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MetLife : Insurer's Spinoff Lifts Off -- WSJ

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06/29/2017 | 08:48am CEST

Delaware regulator lets MetLife divest itself of most of its core life business

By Leslie Scism 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the US print edition of The Wall Street Journal (June 29, 2017).

MetLife Inc. on Wednesday cleared one of the last obstacles to spinning off most of its longtime core business of selling life insurance to U.S. families.

Delaware state insurance regulators approved the company's planned divestiture, which will create a new company called Brighthouse Financial. The spinoff is expected to strip MetLife of its bragging rights as the nation's biggest life insurer by assets, as it is slips behind Prudential Financial Inc. in size.

The new company will start life with about $223 billion in total assets, about a quarter of MetLife as of March 31, according to MetLife's regulatory filings. As of March 31, Prudential's assets totaled $797.4 billion.

Brighthouse is expected to be one of the nation's biggest life insurers, with 1.3 million life insurance policyholders and 1.5 million annuity owners. MetLife disclosed its plan to spin it off in early 2016, filed the registration statement in October of last year and aimed for completion by June 30 of this year. The company declined to comment on exact timing.

Evercore ISI analyst Thomas Gallagher told clients in a June 23 note that the spinoff could come as early as the end of July or early August. "However, we would not be surprised if the spin took place at the end of August or September," he added.

Even with the green light from Delaware, MetLife still needs a final approval from the Securities and Exchange Commission before the Brighthouse shares can be issued to MetLife shareholders. MetLife has yet to file some details of the share distribution, but Wall Street stock analysts generally expect a launch-of-trading ceremony at the Nasdaq Stock Market within the next month or two.

Delaware regulates the unit that is at the heart of Brighthouse, and the job of approving MetLife's plan belonged to a new insurance commissioner, Trinidad Navarro, who was elected in November and inherited a backlog of work. He said in a release Wednesday that the state's internal and external experts analyzed the transaction for the last eight months.

"I am satisfied that my department has done a careful and thorough job," he said in the release.

The Delaware department also has had before it a pending application for Chinese investment firm China Oceanwide Holdings Group Co. to acquire mortgage- and long-term-care insurer Genworth Financial Inc.

Besides life insurance, Brighthouse will be a leading seller of annuities, which are retirement-income products favored by many conservative investors. For its part, MetLife will be focused on an international network of life-insurance businesses as well as group life-insurance and other benefits sold to employers, and some other products.

Analysts have said these remaining MetLife businesses have better growth possibilities than the ones moving into Brighthouse, and aren't as hurt by low interest rates.

By splitting apart, MetLife could avoid being redesignated as a "systemically important financial institution" by a panel of federal regulators, analysts say. Last year, a federal court rescinded the label in a legal challenge brought by MetLife, and the matter is now in the hands of a federal appellate court.

MetLife Chief Executive Steven Kandarian has said that the company doesn't pose a risk to the broader economy, and that extra regulation would hurt it competitively. Historically, insurers have been state-regulated.

MetLife's decision to split itself apart coincided with a push by activist investors for a breakup at insurance conglomerate American International Group Inc. Advocates of such breakups say that smaller companies are more nimble and better focused on product development and other keys to improving sluggish results.

Brighthouse will sell its products through securities brokerages, financial advisers and other outside sales forces. Its chief executive is Eric Steigerwalt, who has been the MetLife executive vice president in charge of the business that is becoming Brighthouse.

Write to Leslie Scism at [email protected]

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Financials ($)
Sales 2017 68 677 M
EBIT 2017 7 128 M
Net income 2017 5 632 M
Debt 2017 -
Yield 2017 2,97%
P/E ratio 2017 11,11
P/E ratio 2018 9,64
Capi. / Sales 2017 0,85x
Capi. / Sales 2018 0,84x
Capitalization 58 681 M
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Mean consensus OUTPERFORM
Number of Analysts 17
Average target price 59,4 $
Spread / Average Target 8,8%
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Steven Albert Kandarian Chairman, President & Chief Executive Officer
Martin J. Lippert Executive VP-Global Technology & Operations
John C. R. Hele Chief Financial Officer & Executive Vice President
Jacki Goldstein Chief Medical Officer
Cheryl W. Grisé Independent Director
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