MetLife on Track for Brighthouse Spinoff in First Half

MetLife is on track to spin off Brighthouse Financial, its huge U.S. retail life and annuity distributor, in the first half of 2017, MetLife’s top executive said.

Spinning off Brighthouse Financial into a separate company represents a key element to MetLife’s plan to transform itself into a leaner, more nimble life insurer.

“Our target is still the first half of 2017,” said Steven A. Kandarian, chairman, president and CEO of MetLife, in an earnings call with analysts.

New York-based MetLife announced the creation Brighthouse Financial last year and had previously targeted the first half of 2017 as the date for the separation.

Until the separation, Brighthouse is operating as a standalone operating business segment within MetLife.

Brighthouse Financial, based in Charlotte, N.C., reported fourth quarter operating earnings of $330 million, a 15 percent decrease compared with the year-ago period, due to life reserve changes and lower separate account fees, MetLife said in a news release.

Brighthouse Financial also reported fourth-quarter premiums, fees and other revenues of $1.3 billion compared with $1.6 billion in the fourth quarter 2015, due to lower single-premium income annuity sales, MetLife said.

Fourth-quarter life and annuity sales dropped 36 percent compared with the year-ago period. However, sales of Shield Level Selector, an indexed annuity, soared to $457 million, a 45 percent increase over the fourth-quarter 2015, the company said.

The impending Department of Labor’s fiduciary rule had a dampening effect on variable annuity sales, said Eric T. Steigerwalt, executive vice president of MetLife’s U.S. Retail business and incoming president and CEO of Brighthouse Financial.

The DOL rule raises investment advice standards into retirement accounts and advisors say they will have a harder time selling variable annuities under the rule which was scheduled to take effect April 10.

Variable annuity sales dropped to $79.4 billion in the first three quarters of 2016, a 22 percent drop compared with the first three quarters in 2015, according to LIMRA Secure Retirement Institute, an industry data tracker.

Lower Life Sales Were Expected

MetLife expected lower life insurance sales in the wake of the transfer of 5,900 career agents to Mass Mutual Financial Group as part of MetLife’s separation from life and annuity distribution announced last year, Steigerwalt said.

“We continue to see momentum in the Shield (Level Selector) business, but the life business was clearly weak in the fourth quarter and we'll have to work on that in the coming quarters going forward,” he added.

From the moment MetLife spins off Brighthouse Financial into a separate public company, Brighthouse will be one of the largest life and annuity companies in the U.S. with $240 billion in assets, 2.6 million insurance policies and annuity contracts and a robust network of distribution channels.

MetLife reported a fourth-quarter loss of $2.09 billion, after reporting a profit in the same period a year earlier.

The company reported a loss of $1.94 per share. Earnings, adjusted for non-recurring costs, came to $1.35 per share.

The results surpassed Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1.34 per share.

Company executives said the losses were connected to hedging strategies and changes in interest rates and equity markets.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.