Principal Financial Group's deal for ABN Amro Trust Services Co. is part of a strategy to increase its scale and expand its retirement business as the defined contribution industry consolidates.
Greg Burrows, a vice president in Principal's retirement and investment division, said the Des Moines company decided to buy the ABN Amro business after the Netherlands-based banking company approached it with a proposal. "ABN Amro realized that this is not their core focus, and they approached us as part of that strategy," he said.
Principal announced the deal Friday to acquire the Chicago-based pension and retirement business of ABN Amro. The purchase is expected to close Dec. 31; its price was not disclosed.
Mr. Burrows said the purchase agreement is part of a larger acquisition strategy. "We are always looking to increase our scale and consider acquisitions as part of that plan," he said.
Principal Financial closed a similar deal in 2002 for the 401(k) business of KeyCorp's investment management division, Victory Capital Management. The Iowa insurer acquired $8 billion of assets and 1,400 retirement plans in the Victory transaction.
The defined contribution industry has consolidated in recent years, and Mr. Burrows said he believes it will continue to shrink. Some insurance companies, mutual fund firms, and banks "will realize they don't have the scale they want to have and may exit the business," he said.
Principal Financial did a similar deal with Wilmington Trust a couple of years ago for record keeping involving 60 defined contribution plans but no asset transfers.
"We want a partner that has a similar client mix - small businesses and mid-size companies with fewer than 3,000 employees. That's typically our target market," said Mr. Burrows.
ABN Amro sells defined contribution record keeping and investment services in the United States, administering about 300 401(k) plans, with an aggregate $3.6 billion of assets.
After completing a strategic review, ABN Amro decided that its retirement services business is not a good strategic fit with the company's overall business, Mr. Burrows said.
Russell Campbell, the chief executive officer of ABN Amro Asset Management North America, said in a press release, "The Principal offers a strong match for our retirement services clients. They will provide the complete set of products and services needed today to best serve plan sponsor clients and their participants."
Principal Financial Group sells retirement and investment services, life and health insurance, and banking products through its family of financial services companies. It manages $156 billion of assets.
