MetLife Inc , the largest U.S. life insurer, said the Federal Reserve blocked it from raising its dividend and buying back shares, a surprise to investors and analysts who had expected both as soon as this week.

MetLife shares fell 4 percent in after-hours trading. As recently as Monday, Bernstein analysts were predicting a dividend raise of at least 50 percent and perhaps a share buyback of $2 billion or more as well.

But MetLife, which is subject to greater oversight because it also owns a bank, said the Fed blocked its plans. In a statement on Tuesday, the company said the Fed wants to subject its plans to a more stringent industry review, planned for next year, that assumes worsening economic conditions.

We are disappointed that we cannot commence increased capital actions now, as our analysis shows that the company's current capital level and financial strength support capital action increases. We look forward to seeking and gaining approval of our capital plan from the Federal Reserve early next year, CEO Steve Kandarian said in a statement.

Kandarian also said the company was still working on its plans to sell the deposit-taking and mortgage activities of MetLife Bank.

MetLife has said it might sell its banking business to avoid regulatory issues that might arise from being tagged as too big to fail.

Even without MetLife Bank, though, many analysts expect the company to be one of the nonbank financial firms designated systemically important by the Financial Stability Oversight Council, by virtue of its size.

In the absence of the Fed approval, MetLife declared its regular annual dividend of 74 cents per share.

The company will report results for the third quarter on Thursday night.

(Reporting by Jochelle Mendonca in Bangalore and Ben Berkowitz in New York; Editing by Sriraj Kalluvila and Carol Bishopric)