MetLife Says Regulation Is Main Challenge to Profit GoalZachary Tracer and Alexandria Baca
MetLife Inc., the largest U.S. life insurer, said pending oversight from U.S. regulators poses the biggest challenge to meeting Chief Executive Officer Steve Kandarian’s 2016 return-on-equity goal.
“The operating ROE target assumes that regulatory capital rules appropriately reflect the life insurance business model, in that we have clarity on the rules in a reasonable time frame, allowing for meaningful share repurchases prior to 2016,” Kandarian said in a presentation today on the company’s outlook.
MetLife set an operating ROE target of 12 percent to 14 percent by 2016, compared with about 11 percent last year. The New York-based company is in the final stage of consideration to be labeled a systemically important financial institution, a finding that would subject the company to oversight from the U.S. Federal Reserve, and may include tighter capital rules.
American International Group Inc., Prudential Financial Inc. and General Electric Co.’s finance unit have already been designated as non-bank SIFIs by a group of U.S. regulators led by Treasury Secretary Jacob J. Lew. MetLife and Prudential have said insurers don’t present systemic risks and shouldn’t be subject to the same rules as banks such as JPMorgan Chase & Co., which have more funds subject to immediate customer withdrawals.
MetLife slipped 0.3 percent to $51.30 at 9:39 a.m. in New York. The stock has gained 56 percent this year, compared with the 40 percent gain of the Standard & Poor’s 500 Insurance Index.
After buying Chilean pension provider AFP Provida SA this year for about $2 billion, MetLife said it still has room for additional takeovers.
“We would anticipate potentially using more on-balance-sheet capital for further acquisitions,” Kandarian said. “We are always looking in the marketplace at opportunities that fit into our strategy, and I think you know that we are very disciplined buyers of businesses.”
MetLife hasn’t announced a share repurchase plan since 2008 and said it is looking for direction from regulators before resuming buybacks.
“We are hopeful that we”ll be able to get things resolved on the regulatory front before the end of 2016, and that we’ll be able to do some share repurchases,’’ Kandarian said. “It’s just too uncertain for us right now to put any sort of stake in the ground regarding what kind of share repurchases we’ll be able to do.”