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Original Source: FD (FAIR DISCLOSURE) WIRE
. Tracey Dedrick, MetLife, Inc., VP, IR . Bob Benmosche, MetLife, Inc., Chairman & CEO . Rob Henrikson, MetLife, Inc., President & COO . Bill Wheeler, MetLife, Inc., EVP & CFO . Hugh McHaffie, MetLife, Inc., Head of Product Management
MET acquired Travelers Life & Annuity and CitiInsurance International from Citigroup for $11.5b. The Co. expects the acquisition to be modestly accretive to operating EPS in 2005, and be 4-6% accretive in 2006. Q&A Focus: Financing the acquisition, synergies, and products.
S1. Reasons for Acquiring Travelers Life & Annuity (B.B.) 1. Goals:
1. MET's aspirational goals stated when the Co. went Public in
2000 were: 1. To have 100m customers by 2010. 2. To be in the giant league of financial services companies. 1. This transaction will allow the Co. to do it. 2. It allows MET to return to its roots (From 1865-1868, MET was the National Life and Travelers Insurance Co.). 2. MET's Advantages: 1. MET's people: 1. Citigroup can depend on MET to deliver to its clients superior service, superior guarantees, and superior products. 1. In the last couple of weeks, the Co. had over 200 MET associates working on this due diligence at all levels. 2. No one ever knew who was the buyer of this transaction until they saw the Wall Street Journal on 01/31/2005.
2. Common platform: 1. Common platform (technology, finance, HR & legal, and investments). 2. Earlier acquisitions: 1. General American and New England Financial. 2. Created MetLife Investors Group from the two companies, COVA and Security First Group.
3. In 2003, the Co. stated that it is going to have a common platform all the way up, but not including the sales distribution. 1. Common marketing, common product design, common pricing. 2. The Co. has since doubled its business and kept headcount basically flat. 3. This platform is operational and in good shape. 3. Strategic Rationale & Financial Implications: 1. The transaction allows MET to enhance its products' volume, and size. 1. The Co. spends $1b a year on technology, over the last five years. 2. When the Co. has more volume, it makes sense to reduce fixed unit costs. 1. This will clearly help the margins. 2. Proprietary distribution:
1. A great opportunity for MET and the brand of MetLife to be
distributed through the Citigroup enterprise. 2. It won't be the entire enterprise, there will be some areas not included.
3. MET has most of the US operation and some of the international operation, almost all of the countries that Citigroup is now in.
4. A bigger footprint outside the US. 5. MET's stock price is up. 3. The transaction is accretive to MET's EPS. 4. It will be an improvement to MET's ROE. 5. Scale: 1. MET will now be far and away the largest seller, building value through sales of Individual Life. 2. The Co. will be tied with Hartford for Number 2 on the Annuity front. 3. On Retirement & Savings, a great sales lead here as well. 4. Strong distribution, strong sales building future value. 4. Value of the Deal: 1. The value of the deal = $11.5b. 1. MET will pay $1-3b in stock. 1. Goal is to be at the lower end of the range. 2. The cash will come from: 1. Cash on hand. 2. Debt. 3. Mandatory converts. 4. Appreciated assets. 2. Ten-year distribution agreement for the Citigroup enterprise.
3. MET expects to close in the early summer. 4. The transaction is subject to state regulators, and approvals, and so on.
S2. Acquisition Details (R.H.) 1. Companies Acquired: 1. Main companies acquired: 1. Travelers Life & Annuity. 2. CitiInsurance International. 2. Distribution through proprietary Citibank channels (Citibank, Smith Barney, Primerica, CitiStreet). 1. Not acquiring Primerica, CitiStreet, and the Mexican operations.
2. MET is already the Number 1 life insurer in Mexico. 2. Key Metrics:
1. Operating earnings of $868m in 2004. 2. Balanced Business Mix: 1. Institutional Annuities: all three. 2. The transaction gives MET more balance than it had before between Individual, Retail operations, and Institutional business. 3. About a 30% increase on the Individual side. 3. Puts MET in a leadership position in product. 1. Number 1 in Individual Life, Universal Life Variable,
Universal Life Retirement & Savings. 2. Number 1 in Institutional Annuities, where MET is already Number 1. 1. The transaction makes this even stronger. 3. In Individual Annuities, Number 3 in Retail.
4. Wonderful opportunities in international. 3. Distribution Synergies - Life: 1. Where Citigroup complements MET: 1. Independent agents. 2. National Marketing Organizations (NFP, Bramco, Capitas, and so forth) 3. Smith Barney. 4. Citibank.
2. Where MET complements Citigroup: 1. Independent footprint agencies. 1. Example, Gen America. 2. National/regional accounts (UBS, Jones, Edwards, and so forth) 3. Overlap: 1. Wachovia.
2. In the Independent Life channels, putting both the companies
together, the overlap equates to about $10m in sales. 4. Distribution Synergies - Annuity: 1. Where Citigroup complements MET: 1. Primerica. 2. Smith Barney. 3. Citibank. 4. Tower Square Securities. 5. …