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MetLife files for spinoff of US unit after weighing IPO, sale

Thursday, October 6, 2016 - 11:09
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MetLife Inc has filed for a spinoff of a US retail unit after considering alternate plans to sell the business or exit through an initial public offering.

[NEW YORK] MetLife Inc has filed for a spinoff of a US retail unit after considering alternate plans to sell the business or exit through an initial public offering.

At least 80.1 per cent of the shares in the unit, Brighthouse Financial Inc, will be distributed to MetLife investors, the parent company said Wednesday in a filing.

MetLife chief executive officer Steve Kandarian is retaining international units and operations that offer workplace-benefits as he focuses on businesses with more predictable cash flow and reduces risks tied to securities markets.

A spinoff of the Charlotte, North Carolina-based unit would help MetLife avoid the pitfalls of trying to price an IPO during periods of market volatility, chief financial officer John Hele said Sept 12.

"A spin can generally happen even if the IPO markets are a bit choppy," Mr Hele said. "Had we planned this a year ago, and were scheduled for the first quarter this year, it would have been very tough to do an IPO."

Brighthouse offers policies with death benefits and also retirement products such as variable annuities, which can provide a lifetime stream of income to customers.

While low bond yields or declines in stock values can pressure results, annuities can generate substantial profits when markets are favourable.

Spinning off the unit may also be the quickest option, RBC Capital Markets analysts led by Eric Berg said Aug 24 in a note.

"A spin would get the majority of the highly capital-markets-sensitive, and therefore volatile, retail business off of Met's books a lot sooner than would an IPO," the analysts said.

Mr Kandarian is seeking to simplify MetLife and limit regulatory oversight, announcing a deal in February to sell an adviser network to Massachusetts Mutual Life Insurance Co ahead of new, stricter rules on pitching the products to consumers. He won a court ruling the next month that overturned the government's designation of MetLife as too big to fail, a tag that could come with stricter capital requirements. The US is appealing the decision.

MetLife has slumped about 4.6 per cent in New York trading this year. The insurer tumbled 11 per cent in 2015, after gaining 0.3 per cent the year earlier.

BLOOMBERG