Newport Beach-based Pacific Life Insurance Co. is selling three of its stock brokerages after nearly a year of negotiations.
San Diego-based Linsco/Private Ledger Corp., one of the largest independent stock brokerages, plans to buy Pacific Life’s Mutual Service Corp. of West Palm Beach, Fla., Los Angeles-based Associated Financial Group and Waterstone Financial Group of Itasca, Ill.
Terms of the deal, expected to close in June, weren’t disclosed.
The deal involves 2,200 brokers and advisers. They generate $350 million in yearly revenue, according to trade publication Investment News.
Linsco/Private Ledger is buying the brokerages in a bid to gain market share, according to Mark Casady, the company’s chief executive.
The acquisition “is a major cornerstone for our growth strategy in an industry where, increasingly, size and scale matter,” Casady said.
The brokerages are set to continue operating under their own names, he said.
Ameriprise Financial Inc. of Minneapolis was reported to be in the running for the Pacific Life brokerages and was rumored to be close to a deal earlier this year.
Pacific Life is set to keep its other brokerages, M.L. Stern & Co. in Beverly Hills and United Planners’ Financial Services of America in Phoenix.
M.L. Stern deals in bonds and wasn’t a fit for Linsco/Private Ledger, according to Bruce Kelly of Investment News, who’s covered the deal.
United Planners runs as a partnership with United Planners’ Group, which owns 45%, complicating a sale.
Pacific Life likely sold off the other brokerages because they weren’t making money, according to Kelly. Small brokerages are dealing with shrinking profits because of higher costs of compliance and investment needed in technology to stay competitive, he said.
Pacific Life said it is selling the brokerages as part of a strategy to focus on its mainstay insurance and annuity businesses, according to Jim Morris, chief operating officer.
Morris becomes chief executive next month with the retirement of longtime boss Tom Sutton, who’s staying on as Pacific Life chairman.
The brokerages, including those being sold, make up about 7% of Pacific Life’s $5 billion in yearly revenue, according to Pacific Life spokesman Tennyson Oyler.
Pacific Life’s brokerages are part of a long running effort to expand into broader financial services.
The life insurer got into the business by buying Mutual Service in the late 1980s. It added Associated Financial Group in 1997.
The Financial Services Modernization Act of 1999 allowed insurance companies to get deeper into investing services.
