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AXA Equitable IPO draws lukewarm response

After pricing below its expected IPO range, AXA Equitable Holdings Inc.'s shares fell further after its debut on the New York Stock Exchange, before regaining ground and finishing the first trading day up slightly.

The insurer's stock closed the May 10 session up 1.70% at $20.34.

The S&P 500 gained 3.55% to 2,723.07 for the week, while the SNL U.S. Insurance Index rose 1.89% to 995.03.

Josef Schuster, founder of IPOX Schuster LLC, said the initial results for AXA Equitable were relatively disappointing for a company with such a strong brand, but were not unsurprising. The $20 IPO price offered no discount to competitors, and AXA Equitable lacks significant exposure to high-growth segments in asset management like exchange-traded funds, Schuster said in an email to S&P Global Market Intelligence. Also pressuring shares is the expectation that the IPO was just the first step in the split from parent Axa. Pending secondary sales are an overhang, Schuster explained.

Investors are also aware of the poor first-quarter performances for shares of companies with recent large U.S. IPOs such as Snap Inc. and Brighthouse Financial Inc. Significant gains for AXA Equitable will be unlikely for the next six months to a year, Schuster said.

"However, the stock may well be attractive when taking the perspective of holding it within a diversified basket of other new listings over the next 36 [to] 48 months," he said.

Axa plans to use the proceeds from the IPO to help fund its pending acquisition of XL Group Ltd.

Ambac Financial Group Inc.'s stock posted one of the largest percentage increases for the week. The company's shares got a bump after reporting a large year-over-year improvement in first-quarter earnings. The insurer recently completed its rehabilitation deal for Ambac Assurance Corp. Segregated Account; CEO Claude LeBlanc on a conference call trumpeted a new financial paradigm that will see Ambac Financial looking for M&A deals to boost growth. The bond insurer's shares rose 8.33% for the week to $18.34.

Brighthouse's stock price declined after reporting its first-quarter results, but finished the week up modestly. The company logged an improvement in adjusted earnings compared to the 2017 first quarter and adjusted EPS of $2.36 that exceeded the S&P Capital IQ consensus estimate. However, it also booked a net loss for the quarter and lower book value excluding accumulated other comprehensive income.

Sandler O'Neill analyst John Barnidge in a May 8 research note to clients questioned whether management has been setting guidance conservatively in order to post earnings beats. Barnidge maintained his "hold" call on Brighthouse shares, but lowered his 2018 EPS estimate to $9.10 from $9.30. Disappointing life insurance product flows will likely mean that the company will take longer to shift its business mix to more profitable products, according to the analyst, who noted that the company is trading at a discount to book value.

Brighthouse shares rose 1.27% for the week and closed at $48.67.

Berkshire Hathaway Inc.'s shares climbed after the company reported first-quarter operating earnings of $5.29 billion, nearly 50% higher than the 2017 first-quarter number.

The results for GEICO Corp. were better than Keefe Bruyette & Woods analyst Meyer Shields anticipated. Also surprising was how quickly regulated utility rates fell for Berkshire companies following the reduction in the federal tax rate.

"It seemed to happen earlier than we anticipated," Shields said in an interview.

Berkshire Chairman, President and CEO Warren Buffett fielded several questions during an annual shareholders meeting about whether the company will maintain its dealmaking edge when, someday, he is no longer at the helm. The company previously announced promotions that make its succession plan more apparent, and Buffett insisted during the meeting that the company's reputation for handling investments will carry on without him.

Shields still believes management transition is a risk for Berkshire because so many of the company's shareholders are loyal to Buffett himself.

"My concern is that people own the stock not because of the businesses, but because of Warren Buffett," said Shields.

Berkshire's stock was up by more than 3% for the week.