MetLife (MET) Unit to Reinsure Legal & General's Longevity Risk

MetLife, Inc.’s MET unit Metropolitan Tower Life Insurance Company recently announced the wrapping up of four U.K. longevity reinsurance deals with Legal & General Assurance Society Limited.

The agreements, which were concluded in 2020, will pave the way for MetLife’s unit to offer reinsurance for longevity risk valued at around $2 billion of pension liabilities to Legal & General.

With MetLife’s proven expertise in managing longevity risk and strong presence in the reinsurance space, Legal & General can now manage longevity risk more efficiently. The recent move seems to be time opportune since increased longevity risk has been putting persistent pressure on pension funds or insurance companies due to higher life expectancy trends noticed among policyholders, an aging population and increase in number of people attaining retirement age.

Further, this Zacks Rank #3 (Hold) multiline insurer has been steadily pursuing reinsurance agreements aimed at risk-sharing, reduction to risk exposure and limiting losses suffered. With these deals, the company is equipped with additional capacities, which positions it well for long-term growth.

Shares of MetLife have gained 32% in the past six months compared with the industry’s growth of 29.9%.

It is worth mentioning that the latest move hints toward the company’s constant efforts to strengthen its presence in the U.K pension and longevity risk transfer market, wherein pensions look for sources of risk transfer for lightening their longevity risk. Last year in June, MetLife’s unit unveiled its first U.K. longevity reinsurance deal with Pension Insurance Corporation plc (PIC), per which the former agreed to provide reinsurance to PIC for longevity risk worth around $280 million of pension liabilities. In October 2020, the same unit pursued the second longevity reinsurance transaction in the U.K. market with Rothesay Life by reinsuring longevity risk worth $320 million of pension liability.

It has to be noted that the COVID-19 pandemic, which had triggered financial volatilities globally, had less impact on the U.K. longevity risk transfer market. The incidence of smaller pension risk transfer transactions continued in the U.K. market despite the pandemic, with hassle-free transition to virtual closings of the longevity reinsurance deals by most insurance companies streamlining the process further. MetLife remains optimistic regarding the market’s growth in this year.

Stocks to Consider

Some better-ranked stocks in the insurance space are Manulife Financial Corporation MFC, Kemper Corporation KMPR and Primerica, Inc. PRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Manulife Financial, Kemper and Primerica have a trailing four-quarter earnings surprise of 6.87%, 24.01% and 10.04%, on average, respectively.

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