MetLife CEO: Lighter Regulations, Tax Reform Brightens 2018 Outlook
December 15, 2017 by Frank Klimko
NEW YORK – The prospect of a reduced regulatory burden coupled with a potential deep reduction in the corporate tax rate could lessen financial headwinds for MetLife Inc. in 2018, said Steven A. Kandarian, company chairman, president and chief executive officer.
“From what we are seeing in Washington, on tax reform, there should be a positive upon our effective tax rate,” Kandarian said during a conference call with investors to discuss its 2018 outlook. “I don’t want to put out a specific number because the bill is still being negotiated. But we do view it as a positive. We support tax reform as pro-growth.”
The Senate voted 51-49 on Dec. 2 to pass the Republican tax overhaul bill that would slash the corporate tax rate from 35% to 20%. Republican congressional leaders hope to have it on the president’s desk before Christmas (Best’s News Service, Dec. 12, 2017).
That Senate bill is being reconciled by a Senate-House conference committee, which is now considering a slighter higher corporate rate of 21%.
On federal regulations, Kandarian noted the U.S. Treasury Department issued a new report which recommended the Financial Stability Oversight Council reduce its oversight of individual nonbanks. It also suggested prior to a systemically important financial institution designation, the FSOC conduct an analysis of whether an individual nonbank was subject to material financial distress. MetLife said such an analysis should have been done in the administrative process that led up to its designation.
Also, MetLife recently won a round in the lawsuit that seeks to decide the constitutionality of its SIFI designation. It shed the designation last year at the district court level, but that decision was appealed by attorneys for the FSOC. The company won the right to file new briefings in the case.
“We believe all these developments point to a better regulatory future,” Kandarian said.
Last month, the company reported that costs associated with the spinoff of Brighthouse Financial and catastrophe losses in the group’s property/casualty segment contributed to a third-quarter net loss. MetLife recorded a third-quarter net loss of $87 million, compared with net income of $571 million in the same quarter a year earlier. Property/casualty earnings were down 12% for the quarter (Best’s News Service, Nov. 2, 2017).
Separation-related costs to MetLife for Brighthouse Financial totaled $1.1 billion for the third quarter and the company has divested 80.8% of its Brighthouse stake. MetLife intends to dispose of its remaining Brighthouse common stock through an exchange offer in 2018, Kandarian said during the call. The move is part of MetLife’s restructuring and separation of its U.S. retail business.
“We have executed the centerpiece of our transformation, the spinoff of Brighthouse Financial. And we are encouraged by the positive market reaction,” Kandarian said. “MetLife is now is well positioned and less volatile in protection and fee-based businesses.”
“An exchange offer allows us to sever ties with our Brighthouse Financial stake on a tax-advantaged basis and does so at a lower transaction cost than other options,” he said.
Brighthouse separated from MetLife and began trading as a separate company in early August.
“Excess capital belongs to MetLife owners,” he said. “We are always looking for opportunities to grow the business profitably, whether organically or inorganically. With respect to M&A, we will remain selective and opportunistic.”
Metropolitan Life Insurance Co. has a current Best’s Financial Strength Rating of A+ (Superior).
Shares of MetLife Inc. (NYSE: MET) were trading at $51.41 on the afternoon of Dec. 15, down 2.06% from the previous close.
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)