M&a Metlife Strategy
M&A Acquisition of Alico by Metlife
Strategic Management Nicolas Lo Bianco
Table of content
I. MetLife & Alico insight ll. MetLife Environment & Organization Financial results Environment : Swot analysis / Benchmarking / Competitors Competitive advantages Metlife Business Model
lll. The strategy : Acquisition of ALICO by METLIFE Motivations Results Risks Similar competitor´s strategies
• It is an american insurance company operating in over 60 countries and has over 90 million customers.
• MetLife activities : Life insurance / Dental / Disability / Auto&home. • It is a Leader in life insurance in the USA and also holds leading market positions in Japan, Latin America, South Pacific region, Europe and the Middle East. Its current Net Income is US$ 2.786 billion.
• Alico was a successful American insurance company that had over 19 000 000 clients and operated in 50 countries worldwide. • Alico activities were focused on life insurance and retirement services operation. • It had a net income of $176.9 million and high quality investment portfolio. The Company was ranked on the top 5 and was rated at AA.
Financial results
Total Asset Total Liabilities Total Stockholder Equity
Dec 30, 2011 799,625,000 739,723,000 59,797,000 Dec 30, 2011 70,262,000 10,026,000 6,981,000 Dec 30, 2011 10,290,000 (22,235,000) 9,382,000
(2,585,000)
Total Revenue Operating Income or Loss Net Income
Total Cash Flow From Operating Activities Total Cash Flows From Investing Activities Total Cash Flows From Financing Activities Change In Cash and Cash Equivalents
BALANCE SHEET Dec 30, 2010 730,906,000 682,164,000 48,625,000 INCOME STATEMENT Dec 30, 2010 52,265,000 3,912,000 2,790,000 CASH FLOW Dec 30, 2010 7,996,000 (18,314,000) 13,381,000 2,934,000
Dec 30, 2009 539,314,000 506,193,000 33,121,000 Dec 30, 2009 40,657,000 (4,361,000) (2,246,000) Dec 30, 2009 3,803,000 (13,935,000) (4,103,000) (14,127,000)
SWOT Analysis
Location of Factor Favorable Internal Strengths Strong brand name and good financial position Major player in insurance sector Strong distribution network Varied range of services and products Loyalty of customers Over 65 000 employees Opportunities Growth opportunities in emerging markets Demographic shift in US throwing up opportunities in the retirement market Current acquisitions likely to drive future growth Diversifying portfolios for customers TYPE OF FACTOR Unfavorable Weaknesses Weak international presence US subprime mortgage exposure Over-dependence on US Lacking in global recognition as compared to competitors
External
Threats Gloom in natural catastrophes forecast Consolidation in the US financial service industry US economic slowdown and weak financial markets Other competitors in the industry
Competitors
Benchmarking
Direct competitor comparison MET Market Cap: Employees: Qtrly Rev Growth: Revenue: Gross Margin: EBITDA: Operating Margin: Net Income : EPS: P/E : PEG (5 yr expected): P/S : 0.53 0.44 0.68 0.47 0.79 36.26B 67,000 -0.16 67.80B 0.27 8.85B 0.12 2.58B 2.45 13.55 0.53 ALLIANZ 57.48B 143,005 0.17 125.78B 0.18 13.28B 0.09 5.75B 1.26 10.08 0.18 AIG 48.47B 57,000 0.39 70.61B 0.25 24.79B 0.21 26.83B 14.53 2.26 0.42 PRU 24.14B 50,104 -0.12 50.60B 0.25 2.70B 0.05 1.18B 2.58 20.15 0.64 Industry 16.06B 8.56K 0.06 20.07B 0.23 1.35B 0.07 N/A 0.84 24.17 1.07
Competitive advantages
Diversified High Quality Portfolio
One of the most geographically diverse insurance company in the world
Competitive advantages
• Exceptional product and distribution diversity.
• Best risk-management culture in the business • One of the strongest brands in the industry : Most Admired&Trusted company in 2011 (CNN)
• High quality Management Information system.
