In a move it says is “an important step toward repaying the government,” American International Group has agreed to sell its international life insurer to MetLife for $15.5 billion.

MetLife said it is set to acquire American Life Insurance Co. (ALICO) in a deal consisting of $6.8 billion in cash and $8.7 billion in MetLife equity securities, subject to closing adjustments. The transaction, approved by companies’ boards of directors, is expected to close by the end of the year, pending regulatory approvals and other closing conditions.

It is the second sale of an AIG life insurance unit in the past several weeks.

C. Robert Henrikson

The deal, speculated upon for months, was finalized today (March 8) and will broaden MetLife’s reach into Japan, the world’s second-largest life insurance market and move the insurer into a top-five market position in many emerging markets in Central and Eastern Europe, the Middle East and Latin America, it said in a statement.

“With this acquisition, MetLife is delivering on its strategy to accelerate international expansion as a powerful growth engine for the company,” said C. Robert Henrikson, chairman, president and chief executive officer of MetLife.  “Today’s transaction will bring together two profitable, complementary, well-established businesses with superb track records and strong long-term growth potential.  We expect it will increase MetLife’s return on equity and be accretive to operating earnings.”

Henrikson added that the transaction “creates a global leader in life insurance and employee benefits,” by adding scale and geographic reach to MetLife’s international footprint. He has asked Bill Toppeta, president of MetLife’s International business, to lead the integration of ALICO into MetLife.

AIG said the $6.8 billion in cash proceeds from the sale of ALICO will be “used to reduce the liquidation preference” of the Federal Reserve Bank of New York in the special purpose vehicle the two bodies formed to hold the interests in ALICO.

“This sale is an important step toward repaying the government,” said Harvey Golub, chairman of the AIG Board of Directors, in a statement. “With this sale of ALICO, along with the sale of AIA to Prudential plc announced last week, we are on track to generate approximately $50.7 billion from these two transactions alone, consisting of approximately $31.5 billion in cash to repay the FRBNY, plus another approximately $19.2 billion in securities that we will sell over time to repay the government.”

Golub added that both sales give AIG “greater flexibility to move forward” with its restructuring and rebuilding efforts, “and focus on enhancing the value of our key insurance businesses.”

ALICO, founded in 1921, is an international life insurer, including 60,000 points of distribution, including agents, brokers and financial institutions; 12,500 employees across more than 50 countries; and 20 million customers worldwide.

According to the companies, MetLife and AIG will enter into an investor rights agreement, requiring AIG to hold specified amounts of MetLife securities for certain designated periods of time. Certain lock-ups will begin to expire nine months after closing, according to the companies.