NEW YORK — The insurance giant MetLife Inc. is buying Travelers Life & Annuity Co. for at least $11.5 billion from Citigroup Inc., the nation's largest financial institution.
The two companies, both based in New York, said in a statement that the deal will make MetLife "the largest individual life insurer in North America, based on sales."
In addition to buying Travelers Life, MetLife also is acquiring almost all of Citi's international insurance business, the companies said.
The deal already has been approved by both companies' boards and is expected to close in the summer, the statement said. It said the price was "subject to closing adjustments."
MetLife shares fell 19 cents to close at $39.75 in Monday trading on the New York Stock Exchange. Citigroup shares rose 67 cents to close at $49.05 on the Big Board.
Citigroup had retained Travelers Life & Annuity in 2002 when it spun off Travelers Property Casualty Corp. in a $5 billion initial public offering. Travelers Property merged with St. Paul Cos. Inc. in 2003 to create The St. Paul Travelers Cos., based in St. Paul, Minn.
Martha Butler, an analyst with Fitch Ratings in Chicago, said that the agency affirmed MetLife's long-term insurer rating because "this gives them more scale, better distribution channels." She added: "They were probably attracted to (Citi's) international business as well."
Marc Steinberg, an analyst with insurance rating agency A.M. Best Co. in Oldwick, N.J., said the acquisition was the latest in a series of steps by MetLife to expand its business.
"They wanted to increase their distribution channels," he said. "They've been looking to evolve their international business, particularly in emerging markets. This acquisition of Travelers positions them for what they have been striving for."
A.M. Best affirmed its financial strength ratings of MetLife, but put its debt rating under review "with negative implications." Standard & Poor's Ratings Services also put MetLife ratings on watch "with negative implications."
The companies' announcement Monday said that Citigroup and MetLife "have entered into 10-year agreements under which MetLife will greatly expand its distribution by making products available through certain Citigroup distribution channels," including Citi branches and its Smith Barney brokerage unit.
It said that Citigroup will receive $1 billion to $3 billion in MetLife equity securities and the balance in cash, which will result in an after-tax gain of about $2 billion. It added that MetLife may finance the cash portion of the transaction through a combination of cash on hand, debt, mandatory convertible securities and selected asset sales.
In a phone call with analysts, MetLife's chief financial officer, William J. Wheeler, said that the asset sales could include divestiture of MetLife's reinsurance operations. Reinsurance is backup coverage purchased by insurance companies. MetLife owns about 52 percent of the Reinsurance Group of America.
Wheeler said asset sales also may include "equity real estate investments and potential other things."
C. Robert Henrikson, MetLife's president and chief operating officer, said the purchase would bring "even more balance" to MetLife's business mix.
MetLife currently earns about 46 percent of its profits from institutional sales and 30 percent from individual sales, he said. After the merger, profits from institutional sales should drop to about 43 percent, while earnings from individual sales should rise to 36 percent. Other categories are international, 7 percent; auto and home, 6 percent; and miscellaneous, 8 percent.
MetLife estimated that after acquiring Travelers Life, it would have 7.6 percent of individual life insurance sales annually, putting it ahead of Northwestern Mutual and American International Group, both at 6.1 percent. MetLife currently has 4.9 percent of life sales.
The move was the latest by Citigroup to sell off noncore businesses. In November, Citigroup sold a truck-leasing operation to General Electric Co. for $4.4 billion. It also sold its European vendor-finance leasing operation for CIT Group Inc.
Citigroup chief executive Charles Prince said that selling Travelers "sharpens our focus on Citigroup's long-term growth franchises."