NEW YORK (CNNfn) - Metropolitan Life Insurance Co., the nation's No. 2 insurer, agreed Thursday to buy troubled reinsurance provider GenAmerica Corp. for $1.2 billion in cash.|
MetLife, the New York-based mutual second only to Prudential in size, said it plans to launch a "stabilization program" at GenAmerica's main subsidiary, General American Life.
The acquisition of the St. Louis-based insurer comes two weeks after General American started looking for a buyer that could help the company pay back billions of dollars in short-term bond investment it owed big money managers.
MetLife said through the deal carries with it a strong brand and distribution system and opens new opportunities in life reinsurance, the company said. Reinsurance involves the sharing of risk of covering policy holders among several insurers.
"General American has strengths in a number of MetLife core businesses such as life insurance and asset management, while introducing new opportunities such as life reinsurance," Robert Benmosche, MetLife's chairman and CEO, said in a statement.
General American Life is the parent of publicly traded Reinsurance Group of America (RGA), a leading reinsurer, and Conning Corp. (CNNG), an insurance industry research firm.
General American two weeks ago placed itself under the supervision of the Missouri Department of Insurance after it said it could not immediately pay back investors some $6.8 billion in short-term bond investments, or funding accords.
Investors had bought these financial instruments with the aim of getting high returns on their cash but rushed to redeem them when several credit-rating agencies, including Moody's Investors Service Inc., downgraded General American.
The downgrades were spurred by General American's taking back $3.4 billion of these funding agreements from ARM Financial Group Inc. (ARM) ARM.N, a Louisville, Ky.-based insurer that previously marketed and reinsured the instruments for General American.
The deal, which is expected to close within four to six months, requires the approval of regulators both in New York and Missouri.
-- from staff and wire reports