MET MetLife Inc

By Leslie Scism 

MetLife Inc. will cut $1 billion, or 11%, in costs by the end of 2019 with some job losses, as the big insurer reacts to protracted ultralow interest rates that pressure earnings of life-insurers, the company said Thursday.

MetLife Chief Executive Steven Kandarian told analysts and investors during a conference call following Wednesday's disappointing second-quarter earnings that the cost-cutting "will require us to reduce head count." MetLife shares are off 8% this morning.

The Federal Reserve has used ultralow interest rates since the 2008 global financial crisis to revive the economy, and though rates had begun edging up, they were set back by the U.K.'s vote in June to exit the European Union, creating a flight to safety in U.S. Treasurys.

Insurers invest premium dollars from customers until the money is needed for claims, and U.S. life insurers typically favor longer-term, high-quality bonds, priced off the 10-year Treasury. The life-insurance industry has been among the hardest hit by the prevailing low-interest rates across many parts of the globe.

Mr. Kandarian said his anticipation is that Treasury rates will remain "lower for longer," saying such a scenario "is not going away anytime soon and life insurance companies will need to adapt."

In the face of such low rates, "MetLife must do even more to avoid simply running in place," he said.

The cost-cutting will occur as the nation's biggest life insurer by assets continues with plans to divest a large part of its U.S. retail life-insurance operations, probably by a spinoff or initial public offering, for strategic and regulatory reasons. The operations being divested represent about a fifth of the company's recent operating earnings. They're being rebranded as Brighthouse Financial.

After the divestiture, MetLife will cede bragging rights as the nation's biggest life-insurer to longtime rival Prudential Financial Inc.

MetLife said the cost-cutting will apply to the large part of the company that will continue operating as MetLife, which will be focused on group life-insurance and other benefits sold to employers, an international network of life-insurance operations and some other businesses.

The reductions will be on top of $1 billion sliced out of expenses between 2012 and 2015.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

August 04, 2016 10:29 ET (14:29 GMT)

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