MetLife Divests U.S Retail Advisory Force To MassMutual

MetLife, Inc. (NYSE:MET) has sold its U.S retail advisory force, Premier Client Group, to Massachusetts Mutual Life Insurance Company (“MassMutual”) for $165 million as per media release. The company’s affiliated broker-dealer, MSI Financial Services Inc. (earlier known as MetLife Securities), was also part of the deal. This acquisition agreement was announced in Feb 2016.

This sale reflects MetLife’s intention to separate itself from a large portion of its U.S. retail business. Also, the business was unable to deliver impressive results of late, making the divestment a feasible option.

Moreover, there was need of higher capital requirements owing to its SIFI status. Nonetheless, MetLife successfully shed its SIFI status in March as District of Columbia federal judge Rosemary Collyer gave the verdict that the insurer is not ‘too big to fail’ and should not be subject to stricter regulation.

With the sale, the company separated the distribution and product manufacturing functions in its U.S. retail unit. The axing of the distribution business will now allow the U.S. retail unit to focus more on product manufacturing, which is its core business. This, in turn, will provide the company a greater competitive advantage.

Notably, MetLife has also inked a product development agreement with MassMutual as part of the aforesaid deal. According to the terms of this agreement, the insurer will design certain annuity products to be sold by MassMutual.

On the other hand, the acquisition broadens MassMutual’s business by 45% in terms of sales and advisory offices and by 60% in terms of financial professionals. The acquisition also positions MassMutual as an ace individual life insurance and whole life insurance provider in the U.S.

MetLife currently carries Zacks Rank #3 (Hold).

Stocks To Consider:

Investors seeking yield from insurance sector can consider few better ranked stocks like Cigna Corp. (NYSE:CI) , MGIC Investment Corp. (NYSE:MTG) and Assurant, Inc. (NYSE:AIZ) Each of these carries a Zack Rank #2.