By LESLIE SCISM
Updated Feb. 25, 2016 8:22 a.m. ET
MetLife Inc. is preparing to part ways with a central force in the company’s history: its life-insurance agents.
The nation’s largest life insurer by assets is in talks to sell a business of roughly 4,000 sales people to Massachusetts Mutual Life Insurance Co., according to people familiar with the situation. The talks are at advanced stages, these people said, but could still fall apart.
Both companies confirmed they are in talks following The Wall Street Journal’s report.
The discussions are part of a larger effort by MetLife to slim down and respond to a shifting regulatory environment in the wake of the 2008 financial crisis. In January the New York company announced that it is seeking to divest a large piece of its U.S. life-insurance unit, which has been at the company’s core for decades.
MetLife is one of the best-known sellers of financial protection to U.S. households.
A sale of MetLife’s sales force would sever ties with an important contributor to the company’s rise as a nationwide giant. Decades ago MetLife had some 14,000 agents. For many years, they walked door to door to make sales and collect premiums. They became a fixture of American culture often portrayed in movies and television shows such as “Father Knows Best.”
But life-insurance agents began dropping in number across the industry as mutual funds gave families savings alternatives, and sales-practice scandals led to widespread class-action litigation and settlements.
Those troubles and tougher regulation forced insurers to spend more heavily on training, compliance and other monitoring. Publicly traded life insurers like MetLife concerned about costs increasingly have relied on financial advisers, stockbrokers, banks and direct marketing for sales. Without its agents, MetLife would focus on those channels for life insurance sales.
The potential buyer, Massachusetts Mutual, markets itself as MassMutual and is one of a small number of prominent life insurers owned by their policyholders. These companies have remained committed to sales through large career sales forces. MassMutual currently has about 5,600 agents.
The Springfield, Mass., insurer ranks in the top 10 of U.S. life insurers by assets, according to ratings firm A.M. Best Co.
MetLife’s current group of agents, known as the MetLife Premier Client Group, targets the middle to upper-income consumer market, including the executives of small- to medium-size companies and small-business owners. The group includes three formerly separate distribution channels: MetLife, New England Financial and MetLife Resources.
Cablevision Ends 2015 With First Customer Growth Since 2008 Crisis
Cable operator’s quarterly revenue comes in below expectations
Cablevision Systems Corp. said 2015 marked its first year-over-year growth in customers since 2008, though the cable operator’s fourth-quarter revenue was slightly below expectations.
As of Dec. 31, Cablevision reported 3.1 million total customers—businesses or households that use at least one of its services—an increase of 2,000 customers from a year earlier.
Cablevision, which expects its pending $10 billion acquisition by Altice NV to close in the second quarter, also reported its lowest level of what it called “competitive voluntary churn” in more than six years in the final quarter of last year.
Like other pay-television companies, Cablevision has faced challenges as a shift toward streaming video and rising cable TV costs have prompted more consumers to either cut the cord entirely or move to “skinny” bundles of channels.
During the quarter, Cablevision lost about 10,000 video customers, but added roughly 25,000 high-speed Internet customers and 5 million voice customers.
Over all, Cablevision reported a profit of $32.1 million, or 12 cents a share, down from $56 million, or 20 cents a share, a year earlier. The latest period included $14.2 million in negative one-time items. Revenue edged down by $2.1 million to $1.63 billion.
Analysts polled by Thomson Reuters expected per-share profit of 15 cents and revenue of $1.64 billion.
A scam in which criminals impersonate the email accounts of chief executives has cost businesses around the globe more than $2bn in little over two years, according to the US Federal Bureau of Investigation.
The FBI has seen a sharp increase in “business email crime,” a simple scam that is also known as “CEO fraud”, with more than 12,000 victims affected globally.
In the scam, a criminal mimics a chief executive’s email account and directs an employee to wire money to an overseas bank account. By the time the company realises it has been duped, the money is gone.
The average loss is $120,000 but some companies have been tricked into sending as much as $90m to offshore accounts, US authorities say.
