The Engineer Behind the MetLife, ALICO Deal

NEW YORK (TheStreet) -- Sometimes it takes a bit of rocket science to get a deal done. Lucky for MetLife(MET) senior vice president Sachin Shah-- the dealmaker behind the $15.5 billion acquisition of American International Group's(AIG) ALICO unit-- has experience building harpoons and missiles. Sachin Shah, senior vice president, MetLife

Shah stood side by side with William Toppeta, international president of MetLife and MetLife CFO Bill Wheeler when the insurer started discussions with AIG in 2008.

"We saw what was an unbelievable opportunity. We did compete with [AIG's ALICO] in many markets and never thought this was a company we could acquire. We very quickly tried to seize the opportunity and it took a little longer than expected," Shah says.

Shah, who joined MetLife in 1999, says his prior jobs-- engineering missiles, elevators, and back office and trading operations -- have helped prepare him for the pressure involved in completing the transaction.

"My specialty is figuring out complex problems. I was quickly fansinated with the business side," he said. "This was not your normal sale. We had to work with them to very quickly to prepare the divestiture of these assets. There was a lot of complexity involved in this; ensuring this was the right answer for AIG."

As the dealmaker in charge of leading the integration, Shah has put together an integration team consisting of 30 different sub-teams that are working on fully integrating ALICO's distribution systems, technology, branding and marketing across 64 countries in 18 months.

Shah spends most of his day collaborating with people from different businesses in both MetLife and ALICO on the best way to drive change in the organization. He says the most difficult part of his job is making the right decisions quickly.

"You are always moving fast and you are always striving to balance speed versus perfection at minimal risk. Just finding enough time to ensure that every decision we are making is the best decision we are making," Shah explains, saying he has been frequently traveling and has had very few weekends free. "The stakes are now much higher and we are in markets that we had no presence in before. We have had to move very quickly. I stressed over that a lot."

View the original article here

MetLife to Gain From ALICO Acquisition

MetLife (MET), one of the largest insurance providers in the US, competes with AIG (AIG) and Hartford Financial (HIG) to provide life insurance, health insurance, retirement planning products and auto and home insurance to both consumers and corporations.

MetLife’s most valuable business is its collection of premiums and fees on US life and non-medical health insurance policies, from which it derives about 36% of the Trefis price estimate of $43.12 for MetLife. The company also derives an estimated 25% of its value from the investment of insurance premiums, and 13% of its value from international insurance.

MetLife recently announced guidance for 2011, citing an expectation for 38% growth in operating earnings. The raised optimism is due to the company’s major acquisition of American Life Insurance Co. (ALICO) from AIG last month for $16.2 billion. The company also expects premiums, fees and other revenues to increase by 30% in 2011. [1]

ALICO is one of the largest and most diversified international life insurance companies in the world, providing consumers and businesses with products ranging from life and health insurance to retirement and wealth management solutions. ALICO has operation in more than 50 countries and serves 20 million customers worldwide.

With the acquisition of ALICO, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East, serving roughly 90 million customers in over 60 countries.

MetLife to Gain International Insurance Market Share

Prior to the acquisition of ALICO, MetLife held about 0.15% of the $2.9 trillion insurance premium market outside of the US in 2009. We estimate that MetLife’s share can increase 10% post-acquisition to about 0.16% in 2011, and project flat market share beyond 2011.

MetLife’s aggressive plans to increase its international operations and encouraging guidance into 2011 could present further upside to our estimates. If MetLife’s international market share increases to 0.3% by the end of our forecast period, it could generate 9% upside to our $47.67 price estimate.

Drag the trend-line in the chart above to assess the impact of MetLife’s international market share on the company’s stock value.

MetLife’s Investment Portfolio Could Increase by 25%

MetLife will also acquire the invested assets of ALICO which could reportedly increase its investment portfolio by 25%. [2] MetLife has nearly $250 billion invested in fixed maturity securities which we estimate to increase modestly by 3% to $256 billion in 2011.

Drag the trend-line in the chart above to assess the impact of MetLife’s fixed maturity investment growth on the company’s stock value.

Although we are positive on MetLife’s outlook post acquisition, we remain cautious regarding MetLife’s risks in integrating ALICO’s business and managing its growth, as ALICO faces turbulent times post AIG bailout.

Notes:

See: Reuters: MetLife to Grow in 2011 because of ALICOSee: Zacks: ALICO to Earn for MetLife in 2011

Disclosure: No position

View the original article here

ALICO to Earn for MetLife in 2011

{"s" : "aig,met","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""} Zacks Equity Research, On Tuesday December 7, 2010, 3:00 pm EST

Yesterday, MetLife Inc. (NYSE: MET - News) announced its projected operating earnings growth to be more than 38% year over year in 2011, which is guided in the range of $5.1–$5.5 billion or $4.75–$5.15 per share. The raised optimism reflects the company’s major acquisition of American Life Insurance Co. (ALICO) from American International Group Inc. (NYSE: AIG - News) last month for $16.2 billion.

