by types of ownership structures, primary means of distribution, geographic focus, and core customer base. And the business conditions that have led some insurers to reconsider their multiline strategies may not result in identical outcomes given that the circumstances facing individual carriers and the niches in which they operate differ.
At Kemper Corp., a company whose U.S. P&C units generated nearly 5x as much direct premiums in 2017 than its U.S. life units, President and CEO Joseph Lacher Jr. affirmed his commitment to the multiline approach when he was asked during an April conference call about what he planned to do with the life business.
Lacher said that Kemper is focused on finding niches that either are not being adequately served or where his company possesses a unique skillset. The life business targets what Lacher characterized as an "unmet need" among "very low-income consumers."
Should carriers opt to end their multiline approaches, the recent transactions show a range of willing and able buyers.
Kansas City Life, for its part, has experience incorporating the life division of a group primarily focused on P&C into its ranks. Fifteen years ago, it acquired GuideOne Life Insurance Co. from GuideOne Mutual Insurance Co.
Published reports from that time frame indicate that the sale came as GuideOne opted to focus on growth opportunities in its core P&C business and to provide its agents with access to a wider array of life products, strategic rationales that may resonate even more loudly today.
