Insurer Metlife (NYSE:MET) could postpone its share buybacks in to the second half of 2012 as it is struggling to determine its long-term regulatory capital requirements.
The latest development comes on the heels after the company said it expects to resume buying back stock in "the first part" of 2012. Metlife's potential postponing of share repurchases could be tied to the rumors that Metlife could be designated as Systematically Important Financial Institution (SIFI).
SIFI are the institutions that are considered too big to fail and their failure in the form of bankruptcy could adversely impact the global economy. The government will provide financial support, if these firms do run into any financial trouble.
As a result, regulators are demanding strong capital requirements and risk absorbing capacity from such institutions. U.S. financial institutions including Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo have already been designated as SIFIs.
Now, Metlife is speculated to join in this list.
"New information that has come our way from a leading industry consultant has led us to believe even more strongly than we did before that Met will be designated a Systemically Important Financial Institution (SIFI)," RBC Capital Markets analyst Eric Berg wrote in a note to clients.
In addition, regulators outside the United States are moving forward rapidly with plans to impose heightened capital requirements on global insurers such as Metlife, which made the analyst to conclude that Metlife could put off share repurchase to the second half of this year until it gets sufficient clarity from regulators here and abroad on its longer-term capital needs.
In June, the company had said it would deploy $2 billion in 2012 for buybacks and dividends. But, as the situation goes by, even if Metlife announces any buyback it would be lesser than the investors expectations.
"The buyback could not only be less than $1.3 billion, but any meaningful buyback could happen later than management suggested," said Berg, who has a "sector perform" rating on Metlife shares.
Shares of Metlife were down 74 cents, or 1.96 percent, to $36.94 on the New York Stock Exchange.