Is MetLife Finally Ready for an Acquisition?

On Friday's MetLife conference call for 2009 second quarter earnings, insurance analysts were being lulled into a summer slumber asking innocuous questions when top management jolted them awake.

When the issue of another share buyback program came up, management said it was likely "a number of years away." Buybacks are a regular part of what insurers do with their excess cash, so the fact that the country's largest life insurer was keeping its powder dry was significant. The life insurer, with half a trillion dollars in assets, hasn't had a buyback program since the second quarter of 2008.

So just what will MetLife, which has $20.5 billion in retained earnings, do with the money? Was it finally going to make a big acquisition?

One analyst pointed out that MetLife had put "a lot of money in Treasuries," a safe but, hardly, lucrative way to earn. Another noted that the insurer had a "lot of earnings power that's not engaged."

MetLife management's response that "we have excess capital and we expect to put capital to work," was an indication that, at a time when there are bargains to be had, they've probably kicked the tires of at least a few insurers up for sale.

And that was enough to get analysts salivating.

One likely scenario: MetLife will grab a piece of the American International Group pie. Rumors that MetLife would buy ALICO, an AIG foreign life insurance operation, have been circulating since February, but both sides are reluctant to either commit or separate. The rumors resurfaced in July. But AIG, which has set a five-year time horizon for its liquidation program, doesn't seem to be in a rush. And with the federal government heavily invested in AIG, it doesn't need to be.

If Hartford Financial were to sell off its life or property casualty units, perhaps MetLife might want to buy Hartford's ailing life unit and try to turn it around. But on its own recent analyst conference call, Hartford CEO Ramani Ayer indicated that the insurer would continue to work both sides of the street, and keep both its life and property units.

Are there other possible purchases out there? MetLife is mum. Having played ball conservatively in the past by keeping a lot of cash on hand, MetLife is starting to sound more aggressive. If it barks, will it bite?