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August 06, 2016 at 05:30 AM
WASHINGTON — “Lower for longer” interest rates “are not going away soon,” MetLife Chairman and CEO Steve Kandarian warned this week.
U.S. life insurance companies will need to adapt to the low rate environment, he said.
Kandarian made his comments Thursday during MetLife’s quarterly conference call with analysts following the release of company’s quarterly earnings.
See also: MetLife net falls 90 percent on review of annuities slated for exit
Kandarian cited Britain’s decision to exit the European Union as one reason he expects a protracted period of lower interests. Kandarian called that decision, “One of the most significant geopolitical developments in the quarter.”
See also: U.S. insurers ‘less exposed’ by Brexit than other sectors
Coincidentally, the Bank of England decided this week to cut rates to .25 percent, as well as expand its bond buying and set up a new funding scheme for lenders.
Fitch’s Rating Service, buttressing Kandarian’s remarks, said the BOE actions are “only likely to cushion, rather than fully offset, the shock to UK growth that June’s Brexit vote will cause… The balance sheet expansion goes beyond our expectations and includes innovative measures to mitigate potential unintended consequences of policy easing.”
During Thursday’s MetLife earnings call, Kandarian said that Metlife will begin reporting results separately for its Brighthouse Financial unit, a spinoff of its variable rate and universal life businesses, as of the third quarter.
He added that MetLife will disclose a detailed plan as to when the spinoff plan will take effect following its Sept. 27 board meeting.
The spinoff of that unit is part of MetLife’s plan to adjust to the projected protracted period of low interest rates, although that decision was also prompted by the fact that regulators, especially federal regulators, are moving to require higher capital standards for insurers, especially larger insurers.
Kandarian said that Brighthouse Financial will be reported in a standalone operating segment that will no longer receive credit for the broader diversification of MetLife’s consolidated U.S. retail universal life business.
