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Will Metlife Stock Gain on Pension Buyout Deal with TRW? - Analyst Blog

Zacks Equity Research
Updated

A leading provider of insurance and financial services to a broad spectrum of individual and institutional customers, MetLife, Inc. (MET) inked a deal with TRW Automotive Holdings Corp’s (TRW) subsidiary, TRW. Per the deal, Metlife will offer pension benefits to 7,045 retirees and current beneficiaries in TRW’s defined benefit plan in exchange of $440 million.

MetLife, an expert in managing transferred pension liabilities, helps its customers to remain secure in the belief that their risks are managed and their retirees’ and beneficiaries’ pensions are protected. This helps its customers to concentrate on their core businesses. The company aims at reducing TRW’s risk and volatility related to managing the pension plan thereby creating value for TRW shareholders.

Only last month TRW had announced a partial buyout agreement with Legal & General Assurance Society related to $3.9 billion of their U.K. pension scheme. These agreements are a part of TRW’s strategy of reducing its pension liabilities in the U.K., U.S. and Canada.

TRW purchased a group annuity contract from MetLife which resulted in the takeover of pension payments made to the retirees and beneficiaries. The deal also maintains record of monthly pension benefit received by covered retirees and surviving beneficiaries. On the closure of the transaction, Metlife will be accountable for making the above payments to the retirees/beneficiaries.

This takeover adds to MetLife’s earlier closed deals in the last few months. The pension risk mitigation business is expected to see robust growth in the next couple of years. Management also believes that the pipeline of new business is strong and the current deal is expected to add to it.

Currently, MetLife carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked stocks in the multiline insurance sector include CNO Financial Group, Inc. (CNO) and Ping An Insurance (Group) Company of China, Ltd. (PNGAY). Both these stocks sport a Zacks Rank #1 (Strong Buy).


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Zacks Investment Research