Guard the blanket, Linus, MetLife’s into wraps now

Metropolitan Life Insurance Co. is hoping to generate more than peanuts when it begins selling wrap accounts shortly before going public in March — the start of an aggressive strategy to beef up its asset management business.

The country’s biggest life insurer has made selling agreements with about 40 mutual fund companies and will initially offer the program through roughly 350 of its 7,100 agents, according to sources familiar with MetLife’s plans.

To head the effort, the New York insurer last month hired Kevin Burns, 38. He had helped build a similar program for rival Prudential Insurance Co. of America. MetLife declines comment, citing the government-mandated quiet period surrounding the initial stock offering.

“Insurance companies, banks and mutual fund firms are all going after the same group of customers,” says Ed Easop, an analyst at A.M. Best Co., an insurance rater in Oldwick, N.J. “Part of the reason many insurance companies are demutualizing is so they can have the capital needed to expand into all these other businesses.”

Analysts expect MetLife, which runs $400 billion, to purchase money managers with some of the cash it raises from the public. Moreover, it is reportedly seeking an executive to oversee its disparate money management units and affiliates.

The move into wrap accounts is also noteworthy because it pits the company against subsidiary New England Financial, which, through a brokerage arm, started a mutual fund wrap program of its own in 1997. Known as Investment Manager New England Securities, it has amassed about $700 million and has an average account size of $300,000.

Laura A. Hutner, national sales manager for the brokerage, rebuts the notion that MetLife’s program will compete with New England’s. She emphasizes that each company operates independently, with separate sales forces and strategies.

Plus, she says, each program aims at different investors.

“Our program is aimed at small-business owners and affluent individuals,” she says. “Theirs is directed more at the middle market.”

Fueled by the efforts of companies such as Fidelity Investments and Salomon Smith Barney, mutual fund wrap assets totaled $94.4 billion at the end of last year’s third quarter, up 22.7% from the beginning of 1999, according to Boston-based financial research firm Cerulli Associates Inc.

Even with growing demand, MetLife faces an uphill battle in trying to break into the wrap business. The biggest hurdle, by far, will be persuading agents accustomed to collecting commissions on each life insurance policy sold to instead collect annual fees for marketing portfolios of mutual funds.

Insurance companies currently account for a scant 0.2%, or $200 million, of mutual fund wrap assets. By comparison, the big brokerages make up 34.7%, or $32.8 billion; and brokerages that cater to independent advisers account for 24.2%, or $22.8 billion, says Cerulli.

“Putting these wrap programs on the shelf is easy,” says Jeffrey L. Benjamin, a Cerulli consultant. “The hard part is convincing brokers that they will have to get rich slowly.”

Look at what happened to Guardian Insurance Co. Two years after launching its own mutual fund wrap, the New York insurer has gathered only $110 million in wrap assets. Even more telling, only 10% of its 3,000-strong sales force has shown an interest in setting up wrap accounts.

MetLife’s program will follow the traditional wrap model, say insiders. Agents will choose from a list of 200 mutual funds and determine the allocations appropriate for the client.

Predictably, the list will include funds from such MetLife affiliates as Boston’s State Street Research and Management Co. and Nvest LP, the latter 48% owned by the insurer. But it will also include names like Fidelity, Janus and Putnam Investments.

In June, Metlife will figure into the program stocks that investors already hold, an unusual move that benefits them, analysts say.