MetLife Inc. moved ahead last week with its long-rumored plans to acquire American Life Insurance Company from American International Group Inc., for a price of about $15.5 billion.

Founded in 1921, ALICO sells accident and health insurance as well as life insurance and fixed annuities to about 20 million clients in 55 countries. It has 12,500 employees and 60,000 agents, brokers, banks and other intermediaries in its distribution networks.

The boards of both MetLife and AIG, New York, have approved the transaction, and the companies hope to close by the end of the year.

Completing the acquisition would give MetLife, New York, a significant presence in Japan, prominence in Europe and South America, and number-one positions in the life markets in Russia and Chile, in terms of premiums written, MetLife executives report.

The deal should result in few layoffs, because ALICO has little overlap with MetLife’s operations, MetLife executives add.

AIG would get a significant equity stake in MetLife, New York, but, in a conference call with analysts, MetLife Chairman C. Robert Henrikson said published reports suggesting AIG could end up with a 20% stake in MetLife tell only part of the story.

At the deal’s close, AIG would own 8% of MetLife, and it would have the potential to buy an additional 14% after getting through a 3-year waiting period before it could convert preferred shares.

AIG does not want “to comment on other people’s math,” an AIG spokesman says.

The MetLife-ALICO deal is the second proposed sale of a key AIG subsidiary that AIG announced in little more than a week.

AIG said on March 1 that it had agreed to sell AIA Group Ltd., an international life unit, to Prudential P.L.C., London, for about $35 billion.

“Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts and focus on enhancing the value of our key insurance businesses,” AIG Chairman Harvey Golub says.

AIG says it will use the proceeds from the deals to pay the U.S. government back for part of the bailout financing it received. If all goes as planned, AIG will generate a total of about $51 billion in deal volume, including $31.5 billion in cash and $19.2 billion in securities.

AIG would pay about $31.5 billion to the Federal Reserve Bank of New York, cutting what it owes to the New York Fed to about $45 billion.

The money paid to the New York Fed would include $6.8 billion in cash proceeds that AIG expects to get from MetLife when the deal closes, AIG says.

The special purpose vehicle formed by AIG and the New York Fed to hold AIG’s interests in ALICO would hold more than 78 million shares of MetLife common stock and about 6.9 million shares of MetLife preferred stock that could be converted into about 68 million shares of common stock, and 40 million equity units of MetLife with a liquidation preference of $3 billion, according to AIG and MetLife.

The ALICO special purpose vehicle intends to turn the MetLife securities into cash over time, after the end of the minimum holding period, according to AIG. The ALICO SPV would then pay the remainder of the resulting proceeds to the New York Fed..

This was a “result of a long and diligent study” and “an opportunity to acquire an international insurer that is very complementary to our company,” Henrikson said during the conference call.

The acquisition should improve MetLife’s growth in earnings and return on equity “both immediately and over the long term,” he said. “It significantly accelerates our global growth.”

Analysts are giving the acquisition good reviews.

AIG, New York, will be getting cash and assets it can use to pay off what it owes to the Federal Reserve Bank of New York, and MetLife will get a bigger presence in the fast-growing Asia-Pacific region, analysts say.

Jimmy Bhullar and Erik Bass, analysts for JP Morgan Securities Inc., New York, write in a research memo that the deal “enhances MetLife’s franchise and improves the company’s return profile. ALICO also provides Met with a platform for growth in higher-return foreign markets, primarily Japan.”

“The [AIG sale] expands MetLife’s reach into the Asian region,” says Stewart Johnson, a portfolio manager at Philo Smith & Company, Stamford, Conn. “Coming into the deal, Asia constituted perhaps 15% to 20% of MetLife’s revenue. This buyout will more than double MetLife’s book of business in the region.”

While ALICO operates in more than 50 countries worldwide, Johnson adds, Asia represents the greatest market opportunity for the AIG unit. He cites population growth and still low market penetration as key drivers underpinning the insurer’s expansion into the region.

The deal also helps to establish a foothold–if minor–in other parts of the world, says Johnson.

“But the major stakes in the ground are in Asia,” he says. “And the main company that will be feeling that stake in the ground is Prudential Financial, which also has a significant presence in the region. This certainly spices up the rivalry between the two companies.”

Johnson says the deal may have been eased by the fact that AIG CEO Robert Benmosche was the former CEO of MetLife. Benmosche, 65, spent 8 years at the helm of MetLife. In 2000, he led the transformation of the insurer from a mutual company to a public company.