Reports of CEO fraud are accelerating. Between October 2013 and August 2015, about $1.2bn globally was lost to the scheme, the FBI said, but that loss increased by another $800m in the past six months. US authorities have traced the money involved to 108 countries.
“Criminals don’t have borders and this is a global problem,” said James Barnacle, chief of the FBI’s money laundering unit. “We’re working with our criminal investigation resources, our cyber resources, our international operations divisions — which is all our legal attachés overseas — and we’re working with foreign partners around the world to try to tackle this crime problem.”
The rise in reported CEO frauds can be partly attributed to companies detecting the crime, but it also reflects the simple nature of the scheme that can be run from anywhere around the globe.
“It’s easy. All you need is a computer,” Mr Barnacle said.
Most of the offshore bank accounts in which the money ends up are located in Asia or Africa, where it can be harder for the US to gain the assistance of local authorities.
The FBI has seen similarities between different CEO fraud schemes but it is not clear if there is one dominant global ring.
“We’re putting more resource to it. We’re trying to find those patterns,” Mr Barnacle said.
The FBI advises companies to be more guarded with their information even if it means taking additional steps that are not cost-effective, such as making a phone call to the executive to confirm the transfer.
The crime has hit very large companies and small ones. Most recently, there have been new reports in the US of criminals targeting real estate firms to steal closing fees on housing sales. Some companies have been asked by imposters to email employee wage and tax statements.
Last year police from Italy, Spain and other European countries arrested more than 60 members of an alleged criminal group, including several Nigerians, for their role in an email fraud scheme that affected hundreds of individuals and tens of companies.
Still, few cases have been made, reflecting the challenges of combating international cyber crimes.
The U.S. government has warned some top U.S. banks not to bid on a potentially lucrative but politically risky Russian bond deal, saying it would undermine international sanctions on Moscow, people familiar with the matter said.
The move, apparently the first of its kind since the sanctions went into effect, has sent Wall Street bankers scrambling to determine whether the opportunity for new business is worth the political downside of bucking the administration’s warning. The rules don’t explicitly prohibit banks from pursuing the business, but U.S. State Department officials hold the view that helping finance Russia would run counter to American foreign policy.
Russia plans to issue at least $3 billion of foreign bonds—its first international issue since the U.S. and its allies imposed sanctions in 2014 following Moscow’s annexation of Crimea and support for separatists in Ukraine, according to people familiar with the matter.
Russia invited European and Chinese banks to bid on the deal as well as several from Wall Street, including Bank of America Corp, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley, the people said.
So far, there is no consensus among the Wall Street firms about whether to move ahead. Some bank officials, including at Citigroup, say they won’t participate. Other banks, including Goldman and J.P. Morgan, continue to weigh their options.
Officials at the State Department and Treasury Department issued the caution in response to questions from some of the banks about whether they were permitted to arrange a bond sale for Russia.
U.S. government officials say helping Russia finance its debt would run counter to the objectives of the sanctions.
“It is essential that private companies—in the U.S., EU and around the world—understand that Russia will remain a high-risk market so long as its actions to destabilize Ukraine continue,” the State Department said in a statement to The Wall Street Journal. The State Department also warned of “reputational” risks of returning “to business as usual with Russia.”
American banks had made inroads into the Russian market, setting up offices there and pitching for deals. Since 2002, U.S. banks have collectively captured roughly a quarter of annual Russian investment-banking revenue on average. In 2007, U.S. banks did nearly $630 million of more than $2 billion in investment-banking business in Russia, but that amount dropped to $26 million last year after the sanctions took effect.
J.P. Morgan has been among the more active U.S. banks in Russia, though its business in the country has always been a small part of the overall picture. In 2015, J.P. Morgan made more than any other U.S. bank in investment-banking revenue, though the amount was only $9 million, according to Dealogic.
Still, Russian business has mostly been at a standstill. Banks have cut the size of their staff in Moscow or closed operations in the past year.
