MetLife's Divestiture Will 'Pressure' AIG To Do This

Metlife Inc MET divestiture will put "pressure" on American International Group Inc AIG CEO Peter Hancock to "unveil something similarly dramatic" at the January 26 strategic update, according to Keefe, Bruyette & Woods research note on Tuesday. Keefe, Bruyette & Woods issued an Outperform rating with a price target of $72.00 on Tuesday for MET. "We think the market's very favorable initial response (the shares rose ~11 percent after hours) to MetLife's announced planned divestiture of some of its U.S. Retail business will sustain or accelerate the pressure on AIG CEO Peter Hancock to unveil something similarly dramatic at the January 26 strategic update," the firm commented. Keefe, Bruyette & Woods doesn't see the situations as "completely analogous." The firm believes AIG's P&C underwriting underperformance is a more significant obstacle for the company's valuation rather than its SIFI-related regulation. "We think more conservative loss reserving and withdrawing from unprofitable P&C lines are more important than breaking up AIG, but MetLife's anticipated benefits of greater focus and potentially freeing some divested businesses from SIFI status should also translate over to AIG. The Wall Street Journal quoted a MetLife spokesperson denying any shareholder activism; we think this news will only intensify AIG's widely reported activists' pressure," the firm noted. Keefe, Bruyette & Woods believes that the company's recent earnings underperformance and senior management "shakeup provide an attractive entry point." The firm also views the shakeup as allowing a credible path to better results.