MassMutual Executive: Buying MetLife’s Agent Channel Is ‘Growth at the Right Price For Us’
March 11, 2016 by Dennis Gorski, managing editor-online, BestWeek: Dennis.Gorski@ambest.com
SPRINGFIELD, Mass. – MassMutual’s recently announced deal to purchase MetLife’s Premier Client Group is about expanding its “feet on the street” by 70%, according to Mike Fanning, executive vice president of MassMutual’s U.S. Insurance Group.
“It’s not about growing bigger just for the sake of expanding,” Fanning told Best’s News Service. “We’re aspiring to be big because we believe it brings benefits to the people that we serve… Being big isn’t a goal in and of itself.”
He also made clear MassMutual is not buying MetLife’s book of existing business. “What we’re buying is their distribution organization, the broker-dealer and other assets,” Fanning said. As for worries about workforce cuts once the deal goes through around midyear, “This is completely a growth story, not a consolidation story,” Fanning noted.
Regarding the reported value of the deal, he said, although officially stated as being $300 million, the final cash purchase price after adjustments is expected to be in the $165 million range, net of adjustments (Best’s News Service, Feb. 29, 2016).
In return, MassMutual will add about 4,000 captive, highly trained U.S. product advisers in 40 locations to its existing nationwide roster of 5,600 agents. The deal also includes Met’s broker dealer, MetLife Securities Inc. The sales force will remain focused on U.S.-based business.
“We have no immediate plans to integrate any of those offices because of the acquisition,” Fanning said. “When we look at the marketplaces we’re in, the size of the marketplaces, no single company has more than mid- to high-single digit market share. There’s plenty of room for advisers to peacefully coexist.”
“Just getting more advisers out in front of more clients is a huge benefit to us,” Fanning added. He said his agents operate under an “open architecture”-style of marketing. “They sell our products and we make available other products through our system as well,” he said. “That model will continue.”
One feature of the deal permits MetLife to develop a fixed-rate annuity for MassMutual and then be the product’s exclusive distributor for 10 years. Fanning cited “a gap in our existing product portfolio” as the reason.
“There are certain things we believe we do really well,” he said. “Income annuities, deferred income annuities, we are a very big competitor in that marketplace. We have manufacturing expertise in some of those things.”
“And there are places where we don’t have manufacturing expertise, so fixed-income annuities that require all sorts of living benefits are not in the sweet spot of what we manufacture, especially as a mutual company,” Fanning noted. “So having a partner like MetLife who’s got huge experience, deep experience, in annuity manufacturing plus a strong balance sheet that we can rely on, was just a good fit for us. They had the expertise and the capital structure to be able to support the products and we had a need to have a product and we weren’t a great manufacturer of it. So the combination of those two things really made a lot of sense for us.”
MassMutual also offers a number of variable annuities “and once the deal closes, will offer MetLife VAs through the combined distribution organization,” Fanning said.
“Clearly we want to continue to grow,” he noted. “For us it’s growth at the right price. It’s about becoming a distribution powerhouse and about helping us fulfill, much more rapidly, our purpose of making sure we’re out there securing financial futures and protecting people.”
He added, “It accelerates for us something we’ve been focused on strategically for the last decade.”
Metropolitan Life Insurance Co. has a current Best’s Financial Strength Rating of A+ (Superior). Massachusetts Mutual Life Insurance Co. has a current rating of A++ (Superior).
