* Still working to shed bank charter
* SIFI status needs to be considered – CEO
* CFO expects up to $7 bln in ready capital by year-end
By Ben Berkowitz
April 27 (Reuters) – MetLife Inc will need to
“examine a range of factors” once it sheds its bank holding
company status before it can decide on returning capital to
shareholders, the chief executive of the largest U.S. life
insurer said on Friday.
The comments may have dashed some investors’ hopes that the
company could start buying back shares and paying a richer
dividend as soon as July, though MetLife said it remains
committed to returning capital at some point. Shares fell more
than 2 percent in morning trading, even as S&P; Capital IQ
upgraded the shares to “buy” on valuation.
The Federal Reserve has twice blocked MetLife from raising
its dividend and buying back shares in recent months, and the
company is now selling off and shutting down businesses so it
can shed the bank charter.
Some analysts had expected the company to return capital as
soon as the bank charter was out of the way. But MetLife said
Friday there were other considerations as well, including
whether the company is designated a systemically important
financial institution (SIFI) by the Financial Stability
Oversight Council.
“It’s a difficult environment from which to operate, from
the point of view of providing clarity and certainty to our
shareholders at this very moment on our capital plans,” CEO
Steve Kandarian said on a conference call with analysts.
He said the company was adamant the rules must be “tailored”
to match standards usually used for insurers and not banks.
The council’s decision is pending, and while the insurance
industry has fought hard to make the case that insurers are not
systemically important, most analysts and investors expect
MetLife, and possibly a few others, to be tagged as nonbank
SIFIs.
“Those things are still a moving target. To date, no one’s
been designated yet a nonbank SIFI, so we have to wait and see
more on that,” Kandarian said.
There were timing questions about the bank charter as well.
Kandarian, asked whether MetLife was still hoping to close the
sale of its deposit-taking business to General Electric
by the end of the second quarter, said he couldn’t be certain
because it was in regulators’ hands. It was that second-quarter
estimate that had led some to assume the buybacks could begin
starting immediately after, in July or thereabouts.
“We view (MetLife’s) business mix and geographic reach as
attractive, but note execution risk remains as MET seeks to exit
banking and mortgage operations,” S&P; Capital IQ analyst Cathy
Seifert said in a research note.
CAUTIOUS ON M&A;
Either way, interim Chief Financial Officer Eric Steigerwalt
said the company expected to have $6 billion to $7 billion of
deployable capital by the end of the year, before taking into
account any changes in dividend or share buybacks.
A number of analysts queried whether some of that money
might be used for acquisitions, but Kandarian was cautious,
saying any deal had to be a better use of capital than a buyback
and had to almost immediately add to earnings.
“I’d say that right after the start of the crisis it was
very much a buyers’ market and … now it’s more of a neutral
market. It’s not like 2006, 2007 where it was clearly a sellers’
market,” he said, adding that MetLife is seeing a number of what
it considers distressed sellers coming to market with properties
they want to offload to repair their balance sheets.
MetLife shares fell 2.2 percent to $35.65 in morning
trading. Through Thursday’s close, the stock was up 17 percent
for the year, against 11 percent gains for the S&P; insurance
sector. But the stock is off nearly 10 percent since
a recent high on March 13, and Seifert said it now looks
undervalued relative to peers.
On Thursday afternoon, the company reported a net loss for
the first quarter after losing $1.3 billion on derivatives used
to hedge changes in interest rates. It was the latest in a week
of high-profile headlines for the insurer.
Earlier on Thursday, MetLife said it would stop selling
reverse mortgages, cutting 500 jobs in the process. The company
had been by far the largest in that industry, with a market
share this year of about 23 percent.
On Tuesday, board member Eduardo Castro-Wright resigned amid
a growing scandal over alleged bribe payments by businesses he
oversaw for Wal-Mart.
On Monday, the company said it would pay nearly $500 million
to end a multistate probe into its use of the Social Security
“Death Master” file, after an investigation into whether it was
doing enough to find dead policyholders.
