Insurance premiums written in the US conventionally exceed $1 trillion annually making the US one of the largest markets in the world.
Over the past 20 or so years, insurance premiums mushroomed, which in turn facilitated MetLife’s strong market share. For a snapshot of what things looked like between 2011 and 2021, America’s share of underwriting went up from 25% of the global premiums in 2000 to 40% by the end of 2021.
MetLife, Inc. (NYSE:MET), with a market capitalization of around $71 billion, stands as one of the biggest insurance providers but its product breadth isn’t limited there and includes annuities, employee benefits, as well as asset management offerings.
Over the past year, MetLife stock is up substantially, even eclipsing the overall market. It’s also got a perfect Piotroski Score of 9, meaning it has rock solid fundamentals plus dividend payments have increased for 12 years straight.
So what does the future look like for shareholders getting in now?
Sales Have Been Remarkably Flat
Over the years, MetLife has broadened its reach from the US to lucrative markets like Japan, Latin America, Europe, and the Middle East.
MetLife is also a large institutional investor in the U.S. with a portfolio comprising mostly of fixed-income securities and other comparatively low-risk investments.
Now, with over 150 years of operative history under its belt and a presence in more than 40 markets globally. MetLife currently does business with 96 of the top 100 FORTUNE 500 companies in the United States.
On the other hand, the company’s top line has been subdued. In June 2020, MetLife generated revenues of $18.5 billion while last quarter it posted $18.4 billion in sales.
MetLife Bottom Line Is a Different Story
While the company’s top line has been oscillating up and down, profitability has seen wider swings.
Between 2021-22, the top line rose marginally from $68.70 billion to $68.77 billion but profitability slid from $6.65 billion to $5.10 billion.
Last year, MetLife’s revenues declined by only 2.7% from the prior year to $66.91 billion. However, its bottom line declined sharply to $1.38 billion.
Management cited numerous reasons for this sliding performance, such as the unfavorable effects of net investments, which included impairment losses.
12 Year Dividend Streak Rewards Loyal MET Buyers
MetLife has paid a stable dividend for 12 years straight. This year alone, the company has declared three quarterly dividends, the last two growing marginally than the previous one.
The current annual dividend sits at $2.18 per share which corresponds to a yield of 2.47%, and impressively the dividend is growing at a 4.4% CAGR over the past five years.
With earnings bouncing back this year from a lull in 2023, the dividends look as stable as ever, particularly given the 46% payout ratio.
1.2 Billion Reasons to Buy MetLife?
While the company’s 2023 annual financials did not overly impress investors, the past year has been an entirely different story with strong gains posted last quarter. Net income of $1.2 billion is a testament to the growing profitability and follows a streak of good quarters in 2024.
In Q2 2024, revenues climbed by 7.2% from the prior year’s period to $17.82 billion, despite a slight pullback in premiums.
The Group Benefits segment was the bright spot in driving these results with adjusted earnings from this segment up by 43% from the year-ago value.
On a GAAP basis, MetLife’s bottom line grew by 146.5% from the prior year’s period to $912 million. On a non-GAAP basis, adjusted earnings, on a per share basis, came in at $2.28 per share, a year-over-year growth rate of 18%.
In the most recent quarter, sales really accelerated with the top line growing 16.2% year-over-year. That figure has only been eclipsed once in the past 20 quarters in Q4 2023.
Is MetLife Stock Recession Proof?
A diversified portfolio of investments and insurance products alongside a presence in 40 countries largely makes MetLife stock recession proof.
With that said, the company didn’t fare especially well during the Great Recession where then share price fell from $46 per share to $12 per share.
Still, the company is in a much stronger position now versus then and is more likely to ride through a recession better than a decade or more ago. That view is supported by the company’s strong balance sheet of $21.7 billion. Much of that is offset by liabilities that sum to $26.6 billion.
When we ran a discounted cash flow forecast, the price target sat at $99 per share, though analysts’ consensus pegs fair value closer to $91 per share.
6x Growth In Premiums Creates Bright Future
While the pre-2024 financials were decidedly so-so, MetLife is on track for a rebound this year. Moreover, with the escalation in global risks, insurance is in ever higher demand creating a tailwind for shareholders.
In Deloitte’s view, gross premiums are forecast to climb by as much as 6x to $722 billion by the turn of the decade with China and North America expected to account for approximately two-thirds of the global market.
If they are right, expect MetLife to slowly and steadily climb over time, even if it’s mixed with periods of share price turbulence.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
