MetLife Muddling Through For Now
Stephen Simpson, CFA
Stephen Simpson, CFA
MetLife: The Blimp Could Become A Led Zeppelin
James Stefurak, CFA
James Stefurak, CFA
Today, 12:14 PM
- Don't look for the MetLife blimp "Snoopy" at football games and golf tournaments starting in 2017.
- The Snoopy/Peanuts branding was launched 30 years ago to make us more "friendly and approachable during a time when insurance companies were seen as cold and distant," says MetLife (NYSE:MET), waving goodbye to the gang.
- The need for direct consumer reach won't be nearly as great beginning next year when the company spins off most of its retail U.S. life insurance businesses. The company will then mostly be offering its products to corporate customers.
- The new global brand platform has the tagline: "MetLife. Navigating life together," and the new logo with have "MetLife" in a different typeface and be in black, not blue.
Fri, Oct. 7, 7:44 AM
- Alongside the Top Pick designation for VOYA is a $39 price target, suggesting 30% upside.
- Started at Underperform is Aflac (NYSE:AFL), with analyst John Nadel noting recent outperformance, global low rates as pressuring investment income, and the growing spread between U.S. and Japanese rates as boosting hedging costs. The $75 price target compares to yesterday's close of $72.07.
- Principal Financial Group (NYSE:PFG) also rates an Underperform, with Nadel noting more intense competition, exposure to FX and emerging markets volatility, and lower rates as maybe muting EPS growth and flatten margins.
- MetLife (NYSE:MET), Prudential (NYSE:PRU), Lincoln National (NYSE:LNC), Reinsurance Group of America (NYSE:RGA), AIG, and Unum Group (NYSE:UNM),
Thu, Oct. 6, 3:01 PM
- MetLife (MET +2%) is an outlier to the upside among the life insurers after last night announcing plans to separate Brighthouse Financial.
- From Deutsche's Yaron Kinar: 1) Separation is expected to take place in H1 with an 80% spin to be followed by full divestment within five years 2) Brighthouse appears to be very well capitalized - strong enough to quell any concerns Met will have to inject any capital 3) He estimates MetLife to have $2.2B in excess capital; there is upside to the modeled $2B in annual buybacks (though the SIFI designation case is still in the courts) 4) Book value remaining at MetLife is unclear - he comes up with $42, but this results in far too low of an ROE. To get to a 13% ROE means book value remaining would be just $27.60.
Wed, Oct. 5, 6:10 PM
- MetLife (NYSE:MET) +2.2% AH after confirming that it filed for a spinoff of its U.S. life insurance unit after considering alternate plans to sell the business or exit through an IPO.
- At least 80% of the shares in Brighthouse Financial will be distributed to MET investors under the plan, with the timing of the transaction depending on variables including regulatory considerations and economic conditions, the parent company says.
- MET says it will continues to evaluate possible other alternatives for the separation, including an IPO or a sale.
- Brighthouse is expected to be one of the 15 largest life insurers in the U.S., with ~$240B in total assets; its new CEO will be Eric Steigerwalt, currently a MET executive VP in charge of the business that is becoming Brighthouse.
Tue, Oct. 4, 2:19 PM
- A Bloomberg report says the ECB is likely to gradually wind down bond purchases ahead of the scheduled March 2017 end of its QE program. The central bank is currently buying €80B per month of government and corporate paper, and may begin to slow that amount by €10B per month, according to the story.
- Yields are higher in Europe and the U.S., with the 10-year U.S. Treasury up five basis points to 1.675% and the German 10-year Bund yield is up four bps to -0.048%. TLT -1.1%, TBT +2.2%
- Though the Dow and S&P 500 are each lower by 0.5%, the yield-starved XLF is up 0.6%, with Bank of America (BAC +2.1%), Citigroup (C +1.9%), and JPMorgan (JPM +0.4%) leading the way. Shrouded in scandal, Wells Fargo (WFC -0.2%) continues to underperform.
- Other names: Regions Financial (RF +1.5%), KeyCorp (KEY +2.1%), BB&T (BBT +1.4%), Schwab (SCHW +1.5%), MetLife (MET +1.1%), Prudential (PRU +1.3%).
- ETFs: XLF, FAS, FAZ, KRE, UYG, VFH, KBE, IYF, BTO, IAT, IYG, FNCL, SEF, FXO, KBWB, QABA, KBWR, RYF, FINU, KRU, RWW, XLFS, FINZ, KRS, JHMF, WDRW, DPST, FAZZ, FNCF
Mon, Sep. 26, 3:13 PM
- In what doesn't sound like great news for the already-yield-starved insurance industry, cash balances are "ticking upward," says Zach Buchwald, head of BlackRock's insurance asset-management operation.
- Buchwald: “In today’s environment, where every basis point is so precious, within your core fixed income, we want to be investing wisely and generating the best risk-adjusted returns we can, and a large cash balance doesn’t help.”
- Nearly half of 315 insurers surveyed globally expect to boost cash holdings in coming months - that's up from 36% a year ago, says BlackRock. At issue are poor performance in alternative investments and credit concerns following a sizable narrowing in spreads this year.
