MassMutual to acquire MetLife adviser network for $300 million

MetLife will be the exclusive developer of certain annuity products issued by MassMutual

Feb 29, 2016 @ 9:39 am

By Bloomberg News

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Massachusetts Mutual Life Insurance Co. agreed to buy a distribution network from MetLife Inc., adding 4,000 financial advisers as Chief Executive Officer Roger Crandall seeks to expand offerings of annuities, life policies and disability coverage.

MassMutual will pay $300 million for MetLife Premier Client Group and related assets, the seller said Monday in a regulatory filing. As part of the deal, MetLife will be the exclusive developer of certain annuity products issued by MassMutual.

The companies said last week that they were in talks for a possible transaction.

The deal adds to MassMutual's agency force of more than 5,600 financial professionals. MassMutual is also acquiring MetLife Securities, Inc., MetLife's affiliated broker-dealer.

The MetLife transaction “will result in the transformative creation of a distribution powerhouse,” Mr. Crandall said in a statement. “This unprecedented transaction will position us for stronger future growth.”

The deal indeed seems to be “a big boost” for MassMutual,” said Alan Morley, regulatory compliance and surveillance practice lead at financial services consultancy GFT.

“They're going to gain a geographic footprint, a whole slate of new agents. I think there's a whole rash of new opportunity coming to the organization,” Mr. Morley said.

MassMutual had about $642 billion of assets under management at the end of 2015 and has been expanding through acquisitions under Mr. Crandall. He agreed in 2012 in talks for a possible transaction to buy a retirement-plans business from Hartford Financial Services Group Inc. and announced a deal last year to purchase almost all of the assets of Viability Advisory Group, which helps corporate customers analyze benefit plans.

CONTINUING THE PLAN

In January, MetLife announced a plan to divest a portion of its U.S. retail operations, either through a sale, initial public offering or spinoff, in a move to shed its designation as a systemically important financial institution (SIFI).

That move is separate from today's announced sale and still in the planning process, according to spokeswoman Megan Lantier. As such, that retail business is still part of MetLife until a decision has been reached as to separation.

Whereas the agreement with MassMutual pertains to product distribution, the January announcement relates to product manufacturing — MetLife's blocks of annuity, life insurance and disability insurance business, for example.

However, MetLife's decision to shed its broker-dealer and adviser network relates to the January announcement in that it's part of the continued effort to eliminate SIFI status, which places greater capital burdens on corporations, Mr. Morley said.

“It's the execution of the de-SIFI-cation of the institution,” Mr. Morley said. “A SIFI designation gives them more burden than a smaller institution.”

“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,” Steven Kandarian, MetLife's Chairman, President and chief executive, said in a statement.

By decoupling manufacturing from distribution, MetLife's U.S. Retail business “will be more agile,” and will lead to significant cost savings,” Mr. Kandarian added.

MetLife expects to save about $250 million a year by exiting the operation. Estimated savings for the rest of 2016 are about $100 million, according to the company's filing.

— With reporting by Greg Iacurci

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