MetLife, Inc. (MET) has decided to streamline and modify its product mix to better focus on its U.S. business and gain a strong foothold in the emerging economies, management outlined in an investor conference on Wednesday. The company is planning these actions along with many more strategic repositioning to strengthen its financials by 2016.
MetLife outlined four initiatives to be the base of all its strategic moves. The initiatives include refocus on the U.S. business, construct Global Employee Benefits business, increase its emerging markets presence, adopt a more customer-centric business model and build a global brand.
MetLife desires to attain return on equity (“ROE”) that would be in the range of 12-14% by 2016 compared to 10.3% reported in 2011. The company also expects to improve its risk profile, reallocate its product mix from capital-intensive products to protection products in order to generate more steady operating earnings, which in turn will help achieve its ROE aspiration.
MetLife is striving toward generating at least 20% of its operating earnings from the emerging economies. It stated in its guidance for 2012 that it expects the consolidated operating earnings to be in the band of $5,140 – $5,570 million or $4.80 – $5.20 per share. It also mentioned that operating earnings for the Asian segment is expected to be in the range of $1,110 – $1,210 million and the EMEA segment in the range of $275 – $325 million.
The company also intends to increase its free cash flow as well as achieve a sound cash position. It also expects to achieve net pre-tax expense savings of about $600 million. The company seeks to improve its growth rates through more mergers and acquisitions. It also aims to reduce its attrition rate and control its expenditures.
The Zacks Consensus Estimate for MetLife stands at $5.21 per share for 2012 an increase of 3.78% over 2011. This is backed by MetLife’s strong capital position, ample liquidity and its leading market position Besides MetLife holds a diminishing risk-profile with improved financial leverage.
MetLife competes closely with Prudential Financial Inc. (PRU), which also expects to expand its presence in the emerging markets. It has recently submitted its bid for buying the entire Asian life insurance assets of ING Groep (ING) that is being auctioned out to repay a debt owed to the Dutch government.
The company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain a long-term Neutral recommendation on the stock.
ING GROEP-ADR (ING): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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