MetLife Proposes to AIG: Is Third Time the Charm?

Last Updated Jan 19, 2010 3:58 PM EST

American International Group has tried in vain to sell its Asian life insurance unit Alico to MetLife more times than Britney Spears has been married and divorced, all without success.
The rumors first surfaced in February when AIG's executive bonuses were under attack by Congress. The second round commenced in July and again in August when former MetLife CEO Robert Benmosche took over at AIG. Who better to arrange the deal than someone who had been on both sides?

Now they're bubbling up again. Both the Wall Street Journal and the New York Times are reporting not only that the deal could close in "two to three" or "several" weeks, but that the price will be $14 billion to $15 billion.

The reports violate the cardinal rule of any financial prediction: "Give 'em a time, or give 'em a price, but never give 'em a time and a price." So there just may be some truth to the rumor this time. AIG certainly wants to sell Alico. It already put it and its sister company AIA into special purpose vehicles to separate them from AIG's other operations for an easier sale. It also enables AIG to pay back to the federal government $9 billion of the $60 billion it owes from its 2008 bailout.

And it might take some pressure off Benmosche, who could take some hits if fourth quarter earnings are dismal; as well they might be given the current state of the insurance market and, in particular, AIG. It would show, at the very least, that he still knows "the art of the deal," just like Donald Trump. But from MetLife's vantage point, the price would have to be very - emphasize very - good to make it worthwhile.

As the nation's largest life insurer, MetLife has the cash. It has weathered the recession very well by not taking chances and not reaching for the moon. It has also, at least in the past, focused on lucrative U.S. operations without drifting too far across either ocean. And that has served it well. Remember that MetLife was listed as one the healthiest American financial firms in a government audit, and it publicly rejected TARP funding.

By contrast, The Hartford, which took a big position in the Japanese market, has since had to retreat when the Japanese banks aggressively reentered the life insurance business. Other foreign insurers have also been stung by low profit margins there, although some, like Allianz, see potential profits.

But MetLife is no Allianz, with deep foreign connections. Its logo is "Snoopy," a lovable dog. How will that translate in Dubai? New York-based MetLife may be doing the deal of the century and at a commensurate price. If so, CEO Robert Henrikson better be able to justify it.

  • Ed Leefeldt

    Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.