Brighthouse Financial, the new company housing MetLife’s separated distribution units, will simplify its life and annuity product line and sell those products through independent distributors, the company said.
Moving the bulk of MetLife’s distribution infrastructure in the U.S. to Brighthouse will turn MetLife into a more nimble life and benefit insurer, the company added in financial filings. It will also help it operate more effectively under new Department of Labor rules that take effect next year, the company added.
“Today’s filing marks an important milestone for both MetLife and Brighthouse Financial as we move toward separating into two companies,” said Steven A. Kandarian, chairman, president and CEO of MetLife in a news release.
The separation will help both companies compete more effectively, deliver strong financial results and “create long-term value for our shareholders,” he said.
Brighthouse, headquartered in Charlotte, N.C., will be one of the largest life and annuity companies in the U.S. with $240 billion in assets, 2.6 million insurance policies and annuity contracts and a network of distribution channels.
Brighthouse will operate as a standalone operating segment within MetLife beginning with the third quarter and until it is spun off into a publicly-traded company. It generated $1.1 billion in profits last year.
MetLife has said it would move insurance subsidiaries MetLife USA, New England Life Insurance and First MetLife Investors Insurance to Brighthouse, as well as a licensed broker-dealer, a registered investment advisor, and an affiliated reinsurance company.
Fitch Ratings issued ratings downgrades Thursday for two of MetLife’s insurance subsidiaries but affirmed the ratings assigned to MetLife and its other subsidiaries.
“Fitch views the pending separation of the Brighthouse Financial-related businesses as neutral to MetLife’s ratings based on our view than any declines in diversification of MetLife as a result of the separation will largely be mitigated by the lower risk profiles of the businesses remaining within MetLife,” Fitch said.
Industry experts had long suspected MetLife’s new company would pivot to an independent distribution model after the New York-based giant announced it would sell its career agency network of 5,900 agents to Mass Mutual Financial Group.
Distributing products through independent distribution channels will give Brighthouse more control over fixed costs, target resources more efficiently and increase profitability.
“We will be better able to leverage our product development and wholesale distribution capabilities,” the company said.
Turning to an independent distribution model will help Brighthouse focus on manufacturing a stable of variable annuities, indexed annuities, fixed annuities and life insurance products. And it will develop other “while label” products, products sold under other insurance brands, the company said.
Among the 2.6 million insurance policies and annuity contracts managed by Brighthouse are variable, fixed, indexed-linked and income annuities, as well as variable life, universal life, term life and whole life insurance contracts.
The company will aim do deliver “simple, transparent solutions and experiences” for advisors and consumers, said Eric T. Steigerwalt, executive vice president of MetLife’s U.S. Retail business and incoming president and CEO of Brighthouse Financial.
Under the terms of the spinoff, MetLife will distribute at least 80.1 percent of the shares of Brighthouse’s common stock to the holders of MetLife common stock, the company said in a Securities and Exchange Commission filing.
No date was given for the timing of the Brighthouse spin-off, after which the company will be listed on the New York Stock Exchange with the symbol BHF.
Three Market Segments
The separation of Brighthouse is part of a broader restructuring and resegmentation strategy taking place at MetLife over the past year or more.
Brighthouse said it would focus its sales, marketing and product design efforts at three market segments classified as “Secure Seniors,” Middle Aged Strivers and “Diverse and Protected,” which the company identified in a 2015 survey of 7,000 U.S. customers.
Secure Seniors, which represents 15 percent of the U.S. population, is composed of people between the ages of 55 and 70, members of the baby boom generation, of which the majority has investible assets of more than $500,000.
This segment has the highest affinity for working with advisors, the company said.
The Strivers, almost half of whom were between 40 and 55 years old, make up about 23 percent of the U.S. population. They were the largest of the company’s three segments and exhibited more diversity in terms of invisible assets.
“We believe Middle Aged Strivers are an attractive market for protection products and many of these individual will graduate to wealth and retirement products in their later years,” the company said in the filing.
The Diverse and Protected segment, which only represents 8 percent of the U.S. population, actively buys insurance products and will in the future turn into annuity buyers, the company explained.
All three customer segments are receptive to financial guidance and Brighthouse intends to educate its distributors about selling life and annuity products with those three buckets in mind, the company said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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