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MetLife shares surge after it details retail biz spinoff


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MetLife shares surge after it details retail biz spinoff

MetLife Inc.'s stock jumped for the week ended Oct. 6after the company filed a Form 10 detailing the spinoff of its retail businessinto the newly branded, publicly traded Brighthouse Financial.

The SNL Insurance Index fell 0.19% for the week to 769.22, and theS&P 500 was down 0.35% to 2,160.77.

The separation is expected to start in the first half of 2017. Atleast 80.1% of Brighthouse's common stock will be distributed to MetLifeshareholders in the spinoff transaction. Brighthouse will include MetLife'sU.S. life insurance and annuity books of business.

MetLife expects its cost of capital and exposure to market risk todecrease after the separation, and it will provide employee benefits in theU.S. and serve as a global insurer after the spinoff.

S&P Global Market Intelligence analyst Cathy Seifert saidMetLife's filing provides a catalyst for the company's shares as it helpsremove some of the uncertainty about the spinoff that was present when it wasfirst announced.

Seifert said in an interview that the filing helped outline whatthe go-forward entity will be after the separation of Brighthouse, noting thatthe company would reap significant benefits from the separation.

"In terms of [MetLife], the benefits that they see are thatthey basically become an institutionally focused firm with a global footprintin some rapidly growing economies, and very importantly shorten their liabilityrisk, which is an important metric in this transformation," Seifert said.

The analyst added that the company's shorter duration liabilitywould help immensely in the current interest rate environment, and, even if theinterest rates move up, shortening the duration of its liabilities would helpget the company's asset liability mismatch back in alignment.

Seifert, who has a "buy" recommendation on the company,noted that MetLife is "attractively valued," particularly as itsbusiness model would now reflect some other companies that have more of aglobal mix and a fee-based mix as opposed to a spread-based business mix.

The Financial Stability Oversight Council to a district court that removed thecompany's SIFI tag, and Seifert believes MetLife's filing may have been apre-emptive measure to counter or offset the risk that the company could bere-designated as a SIFI.

Even with the company's effort, the analyst believes regulatoryuncertainty remains a risk, and not only for MetLife. "I think thatregulatory uncertainty is a risk for the entire space, and I think that riskincreases with the fact that there is going to be a new sheriff in town afterElection Day or after Inauguration Day," she said.

Shares of MetLife finished the week up 6.12% at $47.15.

Stocks of life insurers rose during the week. was up 3.23%to $5.12, American EquityInvestment Life Holding Co. rose 1.64% to $18.02, was up 4.12%to $85.01 and Principal FinancialGroup Inc. rose 2.02% to $52.55.

Meanwhile, a hurricane warning is in effect for most of Florida'seast coast and along the entire coast of Georgia, as Hurricane Matthew isexpected to impacteastern Florida as a Category 4 hurricane. Insurers had about $909.53 billionin exposure topersonal and commercial residential property policies with wind coverage in the17 Florida counties under hurricane warnings as of 10 a.m. ET Oct. 6.

Among P&C insurers, Endurance Specialty Holdings Ltd. saw a 39.88% jump inits shares to $91.55. The company recently disclosed that to acquire 100% of EnduranceSpecialty for about $6.30 billion.

Stocks of other P&C insurers were more mixed during the week.Hanover Insurance GroupInc. was up 1.51% to $76.56, American International Group Inc. was up 1.03% to$59.95, and American FinancialGroup Inc. saw a gain of 1.16% to $75.87. fell 2.04% to $67.77,Arch Capital GroupLtd. declined 2.80% to $77.04, and fell 3.02% to$184.24.