MetLife (NYSE:MET), Inc. MET looks to have brighter days ahead with improving economy and the receding pandemic.
The company’s 2021 and 2022 earnings estimates have been revised 3.2% and 0.6% upward over the past 60 days.
The stock has a Zacks Rank #2 (Buy) at present and a Value Score of A. It has been proved time and again that a Zacks Rank #1 (Strong Buy) or 2 along with a strong Value Score of A or B provides best investment returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s in Store for MetLlife?
After suffering revenue decline and high claims, things are now looking up for this multiline insurer.
Revenues in the first quarter of 2021 were up 8% after declining 1% in 2020. The case for revenue growth looks strong for the insurer as the improving employment scenario is expected to drive the sales for its group benefits insurance business. A glimpse of the same was seen in the March quarter with Group Benefit insurance sales surging 45% year over year. Management also commented that the company is on track to deliver a record sales period in 2021.
Its underwriting margins will also see some respite from the COVID-led surge in claims. With the vaccination rollout, claims are expected to decline which will aid margins.
The company is also managing its investment income well. For insurers, low interest rate is a pain as they investmthe premium received and generate investment income from it. But MetLife is navigating this weak interest environment by its sound investment strategy in private equity. It is invested in domestic leveraged buyout funds, European LBOs and venture capital.
Its long-term strategy of streamlining its business by axing non-core and low return business, and focusing on the high-performing ones should pay well. In recent years, MetLife divested BrightHouse Financial, UK Wealth Management business, Hong Kong business, and MetLife Auto & Home to Farmers Insurance.
MetLife’s diversification strategy by acquiring business is also appreciative. Of late, it acquired Versant Health, a leader in vision care, PetFirst, a pet insurance company and Willing, a digital estate planning company.
Strong Capital Position and Dividend: Other Attractions
MetLife’s strategic moves are backed by its solid capital position and a strong cash generating capability. It expects to generate approximately $20 billion of free cash flow over the five-year period from 2020 through 2024, an amount equal to more than 40% of its current market capitalization.
Another attraction for its investor is its dividend payment. Recently, the company hiked its dividend by 4.3%. Over the last decade, the company’s dividend witnessed a 10% CAGR.
Stock Price Performance
Year to date, the stock has rallied 27.2% compared with the industry’s growth of 8.5%. Other stocks in the same space including Prudential Financial Inc (NYSE:PRU). PRU, American International Group Inc (NYSE:AIG). AIG and The Hartford Financial Services Group (NYSE:HIG), Inc. HIG have also jumped 31.3%, 23.5% and 27%, respectively, in the same time frame.
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