MetLife is in talks to buy one of American International Group's largest international life-insurance units, but MetLife's top executive says his company does not need such deals to grow.

Still, analysts say, the insurance giant would be foolish not to be opportunistic.

C. Robert Henrikson, MetLife's chairman and chief executive officer, began the company's fourth-quarter results call by saying the two insurers are negotiating but had reached no agreement on the fate of American Life Insurance Co.

"MetLife does not need to enter any M&A transaction to meet our business goals," he said. "Any transaction needs to be accretive to earnings. … In other words, our acquisition criteria have not changed."

Analysts said MetLife had emerged as the top bidder for the company known as Alico with its willingness to pay $14 billion to $15 billion.

MetLife has said that international expansion is part of its strategy for this year and beyond. Alico sells life insurance and retirement products in 54 countries. Henrikson said during the conference call that MetLife has had at least double-digit growth in all its international regions and 22% international growth overall in premiums, fees and other revenue.

"With momentum in international businesses, we will continue to invest," he said.

Michael White, who heads the research firm Michael White Associates, said companies with excess capital are becoming more opportunistic.

"Alico will strengthen MetLife," he said. "It is a good company with good products and a strong international reach despite the problems of its parent."

Analysts had been expecting more companies to bid for Alico, but worries arose about how liquid AIG's units are and how likely it would be to find a buyer, said Bill Bergman, a senior equity analyst at Morningstar.

Bergman said the word on Wall Street was that Alico was a sound insurance unit laboring under a financial services group in crisis. AIG is 80%-owned by the government after getting a bailout exceeding $180 billion. The problem is that "otherwise sound insurance operations are not sound if there is a crisis of confidence," said Bergman.

In December, AIG announced it had closed a transaction with the Federal Reserve Bank of New York positioning Alico for an initial public offering or third-party sale, depending on market conditions. As part of the deal, AIG contributed the equity of Alico to a special-purpose vehicle. The New York Fed agreed to exchange $25 billion of its loans to AIG for stakes in Alico and AIG's American International Assurance Co., or A.I.A. In return, the Fed is to get $9 billion from an Alico sale or offering and about $16 billion from an A.I.A. offering.

AIG is pursuing an IPO for A.I.A.

During the fourth quarter, MetLife reported, its profit declined 70%, to $289 million, or 35 cents a share, from a year earlier. Operating earnings, which exclude realized capital gains and losses, rose to 96 cents, from 17 cents.

Revenue declined 12%, to $12.34 billion, but operating revenue, which excludes investments, grew by 13%, to $13.3 billion, as premiums, fees and other revenue increased 14%.

The fourth quarter was also the first in which MetLife broke out its bank unit's earnings. William J. Wheeler, an executive vice president and the company's chief financial officer, said results were detailed because the bank has become "more impactful" in the parent's earnings picture. The bank's total operating revenue rose 80%, to $377 million, as mortgage production and servicing revenue rose and net interest margins remained strong. Its total assets rose 37%, to $14.1 billion.

Wheeler said MetLife has no plan to divest its banking unit but is keeping an eye on the changing regulatory landscape. "We are always looking at the value of the bank; if [the regulatory environment] somehow creates some sort of value deterioration for shareholders, we will take it very seriously," he said.

This story has been reprinted with permission from American Banker.

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