The insurance giant MetLife Inc. announced Monday that it was acquiring Travelers Life & Annuity Co. from Citigroup Inc. for at least US$11.5 billion. The two companies, both based in New York, said in a statement that the deal will make MetLife “the largest individual life insurer in North America, based on sales.”

The deal already has been approved by both boards and is expected to close in the summer.

Citigroup decision to sell off the Travelers highlights the tough time banks have cross-selling banking products and insurance.

Following the announcement of the deal, Fitch Ratings affirmed its ratings of Citigroup and Primerica Life Insurance Co., but downgraded Travelers Life & Annuity Co. and Travelers Insurance Co. (TIC).

The ratings of TIC reflect the proposed acquisition by MetLife Inc, a deal which joins Travelers with one of the world’s leading insurance companies. The transaction, which encompasses Traveler’s U.S. business and its international operations (excluding Primerica and Mexico), is expected to expand MetLife’s distribution network and significantly grow its international operations.

Fitch says that the sale is notable for Citigroup as the life insurance business fails to provide the growth synergies Citigroup sought from the original merger between Citicorp and TIC. “The strength of the merger stemmed from the consolidation of the corporate commercial business with trading and investment banking, and the scale of its consumer finance business. Traveler’s contributed 6% of consolidated net income in 2004 and did not hold significant promise for growth,” it notes.

“The cross sell of life insurance to retail consumers confounds virtually all banks,” Fitch adds. “Not surprising, PLIC and its distribution channel Primerica Financial Services (Primerica) will be retained and represents the best of the cross sell distribution vehicles Citigroup has developed. Primerica continues to generate about US$1 billion in consumer finance loans in an average quarter, in addition to its sales of mutual funds, unit investment trusts and annuity products.”

Citigroup has made no statement regarding the proceeds of the sale, Fitch notes.