After American International Group, Metlife Sells Adviser Unit To MassMutual For $300 Million

By Staff Writer

Mar 02, 2016 05:49 AM EST

Metlife Inc., a holding corporation for Metropolitan Life Insurance Company, has announced on Monday selling its US adviser unit to Massachusetts Mutual Life Insurance Co. (MassMutual). With the announcement, a second major insurance company has expressed its decision to exit the brokerage business.

The announced sale includes Premier Client Group of the firm consisting of 4,000 advisers across the US. The advisers sell insurance, annuities and other investment products like mutual funds as well as its broker-dealer Metlife Securities Inc., reports Investment News citing the company's announcement as the source.

Massachusetts Mutual Life Insurance Co. has purchased the adviser unit for $300 million. Metlife's agent army has served important contributions to the company's rise as a national giant.

Metlife has recorded a fleet of 14,000 agents just a decade ago. The agents have moved from doors to doors to make sales and collect premiums and have become a fixture of American culture often portrayed in the movies and TV shows, according to a report published in The Wall Street Journal.

Through purchasing the Metlife Premier Client Group, MassMutual intends to broaden its geographic reach and expand its dominance over the life insurance industry. Financial terms of the deal haven't been disclosed by MassMutual referring as non-materialistic, reports CNBC citing a press release from MassMutual.

Transaction behind the deal is expected enabling Metlife's US retail business to sharpen focus on product manufacturing. It will also offer a broader distribution network through the partnership with MassMutual. By decoupling manufacturing from distribution, Metlife's US retail business will be more agile, predicts Steven Kandarian, the Metlife CEO through a statement.

Metlife is believed to shed the brokerage unit due to higher compliance cost tied to the Labor Department's proposed fiduciary rule. The rule requires the advisers to act in the best interest of their clients while providing investment services for retired accounts.

Peter Hancock, CEO of American International Group (AIG), has also cited the proposed fiduciary rule as one of the key reasons for selling its broker-dealer unit. AIG has sold the unit to private equity firm Lightyear Capital and Canadian pension manager PSP Investments.

More merger activities are expected in the coming days centering the proposed DOL fiduciary rule. The rule is being currently reviewed by the Office of Management and Budget. However, acquisition induced economies of scale may help bring down related costs for firms choosing to keep their brokerage business.

Metlife has employed 14,000 agents just a decade ago. Moving from doors to doors they have become a fixture of American culture often portrayed in the movies and TV shows. But a proposed DOL fiduciary rule has spread panic in the brokerage business. Metlife has appeared as the second major insurance company exiting from the brokerage business.

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