Nearly four years after buying a tiny New Jersey bank, executives at the insurance giant MetLife Inc. say it is on track to meet its goals for deposit and asset growth but that their focus is on expanded distribution and integration with the insurer's other products.
As of last week, the Bridgewater, N.J., bank had $2.3 billion of deposits, said Shailendra Ghorpade, the president and chief executive officer of MetLife Bank, and $2.5 billion of assets. MetLife, a New York insurance company, bought one-branch, $80 million-asset Grand Bank of Kingston, N.J., in 2001 and renamed it MetLife Bank. The deal was unusual at the time because, unlike most of its competitors, MetLife chose to buy a bank instead of forming a thrift.
"We believe we have a consumer brand that is widely known and trusted in the financial services marketplace," Mr. Ghorpade said. And the "distribution model of how we actually create customers" also is a distinguishing characteristic, he said.
The insurer-owned thrifts have reported good asset growth. State Farm Bank has $9.1 billion of assets; Allstate Bank, $954.4 million; Principal Bank, $2.4 billion; and 20-year-old Acacia Federal - possibly the oldest insurer-owned bank - $934.1 million. But one analyst pointed to profitability, not asset size, as the marker for success in these kinds of banks. And MetLife Bank is not expected to become profitable until next year.
He calls MetLife Bank distinctive, Mr. Ghorpade said, because of its three-part distribution model, its focus on consumer savings and loan products, and the strength of its parent's brand.
"Direct banks are different from traditional banks in the way that people access them and the product offerings and so forth," Mr. Ghorpade said. Though his bank uses some mechanisms that other direct banks employ to give customers access - direct mail, the Internet, and telephone centers, for example - it also has two relatively unusual distribution channels, he said.
The first is the 10,000 financial advisers affiliated with MetLife as an insurance company. "We have trained them and certified them to educate their customers about opening savings solutions from MetLife Bank," he said. "Most [other direct banks] don't have that as a distribution channel."
In addition, he said, "we are leaders in the institutional benefits marketplace," offering benefits to employees of more than 40,000 U.S. companies.
"We have a very strong distribution presence in the employee and employer space. We have added the bank's savings and mortgage products as product offerings to that program," he said.
Employees of companies that offer MetLife benefits can get information about the bank through benefits communications and intranet sites. More than 200 companies offer the bank as a benefit to their employees, Mr. Ghorpade said, giving it a pool of 1.2 million potential customers.
MetLife also continues "to offer the bank's savings products as an alternative to our policyholders and our annuitants" when they get a distribution, he said.
The insurer's stated goal in buying the bank was to retain control of the money paid out from a life insurance policy or annuity. As a major insurer, MetLife pays millions of dollars a year on its products.
"The idea here is not to present the bank as a separate option but to integrate it as another choice that our customers have" when they are getting an insurance or annuity payout, Mr. Ghorpade said.
William J. Raczko, the vice president of marketing at MetLife Bank, said it wants to change these disbursements of funds from "a potential end of our relationship" with that customer to "a new beginning."
Each of the three channels - direct bank, institutional marketing, and cross-selling to life insurance beneficiaries and annuitants - generates about one-third of the bank's deposit growth, Mr. Ghorpade said.
Though the institutional customers already have a relationship with MetLife, as do many of the life insurance and annuity customers, "most of the direct customers are new to MetLife," he said. "That goes to the core of why MetLife entered the banking business. We entered the banking business as a source of customers for MetLife's wide array of products and also as a way for us to strengthen our offerings to the existing customers."
Mr. Ghorpade, who joined MetLife Bank in July 2001, said its distribution in the three channels is just "the tip of the iceberg," so the bank plans to focus on fully leveraging its opportunities among those clients.
The bank does not offer checking accounts or credit cards. Instead, it focuses on high-yield savings accounts, money market products, and certificates of deposit. It also introduced a mortgage product a little over a year ago.
Mr. Raczko said the bank intends to make itself more visible in coming months through a marketing plan.
At an investors conference in December, executives said the bank hopes to break even by 2005.
And Carmen Effron, the president of CF Effron Co. LLC in Westport, Conn., said that profitability is more important for insurer-owned banks than deposits or asset size.
FDIC data through Dec. 31, she said, show a cumulative loss of $69 million since the insurer bought MetLife Bank. By comparison, State Farm Bank had earned $143 million, cumulatively, since its start-up in March 2000.
"It's very hard to make an insurance company bank profitable," Ms. Effron said, because the model most of them use - selling through a scattered group of agents - can be expensive in terms of training costs to get up and running.
Ann Perry, an analyst at Moody's Investors Service, said that the bank fits into MetLife's strategy of expanding into new distribution channels. "One of the things that Met has done really well is to diversify their distribution," she said. "They went from, as a mutual company, being very focused on their own career agents and broadened out into a variety of different distribution networks."
The range of distribution used by the bank is one such example, she said.
"I wouldn't expect that to be a big driver in their earnings or their revenues. It's something that I think they're using more as a strategic tool to get them positioned in certain channels," Ms. Perry said, like selling products in the workplace and directly.
Overall, she said, the bank is not a core business for MetLife but rather a way to provide additional products, increase distribution, and perhaps tie customers to them more closely.
"Insurance companies have looked to try and increase their penetration into particular customer groups," she said.
Trying to hang on to assets from life insurance policies and annuities is another focus, she said. Through its bank MetLife "can offer something and keep the money within the enterprise."
