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| Metlife |
The New York-headquartered company's stock jumped 6.9% to $44.90 after ending the day's regular trading session up fractionally at $41.99.
MetLife said the separation plan, spurred in part by the risk of increased capital requirements for the business, could involve a spin-off, a sale or a public stock offering for a unit that has been the company's most publicly well-known division.
The U.S. retail division, which offers life insurance coverage and other financial products to families and individuals across the nation, accounted for 20% of MetLife's operating earnings as of Sept. 30, 2015, the company said.
MetLife President and CEO Steven Kandarian characterized the decision in a formal statement issued with the announcement as a strategic plan to increase long-term investor value.
"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," said Kandarian. "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."
The company's U.S. retail business is part of a company that the federal Financial Stability Oversight Council has designated as a Systemically Important Financial Institution. The designation carries risks of higher capital requirements that could put the division "at a significant competitive disadvantage," said Kandarian.
MetLife has appealed the designation, and has said it believes it does not believe any part of the company is systemic. However, Kandarian said the risk of being required to hold higher levels of capital than competitors "contributed to our decision to pursue the separation of the business."
The separation plan would include MetLife Insurance Company USA, General American Life Insurance Company, Metropolitan Tower Life Insurance Company and several subsidiaries, the company said.
Other MetLife businesses — including Group, Voluntary and Worksite Benefits, Corporate Benefit Funding, and Europe, the Middle East and Africa — would remain a part of the parent company.
Completion of the plan would depend on financial market conditions and the Securities and Exchange Commission's filing and review process, MetLife said.
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