logo
Share SHARE
FONT-SIZE Plus   Neg

MetLife Upset With Federal Reserve Over Stress Test Results - Update

MetLife Inc. (MET) Tuesday played down the results from the latest round of stress tests by the Federal Reserve, stating that its financial position remained strong and is capable of meeting an adverse economic scenario.

The Federal Reserve earlier in the day revealed results from its stress tests, or Comprehensive Capital Analysis and Review, of 19 biggest U.S. banks, including MetLife, to assess their financial soundness to return more capital to shareholders.

Results from the tests showed that MetLife will not be able to maintain its core tier-one capital ratio at above 5 percent of risk-weighted assets, prompting the Federal Reserve to deny a request by the insurer for an increase in its capital distribution plan.

Expressing displeasure, MetLife CEO Steven Kandarian said that bank-centric methodologies used under the stress tests are unsuitable for insurance companies, which have a different business model.

Kandarian said that when gauged under methodologies apt for insurers, MetLife has an enviable financial position. He indicated that at the end of 2011, MetLife had a consolidated risk-based capital ratio of 450 percent.

In its capital plan submitted to the Federal Reserve, MetLife had requested for approval of $2 billion in stock repurchases and a raise in its annual common stock dividend to to $1.10 per share from $0.74 per share.

MetLife had excess capital of $3.5 billion at the end of 2011, and expects that to reach $6 billion to $7 billion by the end of 2012, before any capital distribution actions.

Apart from MetLife, the Federal Reserve said that Citigroup, SunTrust and Ally would all see their capital ratio fall below 5 percent if they went ahead with their capital plans. But most of the banks subject to the stress tests were allowed to raise dividends and buy back shares.

The Federal Reserve had asked these banks to evaluate their financial strength amid a global economy bogged down by recession and double-digit unemployment in the U.S. Only those banks that can prove their ability to maintain core capital levels above 5 per cent of risk-weighted assets are allowed to raise dividends and buy back shares.

J.P. Morgan Chase & Co. was the first institution to disclose its results. The bank said it would increase its quarterly dividend to 30 cents, and repurchase about $15 billion of stock over the next year.

MET closed Tuesday on the NYSE at $39.46, up $1.78 or 4.72%, on a volume of 12.2 million shares. In after hours, the stock dropped 3.7%.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Business News

More Breaking News

Editors Pick
Shares of Deutsche Bank AG are gaining more than 9 percent in pre-market activity on Wednesday following media reports that the German lender is considering buying back several billion euros of its senior bonds. The recovery in the bank's share price comes after two days of falls amid a broader rout of bank stocks due to concerns over their profitability and troubled loans. Time Warner Inc. (TWX) reported a profit for the fourth-quarter of 2015 that increased 19.4% from last year. But, quarterly revenues decreased about 6% from the prior year, due to a decline at Warner Bros., partially offset by increases at Home Box Office and Turner. The company increased its regular quarterly dividend by 15% to $0.4025 per share. Breakfast and snack food giant Kellogg Co. (K) continues to make great progress with its productivity initiatives. Hence, it remains confident in meeting its long-term targets for currency-neutral comparable net sales and operating profit growth in 2016 and beyond. However, negative currency translation impact that prevailed in the last few quarters is expected to continue in the fourth quarter.
comments powered by Disqus
RELATED NEWS
Trade MET now with 
Follow RTT