MetLife Announces $1 Billion Share Buyback, First Since 2008

Jun 10, 2014 8:29 am ET

(Updates with share gain starting in the first paragraph.)

June 10 (Bloomberg) -- MetLife Inc., the largest U.S. life insurer, announced its first stock buybacks since 2008 as Chief Executive Officer Steven Kandarian seeks to reward investors. The shares gained in early trading.

The insurer will repurchase as much as $1 billion of common stock utilizing existing authorizations from the board of directors, New York-based MetLife said today in a statement.

Kandarian, 62, had previously refrained from buybacks at MetLife while preparing for the prospect of increased oversight from U.S. regulators. The insurer is in the final stage of consideration to be designated systemically important, a finding that would subject the firm to increased scrutiny from the Federal Reserve.

“Our philosophy is that excess capital belongs to our shareholders,” Kandarian said in the statement. “The challenge is to strike the right balance between adherence to our philosophy and recognition that MetLife’s required capital levels remain unknown.”

Last month, Kandarian said MetLife would “take a conservative approach to capital management” until there is clarity on how the insurer will be regulated. He had previously said the company favored dividends over buybacks because the outlays are smaller.

MetLife climbed 2 percent to $55.73 in early trading at 8 a.m. in New York. The shares have advanced 1.4 percent this year in New York through yesterday, while smaller rival Prudential Financial Inc. has dropped 3 percent. Prudential, based in Newark, New Jersey, has already been designated a non-bank systemically important financial institution, or SIFI.

Awaiting Fed

“We anticipated that the non-bank SIFI capital rules would be known by now, but recent statements by the Federal Reserve suggest that we may not see draft rules until 2015,” Kandarian said in the statement. “Meanwhile, our capital continues to grow.”

Kandarian cited the upcoming conversion into common stock of the last tranche of equity units issued in connection with the 2010 purchase of American Life Insurance Co. The exchange will raise $1 billion, he said. A prior conversion diluted common shareholders, and was cited by the company last year as limiting growth in earnings per share.

While avoiding buybacks, MetLife last year increased its dividend for the first time since 2007 and purchased Chilean pension provider AFP Provida SA for about $2 billion.

Liquidity, Leverage

The Fed could impose stricter capital, leverage and liquidity requirements on SIFIs, and demand stress testing for crisis scenarios, though the central bank hasn’t yet described how it may adapt regulations for insurers that get the tag. American International Group Inc. and General Electric Co.’s finance unit have also been deemed non-bank SIFIs.

The U.S. Senate approved a bill last week to give regulators more flexibility in how they apply capital standards to insurers. To become law, the bill would need to be approved by the House of Representatives and signed by President Barack Obama.

MetLife is scheduled to hold an investor conference today beginning at 8:45 a.m. New York time.