MetLife Slips to Underperform - Analyst Blog
01 Février 2013 - 5:50PM
Zacks
On Jan 31, we downgraded our recommendation on insurer giant –
MetLife Inc. (MET) to Underperform based on its
faltering growth guidance for 2013 amid challenging interest rates
and intense competition. The delay in submission of the refurbished
capital plan to the Federal Reserve (Fed) also raises the risk of a
ratings downgrade for this Zacks Rank #5 (Strong Sell) stock.
Why the downgrade?
Estimates for MetLife, which is a leading provider of insurance
and financial services, have been exhibiting a downward trend ever
since the company reported its third-quarter 2012 results on Oct
31. Although MetLife’s third quarter earnings per share of $1.32
beat the Zacks Consensus Estimate of $1.28, revenues of $16.61
billion fell short of the Zacks Consensus Estimate of $16.66
billion. Following this, on Dec 13, 2012, management projected
negative to flat growth in earnings in 2013 over 2012. Even the
fourth-quarter earnings estimate ranging from (4%) to 4% raises
caution, on an annual basis.
MetLife’s plan to withhold share buybacks in 2013 increased the
disappointment, given the inflationary pressure and an extended low
interest rate scenario across economies. Consequently, the
Zacks Consensus Estimate for 2012 has gone down 1.5% to $5.21 per
share, over the last 90 days. The Zacks Consensus Estimate for 2013
has also declined significantly (down 5.7% to $5.23 per share).
This further justifies the Zacks Rank on the company.
Cause for Concern
The current interest rate environment continues to put pressure
on the spreads and MetLife’s risk-adjusted capitalization. The
ratings agencies are also concerned about the high financial
leverage as well as above-average exposure to variable annuities
that are adversely affected by the current market volatility.
Moreover, MetLife missed three deadlines since Jun 2012 and
failed to submit a refurbished capital plan to the Fed. Despite
being adequately liquid, the company has not been able to return
wealth to shareholders in its full capacity as its comprehensive
capital plan has been rejected twice by the Fed based on the size
and scale of its banking operations. Further, although MetLife has
exited most of its banking operations, the ongoing regulatory
challenges and the risk of being acknowledged as a systemically
important financial institution could again put the company under
the Fed’s supervision.
Other regulatory risks include financial services regulation,
securities regulation, pension regulation, health care regulation,
privacy, tort reform legislation and taxation in different
countries. These factors create a stressful growth scenario and
pose direct risks on the operating and competitive leverage of
MetLife.
Other Insurers That Warrant a Look
While we prefer to avoid MetLife until we see signs of
improvement in the markets as well as company's performance, other
insurance stocks worth a look are Assured Guaranty
Ltd. (AGO) and Radian Group Inc. (RDN).
Both the stocks carry a Zacks Rank #1 (Strong Buy). CNO
Financial Group Inc. (CNO), which carries a Zacks Rank #2
(Buy) also appears impressive.
ASSURED GUARNTY (AGO): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
RADIAN GRP INC (RDN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Radian (NYSE:RDN)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Radian (NYSE:RDN)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024