Russia last issued foreign bonds in 2013, a record year with $11.4 billion in total, according to Dealogic data. Russian bonds have been strong performers. Last year, they delivered a total return of 21.1% for investors, making them one of the top performers among 65 emerging countries that J.P. Morgan tracks.
The Obama administration’s guidance comes at a particularly sensitive time in U.S.-Russia relations due to the continuing civil war in Syria. The White House and Kremlin have closely cooperated in fashioning a cease-fire in Syria that is supposed to go into effect Saturday.
But U.S. officials are skeptical Russia is serious about enforcing an end to hostilities. Moscow has intensified military operations in Syria in recent weeks in a bid to strengthen President Bashar al-Assad, Russia’s closest Middle East ally.
While the U.S. has applied sanctions against major Russian companies and individuals, it hasn’t taken the more radical step of imposing broader sanctions on sectors of the Russian economy such as energy and banking, or blocked the entire government.
Some U.S. officials are pressing for Washington to impose new sanctions on Russia if it doesn’t abide by the cease-fire agreement. The selective sanctions now in place have scared away Western investment banks anyway, as has the U.S. government’s behind-the-scenes lobbying against doing business in Russia.
Moscow has seen a sharp deterioration in its fiscal health due to the sanctions and plummeting oil prices. The country has also been hit by high inflation and rising unemployment. The Kremlin is already considering cuts to some areas of the federal budget, which relies on oil and gas for half of its revenue.
Any debt arranged between the Russian government and U.S. financial-services firms wouldn’t technically violate the U.S. sanctions. Executives at some of the banks, however, worry that if they participate in the current deal, Russia could then inject the funds into companies currently under sanctions. As a result, the banks could run the risk of inadvertently violating the sanctions in spirit.
Some bank officials believe they were invited to participate by the Russians partly because Moscow wanted to test this loophole, and it could turn into a foreign-policy debacle if Russia later says the sanctions are meaningless because Wall Street banks are still helping them indirectly.
The U.S. and European Union imposed sanctions on Russia in 2014 after it annexed Crimea and supported separatists in eastern Ukraine. U.S. and European investors are banned from buying new debt from several Russian companies that are under sanctions. Even for Russian companies that are free of sanctions, the cost of borrowing in foreign markets has been high.
The Russian bond deal will land at a time when fewer emerging-market countries are tapping international markets, given that the strong dollar and a sharp selloff in bonds from these countries have driven up borrowing costs. According to J.P. Morgan, developing countries are expected to raise $64.9 billion in 2016, a smaller funding need compared with the $82 billion raised by these countries last year.
Stock Market Overview:
Futures are up ahead of Thursday’s open. Stocks staged a big positive reversal on Wednesday after bouncing off their 10 day moving average line. The next level of resistance to watch is Monday’s high and the 50 DMA line.
Gary’s Thoughts: We repeat…watch the 50 day. A move above does not hurt but keep in mind, very little in the way of leadership.
Stocks opened lower but closed higher on Wednesday after the latest round of lackluster earnings and economic data were released. Oil prices also positively reversed after the latest EIA report was released. Economic data was less than thrilling. First, February’s Flash PMI Services Index Fell to 49.8, miss estimates for 53. Then New Home sales plunged -9.2% last month to an annualized rate of 494,000, missing the Street’s estimate for 520,000. This clearly shows that the economy is slowing, not strengthening and that is a problem for both Main Street and Wall Street. Earnings data was also less than stellar. Avis -Budget Group (CAR) plunged over 23% after the company lowered guidance for 2016. The company lowered adjusted EPS to $2.70-$3.30, which was lower than the Street’s estimate for $3.43. Target TGT ($TGT) also missed estimates but the stock was not hurt because the company raised guidance.
Gary’s Thoughts: Wow…that was one heck of a reversal. Just letting you know fedheads out in force yesterday talking no rate hikes imminent! On Monday, markets hit a wall near the 50 day average. They will now get another attempt!