CUSTOMER INFRASTRUCTURE PARTNER NETWORK
Safeguard Health Enterprises General American Hyatt Legal New England Financial
CUSTOMER RELATIONSHIP
OFFER Regular advertisements Website VALUE PROPOSITION Hotline TARGET CUSTOMER Global/Segment: Institutional Ins. Individual Ins. Auto & home Ins. DISTRIBUTION CHANNEL
CORE CAPABILITIES ↗ Insurance policy subscribers ↗ ROI on portfolio
Provide insurance for individuals & organizations VALUE CONFIGURATION Offer development
Website Branches
New market implementation
COST STRUCTURE Customer’s indemnification Operating costs
REVENUE STREAMS Customer subscription Dividend on investment
FINANCE
Overhead costs
Business model
• The business model emphasizes HOW Metlife:
•
INVESTMENT AND INSURANCE
BRANCHES AND WEBSITE
PROFIT= REVENUE-COST
The strategy
SECTOR: Financial INDUSTRY : Life Insurance
•
•
Strategy : Acquisition of the american company life-insurance ALICO ``American Life Insurance Company´´ by Metlife in November 2010.
The selected corporate strategy is an EXPANSION : external growth new market : internationalization current product : life insurance
=> satisfy new demands in different geographical and socio-economic markets.
• • • • $7.2 billion in cash, $9.0 billion in MetLife equity and other securities, $78.2 million shares of MetLife common stock, (6.9 million shares of contingent convertible preferred stock and 40 million equity units).
Motivations
• Accelerate rates of growth through reductions in the costs and risks associated with such growth. • Accelerate international expansion and implement a strong long-term growth potential • Increase MetLife’s return on equity and be accretive to operating earnings • Weaken competitors • Use Hedging • Spread internationally our brand
Motivations
• Enter geographic markets : Europe Asia South America
• Integrate vertically
• Opportunistic
• Grow market share
• Cut costs : economies of scale
• Grow size : defensive
• Acquire technical and management expertise
Main results of the strategy
Internationalization • MetLife became a leading competitor in Japan, the world’s second-largest life insurance market. It also holds top five market position in many high growth emerging markets in Central and Eastern Europe, the Middle East and Latin America. ↗ Profits&Customers • This acquisition added 20 million customers to MetLife’s existing 70 million. It doubled the percentage of operating profits of MetLife abroad to over 40%.
Risks with M&A
Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Risks Poorly planned and managed integration Neglect of existing business due to the attention being paid to the acquired business Underestimating the depth & pervasiveness of human issues triggered by the merger Loss of key staff in acquired business Demotivation of employees of acquired business Underestimating problems of skill transfer Selecting the wrong partner Cultural incompatibility Delayed decisions due to breakdown of responsibilities, delegations & authority Too much focus on doing the deal - not enough on to integration planning & management Insufficient research (due diligence) into the acquired business Paying the wrong price or at the wrong time Buying for the wrong reasons Incompatible business and IT systems Doomed by negotiation % 100 68 50 50 50 34 34 17 17 17 17 17 17 JB JB
M&A made by competitors
• Intact insurance acquired AXA Canada in order to become Canada’s leader in home, auto and business insurance. For a cost of cost $2.6 billion. • AXA accepted the deal because its current strategy is to focus on the Asian market. • It generated an IRR of 20% and an ↗ of annual operating earnings per share by 15 percent. • It ↗ direct premiums by $2-billion, to more than $6.5-billion per year and save at least $100 million a year through cost cuts.
M&A made by competitors
• Allied world and Transatlantic holding merged in order to improve their competitive position, the deal cost $3.2 billion .
• This merger is a clear asset for both companies due to their complementary operations : insurer & reinsurer
• The company will operate in 18 countries and will benefit of an update in S&P credit rating. Furthermore, New York-based Transatlantic change its headquarter to Switzerland, which is an advantage from tax perspectives.
