MetLife in talks for AIG unit after posting profit
MetLife Inc., the biggest U.S. life insurer, said it is in talks to purchase a unit from American International Group Inc. to expand in 50 countries.
Locally, MetLife has operations in Aurora and Downers Grove.
"We are in a very good position to pursue acquisitions that are strategic and would accelerate our long-term growth," New York-based MetLife said today in a statement as the company posted its first profit in a year on the improved performance of investments.
Chief Executive Officer Robert Henrikson, who shunned government aid amid three quarters of losses, is seeking to expand after stock and bond rallies boosted the firm's portfolio. The company posted net income of $320 million in the fourth quarter, its first profitable period since the last three months of 2008 when net income was $985 million.
AIG, the insurer bailed out by the U.S., is divesting assets to a repay loans in its $182.3 billion rescue. The companies are discussing a sale of AIG's American International Life Insurance Co. for about $15 billion, a person with knowledge of the matter said last month. Mark Herr, a spokesman for AIG, declined to comment.
The sum would exceed the total of more than 20 other asset sales announced by New York-based AIG since its rescue in September 2008. AIG in December transferred Alico and American International Assurance Co., the company's two largest non-U.S. life insurers, to vehicles controlled by the Federal Reserve to reduce the company's debt on a credit line by $25 billion.
Alico operates in Japan and parts of Europe, Latin America, the Caribbean and the Middle East. MetLife said there is no guarantee an agreement will be reached.
'Generally Stronger'"MetLife made it through the financial crisis in a generally stronger financial position than many of its peers," Drew Woodbury, an analyst with Morningstar Inc., said in an e- mail.Declines in the value of some holdings, including derivatives, cost MetLife $898 million in the fourth quarter. The change in the value of investments lowered book value per share, a measure of assets minus liabilities, by 3.6 percent since Sept. 30 to $37.54 at the end of December. The figure was $27.33 at the end of 2008. MetLife's portfolio was valued at about $337.7 billion at the end of 2009.The insurer slipped 3.1 percent to $35.26 at 5:36 p.m. New York time in extended trading.Investment IncomeFourth-quarter net investment income, which includes yields from fixed-income holdings, gained about 10 percent to about $4 billion in the first increase since 2007. Results from so-called variable holdings, which include private-equity and hedge-fund assets, were $40 million above the company's plan.Excluding some investment results, MetLife earned 96 cents a share, beating the 95 cent estimate of 18 analysts surveyed by Bloomberg. MetLife in December projected fourth-quarter operating earnings of 90 cents to 95 cents a share.MetLife reported an annual loss of $2.25 billion for 2009, the insurer's first unprofitable years since its 2000 initial public offering. The company, which uses hedges to protect against market declines, posted a $3.21 billion profit in 2008 as rivals including Newark, New Jersey-based Prudential Financial Inc. and Hartford Financial Services Group Inc. slipped to losses. Some of MetLife's hedges turned sour in 2009 as stocks and bonds recovered."The model got strained, it's not broken," Steven Schwartz, an analyst with Raymond James Associates Inc., said of life insurers' performance over the last year and a half.Stock RallyMetLife has advanced about 25 percent in the last 12 months on the New York Stock Exchange, the worst performance in the seven-stock Standard and Poor's 500 Life Health Insurance Index. Prudential the No. 2. U.S. life insurer, has surged about 96 percent in the same period. Aflac Inc. has more than doubled.MetLife is seeking better returns from investments by drawing down the cash hoard it built in 2008 and buying corporate debt and structured securities. The company had about $18.5 billion in cash at the end of 2009 compared with $22.4 billion on Sept. 30.The insurer has been helped as the advance in the stock market lowered the expected cost of guarantees to savers with equity-linked retirement products called variable annuities. MetLife, the No. 1 seller of variable annuities in the first nine months of 2009, increased its offering as hobbled rivals, including AIG, Hartford and Lincoln National Corp., scaled back.The SP 500 Index surged 23 percent last year, its biggest annual gain since 2003. In the last three months of 2009, the index rose 5.5 percent.'Not a Problem'MetLife has said it's better positioned to buy businesses outside the U.S. after the recession hobbled competitors. The insurer doubled the revenue it gets from outside the U.S. in three years after buying Travelers Life Annuity from Citigroup Inc. in 2005. MetLife recorded about $6 billion of revenue from outside the U.S. in 2008, accounting for about 12 percent of the company's total.Henrikson said at a December investor meeting that the company may be interested in Alico. When an analyst asked whether $14 billion was too much to spend on a deal, he replied "the size is not a problem."