MassMutual CEO: $300 Million Deal to Buy MetLife Retail Force Creates a Distribution Powerhouse
March 1, 2016 by Marie Suszynski, Best’s News Service correspondent: news@ambest.com
NEW YORK – Days after MetLife Inc. said it was in talks to sell its U.S.-based retail adviser force to Massachusetts Mutual Life Insurance Co., the two companies have announced a deal worth about $300 million.
MassMutual will acquire MetLife Premier Client Group and its affiliated broker-dealer, MetLife Securities, Inc., along with related assets. The transaction, expected to close mid-year, requires regulatory approval.
MetLife said in a filing with the U.S. Securities and Exchange Commission the deal would result in about $250 million in net after-tax run-rate annual savings for the company. It estimated the company would save $100 million in 2016.
About half of the savings will be realized in the company’s retail segment, which MetLife said in January it planned to separate from the rest of the company.
The deal includes a product development agreement in which the retail business will exclusively develop annuity products issued by MassMutual. MassMutual will also acquire all of the outstanding shares of MetLife Securities.
Under the agreement, MassMutual will offer jobs to all advisers and brokers in MPCG, which includes more than 40 local sales and advisory operations and about 4,000 advisers around the United States. That will significantly grow its career agency system, which includes more than 5,600 financial professionals, and expand its geographic reach.
As a result, the company said it is positioned to become the top individual and whole life insurance provider in the market. And its acquisition of MetLife Securities means MassMutual’s broker-dealer, MML Investors Services LLC, will become one of the largest insurance company-owned broker-dealers in the United States, it said.
“This is a milestone event in the 165-year history of MassMutual — and will result in the transformative creation of a distribution powerhouse,” Roger Crandall, chairman, president and chief executive officer, said in a statement. “Most importantly, this unprecedented transaction will position us for stronger future growth by better enabling our company and agents to do what we do best — help people secure their future and protect the ones they love.”
Calling the acquisition a “natural strategic and culture fit” for the companies, Steven A. Kandarian, chairman, president and CEO of MetLife, said the deal is part of the life insurer’s accelerating value strategic initiative.
“We are evaluating the economic and regulatory environment and directing capital to businesses where we can achieve a clear competitive advantage,” he said in the joint statement with MassMutual. “This transaction will enable our U.S. retail business to sharpen its focus on its core strength in product manufacturing while also providing a broader distribution network through the partnership with MassMutual.”
Separating manufacturing from distribution will make MetLife’s U.S. retail business more agile and offers cost savings, he said.
Both companies announced they were in talks on Feb. 25 (Best’s News Service, Feb. 25, 2016). MetLife said in January it would separate its U.S.-based retail business to help protect MetLife’s U.S.-based variable annuities business from what Kandarian called “onerous” federal rules
MetLife was declared a Systemically Important Financial Institution in September 2014 by the federal Financial Stability Oversight Council and subjected to higher capital requirements and other aspects. The insurer has been fighting the designation and argued its case in district court (Best’s News Service, Feb. 10, 2016).
On the afternoon of Feb. 29, shares of MetLife (NYSE: MET) were trading at $39.54 up 1.37% from the previous close.
Metropolitan Life Insurance Co. has a Best’s Financial Strength Rating of A+ (Superior). Massachusetts Mutual Life Insurance Co. has a current rating of A++ (Superior).