While expressing confidence in Benmosche’s leadership of AIG, Johnson is less sanguine about the insurer’s long-term outlook. He regards the ALICO sale as an “unfortunate, but necessary” move by the company to reduce a still substantial debt owed to the federal government amassed since its financial rescue in 2008.

While viewing the transactions as a positive from a competitive standpoint, JP Morgan’s Bhullar and Bass believe that MetLife overpaid for ALICO considering there was “limited competition for the deal.” Based on the analysts’ calculations, the transaction values ALICO at more than 10 times earnings and above 1.2 times book value.

“While these multiples seem reasonable, they are considerably higher than the sector’s current valuation of 8x 2011 EPS and 0.9x book value,” they write.

The two analysts also observe that the deal could “present opportunities” for other insurers. The ALICO sale and the recent transaction to sell AIA (to Prudential UK) increase the chances that AIG will dispose of its other foreign life subsidiaries.

“In our opinion, Prudential Financial is well-suited to pursue a deal for AIG Star and AIG Edison, two formerly bankrupt Japanese insurers,” they write. “Pru’s strong capital position and potential synergies with Gibraltar (also a previously distressed Japanese insurer) would enable it to achieve significant cost savings through a possible acquisition of Star and Edison.”

Based on recent ratings agency commentary, the analysts add, MetLife could be downgraded by one or more agencies. The company is currently rated AA/Aa. A drop to A by all major agencies would “adversely affect” the insurer’s competitive position in corporate funding products, structured settlements, pension closeouts, and similar arrangements, which account for roughly 20% of total earnings.

Several ratings agencies issued their assessments of the AIG-MetLife deal. Among them:

–The Moody’s Investors Service, New York, affirmed MetLife Inc.s’ credit ratings (senior debt at A3) and the insurance financial strength ratings of its subsidiaries, including Metropolitan Life Insurance Company, at Aa3. The rating outlook for the long-term ratings of MetLife and its subsidiaries was changed to negative from stable.

–Moody’s also affirmed the A1 insurance financial strength rating of ALICO and changed the outlook to stable from developing. The rating agency said that the affirmation of ALICO and the change in outlook to stable from developing is based on “the resolution of its ownership uncertainties, given the planned acquisition by MetLife, as well as the recent stabilization of its business fundamentals.”

Laura Bazer, Moody’s vice president and senior credit officer, said in a prepared statement: “The resolution of ALICO’s ownership, which had clouded its business prospects, will be a key factor behind its return to growth as a strategic part of MetLife when the global economy improves.”

–Fitch Inc., New York, affirmed AIG’s issuer default rating and senior and hybrid securities ratings. Additionally, Fitch revised the Rating Watch status of ALICO’s A plus insurer financial strength rating to “positive” from “evolving.”

–Standard & Poor’s, New York, said it kept most of its ratings on MetLife and subsidiaries, including the A-plus long-term counterparty credit rating on MetLife, on CreditWatch, where they were placed “with negative implications” on Feb. 3, 2010. S&P also affirmed its ‘A-2′ short-term rating on MetLife and its ‘mxAAA’ ratings on MetLife Mexico S.A. and removed them from CreditWatch negative.

“The CreditWatch reflects MetLife’s agreement with AIG to acquire AIG’s international life insurance subsidiary, ALICO,” said Standard & Poor’s credit analyst Shellie Stoddard in a prepared statement. “The transaction should enhance both business and financial profiles in the long term, but we believe it carries significant execution risks and comes at a time when capitalization is weak for the rating.”

Analysts are giving MetLife Inc’s proposed $15.5 billion acquisition of American Life Insurance Company from American International Group Inc. good reviews.

AIG, New York, will be getting cash and assets it can use to pay off what it owes to the Federal Reserve Bank of New York, and MetLife will get a bigger presence in the fast-growing Asia-Pacific region, the analysts say.

Jimmy Bhullar and Erik Bass, analysts for JP Morgan Securities Inc., New York, write in a research memo that the deal “enhances MetLife’s franchise and improves the company’s return profile. Also ALICO provides MET with a platform for growth in higher-return foreign markets, primarily Japan.”

“The [AIG sale] expands MetLife’s reach into the Asian region,” says Stewart Johnson, a portfolio manager at Philo Smith & Company, Stamford, Conn. “Coming into the deal, Asia constituted perhaps 15% to 20% of MetLife’s revenue. This buyout will more than double MetLife’s book of business in the region.”

