MetLife Inc., the biggest U.S. life insurer, was removed from Citigroup Inc.'s list of top stock picks as new chief executive Steven Kandarian reshuffles management and plans his strategy.
Mr. Kandarian, who was promoted to the top job in May, faces interest rate and equity market declines that “will pressure fees and spreads,” Colin Devine, an analyst with Citigroup, wrote in a research report last week.
Mr. Kandarian may respond with expansion outside the United States and “a material downsizing” of sales of variable annuities, said Mr. Devine, who lowered his price target on the stock 7.1% and maintained a “buy” rating.
Mr. Kandarian, 59, is reorganizing MetLife after the $16 billion purchase of American Life Insurance Co. last year added business from Chile to Japan to Poland. Last month, he created three divisions to cover the Americas, Asia and Europe, 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,” Mr. Devine wrote. “There is some strategic uncertainty at [MetLife] following its recent CEO transition.”
Shares of MetLife dropped about 37% this year as of Nov. 25, compared with a 23% decline in the 24-company KBW Insurance Index and a 7.9% slide in the S&P 500.
Mr. Devine lowered his MetLife target price to $39, from $42.
WHEELER, KHALAF
Mr. Kandarian moved William Wheeler from his position as 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 led international operations, will retire next year.
Mr. Kandarian is looking for an executive to head the Asia unit, he said last month. MetLife is seeking to reduce risk on the retirement products that it sells as lower interest rates pressure the insurer's investment yields, he said Oct. 28.
The company will reduce the returns it promises customers who buy variable annuities, Mr. Kandarian said.
MetLife's sales of variable annuities in the third quarter surged 84% to $8.6 billion. The insurer is the biggest seller of the equity-based retirement products in the United States, according to data from trade group LIMRA.
When stock markets fall, VA sellers often are required to shoulder a portion of the losses with their customers.
