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MetLife announced Tuesday that it plans to separate its U.S. life insurance unit — the largest in the country.
Specifically, MetLife said it plans to pursue the separation of "a substantial portion" of its U.S. Retail segment. The company said it is looking at "structural alternatives for such a separation," including a public offering of shares in an independent company, a spin-off, or a sale.
Shares in the company rose more than 8 percent higher in after-hours trading on the news.
Steven Kandarian, MetLife's chairman, president and CEO, cast the proposed separation as the result of the company's strategic initiative to accelerate shareholder value.
"MetLife has been evaluating opportunities to increase sustainable cash generation and is directing capital to businesses where we can achieve a clear competitive advantage and deliver a differentiated value proposition for customers," he said in a statement. "This analysis considers the regulatory and economic environment in each market where we do business. We have concluded that an independent new company would be able to compete more effectively and generate stronger returns for shareholders."
Part of that regulatory environment is that MetLife's U.S. retail unit is designated as part of a Systemically Important Financial Institution (SIFI) "and risks higher capital requirements that could put it at a significant competitive disadvantage," Kandarian said.
"Even though we are appealing our SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision to pursue the separation of the business," he explained. "An independent company would benefit from greater focus, more flexibility in products and operations, and a reduced capital and compliance burden. "
In its statement, MetlLife said that it hopes to spin off MetLife Insurance Company USA, General American Life Insurance Company, Metropolitan Tower Life Insurance Company and "several subsidiaries that have reinsured risks underwritten by" MetLife Insurance Company USA.
That new spin-off would represent about 20 percent of MetLife's operating earnings as of September 30, 2015, the company said.
The company said its other segments — including corporate benefit funding, worksite benefits, Asia, Latin America and Europe — would remain part of MetLife.
MetLife was easily the largest life insurer by total assets in 2014, according to the American Council of Life Insurers, which said the company had more than $608.4 billion — topping Prudential's $551.6 billion in total assets.