(Adds details, background, updating share movement)
By Anurag Kotoky
BANGALORE, Dec 9 (Reuters) - MetLife Inc (MET.N), the largest U.S. life insurer, is well positioned to outperform peers with its strong capital position, according to several Wall Street analysts.
Shares of the insurer soared as much as 16 percent in early trade on the New York Stock Exchange.
At least 9 brokerages maintained their top ratings on the company, a day after the company said it was strongly capitalized and expects to grow faster than its rivals. [ID:nN08498291]
“If there was a message from yesterday’s series of presentations (by MetLife), it was we did things right, we are here because we did things right and we are not going anywhere because we did things right,” Raymond James said.
The rally in MetLife shares lifted those of its peers, such as Prudential Financial Inc (PRU.N) and Hartford Financial Services Group Inc (HIG.N) that jumped 11 percent each, and the broader Dow Jones U.S. life insurance index .DJUSIL that rose as much as 7 percent.
In October, MetLife posted sharply lower third-quarter profit, hurt by investment losses. Since then, it and others in the life insurance sector have seen their shares battered as investors fretted that losses on investments could grow.
“Within a market where balance sheet strength and earnings quality merit a healthy valuation premium, we believe the company (MetLife) is poised to emerge as the benchmark global insurance stock,” Citigroup said while “unequivocally” reiterating its “buy” rating on the stock.
Citigroup said MetLife’s dominant group and individual domestic insurance businesses, coupled with its rapidly growing international operations, will help the company “to leverage opportunities created by the aging baby boomer generation into an accelerating growth rate.”
The New York-based insurer’s key competitive advantage is its excess capital and its conservative approach to variable annuity (VA) hedging program, analysts said.
VAs are a popular investment-linked retirement product sold by life insurers, where payments made to the holder depends on the performance of the portfolio’s securities.
Citigroup said MetLife possesses the most comprehensive risk management program in the industry and sells more conservatively designed products than many of its peers.
“The company has consistently been able to offer insight into its portfolio construction and asset allocation decisions based on its view of where the economy is headed,” Wachovia Capital Markets’ analyst John Hall said.
Hall rates the company’s stock “outperform.”
Barclays Capital analyst Eric Berg, however, slashed his price target on MetLife shares by about 28 percent to $47 to reflect sharply reduced valuations in general in the life insurance group, but kept an “overweight” rating on the stock.
“MetLife presents one of the best general operating pictures among the life insurers we follow: a highly diversified business mix; excess capital; considerable earnings flexibility...” Berg said.
MetLife projected operating earnings below Wall Street estimates on Monday, but Wachovia’s Hall appreciated company’s “mostly profitable” fourth-quarter outlook despite a murky environment. MetLife expects quarterly operating results to range from a loss of 5 cents to a profit of 20 cents a share.
MetLife shares were up $2.97 at $33 in afternoon trade. They earlier touched a high of $34.76. They have shed 51 percent since the start of the year through Monday. (Editing by Himani Sarkar)