The addition of the global life insurer, ALICO, is expected to diversify the company’s income sources while also mitigating the risks arising from other core operations of MetLife in the US, primarily the auto and home segment. This is reflected by the management’s evaluation of a 30% growth in premiums, fees and other revenues, in the range of $45.8–$47.0 billion, in 2011.

Further, this growth momentum is also expected to contribute to the return on equity, which is estimated to be about 11% for 2011. MetLife has also increased its investment portfolio by about 25% with the inclusion of ALICO.

However, the macro risks related to the low interest rate environment and a deflation scenario in Japan coupled with sluggish recovery in the US and Japan is expected to remain on the surface throughout 2011.

Amid these weak factors, MetLife believes that the latest ALICO transaction is poised to boost MetLife fundamentally by contributing to the company’s international operating earnings including international life and international accident and health. Besides, the US corporate benefit is also expected to be major growth contributor with improvement in Latin America, the three together constituting 46% of operating earnings in 2011.

Besides, MetLife projects fourth quarter 2010 net income of $170–$570 million or 17–56 cents per share as compared with $289 million or 35 cents a share in the year-ago period. Excluding investment gains and losses, operating earnings is anticipated in the range of $1.1–$1.2 billion or $1.04–$1.14 per share, increasing about 39% from $793 million or 96 cents a share in the fourth quarter of 2009.

For full year 2010, MetLife guided net income of $2.8–$3.2 billion or $3.13–$3.57 per share, while operating earnings are expected to be $3.8–$3.9 billion. Premiums, fees and other revenues shall be up 5% year over year, in the range of $35.6–$36.0 billion.

Investment Portfolio Update

Concurrently, MetLife also announced yesterday the purchase of credit-default swaps (CDS) worth $200 million, in order to protect itself against declines in Portugal’s sovereign debt. The company had hedged in these bonds that were accumulated in Portugal by ALICO at the time of the acquisition. MetLife’s debt exposure amounts to about $379 million in Portugal and $735 million in Greece.

Meanwhile, MetLife is also pursuing to enhance its investment-grade and high-yield credit investment portfolio from 35.5% to 36.75%. However, junk portfolio is expected to reach 5.0% in 2011 from the current 4.5%, while cash and short-term holdings will account for 5.75% of investments next year as compared with the current 7.7% allocation. Alongside, the US Treasury and agency securities will decline to account for 7.5% of the portfolio against 8.3%.

Estimate Trend Revision

Over the last 30 days, one of the 18 analysts covering the stock has raised its estimates for the fourth quarter of 2010, while 2 downward revisions have been witnessed. Currently, the Zacks Consensus Estimate for third quarter is operating earnings of $1.06 per share, which would be up by 10.3% from the year-ago quarter.

The higher number of downward estimate revisions for the fourth quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.

With respect to earnings surprises, the stock has been almost steady over the last four quarters, with three positive surprises. The average remained positive at 6.07%. This implies that MetLife has surpassed the Zacks Consensus Estimate by 6.07% over that period.

Earnings Recap

MetLife reported third quarter operating earnings of $878 million or 99 cents per share, well ahead of $718 million or 87 cents per share in the year-ago quarter. However, results missed the Zacks Consensus Estimate of $1.03 per share. Reported net income was $286 million or 32 cents per share compared with a net loss of $650 million or 79 cents per share in the prior-year quarter.

While we think MetLife should continue to benefit from its diversified business mix as well as its leading brand, losses in the investment portfolio are likely to impact the results in the upcoming quarters.

AMERICAN INT'L GROUP NEW (AIG): Read the Full Research Report

METLIFE INC (MET): Read the Full Research Report

Zacks Investment Research

View the original article here

MetLife to grow in 2011 because of Alico

{"s" : "aig,met","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""} On Monday December 6, 2010, 9:29 am

By Ben Berkowitz

NEW YORK (Reuters) - MetLife Inc (NYSE:MET - News) expects operating earnings to grow more than a third next year as the largest U.S. life insurer benefits from its blockbuster acquisition of global life insurer Alico.

The company expects operating earnings to decline across its U.S. business lines in 2011, but that will be more than offset by gains from Alico, which MetLife acquired from American International Group Inc (NYSE:AIG - News) in November.

The Alico deal radically reshaped MetLife's profile and doubled what international operations contribute to the company's overall earnings. MetLife paid $16.2 billion in cash and stock for Alico, making AIG its largest shareholder.

Alico has major operations in Japan, where the economy has been weak, but MetLife says it sees some business momentum, and has faster growing operations in Latin America.

MetLife said on Monday that it expected 2011 operating earnings, excluding investment gains and losses, of $5.1 billion to $5.5 billion, or $4.75 to $5.15 per share. Analysts polled by Thomson Reuters I/B/E/S on average expected earnings of $5.03 per share.

