MetLife to Halt Earnings Guidance in Focus on Long-TermNoah Buhayar
MetLife Inc., the largest U.S. life insurer, said it will stop providing annual earnings-per-share forecasts as it seeks to shift investors’ focus from short-term performance.
“I do not believe that we should continue with a practice solely because it is the way it has always been done,” MetLife Chief Executive Officer Steven Kandarian, 61, said today during a conference call to discuss the New York-based company’s third-quarter results. “After careful study and deliberation, we have determined the EPS guidance no longer makes sense.”
MetLife joins Ace Ltd. this year halting the practice. Half of the life insurer’s North American competitors and most global rivals forgo issuing earnings forecasts as well, Kandarian said. His company also has many businesses that are sensitive to fluctuations in interest rates and the prices of securities, which makes predicting future results difficult.
“Guidance has historically had limited value,” Kandarian said. “While we are rebalancing our business mix, we will still have meaningful exposure to the capital markets for the foreseeable future.”
MetLife will continue to provide investors with its view of how much certain businesses typically earn and how sensitive some of its units are to changes in the markets and other events, Kandarian said.
The insurer holds annual investor meetings in December, and previously used the event to forecast results for the next year.
“Our new approach for the December call will be consistent with our internal emphasis on long-term strategic and financial goals,” he said. “It should shift the discussion to our business model, which is the real driver of shareholder value over time.”
MetLife yesterday posted third-quarter operating earnings per share of $1.34, missing by 2 cents the average estimate of 20 analysts in a Bloomberg survey.
The insurer slipped 3.5 percent to $47.31 at 4:03 p.m. in New York. MetLife has rallied 44 percent this year, beating the 23 percent increase in the Standard & Poor’s 500 Index.
Kandarian said he will weigh challenging a designation by regulators of the company as a systemically important financial institution after smaller rival Prudential Financial Inc. abandoned its fight over the label.
MetLife has said it’s in the last stage of review to be designated a non-bank SIFI by the Financial Stability Oversight Council. The council was authorized by the 2010 Dodd-Frank Act and charged with preventing another financial crisis by identifying too-big-to-fail firms whose collapse could threaten the economy. The Federal Reserve can impose tighter capital, leverage and liquidity rules on SIFIs and demand measures including stress-testing and wind-down plans.
Prudential, the second-largest U.S. life insurer, was labeled a SIFI by the council then lost an appeal of the decision to the FSOC. The Newark, New Jersey-based insurer opted this month against filing a lawsuit to contest the ruling.
“In light of Prudential Financial’s decision not to challenge its SIFI designation in federal district court, I suspect you may be wondering what MetLife intends to do,” Kandarian said. “Although it is too early for us to make that decision, we are not ruling out any of the remedies available under Dodd-Frank to contest a SIFI designation.”
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