MetLife Inc. (MET), the biggest U.S. life insurer, was removed from Citigroup Inc. (C)’s list of top stock picks as new Chief Executive Officer Steven Kandarian reshuffles management and plans his strategy.
Kandarian, promoted to the top job in May, is facing interest-rate and equity-market declines that “will pressure fees and spreads,” Colin Devine, an analyst with Citigroup, said today in a research report. Kandarian may respond with expansion outside the U.S. and “a material downsizing” of sales of variable annuities, said Devine, who lowered his price target on the stock 7.1 percent and maintained a “buy” rating.
Kandarian, 59, is reorganizing New York-based MetLife after the $16 billion purchase of American Life Insurance Co. last year added business from Chile to Poland to Japan. Last week, he created three divisions to cover the Americas, Europe and Asia and announced the departure of one executive and the planned retirement next year of another.
“These moves could be the opening salvo in a much larger reorganization than we had anticipated as Mr. Kandarian seeks to position the company as the pre-eminent global life insurer,” said Devine. “There is some strategic uncertainty at MET following its recent CEO transition”
MetLife has dropped 37 percent this year in New York trading to $27.91 on Nov. 25, compared with a 23 percent decline in the 24-company KBW Insurance Index and a 7.9 percent slide in the Standard & Poor’s 500 Index. Devine lowered his MetLife target price to $39 from $42.
Kandarian moved William Wheeler from his position of chief financial officer to head of the Americas division, while Michel Khalaf, who joined the company in the Alico deal, was promoted to lead Europe. William Mullaney, former president of MetLife’s U.S. business, is leaving the insurer and William Toppeta, who previously led international operations, will retire next year. Kandarian is looking for an executive to head Asia, he said last week.
MetLife is seeking to reduce risk on the retirement products it sells as lower interest rates pressure the insurer’s investment yields, Kandarian said on Oct. 28. The company will reduce the returns it promises customers who buy variable annuities, Kandarian said.
MetLife’s sales of variable annuities in the third quarter surged 84 percent to $8.6 billion. The insurer is the biggest seller of the equity-based retirement products in the U.S., according to data from trade group Limra. When stock markets fall, variable-annuity sellers often are required to shoulder a portion of the losses with their customers.
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