MetLife, Inc. MET, the leading U.S. multiline insurer, might sell its Hong Kong unit to FWD Insurance, per multiple sources. However, financial terms of the transaction are not disclosed.
Notably, this buyout complements FWD’s several transactions closed in the region. This deal will further add to its strategy to form an advanced pan-Asian life insurance platform.
It also reflects the strength of Hong Kong's insurance businesses, which is further evident from FWD’s life and health insurance premium to GDP ratio of 17.94% in 2017, according to insurer Swiss Re.
FWD plans to rebrand and rename the Hong Kong unit of MetLife. Post the completion of the above deal, the acquirer would continue to honor the current MetLife Hong Kong policies.
Earlier, MetLife attempted to sell this business to a mainland Chinese buyer. This divestment is in line with the company’s aim to streamline its business to focus more on the areas with growth potential and in fixing or exiting operations that do not create value.
One of the most significant steps taken in this direction was the separation of its U.S. Retail business, BrightHouse Financial. The split-up happened in 2018. This business required MetLife to hold a huge capital buffer, thereby placing it at a massive competitive disadvantage. The strategic move thus freed MetLife from a capital-intensive business. It also saved the company from exposure to interest rate and equity market volatility related to the discontinued business.
MetLife also concluded the shutdown of its UK Wealth Management business, which was enduring low interest rates. Moreover, the company sold MetLife Afore, S.A. de C.V., its pension fund management business in Mexico. Though the termination of these businesses will dent its top-line growth to some extent (in the coming quarters) in the form of fees and premium loss, over the long term, these strategic measures will transform MetLife into a company with less risk level and more free cash flow to generate higher return on equity.
Shares of this Zacks Rank #2 (Buy) have rallied 14% in a year’s time, outperforming its industry’s growth of 7.2%.
Other Stocks to Consider
Investors interested in the same space might also take a look at some other top-ranked stocks like American International Group, Inc. AIG, Cigna Corporation CI and Kemper Corporation KMPR. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American International Group provides insurance products in North America and around the globe. It sports a Zacks Rank #1. In the trailing four quarters, the stock pulled off average positive surprise of 15.61%.
Cigna provides insurance and related products and services in the United States and around the globe. It came up with average positive surprise of 7.4% over the last four quarters. The stock has a Zacks Rank of 2.
Kemper is a diversified insurance holding company, offering property and casualty plus life and health insurance services in the United States. This Zacks #2 Ranked player managed to deliver average trailing four-quarter beat of 14.13%.
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