MetLife Inc. (MET) Chief Executive Officer Steven Kandarian, who is cutting jobs at the insurer’s banking business, said he is forced to hold too much capital and that shareholders could use the funds to boost employment.
MetLife, the largest U.S. life insurer, is seeking Federal Reserve permission to return capital to investors and expects the regulator to rule on its plan by March 31, Kandarian said today on a conference call to discuss the New York-based company’s fourth-quarter results. The Fed last year rejected the insurer’s plan to raise its dividend and resume share buybacks.
“We believe that approval for our capital plan is consistent with the Fed’s mandate to promote maximum employment, as MetLife shareholders would redeploy idle capital in a more productive manner,” Kandarian said. “It is our intention to begin returning excess capital to shareholders this year, pending regulatory approval.”
Financial-firm executives including Jamie Dimon, CEO of JPMorgan Chase & Co. (JPM), have said regulators’ attempt to attempt to prevent another financial crisis may backfire by stifling economic growth. MetLife is exiting the banking business to reduce federal oversight.
The insurer has said it holds more capital than needed to meet obligations to policyholders, lenders and investors, and maintain a buffer against market declines. The “deployable capital” was $3.5 billion on Dec. 31 and will grow to as much as $7 billion by year-end, Kandarian said.
‘We Feel Good’
“We’ve submitted what we’re comfortable doing in terms of capital redeployment for 2012 to the Fed and, again, we can’t pre-judge things, but we feel good,” Kandarian said. “We’ll have to see what happens over the course of this year in terms of what we do around the area of dividends and share buybacks.”
The Fed can reject dividend plans from the largest U.S. financial firms, a group that includes MetLife because of its bank. Prudential Financial Inc. (PRU), the second-largest life insurer, isn’t subject to the same government reviews of its capital plans and raised its dividend and announced a buyback in the past year. MetLife last increased its dividend in 2007.
MetLife said last month it would shut its mortgage- origination operation, and most of the 4,300 employees there would lose their jobs. Jack Gutt, a spokesman for the Federal Reserve Bank of New York, declined to comment.
MetLife’s fourth-quarter net income surged to $1.16 billion from $82 million a year earlier on earnings from outside the U.S. and gains from derivatives, the company said late yesterday. The insurer advanced 1.8 percent to $37.99 at 10:49 a.m. in New York and has jumped about 22 percent this year.
MetLife expanded in Asia, Europe and South America with the $16 billion acquisition of American Life Insurance Co. in 2010. The company’s derivatives, used to generate income and guard against interest-rate declines, produce losses when bond yields rise, as they did in the last quarter of 2010.
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