Insurer to pull back from cash-heavy products like variable annuities
MetLife Inc. (MET), the largest U.S. life insurer, said it will add asset management for institutional investors as part of Chief Executive Officer Steven Kandarian's push to expand fee income.
The insurer, with more than $500 billion in its investment portfolio backing policyholder obligations and generating shareholder returns, will focus the initiative on real estate and private-placement debt, areas in which the company already invests. Clients will include other insurers, pension plans and sovereign-wealth funds, the company said in a statement today.
Kandarian, who was promoted last year from chief investment officer, is scaling back from capital-intensive products such as variable annuities as he targets return on equity of at least 12 percent by 2016. The new effort will be overseen by Chief Investment Officer Steven Goulart, a former Bear Stearns banker who joined MetLife in 2006.
“It certainly fits well strategically with the direction of MetLife,” Goulart, 54, said in an interview today. “It's not a capital-intensive business, it's a high return business.”
MetLife will add about 20 people over the next year, including staff in fundraising and marketing, to assist money managers already working for the insurer, he said. Goulart said the company is in “active conversations” with potential investors, without naming them.
Potential clients may welcome a new firm gathering assets because some of the best money managers have limits on new investments, he said.
Goulart's Goals
“Our goal is to be one of the top five institutional real estate investment managers,” he said. “We think we can certainly be one of the top managers in the private debt space as well.”
Wall Street firms including JPMorgan Chase & Co. (JPM) and BlackRock Inc. (BLK) are vying to manage money for institutional investors seeking returns after the Federal Reserve pledged to keep borrowing costs low to stimulate the economy.
Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd Blankfein and President Gary Cohn wrote in the bank's 2011 annual report that outsourcing of asset management by insurers has accelerated because of “new capital regimes, greater demand as a result of the financial crisis and a sustained low-interest rate environment.”
MetLife's expansion may increase competition with life insurers including No. 2 Prudential Financial Inc. (PRU) and Principal Financial Group Inc. Prudential Investment Management has about $650 billion under management, with funds in commercial real estate, stocks and bonds, according to its website.
Merck, Wilsmann
American International Group Inc. (AIG), once the world's largest insurer, sold its third-party asset manager, PineBridge Investments, in 2010 as part of a plan to repay a U.S. government bailout.
MetLife slipped 3 cents to $35.20 at 9:38 a.m. in New York. The company has gained 13 percent this year, compared with the 14 percent advance at Newark, New Jersey-based Prudential.
Robert Merck, the company's head of real estate investments, will lead the new operation called MetLife Real Estate Investors managing funds for both institutional clients and the insurer. Mark Wilsmann, who has led MetLife's commercial mortgage operation since 2003, will head a new group focused on real estate equity investments.
Brian Casey, from the insurer's Washington office, will lead a separate real estate debt strategies organization.
Scott Inglis, MetLife's global head of private securities, will head the insurer's private-placement debt group. The operation will manage assets including private corporate debt, equity in renewable energy, and project finance and infrastructure debt.
(Bloomberg News)
