MetLife Inc., the largest U.S. insurer, needs to shrink to hone its focus on operations that generate better cash flow, Chief Executive Officer Steve Kandarian said.

“Conventional corporate wisdom holds that bigger is better,” Kandarian said in his annual letter posted to MetLife’s website Tuesday. “That is the view of a manager, not an owner. Our goal is to invest – and when necessary, to divest – in order to create the highest risk-adjusted returns for shareholders.”

The CEO has been working to simplify the company, agreeing in February to sell a distribution network of about 4,000 advisers to Massachusetts Mutual Life Insurance Co. That followed a January announcement that MetLife was seeking a spinoff, sale or public offering of a U.S. retail unit, where profits can be locked up for years before the funds can be used for dividends or share buybacks.

“We are willing to part with a business that represents approximately 20 percent of operating earnings because, as part of MetLife, it could not generate the level and predictability of free cash flow that we demand,” Kandarian said.

Free cash flow accounted for 63 percent of operating earnings last year, up from 36 percent in 2013, according to his letter. Still the stock is trading for less than its closing price at the end of 2013 as low bond yields have sapped returns on the company’s investment portfolio.

“In the current market environment, management actions seem less relevant to MetLife’s stock price than daily movements in interest rates, equity markets, and foreign currencies,” he wrote. “However, over the long term, our focus on cash remains the surest way to maximize value for MetLife shareholders.”

Kandarian is betting on growth in group insurance, which includes products like disability and dental coverage. He’s also counting on fee-generating operations such as the insurer’s third-party asset manager and Chilean pension manager ProVida AFP.

(c) 2016, Bloomberg · Katherine Chiglinsky