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MassMutual Buys MetLife Premier Client, Adds 4,000 FAs

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Massachusetts Mutual Life Insurance Co. agreed to buy a distribution network from MetLife Inc., adding 4,000 financial advisers as Chief Executive Officer Roger Crandall seeks to expand offerings of annuities, life policies and disability coverage.

MassMutual will pay $300 million for MetLife Premier Client Group and related assets, the seller said Monday in a regulatory filing. As part of the deal, MetLife will be the exclusive developer of certain annuity products issued by MassMutual.

The deal adds to MassMutual’s agency force of more than 5,600 financial professionals. The Springfield, Massachusetts-based insurer had about $642 billion of assets under management at the end of 2015 and has been expanding through acquisitions under Crandall. He agreed in 2012 to buy a retirement-plans business from Hartford Financial Services Group Inc. and announced a deal last year to purchase almost all of the assets of Viability Advisory Group, which helps corporate customers analyze benefit plans.

The MetLife transaction “will result in the transformative creation of a distribution powerhouse,” Crandall said in a statement. “This unprecedented transaction will position us for stronger future growth.”

Decoupling Plan

MetLife announced a plan last month to spin off, sell or hold a public offering for much of its U.S. retail unit, an operation that sells products including variable annuities and life insurance. MetLife CEO Steve Kandarian is simplifying the New York-based company after it was designated by regulators as a systemically important financial institution, a tag that can lead to higher capital requirements. He’s also contending with proposed Department of Labor rules to limit conflicts of interest in the sale of retirement products.

“By decoupling manufacturing from distribution, our U.S. retail business will be more agile, and both MetLife and the U.S. retail business can achieve significant cost savings,” Kandarian said in the statement. “This transaction will enable our U.S. retail business to sharpen its focus on its core strength in product manufacturing while also providing a broader distribution network through the partnership with MassMutual.”

The Labor Department, which require companies to put their clients interest first, may increase compliance costs for companies distributing retirement products. American International Group Inc. CEO Peter Hancock said last month that the proposal helped push him to sell a broker-dealer unit. MassMutual will probably incur compliance costs whether or not it expands, according to Mike Fanning, executive vice president of MassMutual’s U.S. insurance group.

‘Face to Face’

“We are in the face-to-face, adviser-driven business so we’re going to have to comply one way or the other,” Fanning said Monday in a phone interview. “And having more scale just helps offset the cost of the compliance.”

MetLife plans to save about $250 million a year by exiting the operation. Estimated savings for the rest of 2016 are about $100 million, according to the company’s filing.

The deal is expected to be completed by the middle of 2016, and the purchase price is not material to MassMutual’s capital and surplus, Crandall’s company said in the statement. The insurers disclosed last week that they were in talks for a possible transaction.

MassMutual will gain advisers particularly on the East Coast and in certain mid-Atlantic states. The insurer will keep its eye out for more opportunities to bolster its distribution force, Fanning said.

‘Always Willing’

“We’ve got our hands full to absorb this one, but I think if the right opportunity came up as always, we’re always willing to consider opportunities if they fit,” he said. “Whenever we see an opportunity that comes in the marketplace to expand that distribution footprint, both geographically and just the overall breadth of what we have, it’s certainly something we want to take a look at.”

Kandarian’s company slipped 29 cents to $39.80 at 2:11 p.m. in New York, extending its decline for the year to 17 percent. MassMutual is owned by its policyholders.

MetLife was advised by Sandler O’Neill & Partners LP and Willkie Farr & Gallagher LLP, according to the statement. MassMutual used Barclays Plc and Sutherland Asbill & Brennan LLP.

– Related on ThinkAdvisor: MetLife’s Planned Spinoff of Retail Unit Puts Pressure on AIG