(Bloomberg News) MetLife Inc. may target annuities and U.S. retail life insurance for cost cuts as Chief Executive Officer Steven Kandarian unveils his plan to improve returns.
"I think they're going to announce some expense-reduction initiatives in those lines of business and maybe announce that they're cutting back on sales," Sean Dargan, an analyst at Macquarie Group Ltd., said in an interview. "The products there are commoditized, the environment there is very competitive and the company can probably achieve higher returns elsewhere."
Kandarian 60, is seeking to reverse a stock slide after the New York-based company declined 30 percent in 12 months through yesterday. Kandarian, who became CEO last May, has said that his firm, the largest U.S. life insurer, will announce its strategy tomorrow. The insurer already has started scaling back annuity sales and is exiting banking to limit U.S. oversight as it seeks to expand in emerging markets.
"We will fix or exit businesses that cannot consistently clear their hurdle rates," Kandarian wrote in a March letter to shareholders. Christopher Breslin, a company spokesman, declined to comment.
MetLife may target as much as $400 million in expense reductions, a goal that could be reached by eliminating jobs and advertising less at units it's scaling back, said Randy Binner, an analyst at FBR Capital Markets.
MetLife reduced expenses by $700 million annually in an initiative announced in 2008, William Wheeler, who was then chief financial officer, said in 2010. The company expanded outside the U.S. with the purchase of American Life Insurance Co. from bailed-out American International Group Inc. for about $16 billion in November of that year.
'More Complex'
"We now have Alico, which makes more complex something we just simplified, and we're going through another exercise in our review," Kandarian said Feb. 15.
Dargan said the focus on emerging markets may persuade the company to cut expenses in the U.S. Industrywide, individual life insurance policy sales increased in just four of the past 30 years, according to trade group Limra. They climbed 2 percent in 2011. MetLife has said it's working to sell more insurance to households making less than $100,000 a year by offering quotes on its Web site, which may lower costs.
MetLife is planning for variable annuity sales of about $18 billion this year, after exceeding $28 billion in 2011, when it was the largest seller of the equity-linked products. The head of U.S. distribution was reassigned as Kandarian sought to cut risk tied to stock market declines. Industrywide, total annuity sales slid 8 percent in the first quarter to $54.8 billion, Limra said.
Emerging Markets
Revenue from emerging markets will grow by about 20 percent a year through 2015, the insurer said in December. Kandarian hired Christopher Townsend from AIG this month to lead operations in Asia.