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AIG and MetLife: How Long Has This Been Going On?

MetLife's on again, off again negotiations with American International Group's Alico unit has been going on longer than a monkeys' mating dance in a rain forest. The New York Times said today that they were at it again.

Price is supposed to be the sticking point.

The theory is that MetLife is waiting until AIG, which recently saw its share price plummet to $1.33 after former CEO Hank Greenberg spanked them in a high-profile court case, lets Alico go for virtually nothing. AIG is now trading higher, but that follows a 20-for-one reverse stock split. MetLife supposedly made an $11.2 billion offer back in February.

Grabbing at that straw would be a mistake, even for a desperate AIG, which needs money to pay yet another round of those infamous bonuses in order to keep its current crop of employees. Alico is AIG's foreign life insurance unit, which derives more than half of its revenues from Japan and is, or at least once was, a crown jewel of the company.

And while a sale is looming, AIG has a little latitude in terms of selling this piece. It is one of two offshore holdings that have been tucked away into an SPV (special purpose vehicle). SPV's were given a bad name during the Enron scandal, but for an ailing AIG they serve a definite and viable purpose, which is why its regulator, the Federal Reserve Bank of New York, allowed AIG to do this in March.

The New York Fed wasn't being altruistic. It got a preferred equity interest in Alico, which means it also has to approve any deal, whether with MetLife or another suitor.

But it remains to be seen if MetLife wants to get wet above the ankles in foreign waters. The country's largest life insurer has done quite well during the recent recession by not sticking its neck out: not giving away the store in terms of variable annuity policies the way Hartford Financial did, and not getting bushwhacked by buying too much toxic mortgage products that were once so erroneously labeled "triple A" by dumb rating agencies.

As a result, MetLife's foreign footprint remains relatively small, less than 12 percent of the company's premiums. And so far CEO Rob Henrikson likes it that way. Is he prepared to make a big move at a time when competition is heating up in Japan so fast that Hartford is backpedaling out of that market? India could be a big market, as could China. But could MetLife inherit AIG's laureate status as the only foreign insurer to operate there without a domestic partner? That's one of the wild cards.

It probably depends on whether he can get Alico for a song with lyrics like, "Gimme $17 billion and it's yours," according to the New York Times.

If you look at its last earnings report, MetLife could have pulled that out of its petty cash drawer. But AIG may be expecting a bit more renumeration, say upwards of $20 billion. And so the mating dance goes on.