MetLife has long been a household name for insurance, with its Peanuts spokes-characters
and its familiar motto: “Get Met. It pays.”
Ask most Rhode Islanders about MetLife Bank, however, and they’ll look at you in puzzlement. MetLife has a bank? Where? Tell them its deposits as of June 30 made it, technically, Rhode Island’s fifth-largest bank, and they’ll be even more confused.
MetLife Bank, you see, is not a regular bank. Based in New Jersey, with a processing center in West Warwick, it has no branches, no ATMs, and only a narrow set of products: mortgages, money market and high-yield savings accounts, CDs and IRAs.
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Thirty employees work at the West Warwick office.
Customers access their accounts mostly online, at metlifebank.com, or through a toll-free line. Many have MetLife policies or benefits packages; others are lured by the competitive rates: 2.15 APY on money market accounts, for example, compared with Bank of America’s 0.70, and 4.35 APY on 60-month CDs, compared with B of A’s 3.60.
The combination of online aggressiveness and a built-in audience has helped MetLife Bank grow exponentially in a very short time. Created through MetLife’s acquisition of Grand Bank, a $52-million institution, in 2001, the bank grew to $206 million in deposits by June 2002, $354 million six months later, $1.25 billion by last December, and $2.06 billion as of June 30.
As it happened, on June 30, more than $1 billion of those deposits were being processed at the West Warwick facility. Because of the way the Federal Deposit Insurance Corp. calculates market share, that made MetLife Bank accidentally turn up as Rhode Island’s fifth-largest bank, topping Bank Rhode Island.
In reality, MetLife Bank’s local presence is small; its customer base is scattered across the nation, as is typical with online banks. But in the U.S. thrift market, it’s risen from a speck to a potential contender for the Top 50 list; the current Nos. 43 to 50’s deposits range from $2.3 billion to $2.8 billion.
MetLife is not the only major insurer to get into banking. State Farm, Allstate, AIG, and many other companies big and small launched banks within a couple of years of one another, all taking advantage of the Financial Services Modernization Act of 1999, which eliminated barriers between banks and other financial services.
Banks had struck first, taking their own captive audiences – credit-card holders, mortgage and auto loan applicants – and pitching them a wide range of insurance products. Depending on your home state, Bank of America, for example, will sell you anything from term life insurance to an auto policy. Citibank went so far as to merge with Travelers, though part of that deal has since been undone.
Insurers such as MetLife saw banking products as a way to deepen their relationships with customers and keep them from jumping ship. They were also, at least in theory, good investments – though whatever its rewards on other fronts, for many insurers in the United States and in Europe, the experiment has been costly.
MetLife hasn’t escaped that pattern. In 2001, MetLife Bank reported a net loss of $14.8 million, FDIC filings show, and in 2002, a loss of $18.8 million; last year was slightly better, with a net loss of $12.1 million. For the first half of 2004, the bank reported a $1.7-million loss. By the end of this year, said Bill Raczko, vice president of marketing for MetLife Bank, the company expects to break even.
“I can tell you that already next year, we expect to achieve full-year profitability,” Raczko said.
But the way Raczko describes it, profits from banking are almost secondary to MetLife. Much like regular banks lose money on free checking accounts to attract customers who’ll buy loan and investment products, MetLife is using its bank as a way to attract new buyers for its whole line of insurance and financial products.
MetLife is already a giant, serving about 13 million U.S. households, including participants in more than 30,000 employer-sponsored voluntary benefits programs. But in a highly competitive market, it’s always looking to grow.
Of MetLife Bank’s roughly 50,000 customers, Raczko said, about 20 percent signed up through MetLife agents, 20 percent through MetLife’s employer-sponsored voluntary benefit programs, and about 60 percent in response to ads and direct mail.
Raczko couldn’t say what share of that 60 percent were already MetLife customers before they joined the bank. But he said “a large number” are new to MetLife. “We’re excited about that.”
Jack Plunkett, CEO of Plunkett Research Ltd., in Texas, said in the big picture, banking is not necessarily a bad line of business for insurers to get into, and some aspects of banking are actually a good fit for companies such as MetLife.
“Historically, life insurance companies have been massive investors in mortgages,” Plunkett said, seeing them as a relatively safe investment for their surplus and reserves. Being able to bypass the middleman and sell mortgages directly, he said, is “brilliant.” And with online banking now widely accepted by consumers, Plunkett added, a branchless institution like MetLife Bank can do well with other products as well.
Still, the key is to be focused, Plunkett said.
“What everybody recognizes who follows financial services is that the lines between various types of companies – banks or insurance companies or investment services – the lines have blurred, but that doesn’t mean that all financial services companies can successfully be all things to all people,” he said.
“The question for a company like Met is not to be a broad-service bank, but
to focus on what services they can profitably offer their existing customer
base,” Plunkett added. “If you bundle services correctly and offer good rates
and good service, then you can create some competitive advantage.”
