By Micah Maidenberg and Leslie Scism
MetLife Inc. said it agreed to purchase Versant Health for about $1.68 billion in cash, a deal the insurance company said would turn it into one of the largest vision insurers in the U.S. and further a diversification push.
The company on Thursday said it would use cash on hand to buy Versant from an investor group that includes Centerbridge Partners and FFL Partners.
Versant owns Superior Vision and Davis Vision, which provide a range of vision-care benefits, including coverage plans for employers. Overall, Versant has roughly 35 million members, and MetLife's existing customers would gain access to Versant's provider network.
The acquisition would make MetLife the third biggest vision insurer in the U.S. based on the number of members, it said in an investor call.
Also Thursday, MetLife said it is resuming its stock-buyback program. MetLife was one of many companies to pause such programs earlier this year as Covid-19 cases mounted in the U.S.
MetLife, one of the nation's biggest life insurers, said it has $485 million remaining in its current share-repurchase program.
The planned acquisition of Versant bolsters MetLife's efforts to expand or add products to its big business of selling group benefits to employers. It has offered vision coverage since 2012 and would vastly expand its scale with the acquisition. Recent deals have added pet insurance, digital estate planning and health-savings accounts.
On a morning call with investors, MetLife Chief Executive Michel Khalaf characterized vision care as buffered from recessionary effects. "It is a must-have service," he said.
Besides its U.S.-focused group-benefits business, MetLife is a big seller of pension products to employers, and has a large international life-insurance network, among other businesses.
Analysts at Morgan Stanley said in a morning note that the planned acquisition of Versant is consistent with the insurer's aim of expanding the benefits business, and "concurrently announcing the acquisition and resumption of buybacks speaks to their confidence in their capital position."
MetLife's rationale for the acquisition hinges in part on scale. The company expects its market share in U.S. vision insurance would jump to 17% from 1% should the deal be completed as expected.
MetLife is targeting completing the deal by the fourth quarter. The acquisition is expected to add to its adjusted earnings on a per-share basis, MetLife said.
Shares of MetLife have fallen by roughly 23% so far this year, compared with a 3.9% gain for the broader S&P 500 index, according to FactSet. Life insurers have been hard hit as a result of ultralow interest rates. Insurers earn a significant portion of their profit by investing customers' premiums until proceeds are paid out, and low rates dent the returns of their investments in bonds. Low rates also hurt results in other ways.
On Thursday, shares of the company traded up 4.5%, even as the market retreated.
Write to Micah Maidenberg at firstname.lastname@example.org and Leslie Scism at email@example.com