(Bloomberg) -- MetLife, the largest U.S. life insurer, plans to separate much of its domestic retail business as CEO Steve Kandarian works to shrink the company amid tighter government oversight.
The insurer is weighing a possible sale, spinoff or public offering of the operation, New York-based MetLife said Tuesday evening in a statement. The new company would have about $240 billion of assets and accounts for approximately 20% of MetLife’s operating earnings, according to the statement.
MetLife joins GE’s finance unit in seeking to simplify operations after being designated by a U.S. panel as a non-bank systemically important financial institution, a tag that can lead to stricter limits on the balance sheet. Kandarian has sought to reverse that designation in court.
The retail business, as part of a SIFI, faces “higher capital requirements that could put it at a significant competitive disadvantage,” Kandarian said in the statement. “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.”
MetLife would retain units providing workplace benefits and property-casualty coverage, along with the corporate benefit funding division that offers pension and retirement products.
The retail unit slated for separation is a provider of variable annuities, where results can be tied to fluctuations in stock markets and interest rates. The new company would also include life insurance entities.
Breaking off the retail unit would leave MetLife “with a regulated set of businesses, but less heavily regulated than retail products,” David Havens, a debt analyst at Imperial Capital, said in a note. “It should also leave Met with a large international portfolio that has good long-term growth prospects.”