Acquisition American Life Insurance Company and Metlife

Acquisition

American life insurance company and Metlife Inc. merger

Acquisition refers to when a company takes over another company and the taken over company loses its identity to the acquiring company. It can either be vertical or horizontal, forceful or friendly. American Life Insurance Company (ALICO) is a member of the American Insurance Group according to business Global Times (2011). ALICO has been one of the largest and most diversified international life and health insurance companies in the world. It was founded in 1921 and has been a leading life insurer operating in more than 50 countries dealing in life insurance, retirement and wealth management issues.

Metlife inc. is the largest life insurer in the United States and Mexico. It is a leading insurance; annuities and employees benefit programs serving in over 60 countries with a customer base of over 90 million. It hoped to strengthen its presence in Europe and Latin America through acquisition of ALICO in 2010 at a cost of $15.5billion.

According to Andrew Ross Sorkin (2011), the acquisition followed an agreement between both companies which show it was not a hostile take over but rather a friendly form of acquisition. It was a horizontal form of acquisition since both companies were dealing in the same products and in the same level of operation in the market which makes it a horizontal form of acquisition.

The rationale behind MetLife's acquisition of ALICO was to accelerate its global expansion policy. Robert C. Henrikson (2011), president and chief executive officer of MetLife Inc., notes that the acquisition was in bid of MetLife to enhance its strategy of global expansion as a powerful growth engine of the company.

According to John Calagna of MetLife, the acquisition was to further diversify and balance MetLife's geographic mix and product offerings and also significantly increase the company's distribution power. ALICO agreed to be acquired in order to get money to pay its big debts to the U.S. government in accordance with find discount insurance 2011 (Find Discount Insurance, 2011).

After the acquisition at the close of 2010, MetLife increased its presence in various parts of the world. MetLife's returns on equity increased and also its role in Europe was strengthened. The Street (2011) has it that the acquisition moves MetLife to a top five position in emerging markets. Loss of control of AIG over ALICO resulted from the acquisition by MetLife. More so, the street has it that the acquisition also resulted into different views and comments sparking forth where by most of them termed the acquisition as surprising.

The acquisition was termed as successful since the deal was successfully sealed towards the close of 2011 though a number of uncertainties were sited by MetLife. They included the ease of compatibility of the systems of both companies, the impact of the acquisition on the financial position of MetLife. More so C. Robert Henrikson notes that the acquisition has made MetLife become the premier global life insurance and employee benefits powerhouse which means it was a success process. He goes ahead to say that the acquisition has been a success since MetLife has managed to reach the international footprint showing that it was a success. AIG also managed to offset part of its debt successfully.

In conclusion it is indisputably worth noting that acquisitions have both pros and cons. In this case the acquisition was a big milestone especially on the side of MetLife since it was a big achievement on its policy of global expansion. Though different views sparked off from U.S. residents it was still a success.