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MetLife to sell or spin-off much of U.S. life insurance business

MetLife wants to divest itself of a large portion of its U.S. life insurance unit in order to ease capital burdens the firm expects to face under new federal regulations.

In an announcement Tuesday, MetLife said it is considering a public offering of shares in an independent, publicly traded company, a spin-off, or a sale.

Taking the company’s retail life insurance market would require U.S. Securities and Exchange Commission (SEC) approval.

Steven Kandarian

Steven Kandarian

MetLife CEO Steven Kandarian said the company concluded “an independent new company would be able to compete more effectively and generate stronger returns for shareholders . . . [and] this risk of increased capital requirements contributed to our decision to pursue the separation of the business.”

MetLife said the move is designed in part as a response to a shifting regulatory environment in the wake of the 2008 financial crisis.

The insurer is one of four nonbanks designated by U.S. regulators as “systemically important financial institutions” under the 2010 Dodd-Frank Act, meaning federal regulators believe the company could pose significant risks to the nation’s financial system should it collapse. Dodd-Frank requires that those firms hold extra capital.

MetLife has insisted, through the courts, that its business doesn’t pose any risk to the system.

“Even though we are appealing our SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision to pursue the separation of the business,” Kandarian said. “An independent company would benefit from greater focus, more flexibility in products and operations, and a reduced capital and compliance burden.”

The parts of the U.S. retail segment that would stay with MetLife include its life insurance closed block, property-casualty, and life and annuity business sold through Metropolitan Life Insurance Company (MLIC). MLIC would no longer write new retail life and annuity business post-separation.

The specific units that MetLife plans to include in the new company are: MetLife Insurance Company USA, General American Life Insurance Company, Metropolitan Tower Life Insurance Company and several subsidiaries that have reinsured risks underwritten by MetLife Insurance Company USA.

According to the firm, all of MetLife’s non-life reporting segments – group, voluntary and worksite benefits, corporate benefit funding, Asia, Latin America, and Europe, the Middle East and Africa – would remain part of MetLife.

A new company would represent, as of September 30, 2015, approximately 20% of the operating earnings of MetLife and 50% of the operating earnings of MetLife’s U.S. retail segment. The new company would have approximately $240 billion of total assets, including $45 billion currently reported in the corporate benefit funding and corporate and other segments. Approximately 60% of current U.S. variable annuity account values, including 75% of variable annuities with living benefit guarantees, are in entities that would be a part of the new company. The new company would also contain approximately 85% of the U.S. universal life with secondary guarantee business.


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