Up 10% in the Past Month, is MetLife Still a Buy?
Leading life insurance provider MetLife’s (MET) shares have shot up 12.5% in price over the past month thanks to earnings and premium revenues growth across all its business segments in...
Leading life insurance provider MetLife’s (MET) shares have shot up 12.5% in price over the past month thanks to earnings and premium revenues growth across all its business segments in its last reported quarter. With increasing risk awareness spurring the demand for insurance plans, is the stock poised to rally further? Let’s discuss.
Life insurance and financial services provider MetLife, Inc. (MET) in New York City is among the leading global providers of annuities and insurance, with approximately 100 million customers in more than 50 countries. The company’s consistent book value growth and significant earnings growth in the third quarter of 2021, and exceptional variable investment income, have helped the stock gain 12.5% in price over the past month and 17.4% over the past six months. MET’s book value, excluding accumulated other comprehensive income other than foreign currency translation adjustments, was up 8% year-over-year.
Because the life insurance company is focusing on expanding its international presence and boosting its return on allocated equity, it should see solid membership growth and generate robust earnings in the coming quarters.
Closing its last session at $68.37, MET is trading slightly below its 52-week high of $68.58, which it hit on January 13, 2022. Although ongoing COVID-19 related concerns and macroeconomic challenges have caused a level of uncertainty in the insurance industry, we think its continued investments in innovative solutions to improve its financial health should help it witness a substantial uptick in demand for its benefits and retirement and income solutions in the coming months.
Here is what could shape MET’s performance in the coming months:
Positive Growth Story
Analysts expect MET’s EPS to increase 8.4% over the next five years. MET has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters.
MET’s revenue has increased at a 1.6% CAGR over the past five years. Also, its EBITDA has grown at a 7.3% CAGR over the past three years. Also, its MET’s levered free cash flow and tangible book value have grown at 11.5% and 12.1% CAGRs, respectively, over the past three years. Furthermore, the company’s EPS has grown at an annualized 5.7% over the same period.
Life Insurance Industry Tailwinds
According to the Swiss Re Institute’s latest sigma research forecast, global insurance premiums are expected to witness above-trend growth of 3.3% in 2022 and 3.1% in 2023. Despite near-term challenges, such as inflation and global supply chain issues, the industry momentum is expected to remain strong. Growing risk awareness in the wake of the COVID-19 pandemic, as more people seek financial security, should be a major driver of higher insurance sales.
As MET continues to strengthen its international presence and control costs while increasing efficiency, the company should see a rise in demand for its insurance plans this year.
Strategic Joint Venture
In October 2021, MET agreed with IGE (India) Private Limited ("IGE") and Elpro International Limited to acquire a combined shareholding of 15.3% in PNB MetLife India Insurance Company Limited. The transaction will increase their stake to 47.3% in the life insurance joint venture. The collaboration should expand the company’s ability to take advantage of the continued growth in the life insurance market in India and help create long-term shareholder value.
MET’s net investment income grew 18% year-over-year to $5.6 billion in the third quarter, ended Sept.30, 2021. The company’s adjusted premiums, fees, and other revenues in the U.S. under the group benefits segment were $5.52 billion, representing a 13% increase year-over-year. This was primarily driven by solid growth across products, including voluntary, and the addition of Versant Health. Its net income came in at $1.5 billion, up 140% from the same period last year. In addition, its ROE was 9.3% for this quarter, compared to 3.6% in the prior-year period.
POWR Ratings Reflect Promising Outlook
MET has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MET has a Sentiment Grade of B, consistent with analysts’ expectation that its earnings will grow.
Also, in terms of Momentum Grade, MET has a B. The stock’s price return over the past month is in sync with this grade.
Click here to see the additional POWR Ratings for MET (Value, Stability, Growth, and Quality).
The stock is ranked #5 of 30 stocks in the C-rated Insurance – Life industry.
MET’s well-diversified growth across all business segments and continued strong book value growth should help the company strengthen its position in the life insurance market. In addition, a surge in demand for life insurance plans, driven by higher risk awareness, should continue to drive demand for its benefit services and income solutions. So, we think it could be wise to bet on the stock now.
How Does MetLife (MET) Stack Up Against its Peers?
MET has an overall B rating in our proprietary rating system. Check out these other stocks within the Insurance – Life industry with B ratings: Humana Inc. (HUM) and China Life Insurance Company Limited (LFC)
MET shares rose $0.01 (+0.01%) in premarket trading Tuesday. Year-to-date, MET has gained 9.41%, versus a -2.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
Entrepreneur Editors' Picks
These Co-Founders Are Using 'Quiet Confidence' to Flip the Script on Cutthroat Startup Culture and Make Their Mark on a $46 Billion Industry
My 7-Year-Old Daughter Started Selling Eggs. Here's What She Taught Me About Running a Startup.
Why You Need to Become an Inclusive Leader (and How to Do It)
Career Transitions You Can Make in Your 40s and 50s
Billionaire Naveen Jain Is an Expert at Disrupting Fields He Has No Experience In. His Secret Sauce for Building Multi-Million Dollar Companies? 'You Have to Come as Naive.'
4 Principles to Develop Next-Level Leadership at Your Company
This Filipino American Founder Is Disrupting the Beverage Aisle by Introducing New Flavors to the Crowded Bubbly Water Market