(Bloomberg) — MetLife Inc. may favor a spinoff of its Brighthouse Financial U.S. business rather than pursue an initial public offering of the unit, RBC Capital Markets analysts led by Eric Berg said after chatting with the company's chief financial officer.
"A 'spin' would get the majority of the highly capital-markets-sensitive, and therefore volatile, retail business off of Met's books a lot sooner than would an IPO," the analysts said Wednesday in a note. "If speed is, in fact, what is first and foremost on the minds of Met's leadership, then we would say a 'spin' of Brighthouse is Met's most likely choice."
Chief Executive Officer Steve Kandarian announced a plan in January to separate the business that sells life insurance and variable annuities to individuals, an operation that has been pressured by low bond yields. He initially said possibilities included a sale, spinoff or IPO, but told analysts Aug. 4 that he expects to file documents tied to one of the latter two options shortly after a board meeting late next month.
Tax considerations would likely limit New York-based MetLife to selling only 20 percent of Brighthouse in an IPO, and the insurer would have to wait six months to exit the rest, Berg wrote. He said his view of MetLife's approach was drawn from "inferences" after traveling with CFO John Hele rather than direct remarks from the executive. For instance, Hele spoke about companies in other industries that separated businesses by spinning them off to shareholders, according to the analyst.
Serious Consideration
"Met's CFO wouldn't be studying these other spinoffs and highlighting them unless he were at least giving very serious consideration" to such an approach, Berg wrote.