Conclusion
• In the globalized world market, insurance companies must constantly implement new strategies in order to be more competitive. • The M&A became the best strategy in order for companies expand activities to develop new markets for their products, and to gain knowledge products and customers through M&A. • The M&A create very large and powerful “Multi National Corporations” which will cause serious ethical issues and will require Governments to step in with new set of rules and regulations. These problems are evident today i.e. the Goldman Sachs, JP Morgan, and other multinationals.
Bibliography
• • • • • • http://en.wikipedia.org/wiki/Metlife http://riskwiki.bishopphillips.com/index.php?title=Managing_Risk_i n_Mergers_%26_Acquisitions_-_Causes_of_Success_%26_Failure Metlife Annual report 2012 http://en.wikipedia.org/wiki/Business_model http://finance.yahoo.com/q?s=MET http://www.alicolifeinternational.com/ireland/en/Home/Assets/p df/Alico-At-A-Glance.pdf http://theinvestmentblog.net/2011/07/15/2011-mid-year-mergersand-acquisitions-outlook-update-summary-review-p2/ http://www.businessweek.com/news/2011-06-01/intact-financialto-buy-axa-s-canadian-unit-for-2-7-billion.html http://www.advantageinsurance.com/documents/MetLifeInvest ments.pdf https://www.metlife.com
•
• •
•
Bibliography: • • • • • • http://en.wikipedia.org/wiki/Metlife http://riskwiki.bishopphillips.com/index.php?title=Managing_Risk_i n_Mergers_%26_Acquisitions_-_Causes_of_Success_%26_Failure Metlife Annual report 2012 http://en.wikipedia.org/wiki/Business_model http://finance.yahoo.com/q?s=MET http://www.alicolifeinternational.com/ireland/en/Home/Assets/p df/Alico-At-A-Glance.pdf http://theinvestmentblog.net/2011/07/15/2011-mid-year-mergersand-acquisitions-outlook-update-summary-review-p2/ http://www.businessweek.com/news/2011-06-01/intact-financialto-buy-axa-s-canadian-unit-for-2-7-billion.html http://www.advantageinsurance.com/documents/MetLifeInvest ments.pdf https://www.metlife.com • • • •
Strategic Management Nicolas Lo Bianco
Table of content
I. MetLife & Alico insight ll. MetLife Environment & Organization Financial results Environment : Swot analysis / Benchmarking / Competitors Competitive advantages Metlife Business Model
lll. The strategy : Acquisition of ALICO by METLIFE Motivations Results Risks Similar competitor´s strategies
• It is an american insurance company operating in over 60 countries and has over 90 million customers.
• MetLife activities : Life insurance / Dental / Disability / Auto&home. • It is a Leader in life insurance in the USA and also holds leading market positions in Japan, Latin America, South Pacific region, Europe and the Middle East. Its current Net Income is US$ 2.786 billion.
• Alico was a successful American insurance company that had over 19 000 000 clients and operated in 50 countries worldwide. • Alico activities were focused on life insurance and retirement services operation. • It had a net income of $176.9 million and high quality investment portfolio. The Company was ranked on the top 5 and was rated at AA.
