MetLife's 'Too Big To Fail' Removal Could Give Prudential A Victory Next Year

Metlife Inc MET has won a legal battle against US regulators seeking to brand the company as “too big to fail.” Terming this as a positive development, Deutsche Bank’s Yaron Kinar maintained a Buy rating for the company, with a price target of $51.

Although the government is likely to appeal the ruling, removal of the FSOC’s tag of “too big to fail” is a clear positive for Metlife, analyst Yaron Kinar said.

He added, “We'd expect the company to continue down the path of separating its US Retail business despite the ruling, though the ruling may increase the company's flexibility by allowing the company to delay the plan should market conditions not be conducive.”

In case the ruling holds, it would “set the stage for greater capital deployment,” Kinar commented, adding that several investors had been frustrated about this for years

Related Link: MetLife Wins "Too-Big-To-Fail" Ruling; Insurance Sector Moves Higher

Read-Through To Prudential Financial

The read-through for Prudential Financial Inc PRU is “clearly positive,” the analyst mentioned. This company is also designated a SIFI and its balance sheet is smaller than that of MetLife.

Kinar added, however, that Prudential Financial no longer had the option to challenge its designation in court. Therefore, the company may have to “wait for FSOC's annual review of SIFIs, which occurs in 1Q, once MET's status is determined.” The Deutsche Bank report added, “We find the rally for the rest of the life insurance group to be less merited.”