MassMutual Emerges as Potential Buyer of MetLife Retail Group

By Katherine Chiglinsky | February 26, 2016

MetLife Inc., the life insurer that is reshaping its business mix to limit government oversight, is in talks with Massachusetts Mutual Life Insurance Co. about a possible sale of MetLife Premier Client Group, the company’s U.S. adviser force.

The group targets middle- to upper-income consumers, including small-to-medium sized company executives and small business owners, according to a regulatory filing. There is no guarantee that a transaction will be consummated, New York-based MetLife said Thursday in a statement.

MetLife Chief Executive Officer Steve Kandarian is weighing the possible sale, spinoff or public offering of a U.S. retail unit after his company was declared by regulators as a systemically important financial institution, a too-big-to-fail designation that can bring tighter capital rules. A separate U.S. proposal for stricter rules on retirement-product sales is pushing some insurers to evaluate whether they keep broker-dealer operations.

American International Group Inc. said last month that it was selling AIG Advisor Group to funds affiliated with Donald Marron’s Lightyear Capital LLC and PSP Investments.

“MET could see some relief from the likely need to alter commission and fee arrangements in response to likely Department of Labor implementation of new fiduciary standards,” Piper Jaffray Cos. analysts led by John Nadel said in a note. “Generally speaking, exiting the career agency, or owned distribution channel, would negate any conflicts, perceived or actual, from being both a ‘manufacturer’ of product as well as a distributor.”

Direct Sales

MetLife has been seeking to increase direct sales through the Internet and also offers products through workplaces. The insurer struck a deal in 2013 to sell two broker-dealer affiliates to a firm backed by Lightyear. And Eric Steigerwalt, who was designated to lead the U.S. retail operation slated for separation, has been cutting advisers in recent years.

“We’re not financing advisers who, frankly, were never going to make it in this business,” Steigerwalt said in 2013. “Our productivity is way up and we’re saving a lot of money.”

He sought to push advisers to sell more car and residential coverage, which is less capital intensive than some retirement products. MetLife plans to keep its property-casualty unit, which sells auto and home insurance.

MassMutual said in a separate statement that it entered into discussions about a possible deal and that “no timetable has been set for any agreement.” The Wall Street Journal reported earlier Thursday on the Springfield, Massachusetts-based company’s talks with MetLife.

MassMutual would probably be able to cut real estate costs by combining its 5,500 agents with 4,000 from MetLife, Nadel said.

Agent Recruiting

“It’s no secret a career agency system is an expensive proposition given the high fixed costs associated with office space, training, compliance, etc.,” he wrote. “Moreover, new agent recruiting continues to decline nationwide and agent retention levels remain relatively weak.”

MetLife gained 14 cents to $38.70 at 9:31 a.m. in New York, narrowing its decline for the year to 20 percent. MassMutual is owned by its policyholders.

Kandarian’s company recently lost a distribution relationship on some retirement products. A spokesman for Fidelity Investments said Wednesday that it suspended sales of MetLife’s annuities given the “limited information available at this time” about the insurer’s plan to separate a U.S. retail business.

–With assistance from Sonali Basak and Lily Katz

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