Winnipeg-based insurance giant Great-West Lifeco Inc. is confident its recent ac-quisition of U.S.-based Metropolitan Life Insurance Co.’s corporate defined pension plan business, as well as a pair of its American subsidiaries, is a dog that will hunt.

Great-West CEO Ray McFeetors says the deal, which will add US$7.5 billion in assets to its Denver-based subsidiary, Great-West Life & Annuity Insurance Co. , is part of the parent company’s strategy to grow both organically and through acquisitions in the U.S. and Britain.

“The place where we have a big need is in the U.S. market,” McFeetors says.

The purchase price for the Met Life deal wasn’t revealed, but Great-West says it’s adding more than 2,600 plans, about 300,000 clients and 225 staff, including 80 “relationship managers” to the fold.

The Met Life deal was nicknamed “Operation Peanuts” when negotiations began last year because of Met Life’s long-standing association with cartoon characters Charlie Brown, his dog Snoopy, Lucy, Linus and the rest of the Peanuts gang in its advertising. “We’ve bought some Peanuts,” McFeetors says with a laugh.

The fact Great-West was the winner in a very competitive bidding process for the Met Life business will significantly increase Great-West’s profile in the U.S., McFeetors says.

Great-West duplicating its success in Canada — where it is the largest provider of insurance products, touching one in three Canadians — south of the border is unlikely to happen in McFeetors’ lifetime, he concedes. The U.S. is, however, a market in which he feels the company can grow in two critical segments — the lucrative 401(k) retirement and health-care businesses.

“We don’t think we’re at the most efficient size or most sustainable size in the U.S.,” he says. “You need to add scale to continue to improve your expenses. In financial services, we’re much better positioned. We’re currently looking at a number of deals in the health-care space. We’d like to conclude on those.”

Although the Canadian market is far less fragmented than its U.S. counterpart, there are still deals that could be made, says McFeetors.

“It’s a little more difficult in Canada, but we’d look at Industrial-Alliance [Insurance & Financial Services Inc. ], Standard Life [Assurance Co. ] and Empire Life [Insurance Co. ] if they became available. Those are companies that I think might someday be in play but aren’t currently. They might not be for a long time, either,” he adds.

Bob Wuelfing, president of RG Wuelfing & Associates, a Connecticut-based market research and consulting firm, says it isn’t the size of the Met Life deal that’s important for Great-West. Rather, “the impact will be from bringing on new capabilities and distribution,” he says. “It picked up a fairly significant group of client relationship managers and a distribution channel.”

TOPS IN 401(K) MARKET

As a result, Great-West “absolutely” has the potential to be a Top Five player in the trillion-dollar U.S. 401(k) marketplace, he says.

“We could see some further consolidation that could put the top one or two so far ahead that nobody is going to catch them. But Great-West runs a very efficient operation in all aspects, from distribution to administration. It’s a very well-regarded operation,” Wuelfing says. “It doesn’t appear that its game is scale and market share. It doesn’t seem to be acquiring scale to acquire scale.”

The Met Life deal was the second significant acquisition for Great-West this year. In the second quarter, its Canada Life Ltd. subsidiary in Britain bought the assets and liabilities associated with the not-for-profit pension annuity business of the Equitable Life Assurance Society, which is based in London.

That transaction, which almost doubled the size of Canada Life’s British payout annuity business, involved the acquisition of about 130,000 policies, with liabilities and supporting assets of about $9.3 billion.

Great-West was also able to make a quartet of tuck-in acquisitions for its mutual fund division, Quadrus Investment Services Ltd. , earlier this year. Transferring about $1 billion in assets to Quadrus were Brian Mallard and Associates and Sanderson Securities Ltd. , both of Saskatoon; Chartwell Financial Inc. of Surrey, B.C.; and iForum Financial Services Inc. of Montreal.

Despite Great-West beating the bushes for deals in Britain, Wuelfing says, the U.S. market represents the company’s greatest opportunity.

“The retirement dollars are here [in the U.S.]. The U.S. market will probably see more changes in the next five to seven years than it’s seen in the past 15 or 20 years,” he says.

@page_break@The aging of the population, and its concurrent move from an accumulation phase to one of distribution will require new investment products, he says. That will also lower demand for high-yielding funds and boost demand for those offering pre-servation of capital and guaranteed income streams.

Says Wuelfing: “Great-West increasing its market share in the U.S. by 1% is more valuable than anything it could do in Britain.” IE