NEW YORK— MetLife Inc., the largest US life insurer, plans to separate much of its domestic retail business as chief executive Steve Kandarian works to shrink the company amid tighter government oversight. The stock rallied in extended trading.

The insurer is considering a possible sale, spinoff, or public offering of the separated operation, New York-based MetLife said Tuesday in a statement. The new company would have about $240 billion of assets and accounts for approximately 20 percent of MetLife’s operating earnings, according to the statement.

MetLife joins General Electric Co.’s finance unit in seeking to simplify operations after being designated by a US panel as a non-bank systemically important financial institution, a tag that can lead to stricter limits on the balance sheet. Kandarian has sought to reverse that designation in court.

The retail business, as part of such a designation, faces “higher capital requirements that could put it at a significant competitive disadvantage,’’ Kandarian said in the statement. “Even though we are appealing our SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision to pursue the separation.’’

MetLife rallied 8 percent to $45.35 on the announcement, which was after the close of regular trading. The company had dropped 13 percent this year through Tuesday’s close after slumping 11 percent in 2015.

MetLife would retain units providing workplace benefits and property-casualty coverage along with the corporate benefit funding division that offers pension and retirement products. Kandarian’s company will also keep operations in Asia, Latin America, Europe, the Middle East and Africa.

The retail unit slated for separation is a provider of variable annuities, where results can be tied to fluctuations in stock markets and interest rates. The new company would also include life insurance entities.

Breaking off the retail unit would leave MetLife “with a regulated set of businesses, but less heavily regulated than retail products,’’ David Havens, a debt analyst at Imperial Capital, said in a note. “It should also leave MET with a large international portfolio that has good long-term growth prospects.’’

The insurer said executive vice president Eric Steigerwalt will lead the new company.