💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

Brighthouse Financial shares slip in market debut

Published 08/07/2017, 11:48 AM
© Reuters.  Brighthouse Financial shares slip in market debut
MET
-
WFC
-
PRU
-

By Aparajita Saxena and Suzanne Barlyn

(Reuters) - Shares of Brighthouse Financial Inc fell as much as 6 percent in its market debut on Monday, as the U.S. retail insurer spun off from MetLife Inc (NYSE:MET) goes solo in an industry that has been hurt by low interest rates.

The stock touched a low of $60.58 in early trading, giving it a market capitalization of $7.26 billion.

At least five brokerages started coverage of the stock, with the majority having a "market perform" or equivalent rating.

Wells Fargo (NYSE:WFC) Securities analyst Sean Dargan said while a stand-alone Brighthouse offers potential upside if markets and interest rates move upward in tandem, he did not view the "risk-reward" favorably at this time.

"If interest rates fall from here or equity markets retrace, we would expect BHF to be a heavily shorted name," said Dargan, who began coverage of the stock with a "market perform" rating and a $71 price target.

Low interest rates have made it difficult for insurers to earn more on their investments as much of their portfolio is made up of low-yielding bonds.

Investors can now decide for themselves whether to hold the two companies, which have different risk profiles, MetLife Chief Executive Steven Kandarian said in a CNBC interview on Monday.

"If you like the theory of Brighthouse, where interest rates might rise over time, where strong equity markets will be a tailwind … then you would be a candidate to be a long-term holder" of the stock, Kandarian said.

MetLife holds a 19.9 percent stake in Brighthouse, which it plans to dispose of "as soon as practicable," within five years, according to a filing.

The completion of the spinoff, a plan unveiled last year, ends MetLife's reign as the largest U.S. life insurer by assets.

That title will now be held by Newark, New Jersey-based Prudential Financial Inc (NYSE:PRU), which had $797.4 billion in assets as of March 31, according to a filing and data from the American Council of Life Insurers.

Following the spinoff, MetLife will be left with core businesses centered mainly around group life-insurance and other employee benefits, asset management and a clutch of international operations.

"Our goal for post-separation MetLife is to be a company that can perform well in a variety of macroeconomic environments," Kandarian said in April.

A slimmed-down MetLife is likely to help the company in its legal battle against the U.S. Financial Stability Oversight Council naming it "systemically important" in 2014.

The designation - which triggers stricter regulatory oversight as the insurer has the potential to devastate the financial system if it fails - was struck down by a U.S. judge last year.

Brighthouse holds $223 billion of total assets and about 2.8 million insurance policies and annuity contracts as of March 31, according to a filing.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.