Metropolitan Life Insurance Company (MetLife) is the largest life insurer in the U.S and a leader in the financial service market for many years. MetLife has more than $2 trillion of life insurance and is a leader in savings and retirement products and services. The company’s services are designed for individuals, small businesses, and large corporations. MetLife has operations in more than a dozen countries and is currently on an ambitious plan to spread its global reach.
MetLife has a long history tracing its way to the National Union Life and Limb Insurance Company, formed in 1863 to ensure the lives and limbs of soldiers during the Civil War. The company struggled to exist in the Civil War era due to many claims that came in from frontline servicemen. The company ran into a financial storm with an accumulation of unpaid policies. MetLife started using income from new policies to settle older policies.
High Demand for Salespeople
In addition, there was a high demand for salesmen with the competition, sometimes forcing companies to engage in abusive practices. The policies sold to frontline servicemen were very expensive, with very high commissions.
MetLife executives were among those investigated by New York’s state legislature in 1905. The investigation was launched following raising levels of insurance abuse. According to testaments issued by executives from various insurance companies, there were improper practices in the industry that needed change. Among the changes proposed was an end to Ponzi-like policies that were being run by companies like MetLife. Following the investigation, MetLife and other insurance companies were fined for operating Ponzi-like policies.
Throughout history, MetLife has been known to invest in buying or construction of skyscrapers. The Metropolitan Tower was completed in 1893 and became a major landmark in New York. The insurance company also financed the construction of Rockefeller Center and the Empire State Building. MetLife broke records in 1980 when it paid $400 million to buy the highly-recognizable Pan Am building. It became the largest amount paid for a building at the time.
In order to minimize tax paid following the introduction of the federal tax system in 1915, many insurance companies like Metropolitan become mutual funds. In this case, policyholders left the companies into the hand of executive teams.
MetLife Securities, Inc. licensed as a brokerage
In 1983, MetLife Securities, Inc obtained a certificate to offer brokerage services. In the past, insurance companies grouped policyholders’ savings with their life insurance to create maximum benefit. Regulators demanded that mutual funds be marketed by insurance companies, which caused many companies to form securities subsidiaries and licensed insurance brokers. In addition to becoming a mutual fund, the company also diversified its portfolio of financial services.
Since its creation, MetLife Securities has expanded and acquired other subsidiaries like New England Securities, Nathan & Lewis Securities, Walnut Securities, Inc., and State Street Research & Management Company.
Following the enactment of the Gramm-Leach-Bliley Act in 1999, which removed barriers that separated banking, insurance, and brokerage, MetLife policyholders were given a choice to make between taking stock, cash, or insurance policy credits. Through this deal, MetLife, which had 12 million policyholders, raised $2.5 billion as part of the demutualization.
Stock prices went up during the first nine months of the IPO but started losing analysts’ ratings when the company’s performance proved to be lackluster. The company continued through the financial storm with no large acquisition, reduced earnings per share, and low net income.
The company started rebranding in 2001 and also diversified its business into retail banking. MetLife reported reduced net income in 2001 following the September 11th attack that led to many casualties and claims. The company lost 50% of its net income due to investment losses and related payouts.