DealZone

It was a two-year quest to seal the MetLife deal for Alico.  Beyond the $15.5 billion purchase price, what does it mean for the companies and the life insurance sector?

*  MetLife seals Alico deal after two-year quest
*  Factbox: AIG’s progress on asset sales

From the Web:

A.I.G. Sells Unit to MetLife (NYT)
“Now comes the hard part.” – NYT

At AIG, What Is Left to Sell? (WSJ)
“One might suggest selling the furniture, but AIG already sort of did that, unloading its downtown New York headquarters to a condo developer.” – WSJ

Alico Deal Will Transform MetLife (WSJ)
“The bold and potentially risky deal would boost the portion of MetLife’s overall operating income that comes from overseas to 40% from 15% currently, estimates Andrew Kligerman, a UBS Securities analyst.” – WSJ

AIG Giveth Back, and Taketh Away, from U.S. Taxpayers (BNET)
“An old adage says that if you owe the bank a million dollars, the bank owns you. And when you are bailed out to the tune of tens of billions, well, then you have a piece of the U.S. Treasury.” (BNET)

MetLife is moving up in Japan, the world’s second-largest life insurance market, with the $15.5 billion purchase of Alico from AIG. The unit accounted for 70 percent of Alico’s pre-tax operating income in fiscal year. It also has operations in Europe and emerging markets in Central and Eastern Europe, the Middle East and Latin America. Much like the $35.5 billion sale of AIG’s Hong Kong-based AIA subsidiary the week before to Prudential of the U.K, a chunk of AIG is a transformative expansion for Metlife.

Both AIG and Metlife share rose on the news – one of those win-win deals, the market says. But if you want to be skeptical, just keep in mind that AIG is still only part of the way towards repaying the $182.3 billion it owes the U.S. government and Metlife has just exposed itself to an aging Japanese population with prospects in some ways even more worrying than in the U.S., given its lost decade and its near-routine bouts of deflation.

One thing Metlife will not have to worry about is having a government functionary on its board. Though the sale features a sizable equity component from AIG, we’re told that the chance of Uncle Sam calling the shots at yet another major U.S. corporation is nil.

What if AIG sold everything it had? How big a hole in the ground would be left? Perhaps something less than a crater but certainly more than a gopher hole, now that it has agreed to sell its Asian life insurance arm to Prudential of the UK for $35.5 billion. AIG CEO Robert Benmosche, who has been focused on getting as much as he can for the assets that once made up the AIG colossus, must have figured the deal was more lucrative than the Hong Kong IPO that had been in the works.

AIG is busy repaying a $182.3 billion government bailout it received at the height of the financial crisis. First to be paid back are a $16 billion special purpose vehicle and $25 billion taken out of a credit facility taxpayers set up for AIG. The Prudential deal won’t cover those debts, but next up is the pending sale of American Life Insurance Co, or Alico, to MetLife in a $15 billion deal held up by a tax question.

Earlier this month, Benmosche said AIG would shed enough assets to remain a global property-casualty and U.S. life and annuity operation at its core. AIG would become “not too big to fail,” he said in an interview with Contact. But having already been saved once, and with taxpayers now owning the company, the question of success or failure seems almost pointless.