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MetLife Looks to Exit Taiwan as Shares Take a Lump From Japan
3/16/2011 5:00:00 PM
The shares for insurers like MetLife ( MET ), AIG ( AIG ), Hartford Financial ( HIG ) and Prudential Financial ( PRU ) have been under pressure recently due to estimates on the costs of the earthquake in Japan. For MetLife this timing coincides with its attempts to exit another Asia market in Taiwan. In its second attempt to sell the Taiwanese unit, MetLife has drawn three bidders, Taiwan's Chinatrust Financial, Yuanta Financial and Mercuries Life Insurance, and is expected to seal the deal by April this year.
We have a price estimate of $48.83 on MetLife's stock which is about 7% above the current market price.
Life Insurers Exit Taiwan
MetLife's earlier attempt to sell its Taiwanese unit for $112 million in October last year to a local firm Waterland Financial was blocked by the regulators on concerns about the financial structure of the buyer. MetLife's Taiwan unit has about 600 employees and controls less than 1% of the market in Taiwan.
AIG also faced regulatory hurdle when it tried to sell its Taiwanese unit Nan Shan to Ruen Chen Investment. The labor unions of Nan Shan has more than 30,000 sales agents who want the buyer to pay about $540 million in pension money to the agents. This could increase the purchase price for Nan Shan by 25% which AIG will most likely reject.
Saturated Taiwanese Market Offers Little Growth Prospects
Foreign insurers are exiting from the $52 billion Taiwan insurance market because of the poor financial returns and stagnant market prospects. The life insurance market in Taiwan has remained sluggish since the economic crisis and is weighed down by the historic business negotiated at interest rates which are no longer profitable. Compared to the neighboring markets such as China, which have seen a return in business growth, the Taiwanese industry has been slow to recover from the global economic downturn and caused some life insurers to re-evaluate their presence in the Taiwanese market. Intervention by the Financial Supervisory Commission ( FSC ), the Taiwanese regulatory authority, has also prompted insurers to seek withdrawal from the Taiwanese life insurance sector.
The Taiwanese unit is small part of MetLife's international insurance operations and its sale will have little or no effect on MetLife's share of international insurance market which was boosted by the acquisition of ALICO in 2010. We expect MetLife's market share to remain stable at around 0.3% during our forecast period.