By Dave Sebastian
Brighthouse Financial shares fell more than 13% to $33.10 Tuesday after two investment banks downgraded their ratings of the life-insurance company.
Credit Suisse Group AG (CSGN) deemed Brighthouse Financial underperforming, downgrading it from a neutral rating. Goldman Sachs Group downgraded its ratings to sell from neutral.
Credit Suisse slashed Brighthouse's per-share price target to $22 from $35, while Goldman Sachs cut it to $32 from $39.
Credit Suisse analysts said the stock is expensive given the volatility of its distributable earnings and new accounting pressure. Lower interest rates could reduce the company's distributable earnings from 2019 to 2021 by $1 billion, "though favorable equity markets may have largely offset it," Credit Suisse analysts said in a research note, adding that the condition illustrates Brighthouse's sensitivity to markets compared with its peers.
Changes in accounting standards in 2021 by the Financial Accounting Standards Board, or FASB, could reduce companies' book value, Credit Suisse analysts said.
Goldman tied its downgrade to how weakened distributable earnings present risks to the company's capital plans.
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