The 2015 CRMER group had their first off-campus visit on Friday, March 3rd in Kansas City, Kansas. The group was invited to meet with several key figures from MetLife at their KC headquarters. Once there we received a wonderful presentation that provided us with an overview of MetLife and their agricultural investment department. In addition, the CRMER group was treated to an opportunity to speak with a panel consisting of: Jack Espenmiller, Kevin Hershberger, Brian Culpepper, Barry Bogseth, and Peter Headley. This provided the group with an in-depth look at how MetLife actively ensures its investment risk is properly managed.
Agricultural is one of the key sources for MetLife to invest in secure, fairly liquid assets and maintain a predicted return. MetLife utilizes its deep credit expertise to grow its already 12 billion-dollar Ag portfolio, and with 97 years of experience it has a myriad of loans. That’s one way it limits and controls some of its risk; diversity. MetLife focuses on three areas of Ag loans: agriculture production sector, food and agribusiness sector, and the timber sector. In the agriculture production area they mainly make loans to large CAFOs (confined animal feeding operation), large dairy farms, and row crop farms. In the food and agribusiness area its key interests are packing plants, grain mills, processing plants, and large cooperatives. And in their final sector, timber, they loan to timber mills and lumber processing plants. This geographic and enterprise diversity helps insulate MetLife from large shocks to their investments. Another risk management technique that was discussed was internal checks and balances. MetLife has monthly portfolio reviews to check for discrepancies or warning signs that an investment may be in danger. They use these to maintain their structured investment regiment and allow for warning signs to present themselves.
Following the presentation and breakdown of their risk management techniques, the panel also provided the CRMER group with some insight into how the “Great Recession” effected the company, their thoughts on equity investing, and how they handle international challenges.
As with many companies the “Great Recession” had a negative impact upon MetLife, but unlike many of its competitors MetLife was able to weather the storm with more dignity and strength. The company’s greatest challenge moving forward will be addressing the impact of the Dodd-Frank Act. This in turn led the discussion to equity positions in their investments, which the panel quickly concluded wasn’t likely in the foreseeable future. Only in extreme cases, even in the past, were equity positions taken, and often that was caused by a default on the loan. Now with the Dodd-Frank Act in place the required capital holdings would make it very difficult for MetLife to justify most investments of that nature. The final question discussed was the challenges that MetLife faces as a global company. The panel touched upon the importance of understanding a country’s culture, estimating political groups effects on the country’s economy, government policy and trade agreement stability, and lastly they discussed exchange policies and their impacts.
MetLife has made a name for itself by becoming an insurance giant. With over 100 million customers in more than 50 countries, the company faces monumental challenges related to the company’s longevity and continued prosperity. To help ensure its continued success the company must continue to seek out investments, which will allow it to utilize its funds to reinvest them in calculated risks. With a company of this magnitude the risk management program must be very disciplined and highly diversified. It was a wonderful opportunity for the CRMER group to receive a brief education of how MetLife tackles their challenges.