Complicated Stock Exchange Offer Questions...

Question

A family member owns common stock of Metlife, Inc.  She received a substantial amount of paperwork that she asked me to look at since I have a similar (I use that term loosely!) background.  It appears that Metlife is offering to exchange shares of Class B Common Stock of Reinsurance Group of America, Inc. for her shares of Metlife.  These were either drafted by a stockbroker or a lawyer, cause those are the two that would benefit from writing like this - you have to hire one or the other to understand them!&#xD;&#xA; &#xD;&#xA;1.  Are they just interested in buying back their shares?  I have studied reorgs and many different tax scenarios when I specialized in tax law in school, but I can&#x27;t see what this is from the documents.  &#xD;&#xA; &#xD;&#xA;2.  If they are just simply exchanging, should she do it?  She said to me; "I don&#x27;t want to lose these shares necessarily because it&#x27;s insurance that I couldn&#x27;t get now (she&#x27;s elderly)."  I am admittedly clueless as to investing, but how would these shares equate to an actual policy? &#xD;&#xA; &#xD;&#xA;3.  What happens if you opt not to exchange, or you don&#x27;t take the time to read and understand the material and don&#x27;t act on it?&#xD;&#xA; &#xD;&#xA;4.  Anywhere I could go that would help me out with this exact offer to exchange, or even just an offer to exchange in general?&#xD;&#xA; &#xD;&#xA;Thanks in advance for your help.

Degenerate · Answer

A family member owns common stock of Metlife, Inc.  She received a substantial amount of paperwork that she asked me to look at since I have a similar (I use that term loosely!) background.  It appears that Metlife is offering to exchange shares of Class B Common Stock of Reinsurance Group of America, Inc. for her shares of Metlife.  These were either drafted by a stockbroker or a lawyer, cause those are the two that would benefit from writing like this - you have to hire one or the other to understand them!&#xD;&#xA; &#xD;&#xA;1.  Are they just interested in buying back their shares?  I have studied reorgs and many different tax scenarios when I specialized in tax law in school, but I can&#x27;t see what this is from the documents.  &#xD;&#xA; &#xD;&#xA;2.  If they are just simply exchanging, should she do it?  She said to me; "I don&#x27;t want to lose these shares necessarily because it&#x27;s insurance that I couldn&#x27;t get now (she&#x27;s elderly)."  I am admittedly clueless as to investing, but how would these shares equate to an actual policy? &#xD;&#xA; &#xD;&#xA;3.  What happens if you opt not to exchange, or you don&#x27;t take the time to read and understand the material and don&#x27;t act on it?&#xD;&#xA; &#xD;&#xA;4.  Anywhere I could go that would help me out with this exact offer to exchange, or even just an offer to exchange in general?&#xD;&#xA; &#xD;&#xA;Thanks in advance for your help.

Degenerate · Answer

Might be irrelevent, but Metlife owns RGA (Reinsurance Group).

P-Unit · Answer

Your family member needs to evaluate which stock she wants to own: life insurance (MetLife) or a company that insures other insurance companies (they are like a Lloyd&#x27;s of London for insurance) such as RGA.  Sounds like this is a spinoff available to current shareholders of MetLife and they are fairly common.  If your family member wants to retain the MetLife, they should do so as it&#x27;s a fairly easy to understand business from an investment standpoint.  They are not obligated to exchange their shares.  They are just given the first chance to do so before the company goes public (most common method, although each case can be different).&#xD;&#xA; &#xD;&#xA;Reinsurance is all about sharing the risk (for a fee) with another insurance company.  They may reinsure property/casualty, some book of life insurance contracts, or other insurance products.  The re-insurers don&#x27;t get all of the benefit of the premiums, and are 100% liable for losses over and above some set amount.  For instance, a hurricaine causes $2 billion in damages and that amount could grow.  The reinsurer may be on the hook for anything over $1.5 billion, for instance.  Then they need to pay out until all the rest of the claims are settled.

wallstreetcappers · Answer

The offer is voluntary, your relative has to do nothing.

Now that doesnt mean it might not be worthy of investigating, and maybe that stock broker can do some hunting on what the new company will pay out dividend wise and if one has an advantage over the other.

There is some truth to the broker getting paid on a "reorg" and she should ask how much of a commission he will make.

To answer the questions-

1- They are wanting to spin off their ownership of that stock, and that stock will trade on the NYSE under RCA.B and the exchange ratio is for every 1 dollar of MET stock you get 1.11 of the new company.

2- I dont see how shares of MET equal to an insurance policy, that is not something I understand, more information is needed.

3- It is voluntary and if you dont act, nothing changes..MET stock stays as is

4- LINK

My opinion is that MET stock is near its 52 week low right here and I probably wouldnt exchange it unless there was a reason to, meaning if one payed a better dividend etc, but from the looks of it that isnt the case.

Complicated Stock Exchange Offer Questions...

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