MetLife CEO: Markets Responding to Trump’s Promises of Regulatory Relief
December 19, 2016 by Frank Klimko
NEW YORK – The insurance industry and the financial markets are responding positively to promises of regulatory relief and tax reform from the administration of President-elect Donald Trump, said Steven A. Kandarian, MetLife Inc. chairman, president and chief executive officer.
“The incoming Trump administration has sent positive signals about pro-growth tax reform, increased infrastructure spending and sensible regulatory relief,” Kandarian said. “The optimism this has fostered can be seen in the 74 basis-point increase in the 10-year Treasury rate since Election Day.
Just after the election, Kandarian said he hoped the new administration would mean a sea-change in the flood of federal regulations that has been inundating the industry. Since then, the enthusiasm for the new administration can be seen throughout the industry, Kandarian said during a conference call with investors.
“The stock prices of the largest life insurance companies have also rallied on the belief that regulation will be better balanced against the goals of spurring growth and providing affordable financial protection to consumers.” Kandarian said. “While it is still early days and more details from Congress and the incoming Trump Administration are needed, early indications are encouraging.”
The company continues to move ahead with the re-segmentation of MetLife’s businesses, including the establishment of a Brighthouse Financial segment, Kandarian said.
“We view 2017 as a transition year during which we will focus on executing the separation of Brighthouse Financial and making critical investments to drive efficiency,” Kandarian said. “While this will put downward pressure on earnings next year, we expect earnings to grow for post-separation MetLife in 2018, driven by both business growth and expense discipline.”
Earlier this year, MetLife filed with the U.S. Securities and Exchange Commission to spin off its U.S. retail business as Brighthouse and said it is evaluating options that include an initial public offering (Best’s News Service, Oct. 6, 2016). Under the insurer’s plan for the spinoff, at least 80.1% of the common stock shares of Brighthouse Financial will be distributed to MetLife shareholders, according to the SEC filing. Once completed, MetLife plans to divest its remaining interest in Brighthouse within five years.
During the fourth quarter, MetLife returned $648 million to shareholders, paid a quarterly common dividend of $440 million and repurchased $208 million of common shares in conjunction with the $3 billion authorization announced in November, Kandarian said.
The property/casualty segment, a small part of MetLife’s business, reported fourth-quarter operating income of $185 million, mainly on variable investment income, catastrophe experience and prior year development, said Maria Morris, executive vice president of global employee benefits and interim U.S. head.
In Asia, the company reported fourth-quarter operating income of $1.3 billion, mainly on variable investment income and other insurance adjustments, Christopher Townsend, president of MetLife Asia, said. The growth was partly offset by tax adjustments, he said. Asian sales volume growth will be impacted in 2017 by a continuing shift to a value-focused portfolio before returning to high single-digit sales growth, Townsend said.
The company also anticipated an increase of up to $300 million in operating earnings over the next three years tied to the recent Federal Reserve announcement to increase interest rates, John Hele, MetLife Inc. chief financial officer, said during the call. The impact of higher rates on new money will build more slowly as premiums, deposits and investment proceeds are invested, Hele said (Best’s News Service, Dec. 16, 2016).
Metropolitan Life Insurance Co. has a current Best’s Financial Strength Rating of A+ (Superior).
On the afternoon of Dec. 16, shares of Metropolitan Life Insurance Co. (NYSE: MET) were trading at $54.50, down 4.85% from the previous close.
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)