In a slide presentation filed with securities regulators ahead of its investor day, MetLife said its largest segments in 2011 by earnings will be U.S. corporate benefits, international life and international accident and health. The three together will account for 46 percent of operating results.

The company forecast slow economic growth in both the United States and Japan next year, with continued low interest rates domestically and disinflation or deflation in Japan.

"The economy's not performing the way any of us would have liked at this point in time in terms of the recovery," Steve Kandarian, MetLife's chief investment officer, said in a presentation at the investor meeting.

The low interest rate environment in particular has become a huge concern for U.S. insurers given its impact on their investment portfolios. MetLife projected 10-year rates would actually fall from current levels through the end of March 2011 before starting to rebound.

For this year, MetLife expects operating earnings of $4.26 to $4.36 per share, while analysts expected $4.28.

Based on the midpoint of the ranges, the company expects a 38 percent earnings increase for next year.

For the current quarter, MetLife forecast operating earnings of $1.04 to $1.14 per share, while analysts expected $1.04.

The company also said it anticipated an improved operating return on equity of 11 percent for 2011.

MetLife shares rose 0.6 percent to $40.40 in premarket trading from a $40.14 close on Friday.

MetLife shares trade at a ratio of 1.19 times the company's book value, against a sector median of 0.94, according to Thomson Reuters data.

(Reporting by Ben Berkowitz; Editing by Lisa Von Ahn and Maureen Bavdek)

View the original article here

MetLife Says 2011 Earnings Will Climb After $16.2 Billion Alico Purchase

MetLife Inc., the biggest U.S. life insurer, said earnings will climb in 2011 after the firm bought a non-U.S. business from American International Group Inc.

Next year’s operating profit, which excludes some investment results, will probably be $4.75 to $5.15 a share, compared with the average $5.02 estimate of 19 analysts surveyed by Bloomberg, the New York-based company said today in a statement. Profit for 2010 will be $4.26 to $4.36, MetLife said, compared with the $4 to $4.40 it predicted in December 2009.

Chief Executive Officer Robert Henrikson sold debt and issued stock to meet the $16.2 billion price for AIG’s American Life Insurance Co. last month. Alico, which has businesses from Chile to Japan, allows MetLife to add clients outside of a U.S. life insurance market that the 63-year-old Henrikson described in March as “relatively slow-growth.”

“They’re bolting on a different business,” said Randy Binner, an analyst at FBR Capital Markets, who has an “outperform” rating on MetLife stock. “What they are hoping to find in Alico is both higher growth potential and higher margin potential by writing insurance in less efficient, less regulated markets.”

MetLife gained 14 percent this year through Dec. 3, compared with the 17 percent jump in the 24-company KBW Insurance Index.

MetLife will probably post 2010 operating earnings of $4.27 a share, according to the average estimate of 19 analysts surveyed by Bloomberg.

Rivalry

MetLife is extending its rivalry with Prudential Financial Inc., the second-biggest U.S. life insurer, as bailed-out rivals including AIG and Hartford Financial Services Group Inc. scale back. In September, Newark, New Jersey-based Prudential agreed to buy two Japanese life insurers from AIG for $4.8 billion.

MetLife’s U.S. business posted operating revenue of $32.5 billion in the first nine months of the year, up 6 percent from the same period in 2009. International business revenue jumped 24 percent to $4.9 billion.

Henrikson is retreating from the market for long-term care insurance as he seeks to expand in more-profitable businesses. MetLife will halt new sales of the policies at the end of the year, while honoring previously written contracts, Henrikson said on Nov. 17.

Investments

The insurer, which had investments of $386 billion at the end of September, is making more from bond coupons and dividends this year after drawing down the cash holdings it built during the financial crisis. Net investment income rose 15 percent to $12.8 billion in the first nine months of the year.

Results have been helped by an improvement in so-called variable investments, including real estate, private equity and hedge funds and MetLife’s securities-lending program. Chief Investment Officer Steven Kandarian, who in December 2009 forecast $400 million to $800 million in variable investment income for 2010, has posted $902 million in the nine months through the end of September.

MetLife paid $7.2 billion in cash and $9 billion in securities for Alico. AIG will sell the securities subject to market conditions, “following the lapse of agreed-upon minimum holding periods,” the company said.

MetLife expects to receive a “very healthy dividend” from Alico late next year, Chief Financial Officer William Wheeler said in October.

U.S. life insurers extend loans to property owners as part of their investment strategy. MetLife’s portfolio included $35.5 billion of property loans and $15.5 billion of commercial mortgage-backed securities at the end of September. Combined, that accounted for about 13 percent of the firm’s investments. MetLife owned $45.9 billion of securities tied to home loans.

Life insurers, including Prudential and Lincoln National Corp., have said this year they’re seeking to lend more as the economy grows and helps relieve pressure on real estate owners. U.S. commercial property prices rose 4.3 percent in September, Moody’s Investors Service said last month. Prices are about 43 percent below October 2007 peaks, according to Moody’s.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

View the original article here