Signage is seen on the MetLife Inc building in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly/File Photo

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NEW YORK, Feb 11 (Reuters) – MetLife Inc (MET.N) is considering divesting its U.S. variable annuity portfolio as it seeks to free up resources to invest in higher growth segments of its business, said people familiar with the matter. .

The New York-based insurer is working with an investment bank on the plan, which is in its early stages, the sources said, warning no deal is certain.

MetLife does not disclose the size of its variable annuity business. Its aggregate annuity book — comprising both fixed and variable rate policies — stood at $58.23 billion at the end of 2021, according to its financial statements.

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Any sale would give MetLife only a fraction of the book value sold in terms of proceeds. But the financial benefit of unloading policies could still be substantial – potentially in the billions of dollars – due to freed-up capital, tax implications and other financial improvements, the sources said.

The sources spoke on condition of anonymity to discuss confidential information. MetLife declined to comment.

In recent years, US insurers have been shedding closed portfolios of annuity business, which require the setting aside of significant capital and offer limited revenue growth because no new policies are being written.

Insurers have found willing buyers in private equity firms and their lines of insurance, who can use cash flow generated from policies to invest in their line of credit and other products.

MetLife’s variable annuity portfolio is housed within MetLife Holdings, a unit that holds product lines that the insurer no longer actively sells and simply manages to maturity – known in the industry as liquidation activity.

MetLife Chief Financial Officer John McCallion told analysts this month that a rising interest rate environment could serve as a catalyst to shed some of its runoff business. He did not, however, say that MetLife was considering selling part of MetLife Holdings.

To date, the bulk of run-off transaction activity has focused on life insurance and fixed rate annuities. Variable annuities have attracted less interest, as there is a greater risk of generating a sufficient return on investments.

This, however, is starting to change, as rising interest rates make it easier to pay for these policies, as the returns that can be obtained on the investments generally increase.

Prudential Financial Inc said in September it had agreed to sell variable annuity policies worth $31 billion to Fortitude Re, which is backed by buyout firm Carlyle Group (CG. O), for a total transaction value of $2.2 billion.

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Reporting by David French in New York; Editing by Edwina Gibbs

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