On Dec 18, we issued an updated research report on MetLife, Inc. MET – Analyst Report). Notably, MetLife is one of the largest Life Insurance companies in the world, with global operations and significant market share in a number of Life Insurance and Retirement oriented business lines.
The company is awaiting final capital rules yet to be drafted for federally regulated life insurers. The insurer is contesting its designation as a systemically important financial institution, on grounds that its restructured operations pose less systematic risk than other banking institutions. The SIFI tag warrants stressful capital compliance scenarios, whereby MetLife will have to increase its capital-adequacy levels to guard against potential losses and contingencies.
MetLife also faces another issue being discussed in the Department of Labor regarding the sale of variable annuities. According to research firm Limra, MetLife holds the eighth place among U.S. variable annuity sellers, other top players being American International Group, Inc. AIG and Lincoln National Corporation LNC.
The company’s results in recent quarters have been victim to unstable macroeconomic factors, foreign currency, equity markets and interest rates.
However, in its U.S. business, the company continues to accelerate growth in Group, Voluntary and Worksite Benefits insurance. Over the near term, the company expects double-digit growth in voluntary/worksite products driven by increasing demand for voluntary products as responsibility shifts to employees. In Latin America, MetLife qualifies as one of the largest life insurance companies. In Asia, MetLife continues to offer attractive opportunities and is diversifies across geographies, currencies, products and channels. However, a strengthening U.S. dollar and regulatory challenges will be some of the headwinds in this segment.
In Europe, Middle East and Africa (EMEA), the company has the largest operations in the Gulf, UK and Poland account for approximately 40% of EMEA’s operating earnings. Also, UK is expected to be a key contributor, with growth coming from wealth management and employee benefits.
Last week, the insurer came out with its outlook for 2015 and 2016. It estimates free cash flow of 60% of operating earnings in 2015 and for 2016-2018 it is expected to be around 55-65% of operating earnings.
Zacks Rank
MetLife carries a Zacks Rank #4 (Sell) currently. MetLife carries a Zacks Rank #4 (Sell) currently. A better-ranked stock is Assured Guaranty Ltd. AGO. It carries a Zacks Rank # 2 (Buy).
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