MetLife Can't Court AIG's 'Alico' Forever, Can It?

When it comes to keeping relationships a secret, giant insurer MetLife is about as subtle as Tiger Woods. During its year-long courtship of Alico, someone, either Alico's parent, American International Group, or MetLife itself, has been dropping hints for the media that indicate how close the two have gotten. What's even more surprising is that the National Enquirer hasn't released the story.

But now it's official. Well, semi-official. MetLife announced in its fourth quarter earnings report that it's in negotiations to buy Alico, AIG's Asian life insurance unit. Of course, there's the usual caveat of "no assurances that an agreement will be reached." And, on MetLife's earnings call, CFO William Wheeler was quick to slough off analysts' continued questions about how the deal would be structured.

What's apparent is that MetLife can buy Alico - and for that matter probably all of AIG - any time it wants. Despite the dire headlines about losing money in the fourth quarter, the nation's largest life insurer is doing just fine, with premium and revenues up 14 percent year over year and operating earnings of 96 cents a share, a whopping increase over last year's 17 cents. Its losses (unrealized) come from the credit derivatives it took out to hedge its own portfolio, proof that with each crisis the accounting gets more arcane.

But the real question: Why would MetLife want to marry the ugly duckling castoff of a company now 80 percent owned by taxpayers? And why would it pay a reported $15 billion?

Some answers are found in MetLife's earnings report. While substantially grounded in the U.S., MetLife clearly sees opportunities in Asia, where Alico does a lot of business. MetLife said its international business was up 22 percent in the latest quarter, with growth in areas such as India, South Korea and China that are, with the infusion of wealth taking place there, likely to explode.

In the chaotic and highly competitive Japanese market, MetLife's assets under management jumped 30 percent due to annuity sales. Yes, there are problems selling some products like variable annuities, but medical disability insurer Aflac, which also reported earnings yesterday, seems to be winning in its arena, and MetLife probably thinks it can too.

The courtship between MetLife and AIG indicates that Snoopy isn't going to pay anything more than the bottom line, and MetLife CEO Rob Henrikson made it clear that "any acquisition had to be accretive (add to) earnings." Of course, that can mean different things to different CEOs. But logic dictates that MetLife, which now has access to Alico's dowry, will take a look at the fourth quarter numbers before approaching the altar. And as an usually slow earnings reporter, AIG probably won't have that available until mid-February.