(Updates with analyst’s comment in fourth paragraph.)
Oct. 25 (Bloomberg) -- MetLife Inc., the largest U.S. life insurer, said its plan to increase the dividend and resume share repurchases was rejected by the Federal Reserve. The stock declined in extended trading.
“We are disappointed that we cannot commence increased capital actions now,” Chief Executive Officer Steven Kandarian said in a statement today.
Kandarian is seeking to sell the company’s deposit- gathering operation, which subjects the company to Fed oversight along with lenders such as JPMorgan Chase & Co. and Bank of America Corp. JPMorgan was permitted in March to increase its quarterly payout and buy back shares, while Bank of America’s plan was rejected.
“It’s clearly an embarrassment for the company,” said Dan Theriault, an analyst at New York-based Portales Partners LLC. “Met had signaled to investors that it was increasing its common share dividend and initiating a share repurchase program,” said Theriault, who said he plans to keep his “hold” rating on the stock.
The annual dividend remains 74 cents a share, the same level it’s been since 2007, MetLife said in today’s statement. Prudential Financial Inc., the No. 2 U.S. life insurer, announced last year it was boosting its annual dividend 64 percent to $1.15, its highest payout since 2007. Prudential wasn’t one of the firms that had a capital plan reviewed by the Fed in March.
MetLife slipped 4.8 percent to $31.25 in extended trading at 5:30 p.m. in New York. The firm has dropped 26 percent this year on the New York Stock Exchange, compared with the 17 percent slump in the 24-company KBW Insurance Index.
“Our analysis shows that the company’s current capital level and financial strength support capital action increases,” Kandarian said in the statement. “We look forward to seeking and gaining approval of our capital plan from the Federal Reserve early next year.”
MetLife said Oct. 12 it may also try to sell its mortgage- origination operation. The firm cited the “tremendous amount of resources” needed to compete in home lending, given what the company called an “uncertain marketplace and regulatory environment.” Insurers Allstate Corp. and Hartford Financial Services Group Inc. have also announced exits from banking.
MetLife issued stock in 2008 as the company built capital to guard against investment losses and again in 2010 as it raised funds to expand outside the U.S. with the purchase of American Life Insurance Co. for about $16 billion. The insurer freed up $1 billion in capital selling operations in Venezuela and Taiwan and portions of its businesses in the U.K. and Japan, Kandarian said in July.
MetLife, which pays a dividend once a year, said in March that it was too early to state its plans.
“Our capital distribution activity typically occurs later in the year, and if our board should decide to pursue any such activity, that action will need to be reviewed and approved by the Federal Reserve at that time,” the company said March 18.
The Fed has said its review included a test of how banks would absorb stresses of a typical recession, such as a decline in the value of riskier assets, and an 11 percent unemployment rate.
The Fed told banks in November to consider conservative payouts that would still allow for a significant build-up of capital. Jack Gutt, a spokesman for the New York Fed, declined to comment today.
--With assistance from Maryellen Tighe and Caroline Salas Gage in New York. Editors: Dan Kraut, Dan Reichl
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