NEW YORK (TheStreet) -- MetLife (MET) shares are flat at $53.30 in early market trading on Tuesday after the U.S. government filed a request to have a lawsuit brought by the insurer seeking to toss out its designation as a financial institution that is "too big to fail" dismissed.
The New York City-based insurance company was given the designation by the Financial Security Oversight Council, which was formed in 2011 as part of the implementation of the Dodd-Frank reform bill, as a financial institution that is systemically important to the health of the American economy.
A company's designation as a "systemically important financial institution" (SIFI) subjects it to increased regulation on the amount of its cash reserves and oversight by the Federal Reserve.
MetLife is the first non-bank to challenge its SIFI designation, according to Reuters. "Far from presenting systemic risk to the U.S. economy, MetLife is a source of financial stability. We strongly disagree with the arguments laid out by the government in its brief and look forward to responding in court next month," the company said in a statement today.
However, regulators contend that the company's business is interconnected to many financial institutions through its capital market activities and insurance products and therefore worthy of a SIFI designation.
"MetLife's numerous disagreements with the Council's analysis and conclusions are meritless," the government said in a filing with the U.S. Department of Justice. "MetLife's complaints, if accepted, would frustrate the express statutory purpose of the Council: to address potential risks to financial stability posed by the distress of certain companies before that distress occurs and poses an imminent, grave threat to the nation's economy."
TheStreet Ratings team rates METLIFE INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate METLIFE INC (MET) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- METLIFE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, METLIFE INC increased its bottom line by earning $5.42 versus $2.91 in the prior year. This year, the market expects an improvement in earnings ($5.85 versus $5.42).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 62.5% when compared to the same quarter one year prior, rising from $1,328.00 million to $2,158.00 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, METLIFE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: MET Ratings Report