Taking a step to shore up its finances post the global financial crisis, MetLife Inc. (MET) has recently decided to vend its insurance business in Taiwan. On Tuesday, Taiwan Life Insurance Co. offered $122 million to buy MetLife’s insurance wing in Taiwan. However, the final decision by MetLife is expected in a couple of days.
Incidentally, Taiwan Life Insurance is not the first one to approach MetLife. Formerly, Waterland Financial Holdings Co., Hontai Life, Chinatrust Financial Holding Co. and Cardif Assurance Vie were reported to have submitted bids to acquire the MetLife unit in Dec. 2009. However, the price offer of Taiwan Life Insurance’s offer stands much above all the other bidders.
MetLife entered the Taiwanese market in 1988 and has 400,000 clients there. However, management of MetLife has been considering exiting Taiwan since last year when the global economic breakdown created an unprofitable investment environment and financial losses in the Taiwan unit.
Additionally, MetLife faced other operating challenges in Taiwan that include amendments in International Accountancy Standards, cues of tightening monetary policies following China and other regulations where foreign insurers are debarred from investing in government bonds. These issues have been negatively affecting the profit margins of the company, which is likely to be non-beneficial in the near to medium term.
Hence, moving out from an unfavorable situation is a viable option for MetLife presently as the company is also in process of mitigating its overall business risks as much as possible. Moreover, MetLife is not the first foreign investment company to exit Taiwan. In 2009, companies like the ING Group (Dutch), Prudential Life (London), Aegon (Dutch) and American International Group Inc. (AIG) are known to have pulled out their businesses from Taiwan.
MetLife is on a development and restructuring mode to keep in pace with the economic volatility. Last week, the company had also issued notes worth $2.5 billion to fund its developmental activities. This also indicates that the global economic downturn has not left MetLife unscarred.
The company continues to incur investment losses and low investment income although its sturdy capital and diversified business mix places MetLife in a relatively advantageous position in the industry. We believe that once the economy rebounds and unemployment trends become favorable, MetLife will benefit from the savings and investment opportunities that will come ashore.
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