- Struggling insurers are past the point of expecting rising interest rates, says Buchwald. So - other than cash - where else will the money go? Allocations to private-equity appear to be set to rise, and outfits like AIG are turning to direct lending. At MetLife (NYSE:MET), commercial real estate loans hit a record last year.
- Other interested parties: PRU, LNC, MFC, SLF, PRI, VOYA
Mon, Sep. 26, 11:37 AM
- The S&P 500 is lower by 0.65%, but the XLF is down nearly double that amount, with Deutsche Bank lower by 7% on capital worries and interest rates sliding to a three-week low.
- At 1.59% on the 10-year Treasury, the yield curve in the space of a few sessions has erased all of its post-Labor Day steepening, and yield-starved players are in retreat.
- Regions Financial (RF -1.9%), KeyCorp (KEY -1.7%), SunTrust (STI -1.9%), Fifth Third (FITB -1.6%), MetLife (MET -1.6%), Lincoln National (LNC -1.3%).
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Thu, Sep. 22, 3:23 PM
- “We believe we have the legal case to prevail on appeal,” says Treasury Secretary Jacob Lew, speaking to a court's decision to strike down the government's designation of MetLife (MET -0.2%) as a SIFI. "We don't believe that the end of the Metlife case will be to de-designate," he says, though quickly adding that's for the courts to decide.
- He says the records of the FInancial Stability Oversight Council (which made the SIFI designation) support its decision, and the court's basis for reversing it was "very flawed."
Thu, Aug. 4, 1:00 PM
Thu, Aug. 4, 9:49 AM
- There's a lot of moving parts, but the bottom line for life insurers in this low interest rate environment is they just can't earn enough money to meet their obligations.
- Following a rough Q2 report, MetLife (MET -9.4%) plans to cut expenses by 11%, or $1B annually by 2019. This will include job cuts, though CEO Steve Kandarian declined to specify a number. “In light of the significant headwinds our industry is facing, MetLife must do even more to avoid simply running in place,” he tells conference call listeners.
- Also missing estimates last night were Prudential Financial (PRU -3.7%) and Lincoln National (LNC -2.9%).
Wed, Aug. 3, 4:33 PM
- Q2 operating earnings of $924M or $0.83 per share vs. $1.765B and $1.56 a year ago. Reserve adjustments mostly in the too be spun off retail business, cut operating earnings by $257M or $0.23 per share. The annual retail variable annuity actuarial assumption review knocked off another $161M or $0.15 per share. An adjustment to reinsurance receivables in Australia took out another $44M, or $0.04 per share.
- Book value per share (excl. AOCI) of $53.20 vs. $50.73 one year ago. Tangible BVPS of $43.98 vs. $41.73.
- Total revenue of $15.244B fell 6% from a year ago.
- Americas operating earnings - excluding items - still fell 11% on a constant currency basis from a year ago.
- Asia operating earnings of $259M fell 41%.
- EMEA operating earnings of $64M fell 36%.
- Net investment income of $4.9B fell 6%.
- Conference call tomorrow at 8 ET
- Previously: MetLife misses by $0.52, misses on revenue (Aug. 3)
- MET -3.9% after hours
Wed, Aug. 3, 4:17 PM
Tue, Aug. 2, 5:35 PM
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Thu, Jul. 28, 8:59 AM
- Many insurers have been in the commercial real estate market for decades, but - with banks constrained by post-crisis regulations - companies like MetLife (NYSE:MET) and AIG are moving into residential mortgages, small-business lending, car loans, renewable energy funding, and student debt.
- It's not just the void left by banks. In an era of barely visible interest rates on government debt, insurers need higher returns to meet their obligations.
- Insurers are now responsible for 11.6% of loans in the global debt market, and made $430B in mortgage loans last year - up 50% in the last decade. MetLife made more property loans in 2015 than it ever had, and CEO Steve Kandarian says to look for further expansion this year.
- In the midst of pulling capital out of poorly-performing hedge fund investments, AIG is boosting its lending business as well.
Thu, Jul. 21, 11:31 AM
- The Charlotte-based operation will be rebranded as Brighthouse Financial as part of its spinoff from MetLife (MET -0.1%). The company will be led by current EVP Eric Steigerwalt.
- Met CEO Steve Kandarian: "This separation will also bring significant benefits to MetLife as we focus even more intently on our group business in the U.S., where we have long been the market leader, as well as on our international operations."
Thu, Jul. 14, 2:43 PM
- Moving past the overseas macro, today's modest rally is being led by the financial sector (XLF +1%), particularly the banks (KRE +1.8%), (KBE +1.8%) after JPMorgan beat estimates.
- Also helping is another five basis points move upward in the 10-year Treasury yield to 1.53%. Among the yield-starved names applauding: Prudential (PRU +3.1%), Lincoln National (LNC +4.7%), E*Trade (ETFC +1.8%), Schwab (SCHW +1.9%), State Street (STT +2.5%), MetLife (MET +5.2%).
- The Dow is up 0.8%, the S&P 500 0.55%, and the Nasdaq 0.6%.