What happened

MetLife (NYSE:MET) dropped by just over 10% shortly after the market opened on Monday, but this isn't really a bad day for MetLife's shareholders. Rather, the stock is down because of the spin-off of Brighthouse Financial, which provides annuities and life insurance products.

So what

When you consider the details of the spin-off, you can see why MetLife's stock-price drop was appropriate, and should not be a cause for concern. Under the terms of the spin-off, MetLife shareholders received one share of Brighthouse Financial for every 11 shares of MetLife they owned. The shares were distributed on Friday, August 4, 2017, but started "regular-way" trading this morning, which is the reason for the big price move.

As of this writing (about 10:30 a.m. EDT on August 7, 2017), MetLife stock is down $5.60 per share. Using the 1-for-11 spin-off ratio, this implies that Brighthouse stock should be worth $61.71, which is almost exactly its trading price. In other words, MetLife shareholders haven't actually lost anything -- the math works out evenly.

Fork in a wooded trail.

MetLife didn't really drop, it simply split into two companies. Image source: Getty Images.

Now what

MetLife decided to spin off Brighthouse in order to increase its cash flow and to reduce its dependence on capital-intensive businesses. Brighthouse holds $223 billion in assets and has about 2.8 million insurance policies and annuity contracts.

The move allows MetLife to focus on its core business activities of group life insurance, employee benefits, international operations, and asset management. "MetLife's core businesses -- employee benefits, protection and fee-based retail products outside of the United States, and our growing asset management arm -- position the company well for profitable growth," said MetLife's Chairman, President, and CEO Steven A. Kandarian.

It remains to be seen how Brighthouse will fare as an independent company, or what long-term benefits a leaner MetLife will have for shareholders. For the time being, however, there's no reason to be alarmed because of MetLife's price drop.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.