Recognizing the value of a growth industry, Magic Johnson has taken a major position in life and annuity company EquiTrust. The company was purchased just a few years ago by Guggenheim Partners.
Guggenheim also bought Security Benefit and other life and annuity carriers just a few years back, and kicked off concern in the industry that the NY based investment company was not in the sapce for the ‘long haul. Many of the index and hybrid annuity products offered by EquiTrust and especially Security Benefit sported flashy benefits and bonuses that masked low payouts and mediocre credit quality. Billions of nmew premium flowed into these products nonetheless, giving Guggenheim lots more assets under management.
Now with thhis move, perhaps their overall plan is revealed- buy small to mid sized insurance companies, get control of the assets , retain those assets under investment advisory management, and then sell off the operating company.
Hopefulyl the deal works out for Mr Johnson. I’m pretty sure it already worked out for Guggenheim…. I hope the policy holders fare as well too.
Here’s the article:
Magic Johnson Buys Into FIA Carrier EquiTrust
Retired basketball legend-turned-entrepreneur Earvin “Magic” Johnson has acquired more than 60 percent of EquiTrust Life from Guggenheim Partners.
The deal, which began last year, concluded for an undisclosed amount. EquiTrust is a leading writer of retail annuities. Guggenheim is a New York-based investment and advisory firm that reportedly had bought the carrier in 2011.
The deal gives Johnson’s firm — Magic Johnson Enterprises (MJE) – controlling interest in EquiTrust, which writes annuity and life insurance through more than 20,000 independent agents nationwide. The company is based in Chicago, with operations in West Des Moines, Iowa.
According to MJE, Guggenheim will continue to provide investment management services for EquiTrust.
A superstar in the business
For the insurance industry, this means a superstar has entered the annuity business. Johnson is the famed former Los Angeles Lakers point guard who is a two-time inductee to the National Basketball Association’s Hall of Fame. As founder, CEO and chairman of his own company, he has been investing in fitness sport centers, restaurants, travel, real estate funds and other businesses.
With this new investment, Johnson’s firm is extending its reach into the retail insurance market, especially the index and fixed-rate annuity market where the insurer has prominence.
At year-end 2014, EquiTrust ranked eighth in sales among 41 FIA carriers tracked by Wink Inc. In terms of overall fixed annuity sales at year-end 2014, the company ranked 14th in the top 20 list of fixed annuity writers, as posted by LIMRA.
The annuity products that EquiTrust writes include index-linked, multi-year guarantee and traditional tax-deferred contracts, and immediate-income annuities.
The company also sells life insurance life products including simplified-issue, wealth-transfer life insurance.
Formed in 1996, the carrier now manages more than $14 billion in assets. MJE was formed a little earlier, in 1987, and now invests in firms from many industries. So the two share a common bond in that their formative years were in close proximity to each other and that they have both grown substantially over time.
But the bond that Johnson identified in his public statement on the closing has to more to do with future direction.
The acquisition will provide MJE with “a tremendous platform to advocate for financial literacy and assist in creating job opportunities at every level,” Johnson said. “We will educate and emphasize the importance of life insurance for estate planning and annuities for retirement planning purposes.”
He described this as not only “groundbreaking” but also as something that “continues my mission to invest in businesses where we can make a positive impact in the community.”
That aligns closely the company philosophy outlined on the MJE website — to hold a “firm commitment to strengthening urban and underserved communities” and work to “accelerate the advancement of multicultural communities.”
The celebrity factor
Annuity industry analyst Sheryl J. Moore is not sure whether Johnson’s celebrity status will impact annuity sales at the company. “In the past, I’ve see marketing group partners who have hired celebrities to help stimulate sales, but the feedback from the field that I’ve heard has tended to be uncertain,” the president and CEO of Moore Market Intelligence said in an interview.
“The producers would say things like, ‘How does this (celebrity) help my business?’”
Regarding the EquiTrust deal, Moore said she has not heard one single comment on the new ownership since news about the pending deal surfaced last year. “I’ve gotten calls from journalists, but not from producers,” she said.
No doubt other celebrities own stock in insurance companies, but no one in the industry talks about it, Moore added. “I’m not sure this is news for annuity producers.”
In the MJE case, though, the celebrity’s firm now has controlling interest, and this particular celebrity has a lot of knowledge about team strategy and championship. For those reasons alone, at least some industry onlookers will be watching to see whether this new boss takes the company’s sales, productivity, and other annuity and life insurance metrics to new heights.