Financial results
Total Asset Total Liabilities Total Stockholder Equity
Dec 30, 2011 799,625,000 739,723,000 59,797,000 Dec 30, 2011 70,262,000 10,026,000 6,981,000 Dec 30, 2011 10,290,000 (22,235,000) 9,382,000
(2,585,000)
Total Revenue Operating Income or Loss Net Income
Total Cash Flow From Operating Activities Total Cash Flows From Investing Activities Total Cash Flows From Financing Activities Change In Cash and Cash Equivalents
BALANCE SHEET Dec 30, 2010 730,906,000 682,164,000 48,625,000 INCOME STATEMENT Dec 30, 2010 52,265,000 3,912,000 2,790,000 CASH FLOW Dec 30, 2010 7,996,000 (18,314,000) 13,381,000 2,934,000
Dec 30, 2009 539,314,000 506,193,000 33,121,000 Dec 30, 2009 40,657,000 (4,361,000) (2,246,000) Dec 30, 2009 3,803,000 (13,935,000) (4,103,000) (14,127,000)
SWOT Analysis
Location of Factor Favorable Internal Strengths Strong brand name and good financial position Major player in insurance sector Strong distribution network Varied range of services and products Loyalty of customers Over 65 000 employees Opportunities Growth opportunities in emerging markets Demographic shift in US throwing up opportunities in the retirement market Current acquisitions likely to drive future growth Diversifying portfolios for customers TYPE OF FACTOR Unfavorable Weaknesses Weak international presence US subprime mortgage exposure Over-dependence on US Lacking in global recognition as compared to competitors
External
Threats Gloom in natural catastrophes forecast Consolidation in the US financial service industry US economic slowdown and weak financial markets Other competitors in the industry
Competitors
Benchmarking
Direct competitor comparison MET Market Cap: Employees: Qtrly Rev Growth: Revenue: Gross Margin: EBITDA: Operating Margin: Net Income : EPS: P/E : PEG (5 yr expected): P/S : 0.53 0.44 0.68 0.47 0.79 36.26B 67,000 -0.16 67.80B 0.27 8.85B 0.12 2.58B 2.45 13.55 0.53 ALLIANZ 57.48B 143,005 0.17 125.78B 0.18 13.28B 0.09 5.75B 1.26 10.08 0.18 AIG 48.47B 57,000 0.39 70.61B 0.25 24.79B 0.21 26.83B 14.53 2.26 0.42 PRU 24.14B 50,104 -0.12 50.60B 0.25 2.70B 0.05 1.18B 2.58 20.15 0.64 Industry 16.06B 8.56K 0.06 20.07B 0.23 1.35B 0.07 N/A 0.84 24.17 1.07
Competitive advantages
Diversified High Quality Portfolio
One of the most geographically diverse insurance company in the world
Competitive advantages
• Exceptional product and distribution diversity.
• Best risk-management culture in the business • One of the strongest brands in the industry : Most Admired&Trusted company in 2011 (CNN)
• High quality Management Information system.
CUSTOMER INFRASTRUCTURE PARTNER NETWORK
Safeguard Health Enterprises General American Hyatt Legal New England Financial
CUSTOMER RELATIONSHIP
OFFER Regular advertisements Website VALUE PROPOSITION Hotline TARGET CUSTOMER Global/Segment: Institutional Ins. Individual Ins. Auto & home Ins. DISTRIBUTION CHANNEL
CORE CAPABILITIES ↗ Insurance policy subscribers ↗ ROI on portfolio
Provide insurance for individuals & organizations VALUE CONFIGURATION Offer development
Website Branches
New market implementation
COST STRUCTURE Customer’s indemnification Operating costs
REVENUE STREAMS Customer subscription Dividend on investment
FINANCE
Overhead costs
Business model
• The business model emphasizes HOW Metlife:
•
INVESTMENT AND INSURANCE
BRANCHES AND WEBSITE
PROFIT= REVENUE-COST
The strategy
SECTOR: Financial INDUSTRY : Life Insurance
•
•
Strategy : Acquisition of the american company life-insurance ALICO ``American Life Insurance Company´´ by Metlife in November 2010.
The selected corporate strategy is an EXPANSION : external growth new market : internationalization current product : life insurance
=> satisfy new demands in different geographical and socio-economic markets.
• • • • $7.2 billion in cash, $9.0 billion in MetLife equity and other securities, $78.2 million shares of MetLife common stock, (6.9 million shares of contingent convertible preferred stock and 40 million equity units).
Motivations
• Accelerate rates of growth through reductions in the costs and risks associated with such growth. • Accelerate international expansion and implement a strong long-term growth potential • Increase MetLife’s return on equity and be accretive to operating earnings • Weaken competitors • Use Hedging • Spread internationally our brand
Motivations
• Enter geographic markets : Europe Asia South America
• Integrate vertically
• Opportunistic
• Grow market share
• Cut costs : economies of scale
• Grow size : defensive
• Acquire technical and management expertise
Main results of the strategy
Internationalization • MetLife became a leading competitor in Japan, the world’s second-largest life insurance market. It also holds top five market position in many high growth emerging markets in Central and Eastern Europe, the Middle East and Latin America. ↗ Profits&Customers • This acquisition added 20 million customers to MetLife’s existing 70 million. It doubled the percentage of operating profits of MetLife abroad to over 40%.
