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New regulations are forcing some large insurance companies and financial institutions to divest of their offerings and focus on their core. Like General Electric did in 2015, MetLife is pursuing the potential separation of its U.S. Retail business to focus on its core offerings. What impact this might have on MetLife’s brand loyalty remains to be seen.
MetLife’s decision was driven by a strategic review and the current regulatory environment.
When contacted by Loyalty360, Kim Friedman, MetLife’s VP of Global Communications, said it’s too early in the process to determine the impact of the separation of its U.S. Retail business on brand loyalty.
Friedman referred Loyalty360 to the company’s press release about the potential separation of its U.S. Retail business.
“MetLife 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,” according to the release.
All of the MetLife’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. In the U.S. market, MetLife will remain the leader in employee benefits through its GVWB business and a major provider of pension and retirement products through its CBF business.
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.
The new company would represent, as of Sept. 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.
The parts of the U.S. 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 postseparation.
The new business is to be led by MetLife Executive Vice President Eric Steigerwalt.
“At MetLife our goal is to create long-term value for our shareholders and deliver exceptional customer experiences,” Steven A. Kandarian, MetLife chairman, president, and CEO, said. “As a result of our Accelerating Value strategic initiative, MetLife has been evaluating opportunities to increase sustainable cash generation and is directing capital to businesses where we can achieve a clear competitive advantage and deliver a differentiated value proposition for customers. This analysis considers the regulatory and economic environment in each market where we do business. We have concluded that an independent new company would be able to compete more effectively and generate stronger returns for shareholders.”
What’s more, Kandarian said U.S. Retail is part of a Systemically Important Financial Institution (SIFI) and risks higher capital requirements that could place 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,” he added. “An independent company would benefit from greater focus, more flexibility in products and operations, and a reduced capital and compliance burden. This separation would also bring significant benefits to MetLife as we continue to execute our strategy to focus on businesses that have lower capital requirements and greater cash generation potential. In the U.S., it would allow us to focus even more intently on our group business, where we have long been the market leader. Globally, we will continue to do business in a mix of mature and emerging markets to drive growth and generate attractive returns.”
Founded in 1868, MetLife is a global provider of life insurance, annuities, employee benefits and asset management. Serving about 100 million customers, MetLife has operations in nearly 50 countries and holds leading market positions in the United States, Japan, Latin America, Asia, Europe, and the Middle East.
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