(Bloomberg) -- Brighthouse Financial Inc. was valued at about $7.5 billion in its trading debut after being spun off from MetLife Inc.
The stock changed hands for $61.45 at 10:32 a.m. in New York. There are about 122.7 million shares in Charlotte, North Carolina-based Brighthouse, with MetLife holding less than 20 percent after distributing a majority stake to its investors on Aug. 4.
MetLife Chief Executive Officer Steven Kandarian was working for months to separate Brighthouse, a unit with about $220 billion in assets that sells annuities and life insurance to individuals in the U.S. The move freed MetLife from capital-intensive businesses and leaves it more reliant on earnings from divisions selling coverage through employers as well as international markets. And the spinoff gives investors a chance to make a different kind of wager through Brighthouse stock.
“We believe Brighthouse Financial and MetLife will offer investors unique value propositions,” Kandarian said in an April letter to shareholders. “As a largely pure-play U.S. retail life and annuity manufacturer, we believe Brighthouse Financial will benefit from rising interest rates and equity markets. Our goal for post-separation MetLife is to be a company that can perform well in a variety of macroeconomic environments.”
Eric Steigerwalt, who formerly led the U.S. business at MetLife, is the new CEO of Brighthouse and has been appointing a management team. John Rosenthal, a longtime money manager at the parent company, was named chief investment officer, and Anant Bhalla was designated chief financial officer.
Brighthouse was rated sector perform by RBC Capital Markets analysts, who have a $77 price target on the stock. While praising the company's strategy, they noted increased regulation of the annuity industry and heightened competition as firms with Wall Street ties gain market share in pursuit of more assets under management.
See also: Wall Street's annuity push challenges insurers
“We think the company's nimbleness, focus and thoughtful approach to risk management will serve it well in the long-run,” wrote the analysts, led by Mark Dwelle. “In the near-term, it will be challenging to simultaneously build a brand, absorb incremental costs and grow capital in the current environment.”
Brighthouse will focus on distributing its products through independent channels after MetLife sold its adviser force to Massachusetts Mutual Life Insurance Co. last year. The new company trades on the Nasdaq Stock Market under the ticker “BHF.”z
The company is down almost 5 percent from Friday's close on the “when issued” market, which allowed investors to speculate on the price before the shares were distributed. John Nadel, an analyst at Credit Suisse Group AG, assigned the stock a $71 price target and gave it a neutral rating. He cited risks from low interest rates or stock market declines, which could lead to wider liabilities on annuities that guarantee a lifetime stream of income to clients. Beyond that, tighter regulation from the U.S. Department of Labor could pressure sales, he wrote.
‘Market Sensitive'
“BHF will be a highly capital-market-sensitive stock,” Nadel said in a note. “Additionally, the DOL's fiduciary rule could have a negative impact on indexed annuity sales, and the company's indexed annuity product is currently one of the company's only growth engines.”
MetLife dropped to the No. 2 rank among U.S. life insurers by assets after the spinoff, falling behind Newark, New Jersey-based Prudential Financial Inc. Without majority ownership of Brighthouse, MetLife traded Monday for $48.38, an increase of about 0.7 percent from Friday's spinoff-adjusted close.
Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. were MetLife's bankers on the transaction. The insurer got legal advice from Willkie Farr & Gallagher.
To contact the reporters on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net, Natasha Rausch in New York at nrausch@bloomberg.net.
To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net, Dan Reichl
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