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MetLife is reportedly negotiating to buy the American Life Insurance Co. from its parent American International Group Inc. (NYSE: AIG). The deal would give MetLife more exposure to Japan and assist AIG in paying back the billions of dollars it owes to the government.
Under the terms now being discussed, MetLife would pay $14 billion to $15 billion for American Life, commonly known as Alico, The New York Times reported. At least $9 billion of that sum would immediately go to the Federal Reserve Bank of New York to redeem preferred stock now being held in a special-purpose vehicle. Additional proceeds would go toward paying down part of a separate, $35 billion credit facility from the New York Fed.
Acquiring Alico would give MetLife a strong presence in Japan where an aging population offers fresh growth opportunities. Alico had about 200 offices, 4,600 consultants or employees, and 10,000 agencies in Japan as of March of last year, according to The Wall Street Journal. The company generates about 70% of its revenue from the Pacific island.
The Alico unit is considered one of AIG's strongest assets, but the brand's reputation has been damaged badly by its parent's highly publicized failures.
"Alico still has a strong sales channel and a brand, so if MetLife acquires Alico's operations, its credibility will be restored," Masao Muraki, an analyst at Daiwa Capital Markets, told The Journal.
Alico Japan's name recognition among the general public was 99.2%, according to a 2008 corporate image survey.
Metlife is the No. 1 life insurance partner in the United States, but has virtually no presence in Japan, where competitors like Aflac are making hay. Aflac, like Alico, generates 70% of its revenue from Japan.
A sale of Alico, which could be completed in the next few weeks, would be the second big insurance acquisition of the young year. Swiss Re earlier this week transferred part of its U.S. life insurance business to Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) for about $1.3 billion.
The deal with Buffett's company, which already has a stake in Swiss Re, takes effect retroactively on Oct. 1, 2009.
News and Related Story Links:
- Wall Street Journal:
MetLife Bets on Restoring Alico's Reputation
- NY Times:
A.I.G. Unit May Be Sold to MetLife