Wednesday, June 11, 2014

MetLife’s Buyback: ‘A Good First Step’

Investors have been waiting–and waiting and waiting–for MetLife (MET) to start buying back shares. Most of the big insurers do it. Heck, even American International Group (AIG) does it, even if it disappointed with its announcement last week.

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Well, MetLife finally did it. The mega-insurer announced that it would buy back $1 billion shares. Wells Fargo’s John Hall calls MetLife’s buyback a “good first step.” He explains why:

We view MetLife’s resumption of share buyback as a good first step toward a more comprehensive return of capital to shareholders. As it stands, $1 billion of repurchases will serve to offset the $1 billion of equity that MetLife is slated to issue in conjunction with the conversion of equity units in the fall associated with the acquisition of Alico. In our view, MetLife’s build of capital over 2013, 2014, and 2015 can well support more than $1 billion of share repurchase, which is bolstered by the company’s low relative leverage position.

Deutsche Bank’s Yaron Kinar and Sam Desai expect MetLife to complete the share repurchase by the end of the year:

While management has not indicated that the program would be exhausted this year, we expect it to be, noting that it offsets a $1 billion equity unit conversion in October. We believe that Street estimates do not reflect buybacks in 2014. 2015 Consensus EPS should increase by about 10 cents to reflect the buyback, which amounts to about 1.5% of shares outstanding. This would close the gap to our $6.25 EPS estimate for 2015.

Shares of MetLife have gained 0.6% to $54.96 at 2:35 p.m., while American international Group has dropped 0.3% to $54.93.

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