MetLife Sidesteps Capital Questions as CEO Can’t Read Fed
(Corrects CEO quote in fourth paragraph of story originally published April 27 to add word “when.”)
MetLife Inc. Chief Executive Officer Steven Kandarian, whose attempts to buy back stock were blocked twice by the Federal Reserve, sidestepped questions about returning capital to investors, saying he couldn’t read regulators.
“I just don’t see any upside in me making predictions,” Kandarian, 60, said today on a conference call in response to a question from Jimmy Bhullar, an analyst at JPMorgan Chase & Co. “I’m afraid that’s not the clarity you’d like to have and frankly it’s not the clarity I’d like to give you, but that is the environment we’re living in.”
Kandarian is seeking to reduce federal oversight of MetLife, the biggest U.S. life insurer, by selling the firm’s deposits business and removing its status as a bank holding company. That process was expected to be concluded by the end of June, New York-based MetLife (MET) said at least twice last month. Today, Kandarian was asked by John Nadel, an analyst with Sterne Agee & Leach Inc., if he could reiterate that prediction.
“We can’t say with certainty when the regulatory approval will be forthcoming,” said Kandarian, who held the call to discuss MetLife’s first-quarter results. “We don’t have clarity on our side to be specific about timing.”
MetLife fell 16 cents, or 0.4 percent, to $36.31 at 4:15 p.m. in New York. MetLife said yesterday its first-quarter net loss was $144 million, compared with a preliminary forecast of a $64 million loss that the insurer gave last week.
“On the Docket’
Kandarian, who was promoted to CEO 12 months ago, guided MetLife to a 30 percent stock decline last year as the Fed prevented him from using the company’s capital to buy back shares and increase the dividend. Prudential Financial Inc. (PRU), the No. 2 U.S. life insurer, fell 15 percent in 2011 as it boosted its dividend and repurchased stock. Newark, New Jersey-based Prudential isn’t a bank holding company.
“Fed approval to deregister could take longer than investors are currently assuming,” Bhullar said of MetLife today in a research report. That could lead to reductions in earnings-per-share estimates and hurt “investor sentiment,” he said.
MetLife’s banking exit requires involvement from the Federal Deposit Insurance Corp. and the Fed, Kandarian said. “FDIC has to put it on the docket,” Kandarian said. “They meet once a month. I’m sure they have a lot of matters before them.”
Operating Profit Rises
MetLife Bank had $25.5 billion of assets as of Dec. 31, according to the FDIC. In December, the insurer agreed to sell about $7.5 billion of its approximately $11 billion in deposits to General Electric Co. MetLife said in January it would unwind its mortgage origination unit. The firm said yesterday it would halt sales of reverse mortgages, the home-equity loans marketed to residential property owners age 62 or older.
MetLife is considering acquisitions in the U.S. and beyond, Kandarian said. The company would probably face competition from other potential buyers if it pursued deals in Asia, he said.
“Properties of that nature are going to get more attention and potentially more aggressive bidding,” Kandarian said. “Other markets and other properties that perhaps are not growing as rapidly, might shift more toward the buyer side.”
MetLife swung to a loss in the first quarter, compared with net income of $877 million a year earlier, on a derivative loss of almost $2 billion tied to changes in its credit spreads and hedges against interest rate declines. Operating profit, which excludes some investment results, increased to $1.46 billion, or $1.37 per share, from $1.32 billion, or $1.23, a year earlier, matching the preliminary results the company reported last week.
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