Citigroup yesterday agreed to sell Travelers Life & Annuity to MetLife for $11.5 billion. The sale marks the abandonment by Citigroup of the one-stop financial supermarket strategy it pursued under Sandy Weill. Insurance turned out to be less profitable and slower growing than other financial businesses, and Citigroup is now concentrating on retail and investment banking.
As part of the deal, MetLife will market its financial products through Citigroup for the next 10 years, including through Smith Barney retail brokerages and Citibank branches. Citigroup will receive $1 billion to $3 billion of the purchase price in MetLife stock and the remainder in cash, giving it an after-tax gain of about $2 billion subject to adjustments at closing.
The businesses being acquired by MetLife generated revenue of $5.2 billion and net income of $901 million in 2004, with total net assets of $96 billion. MetLife shares were down 19 cents at $39.75 on the news, while Citigroup shares were up 73 cents at $49.11.
MetLife said it plans to issue debt and convertible securities to finance the deal, and may sell assets, including real estate and its 52 percent stake in Reinsurance Group of America. MetLife also said it would end a stock-buyback program and use the cash for the acquisition. It said its leverage ratio would rise to about 29 percent from 25 percent with the deal, but that it expects to reduce that to 25 percent by the end of 2006. MetLife does not expect ratings downgrades from the deal, Wheeler said. The transaction is expected to close this summer.
The transaction will make MetLife’s already dominant position in the US individual life insurance market even larger and make it Number 2 in the annuities market behind Hartford Life Insurance Co.