* Sees 2013 operating profit of $4.95 to $5.35 a share
* Analysts were expecting $5.47 a share
* Warns of 'lower-for-longer' interest-rate scenario
* Says must accelerate strategic initiatives
By Ben Berkowitz and Tanya Agrawal
Dec 13 MetLife Inc warned that 2013
earnings might be well below Wall Street expectations and said
it did not expect to buy back any shares next year, a blow to
investors who have been waiting more than a year for a capital
The largest life insurer in the United States also said it
needed to move faster on strategic changes amid a persistently
While MetLife has said in the past that it was well equipped
to handle years of low rates, particularly with a hedging
program it has put in place, the company acknowledged on
Thursday that it was in a "lower-for-longer" scenario.
Because their obligations are usually long-term, life
insurers invest the premiums they collect in hopes of generating
sufficient return to pay those obligations over time. In a
low-rate environment, it becomes much harder for insurers to
generate enough return to meet those commitments.
MetLife said operating earnings per share next year would be
lower than this year, compared with Wall Street expectations for
growth in the low single digits. However, it also said the
forecast was "broadly consistent" with its long-term outlook of
a year ago.
For this year, the insurer expects operating earnings of
$5.5 billion to $5.6 billion, or $5.15 to $5.25 per share,
compared with analysts' average estimate of $5.25.
In 2013, it expects $5.5 billion to $5.9 billion, or $4.95
to $5.35 per share. Analysts' average forecast is $5.47,
according to Thomson Reuters I/B/E/S.
MetLife's operating earnings forecast excludes discontinued
operations and net investment gains and losses.
Shares of MetLife rose 2 percent to $34.29 in morning
trading. At Wednesday's close, the stock had risen about 5
percent this year.
On a year-end investor call with analysts, MetLife
management said the 2013 forecast assumes no share buybacks.
Chief Executive Steve Kandarian later added, "I don't have total
confidence" the company will be free to buy back shares after
MetLife investors have waited since the autumn of 2011 for
the company to buy back shares and raise its dividend, but
regulators foiled the company's plans.
Because of its online bank, MetLife has a bank holding
company charter and is subject to Federal Reserve oversight. The
Fed blocked MetLife from a buyback in late 2011, and the company
failed a Fed bank stress test earlier this year.
On Wednesday, the insurer won approval from banking
regulators for a long-delayed deal to sell the deposits portion
of its bank to General Electric Co's GE Capital unit.
Once that sale closes, MetLife will seek to relinquish the bank
charter, which may mean the end of Fed oversight.
RBC Capital Markets analyst Eric Berg, in a research note,
said the sale "was certainly a step in the right direction."
But MetLife executives said they could not be sure when the
sale would close, and how that timing would affect whether the
company has to participate in another stress test, meaning it
was "prudent" to assume it would not buy back shares next year.
Even with the bank sold, MetLife is also considered at risk
of being declared a systemically important financial institution
by a federal panel, which would put it right back under Fed
supervision and could restrict its payout ability.
"And we fear that knowing this, Met will go slow on share
repurchase - exactly the opposite of what investors want to
hear from the company," RBC's Berg said.