Metife CEO Critical of Fed’s Low Interest Rate Policy and its Effect on Savers (MET)
The CEO of Metlife Inc (MET), the United States’ largest life insurer, Steven Kandarian said in his annual letter to shareholders on Friday that he believes the Federal Reserve’s low interest rate policy is inflicting harm on savers, and thus Metlife customers.
Federal Reserve chairman Ben Bernanke has kept interest rate near zero since 2008 as a way to help boost the economy following the financial crisis and Great Recession. However, this policy has not been without its critics, one of which is Kandarian.
“A policy of artificially low interest rates is a form of taxation on savers,” Kandarian said in his annual letter to shareholders. “This social cost should be considered more explicitly in debates over monetary stimulus.”
Low interest rates lead to low returns in bank deposits and fixed-income instruments, which are seen as a penalty on savers. Bernanke maintains a stance that low returns are a necessary cost of the Fed’s effort to boost the economy.
Kandarian went on to say that a low interest rate environment negatively impacts insurance companies and the guarantees that they can offer customers. Insurance companies invest premiums paid by customers into bonds and other assets to help back future payouts. Low interest rates puts a strain on these companies to back future payouts. Moreover, Metlife has had to lower guarantees on customers’ savings products.
However, Kandarian’s views are not solely in the spirit of defending the average saver. Higher interest rates do lead to higher profits for the company, which helps boosts stock price for shareholders (not to mention Kandarian’s bonus).
Metlife shares were inactive during pre-market trading on Monday. The stock is up +2.02% over the past year.
The Bottom Line
Shares of Metlife (MET) have a dividend yield of 1.93% based on Friday’s closing price of $38.40 and the company’s annualized dividend payout of 74 cents per share.
Metlife Inc (MET) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.
Get FREE Dividend Tips, Updates & MoreWe respect your privacy
- Powerful dividend insights sent every weekday morning
- Gain instant access to actionable investing tips
- Strategically grow your portfolio’s profitability