posted gains during theweek ended March 31 as most other insurers edged upward along with the broader market.
The SNLInsurance Index rose 0.56% to 736.71, while the S&P 500 gained 1.11% to 2,059.74.
MetLifesaw shares climb after a court decisionremoved its nonbank systemically important financial institution designation. The Financial StabilityOversight Council initially designatedthe company a SIFI in 2014. The council recently rejected the company's bid to remove the designation.
Chairman,President and CEO Steven Kandarian said in a statement that the ruling validated the company's decisionto seek judicial review of the designation, adding that MetLife's business modeldoes not threaten the country's financial stability. The company's stock rose 2.19%to end the week at $43.94.
"It'sa big win for MetLife," Raymond James analyst Steven Schwartz said in an interview."It wouldn't surprise me if the company was surprised." The analyst cautioned, however,that "it's not over until it's over." Schwartz believes the FSOC willappeal the decision, adding that the ruling does not mean MetLife cannot be renameda SIFI in the future.
Despitethe ruling, Schwartz expects the company's pending sale of its U.S. retail adviser force to to continue, saying the company had other reasons to do the separation.For investors, there might be benefits in case the designation continues to be lifted,the analyst said. Schwartz noted that MetLife holds excess capital in case regulatorsimpose a restrictive capital regime upon the company as a SIFI. "Will thatbe released at some point? If it were, it would certainly benefit investors, andI think investors realize that," the analyst said.
S&PGlobal Market Intelligence equity analyst Cathy Seifert in a March 31 note echoedSchwartz's expectation that the government will appeal the decision. Seifert furtherexpects the company to continue its strategy of narrowing its focus and reducingcapital requirements. The analyst said her "buy" recommendation on thecompany reflects her view that shares remain undervalued.
Seifertsaid further that the ruling brings up strategic issues at Prudential Financial Inc. and American International Group Inc., both insurers having beenpreviously designated as nonbank SIFIs. The companies both saw shares climb duringthe week. Prudential Financial gained 0.29% to $72.22, while AIG rose 1.20% to $54.05.
Seifertnoted that capital requirements in New Jersey, Prudential's primary regulatory jurisdiction,are not as severe as those that would be likely imposed under a final SIFI regulation.Also, she said she expects AIG to seek a SIFI exemption after paring back operations,adding that the government's case for the company's designation may be strengthenedby its near collapse in 2008.
In aninterview on CNBC, AIGPresident and CEO Peter Hancock said the company is taking a wait-and-see approachto challenging its SIFI tag, hinting that AIG will likely follow in the footstepsof General Electric Capital Corp.,which reduced its risk profile before submitting a request to the FSOC to rescindits designation.
Financialguaranty insurers also saw gains during the week. Assured Guaranty Ltd. rose 1.36% to $25.30, climbed 2.67% to $8.85 and edged up0.57% to end at $15.80. Bloomberg News reportedduring the week that advisers and lawyers for certain bondholder groups and bondinsurers that hold Puerto Rico credit met to start working on a counterproposalto the commonwealth's restructuring plan. Additionally, Ambac saw its shares climbduring a week in which shareholder activist CanyonCapital Advisors LLC continued to raise concerns about Ambac President and CEO Nader Tavakoli. Ambaclater announced support agreementswith shareholders representing 18.5% of its outstanding stock, with shareholderRaging Capital Management LLClater expressing supportfor the board.
Of thefew insurers that saw shares decline during the week, First Acceptance Corp., Security National Financial Corp. and Allied World Assurance Co. Holdings AG saw the biggest losses.First Acceptance posted a 15.89% drop to $1.80, Security National Financial sawits stock slide 4.86% to $5.09 and Allied World lost 2.18% to $34.94.