MetLife, Inc. MET unit Metropolitan Tower Life Insurance Company recently announced its first United Kingdom longevity reinsurance deal with Pension Insurance Corporation plc (PIC).
Per the terms of the transaction, Metropolitan Tower Life Insurance Company will provide reinsurance to PIC for longevity risk worth around $280 million of pension liabilities.
Rationale Behind the Deal
This deal is a major milestone in the company’s strategy. It is allowing the company to establish itself as a reinsurance solution provider for direct insurers in the United Kingdom.
We believe that the company’s experience in the concerned field bodes well as it forays into the U.K. longevity reinsurance market.
The U.K. bulk annuity market holds a lot of prospects, which is a positive for the company. Last year, U.K. pension risk transfer transactions worth more than £40 billion were completed, which create opportunities for reinsurers to aid direct insurers by handling their longevity risk. Per a number of consultants and insurers, there is an annual estimate of £30-£40 billion worth UK pension risk transfer deals lined up for the next several years. With emerging demand, insurers are formulating strategies that would best fit their purpose.
According to Mercer, the 2019 UK pension risk transfer figure was double the 2018 total. The figure is expected to continue rising. Mercer projects the market to witness solid growth for the coming decade on the back of currently maturing Death Benefit sector lowering prices, more entries of reinsurers registered in the UK market and capacity addition to pension insurers seeking to offload longevity risk.
The above agreement, which seems a strategic fit, is rightly taken during the current market volatility.
Zacks Rank and Price Performance
Shares of this Zacks Rank #3 (Hold) have lost 19.6% in a year’s time, wider than its industry’s decline of 18%.
The price performance, however, betters the stock movements of other companies in the same space, such as Aegon NV AEG, MGIC Investment Corporation MTG and CNA Financial Corporation CNA, which have shed 37.7%, 25.5% and 36.2% of value in the same time frame. While Aegon and MGIC Investment Corporation hold a Zacks Rank #2 (Buy), CNA Financial carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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