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MetLife to Foray Into Pet Insurance Via PetFirst Acquisition

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MetLife, Inc. (MET - Free Report) has announced that it will acquire PetFirst, a company providing insurance coverage for pets.

The deal, which is to be sealed in the first quarter of 2020, will provide MetLife instant access to the underpenetrated and rapidly growing pet insurance market.

PetFirst seems to be the best fit for MetLife given the significant presence that the former has in the pet insurance space. PetFirst currently manages insurance coverage on more than 40,000 pets with a strong track record of delivering outstanding service to policyholders. It markets its pet insurance products through animal welfare agencies, direct-to-consumer channels and employers.

The under-penetrated pet insurance space, with less than 2% of pets having an insurance cover as of 2018, looks attractive to MetLife. The market is growing fast with spending of $18 billion on veterinary care as of 2018.  Since 2014, the annual growth rate for the pet insurance industry has been more than 20%.

Beginning in the summer of 2020, MetLife will offer pet insurance to employers through its leading group benefits distribution channel, reaching approximately 41 million employees and dependents across the United States.

This deal is in line with the company’s philosophy of building capital-light business and effective deployment of capital.

This product is expected to get a good start given MetLife’s vast customer base, which provides immense cross-selling opportunities.

This acquisition will accrue to the company’s Group insurance business, which reported strong results in the third quarter, led by volume growth, especially sales of voluntary benefits as well as favorable expense margins, and solid underwriting. The company’s U.S. group business has long-standing strategic partnerships, some of which date back a century.

This business offers the widest range of employee benefits products anywhere in the industry. This helps its customers meet the ever-evolving needs and expectations of their current and potential employees.

Another major player in the pet insurance market is Trupanion, Inc. (TRUP - Free Report) , which contributed 28% of the $270 million in added industry revenues in 2018. It is the second-largest pet insurance provider in the United States and estimates medical insurance for pets  to be more than a $1 billion industry in North America.

The Progressive Corp. (PGR - Free Report) also provides pet insurance for as low as $1 per day.

Year to date, stock of MetLife has gained 19.2% compared with the industry’s growth of 12%.

MetLife carries a Zacks Rank #4(Sell).

A better-ranked stock in the same space is Kemper Corp. (KMPR - Free Report) , carrying a Zacks Rank #2 (Buy).  Kemper beat estimates in each of the four reported quarters with an average positive surprise of 16.4%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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