Growing Through Distribution

MetLife, which agreed to purchase Citigroup's (New York; fourth quarter 2004 net income of $5.32 billion) Travelers Life and Annuity Co. and Citi International Holdings for $11.5 billion, will leverage previous technology investments as part of a 10-year distribution agreement resulting from the deal. MetLife will make its products available through Citigroup distribution channels.

According to MetLife (New York; third quarter 2004 net income of $695 million) chairman and CEO Robert H. Benmosche, who spoke at a company presentation in late January, MetLife has spent $1 billion a year for the past five years on running and building new technology infrastructure. Since Citigroup was not operating on a similarly aggressive technology budget, MetLife's infrastructure investments will significantly aid the transition and support the new distribution channel.

"Citigroup hasn't been spending the type of money on infrastructure support in its insurance organization that we have, so savings are embedded in integration expenses as well as in the intellectual power of the two groups," noted C. Robert Henrikson, president and COO of MetLife, at the same presentation.

MetLife will utilize Citigroup distribution channels including Smith Barney, Citibank branches and Primerica in the U.S. International operations include wholly owned insurance companies in the United Kingdom, Belgium, Australia, Brazil, Argentina and Poland; joint ventures in Japan and Hong Kong; and offices in China. There is almost no overlap in sales channels between the two companies, which makes it more convenient for MetLife to transition from its current platform of a career agency system to what will be a new independent agency system, according to Henrikson.

"Strategically, we will be able to enhance our volume, and the technology investment helps to reduce fixed unit cost," explained Benmosche. "When you look at the proprietary distribution system we are purchasing, it is a great opportunity for the MetLife brand to be distributed through the Citigroup enterprise," he continued.

"For the MetLife brand to be distributed to the Citigroup enterprise will be of real value to our shareholders," said Benmosche. "We believe we can provide high-quality technology for high-quality service for all people who do business with us."