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(Updates with analyst’s comment in fifth paragraph.)
Oct. 12 (Bloomberg) -- MetLife Inc., the life insurer selling banking assets to limit federal oversight, may also seek a buyer for its mortgage operation as it increases focus on its main businesses.
Chief Executive Officer Steven Kandarian, who took the job in May, is planning to exit a business that expanded in June when it replaced Bank of America Corp. as the preferred lender of builder KB Home. Kandarian announced in July he was putting the deposits business on the market as the federal government tightens rules on the biggest financial firms.
Keeping the mortgage unit could divert “resources away from MetLife’s primary focus on its global insurance and employee benefits businesses,” the New York-based company said today in a statement. The company, the largest U.S. life insurer, plans to keep a so-called reverse-mortgage business that issues home equity-backed loans to people age 62 or older and jumped to No. 2 in the U.S. this year.
“They were in the forward-mortgage business, but where they really wanted to be is in the reverse-mortgage business,” said Steven Schwartz, an analyst at Raymond James & Associates Inc., who has an “outperform” rating on MetLife’s stock. “The reverse side, they see as all part of the retirement, savings, income-distribution package.”
Assets at the MetLife Bank unit more than doubled to $16.5 billion in the three years ended in June, according to Federal Deposit Insurance Corp. data. Second-quarter operating earnings at the bank plunged to $14 million from $67 million on higher expenses and lower mortgage sales, the company said July 28.
MetLife will continue to originate mortgages as it seeks a buyer for the business, it said. MetLife Bank made about $4.4 billion of residential home loans in the first quarter of 2011, accounting for 1.5 percent of total mortgage originations, according to data from Inside Mortgage Finance.
“We plan to continue our reverse mortgage origination operations,” Christopher Breslin, a MetLife spokesman, said in an e-mail. “I would note that, as a public company, we continuously evaluate all of our businesses based on market conditions and the regulatory environment.”
Insurers, which are regulated by the U.S. states, are exiting banking businesses as federal policy makers prepare additional oversight of the largest lenders. MetLife said in July it was exploring the sale of its deposit-gathering business to sidestep regulation aimed at banks.
“Today’s uncertain marketplace and regulatory environment require a tremendous amount of resources,” MetLife said in the statement. “Exiting the depository business and deregistering as a bank holding company also will enable MetLife to operate within the same regulatory framework as other insurance companies.”
Allstate Corp., the largest publicly traded U.S. home and auto insurer, said in August it would shut its bank after a deal to sell deposits to Discover Financial Services failed to win regulatory approval. Insurer Hartford Financial Services Group Inc. struck a deal in May to sell the lender that it had acquired in 2009 to qualify for a bailout.
MetLife has dropped 29 percent this year on the New York Stock Exchange, compared with the 20 percent decline in the 24- company KBW Insurance Index.
MetLife is the second-biggest provider of reverse mortgages behind Wells Fargo & Co., according to U.S. Department of Housing and Urban Development data. Charlotte, North Carolina- based Bank of America fell from second to third. Wells Fargo, based in San Francisco, said in June it would discontinue origination of reverse mortgages.
--With assistance from Dakin Campbell in San Francisco. Editors: Dan Kraut, Dan Reichl
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