Risks with M&A
Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Risks Poorly planned and managed integration Neglect of existing business due to the attention being paid to the acquired business Underestimating the depth & pervasiveness of human issues triggered by the merger Loss of key staff in acquired business Demotivation of employees of acquired business Underestimating problems of skill transfer Selecting the wrong partner Cultural incompatibility Delayed decisions due to breakdown of responsibilities, delegations & authority Too much focus on doing the deal - not enough on to integration planning & management Insufficient research (due diligence) into the acquired business Paying the wrong price or at the wrong time Buying for the wrong reasons Incompatible business and IT systems Doomed by negotiation % 100 68 50 50 50 34 34 17 17 17 17 17 17 JB JB
M&A made by competitors
• Intact insurance acquired AXA Canada in order to become Canada’s leader in home, auto and business insurance. For a cost of cost $2.6 billion. • AXA accepted the deal because its current strategy is to focus on the Asian market. • It generated an IRR of 20% and an ↗ of annual operating earnings per share by 15 percent. • It ↗ direct premiums by $2-billion, to more than $6.5-billion per year and save at least $100 million a year through cost cuts.
M&A made by competitors
• Allied world and Transatlantic holding merged in order to improve their competitive position, the deal cost $3.2 billion .
• This merger is a clear asset for both companies due to their complementary operations : insurer & reinsurer
• The company will operate in 18 countries and will benefit of an update in S&P credit rating. Furthermore, New York-based Transatlantic change its headquarter to Switzerland, which is an advantage from tax perspectives.
Conclusion
• In the globalized world market, insurance companies must constantly implement new strategies in order to be more competitive. • The M&A became the best strategy in order for companies expand activities to develop new markets for their products, and to gain knowledge products and customers through M&A. • The M&A create very large and powerful “Multi National Corporations” which will cause serious ethical issues and will require Governments to step in with new set of rules and regulations. These problems are evident today i.e. the Goldman Sachs, JP Morgan, and other multinationals.
Bibliography
• • • • • • http://en.wikipedia.org/wiki/Metlife http://riskwiki.bishopphillips.com/index.php?title=Managing_Risk_i n_Mergers_%26_Acquisitions_-_Causes_of_Success_%26_Failure Metlife Annual report 2012 http://en.wikipedia.org/wiki/Business_model http://finance.yahoo.com/q?s=MET http://www.alicolifeinternational.com/ireland/en/Home/Assets/p df/Alico-At-A-Glance.pdf http://theinvestmentblog.net/2011/07/15/2011-mid-year-mergersand-acquisitions-outlook-update-summary-review-p2/ http://www.businessweek.com/news/2011-06-01/intact-financialto-buy-axa-s-canadian-unit-for-2-7-billion.html http://www.advantageinsurance.com/documents/MetLifeInvest ments.pdf https://www.metlife.com
•
• •
•
Bibliography: • • • • • • http://en.wikipedia.org/wiki/Metlife http://riskwiki.bishopphillips.com/index.php?title=Managing_Risk_i n_Mergers_%26_Acquisitions_-_Causes_of_Success_%26_Failure Metlife Annual report 2012 http://en.wikipedia.org/wiki/Business_model http://finance.yahoo.com/q?s=MET http://www.alicolifeinternational.com/ireland/en/Home/Assets/p df/Alico-At-A-Glance.pdf http://theinvestmentblog.net/2011/07/15/2011-mid-year-mergersand-acquisitions-outlook-update-summary-review-p2/ http://www.businessweek.com/news/2011-06-01/intact-financialto-buy-axa-s-canadian-unit-for-2-7-billion.html http://www.advantageinsurance.com/documents/MetLifeInvest ments.pdf https://www.metlife.com • • • •