Policy signals coming from the incoming presidential administration promise an improved business environment for MetLife Inc., according to Chairman, President and CEO Steven Kandarian.
During a Nov. 3 conference call, just days before the election of Donald Trump, Kandarian bemoaned accommodative global monetary policy and a restrictive U.S. regulatory environment amid slow growth. The remedies he offered for those problems were pro-growth tax reform, infrastructure spending and regulatory relief.
"Five days later, the U.S. election shifted the debate in Washington," Kandarian said during a Dec. 16 presentation. Those proposals are near the top of the economic agenda of President-elect Trump.
Reflecting the potential for a reformed business climate has been a 74-basis-point increase in the 10-year Treasury rate since the Nov. 8 election and a surge in the share prices of the largest life insurance companies, he said. Businesses and investors are displaying optimism that regulation can be better balanced against the interests of spurring growth and providing consumers with affordable financial protections.
"While it is still early days, and more details from Congress and the incoming Trump administration are needed, early indications are encouraging," Kandarian said.
The Federal Reserve announced an increase in its benchmark interest rate Dec. 14, and indicated more hikes to come. CFO John Hele said benefits to MetLife's operating earnings will lag because the company will initially have to forego some derivative income. The increase in earnings from higher rates would also take time to come in from new deposits, Hele said.
The outlook in a rising interest rate environment would raise operating earnings by $45 million in fiscal year 2017, $105 million in 2018 and $150 million in 2019.
Even with valuations rising for life insurance companies, MetLife is committed to separating its U.S. retail business, Brighthouse Financial, with a spinoff rather than an IPO, Kandarian said.