(Reuters) - Regulatory delays on two fronts are creating an overhang on MetLife (MET.N) shares and stirring fears the largest U.S. life insurer may not be able to return more capital to shareholders, analysts at Sterne Agee said on Thursday.
The stock fell 0.9 percent at mid-afternoon, on a day when markets were higher and almost the entire insurance sector was up as well.
MetLife shares are down nearly 7 percent in 2012 and are off 26 percent from a high point reached three months ago, in both cases badly underperforming the Standard & Poor’s insurance index .GSPINSC.
Analyst John Nadel, in a note to clients, said it appeared investors were preoccupied with the possibility that MetLife may have to resubmit a plan for share buybacks and dividends to the Federal Reserve.
The Fed has oversight of MetLife because the insurer is also a bank holding company, due to its online deposit-taking operations. The central bank rejected the company’s plan to raise its dividend and buy back shares in October 2011, pending stress testing, and rejected it again last March after certain ratios were below the test’s thresholds.
But MetLife is also in the process of selling the bank’s deposit-taking operations to General Electric’s (GE.N) GE Capital unit.
In light of that, Nadel said, the company has asked the Fed for permission to not resubmit its plans. A MetLife spokesman said the company remains in discussions with the Fed about how to proceed, given the pending sale.
At the same time, MetLife is also stuck waiting on the Federal Deposit Insurance Corp to put the sale on its agenda, another key step in the process. Nadel said the deal did not make the FDIC’s June agenda and it remains unclear whether it will be considered in July either.
“(It) appears MET sits in limbo both awaiting the Fed’s formal approval or denial of the request not to resubmit as well as with the FDIC in terms of beginning the formal regulatory approval process for the sale of the bank,” Nadel said.
In a worst-case scenario - assuming the Fed made MetLife resubmit, the company failed stress testing again and the central bank made the company plug any shortfall - MetLife could cover its obligations with two years of retained earnings, Nadel said.
If MetLife did not buy back stock, that would cut expected earnings per share by nearly 5 percent in 2013, he added.
Reporting By Ben Berkowitz; Editing by Richard Chang