Thesame sort of rationale that drove Mitchell Caplan to sell one financialenterprise he helped build to a larger acquirer years ago led the industryveteran to enter an agreement to partner up Jefferson National FinancialCorp., the immediate parent of variable annuity provider ,with Nationwide Life InsuranceCo.
Caplan,Jefferson National's CEO, headed Telebanc Financial Corp. when thedirect-to-consumer bank sold to E*TRADE Financial Corp. in January 2000. Telebanc hadexpanded independently for about 10 years, and he recognized that it needed tobe "embedded within a larger organization" to get to the next level,said Caplan, who later would become E*TRADE's CEO.
Ithas been a similar length of time since Jefferson National introduced itsflagship Monument Advisor flat insurance fee variable annuity, which it marketsthrough a network of nearly 4,000 registered investment advisers and fee-basedadvisers.
Caplansaid that as the network continued to expand, Jefferson National began toconsider how it, much like Telebanc at the turn of the century, could beembedded within a larger financial services company possessing the "acumenand capacity to add other products and services" and to help "turbocharge"Jefferson National’s growth over time to upward of 10,000 or 20,000 advisers.
JeffersonNational found an acquirer that can help it accomplish those goals inNationwide, a company that had been on the lookout for an acquisition target tohelp it address some emerging needs of its own.
CEO Stephen Rasmussen said in a release that the addition of Jefferson National will"meet the needs of investors and retirement savers who want to do businessin a fee-based advisor environment" ahead of the scheduled implementationof the U.S. Department of Labor's fiduciary rule. President and COO Kirt Walker said the acquisition would provide his companywith a "credible foothold in the fee-based market" and avoid the needto build such a capability on its own.
Walkersaid advisers had been increasingly migrating toward fee-based models, and theLabor Department's issuance of its final fiduciary rule earlier in 2016"dictated that we needed to move." He said Nationwide had beenlooking for targets in that area for a while to complement its presence in thebrokerage channel. In Jefferson National, he added, the company found the"right partner at the right time," one that "excelled in thisspace."
TheLouisville, Ky.-based and Texas-domiciled Jefferson National Life and unitJefferson National Life InsuranceCo. of New York, as consolidated by S&P Global MarketIntelligence, have $4.31 billion in net admitted assets and $38.3 million incapital and surplus as of June 30. Other Jefferson National Financial companiesinclude Jefferson NationalSecurities Corp., JNFAdvisors Inc. and 435 Management LLC. Nationwide put the company'sGAAP asset size at $4.7 billion as of June 30.
TheJefferson National Life group had $802.4 million in net individual variableannuity considerations in 2015; three Nationwide life companies combined togenerate $5.03 billion in individual variable annuity considerations, whichranked No. 10 in the U.S. life industry. On a pro forma basis, the combinationof the Nationwide and Jefferson National Life companies would have ranked No.9.
Termsof the deal were not disclosed. Jefferson National Financial had beenacquired in an$83 million management buyout in December 2011. Jefferson National Life hadbeen a subsidiary of the former Conseco Inc. under the name Conseco VariableInsurance Co. prior to its October 2002 sale to Inviva Inc., an entity led by Telebanc founderand Chairman David Smilow.
's mostnoteworthy foray into M&A during the current decade came through aSeptember 2011 agreement to acquire Harleysville Group Inc. and affiliate with Butits largest deals since the start of this century have involved financialservices and life businesses, including the January 2009 of the outstanding,publicly traded Nationwide Financial shares, the May 2000 of Gartmore InvestmentManagement and the October 2002 purchase of Provident Mutual Life Insurance Co. by wayof a sponsored demutualization. Nationwide Financial had acquired collectionsof mutual funds in separate transactions that closed in and
"M&Ahas always been an opportunity for us," Walker said.