“You Don’t Manage by Models.”

An astute judgment call helped the nation's largest life insurer steer clear of the subprime crisis. An interview with William J. Wheeler, EVP and CFO, MetLife Inc.

When the federal government subjected the country’s 19 largest bank holding companies to a stress test last spring, one company in the test stood out: MetLife. That’s because MetLife is better known as a diversified life insurer, the nation’s largest. With assets of $535 billion, it may be too big to fail, but failure is an extremely remote possibility for MetLife, which passed the stress test with ease (it was the only one of the 19 banks that didn’t take money from the government’s Troubled Asset Relief Program). Not that MetLife has been immune to the recession: operating earnings of $1.6 billion for the first nine months of 2009 were down 39% from the same period a year ago, despite an 18% improvement in the third quarter.

A healthy respect for risk is key to the insurer’s strength. “As an insurance company, we always manage risk, but in the last five years we’ve really taken that to a different level, in terms of how we analyze it, how we measure it, how we report on it, and how it drives our strategies,” says William J. Wheeler, MetLife’s CFO and executive vice president. A big payoff from the increased vigilance was that, unlike so many other investors, MetLife saw the housing bubble inflating and reduced its exposure to the bubble before it popped.

The 48-year-old Wheeler was an investment banker for 10 years before he joined MetLife in 1997 as treasurer to help with its demutualization and initial public offering. “But after the IPO in 2000, I was advised that if I wanted to move up, I needed to get broader experience,” he recalls. Subsequently, he became CFO of the insurer’s institutional business before assuming the finance chief’s chair in 2003. “I think of a CFO as being a little bit of a jack-of-all-trades,” says Wheeler, adding with a laugh, “You could also add to that ‘master of none.’”

How did your background as an investment banker prepare you for MetLife, first as treasurer and ultimately as CFO?

The transition was very interesting. I was hired to help guide MetLife through demutualization and prepare it to be a public company. I had had experience doing that at Donaldson, Lufkin & Jenrette, where I covered the insurance industry. DLJ’s former parent, The Equitable, had gone through demutualization and I had worked on that. As treasurer, the skill sets are similar in terms of capital-market transactions and so on, but there’s a very big difference between being an investment banker and a CFO. Obviously, as a CFO you still pay attention to the capital markets and financial transactions, but there are lots of things that being an investment banker does not prepare you for at all.

Such as?

For one, managing a lot of people. Investment bankers aren’t known for their great management skills. And technology. The importance of technology for a major financial-services company is huge, and the amount of our budget that is spent on technology initiatives is huge. I would also include a lot of the softer aspects of the job, such as human resources.

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