MetLife has announced a plan to pursue the separation of a substantial portion of its US retail segment.
The insurer said it is currently evaluating structural alternatives for such a separation, including a public offering of shares in an independent, publicly traded company, a spin-off, or a sale.
The company is also undertaking preparations to complete the required financial statements and disclosures that would be required for a public offering or spin-off.
MetLife plans to include the following entities in the new company: 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.
All of the company’s other reporting segments – group, voluntary and worksite benefits (GVWB), corporate benefit funding (CBF), Asia, Latin America, and Europe, the Middle East and Africa (EMEA) – would remain part of MetLife.
MetLife said the completion of a transaction taking the US retail segment public would depend on, among other things, the U.S. Securities and Exchange Commission (SEC) filing and review process as well as market conditions.
Impact of separation
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The new company would represent, as of 30 September 2015, approximately 20% of the operating earnings of MetLife and 50% of the operating earnings of MetLife’s US retail segment.
The new company would have approximately $240bn of total assets, including $45bn currently reported in the Corporate Benefit Funding and Corporate and other segments.
Approximately 60% of current US 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.
The parts of the US retail segment that would stay with MetLife are: the life insurance closed block, property-casualty, and the life and annuity business sold through Metropolitan Life Insurance Company (MLIC). MLIC would no longer write new retail life and annuity business post-separation.
MetLife executive vice president Eric Steigerwalt is to lead the new business. The complete management team of the new company, as well as its board of directors, is to be defined over time as preparations for the transaction take shape.
Steven A. Kandarian, MetLife chairman, president and CEO, commented: "We have concluded that an independent new company would be able to compete more effectively and generate stronger returns for shareholders.
"Currently, US Retail is part of a Systemically Important Financial Institution (SIFI) and risks higher capital requirements that could put it at a significant competitive disadvantage. 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. An independent company would benefit from greater focus, more flexibility in products and operations, and a reduced capital and compliance burden."
Any separation transaction that might occur will be subject to the satisfaction of various conditions and approvals, including approval of any transaction by the MetLife Board of Directors, satisfaction of any applicable requirements of the SEC, and receipt of insurance and other regulatory approvals and other anticipated conditions.