While ALICO operates in more than 50 countries worldwide, Johnson adds, Asia represents the greatest market opportunity for the AIG unit. He cites population growth and still low market penetration as key drivers underpinning the insurer’s expansion into the region.

The deal helps to establish a foothold–if minor–in other parts of the world, says Johnson.

“But the major stakes in the ground are in Asia,” he says. “And the main company that will be feeling that stake in the ground is Prudential Financial, which also has a significant presence in the region. This certainly spices up the rivalry between the two companies.”

Johnson says the deal may have been eased by the fact that AIG Chief Executive Officer Robert Benmosche was the former CEO of MetLife. Benmosche, 65, spent 8 years at the helm of MetLife. In 2000, he led the transformation of the insurer from a mutual company to a public company.

While expressing confidence in Benmosche’s leadership of AIG, Johnson is less sanguine about the insurer’s long-term outlook. He regards the ALICO sale as an “unfortunate, but necessary” move by the company to reduce a still substantial debt owed to the federal government amassed since its financial rescue in 2008.

While viewing the transactions as a positive from a competitive standpoint, JP Morgan’s Bhullar believe that MetLife overpaid for ALICO considering “limited competition for the deal.” Based on the analysts’ calculations, the transaction values ALICO at more than 10 times earnings and above 1.2 times book value.

“While these multiples seem reasonable, they are considerably higher than the sector’s current valuation of 8x 2011 EPS and 0.9x book value,” they write.

The two analysts observe also that the deal could “present opportunities” for other insurers. The ALICO sale and the recent transaction to sell AIA (to Prudential UK) increase the chances that AIG will dispose of its other foreign life subsidiaries.

“In our opinion, Prudential Financial is well-suited to pursue a deal for AIG Star and AIG Edison, two formerly bankrupt Japanese insurers,” they write. “PRU’s strong capital position and potential synergies with Gibraltar (also a previously distressed Japanese insurer) would enable it to achieve significant cost savings through a possible acquisition of Star and Edison.”

Based on recent ratings agency commentary, the analysts adds, MetLife could be downgraded by one or more agencies. The company is currently rated AA/Aa. A drop to A by all major agencies would “adversely affect” the insurer’s competitive position in corporate funding products, structured settlements, pension closeouts, and similar arrangements, which account for roughly 20% of total earnings.

Several ratings agencies issued their assessments of the AIG-MetLife deal. Among them:

- The Moody’s Investors Service, New York, affirmed MetLife Inc.s’ credit ratings (senior debt at A3) and the insurance financial strength ratings of its subsidiaries, including Metropolitan Life Insurance Company, at Aa3. The rating outlook for the long-term ratings of MetLife and its subsidiaries was changed to negative from stable.

- Moody’s also affirmed the A1 insurance financial strength rating of ALICO and changed the outlook to stable from developing. The rating agency said that the affirmation of ALICO and the change in outlook to stable from developing is based on “the resolution of its ownership uncertainties, given the planned acquisition by MetLife, as well as the recent stabilization of its business fundamentals.”

Laura Bazer, Moody’s vice president and senior credit officer, said in a prepared statement: “The resolution of ALICO’s ownership, which had clouded its business prospects, will be a key factor behind its return to growth as a strategic part of MetLife when the global economy improves.”

- Fitch Inc., New York, affirmed AIG’s issuer default rating and senior and hybrid securities ratings. Additionally, Fitch revised the Rating Watch status of ALICO’s A plus insurer financial strength rating to “positive” from “evolving.”

- Standard & Poor’s, New York, said it kept most of its ratings on MetLife and subsidiaries, including the A plus long-term counterparty credit rating on MetLife, on CreditWatch, where they were placed “with negative implications” on Feb. 3, 2010. S&P also affirmed its ‘A-2′ short-term rating on MetLife and its ‘mxAAA’ ratings on MetLife Mexico S.A. and removed them from CreditWatch negative.

“The CreditWatch reflects MetLife’s agreement with AIG to acquire AIG’s international life insurance subsidiary, ALICO,” said Standard & Poor’s credit analyst Shellie Stoddard in a prepared statement. “The transaction should enhance both business and financial profiles in the long term, but we believe it carries significant execution risks and comes at a time when capitalization is weak for the rating.”