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MetLife reduces estimated share price at upcoming IPO

Metropolitan Life Insurance Co. has reduced the estimated share price of its stock that it plans to sell at its upcoming initial public offering because of the poor reception insurance stocks have received on Wall Street recently.

MetLife is currently in the process of demutualizing, a process in which a mutual company becomes a stock company and transfers ownership from policyholders to stockholders. The company estimates that share prices will fall between $13 and $15 a share, according to company filings with the Securities and Exchange Commission.

"The fact is that the market is not great for insurance stocks right now."

However, in late February, MetLife predicted that its IPO price would range between $14 and $24 a share. With shares set at the current rate, the IPO could raise between $2.3 billion and $2.7 billion. Prior to the recent filings, the offering expected to raise between $3.3 and $5.7 billion.

According to filings, the company also plans to reduce the number of shares it will sell to the public and issue to policyholders. Previously, the company estimated it would sell 236 million to 238 million shares to the public. That number has fallen to 179 million. Policyholders were also supposed to get 576 million shares, but now they are expected to receive 493.5 million shares, according to the filings.

John Calagna, a spokesperson for MetLife, would not comment on the recent filings, saying that the company is in a "quiet period" where it is not allowed to divulge information other than what is in the SEC filings. But it appears that the main reason for the allocation shuffle is that MetLife has agreed to sell 73 million to two institutional investors, Credit Suisse First Boston and Banco Santander Central Hispano, according to the filings. The two investment banking firms would hold a combined 9.8 percent interest in the company.

Behind the story

Analysts say MetLife reduced its share price because the company's IPO comes at a time when the value of technology stocks on Wall Street are soaring while traditional blue chip stocks in the insurance and financial services industries are struggling. "The fact is that the market is not great for insurance stocks right now," says Ira Zuckerman, an insurance and financial services analyst with Nutmeg Securities in Westport, Conn. "They probably think that maybe this isn't the perfect time to come to the market."

A case in point is John Hancock Financial Services, which had its IPO on Jan. 28. After opening at $17 a share, the company saw its stock price drop below 20 percent of the initial offering on Feb. 15, to 13 15/16, before recovering slightly in the following days. In recent days though, the company has been selling at below its IPO price.

David Menlow, president of IPO Financial, a firm that provides financial information on IPOs to private and institutional investors, says John Hancock's poor showing on Wall Street puts a blemish on the insurance industry as other companies try to go public. In addition to MetLife, Prudential Insurance Co. of America and Sun Life Assurance Co. of Canada are vying to go public by the end of the year.

Menlow speculates that the company lowered the IPO price in order to "fine tune" realistic expectations. He says that previous filings set "absurd" expectations for its IPO given the recent performance of blue chip stocks. "(This filing) certainly makes a lot more sense," he says.

Demutualization needs approval

In late February, nearly 2.6 million eligible policyholders — or 93 percent — approved of the company's proposed demutualization. To be eligible to receive compensation in the form of stock, cash, or policy credits, you must have a MetLife policy in force as of Sept. 28, 1999, the day the company's board of directors approved the demutualization plan.

In addition to shares issued to investors, policyholders will receive shares that will be put into a trust. After the market close on the IPO date, policyholders can then sell their shares or have them remain in the trust for one year. After that, policyholders can withdraw the stock from the trust and place it in their own brokerage accounts. Policyholders will not be able to purchase additional shares until 90 days after the IPO.

The demutualization plan still needs approval from Neil Levin, superintendent of the New York Department of Insurance. MetLife's IPO is slated for late March or early April.

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