MetLife to Cut Costs by $1 Billion Through 2019
August 04 2016 - 10:50AM
Dow Jones News
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 10:35 ET (14:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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