MassMutual Financial Group has expanded its products and international reach in the past year and now has its sights set on buying a "high-net-worth" bank to support an aggressive growth strategy, its chief executive officer said in an interview.
"We are actively looking at potentially acquiring a small to medium-sized, high-net-worth bank," said Robert J. O'Connell, the company's chairman, president, and chief executive officer. "In the United States is generally where we have been looking."
Mr. O'Connell said MassMutual has been looking to buy a bank for three years. "Valuations for banks are very high," he said, however, "and the kinds of banks we are looking for, with the capabilities we are looking for, do not come along easily. We are continually having conversations with banks that might be interested in joining us."
The closing last week of MassMutual's purchase of Baring Asset Management Ltd. from ING Group will expand his company's bank search, he said. The Baring brand opens up the number of possibilities and expands the search globally, he added.
"We believe that the Baring name can be used as a bank's name either here or abroad," he said.
MassMutual, a subsidiary of Massachusetts Mutual Life Insurance Co., is looking closely in California, the Northeast, and Florida for the right banking partner, Mr. O'Connell said. He said he is looking for a bank with a strong management team and the capacity to serve high-net-worth clients.
"I hope to have a bank as soon as possible, but realistically, we are not in advanced discussions," Mr. O'Connell said. "We are just hopeful at this point that we find a bank or a bank finds us."
The insurer has expanded its geographic footprint in the past year to make itself more attractive to a potential bank partner. In addition to the Baring purchase, MassMutual bought Taiwan-based Fuh Hwa Securities Investment Trust Co. Ltd. in February 2004 and London-based Duke Street Capital Debt Management last May.
Mr. O'Connell said he hopes for more opportunistic expansion in Poland and the rest of Eastern Europe, Brazil and the rest of Latin America, and in Malaysia, Singapore, Thailand, and Korea. "Our international business has expanded dramatically in a short period," he said. "I hope it will continue for the next three or four years."
In the company's 2004 annual report Mr. O'Connell recalled that he had said four years before, when the international business was started, that he wanted to derive at least one-third of sales revenue from products or distribution channels that did not then exist. He had far surpassed that goal by 2004, reporting 63% of sales revenue from new products and channels.
Before the Baring acquisition, MassMutual had $13.6 billion of international assets under management; but Baring added $35 billion to the international subtotal, and MassMutual's overall managed asset count now exceeds $350 billion. Baring operates 11 offices in 10 countries. MassMutual and its subsidiaries have offices in 12 countries on four continents, with 11 million customers.
Two analysts took very different views of the rationale for an insurer like MassMutual to buy a bank, one seeing it as an opportunity, the second, as illogical.
Burton Greenwald, an analyst at BJ Greenwald & Associates in Philadelphia, said opportunities exist for a company like MassMutual to buy a small or large independent trust bank. The Springfield, Mass., insurance company is interested in obtaining trust powers to add "another arrow to its quiver to serve high-net-worth clients," he said.
"MassMutual is a huge enterprise and is capable of making sizable acquisitions as they have in the past," Mr. Greenwald said. "The banking industry is still in a period of consolidation, so there are a lot of possibilities out there."
Geoffrey Bobroff, the president of Bobroff Consulting Inc. in East Greenwich, R.I., said on its face he can see the appeal for a bank to merge with a company like MassMutual but that, culturally, there is a substantial disconnect. The company's plan to buy a bank is both "puzzling" and "illogical," he said.
"The concept of 'one-stop-shopping' or 'turnkey solution' or all proprietary products just doesn't work," Mr. Bobroff said. "Having a bank might be of some value, but I am struggling to figure out what they could do with the traditional banking business. Partnering with a bunch of banks in different regions and providing services to them makes sense. I am at a loss to understand why buying a bank is the right answer."
He added, "It is hard to see what buying a bank provides them and vice versa."
A company spokesman declined to comment on Mr. Bobroff's remarks.
Mr. O'Connell said he thinks MassMutual brings a lot to the table for a bank, including strong products, a large pool of clients, and a distribution network that includes nearly 4,000 financial professionals in 80-plus agencies and 1,800 other offices in the United States, as well as nearly 15,000 representatives abroad.
"We have been trying to expand and diversify our product portfolio and our geographic stretch," Mr. O'Connell said. "I really believe a bank is the one significant piece we are missing at this point."
