Shares of MetLife (NYSE:MET), Inc. MET have exhibited a downtrend so far this year due to the challenging economic and operating environment triggered by the COVID-19 pandemic.
Notably, in the first nine months of 2020, the company’s revenues declined 7.7% year over year due to a decline in premiums across all its major geographic segments, namely United States, Asia, Latin America and EMEA. Also, a low interest rate environment caused a decline in the net investment income, which is another revenue driver.
The company expects a hostile face-to-face global sales landscape and muted sales across most segments. This, in turn, may put pressure on the top line.
Also, the low interest rate environment (which is expected to continue through 2023) might exert pressure on net investment income because of soft investment yields.
However, strategic measures taken by the company to focus on high-growth areas and discard non-core businesses will streamline its business and restore investors’ confidence in the stock. To this end, the company recently announced that it will sell its unit, Metropolitan Property and Casualty Insurance Company and certain wholly owned subsidiaries to Farmers Group, Inc. (FGI), a subsidiary of Zurich Insurance Group (OTC:ZFSVF).
The deal valued at $3.94 billion is likely to close in the second quarter of 2021. Also, in October 2020, the company sold its wholly-owned subsidiary MetLife Seguros de Retiro S.A. Earlier in June 2020, it divested its two wholly-owned subsidiaries MetLife Limited and Metropolitan Life Insurance Company of Hong Kong Limited (collectively, MetLife Hong Kong).
During the third quarter of 2020, the company booked the sale of its annuity business in Argentina, which was no longer the right fit for MetLife. With no material impact on the company, this divestiture helps illustrate its ongoing process of planting and pruning in a bid to achieve the optimal business mix.
Apart from selling its non-profitable businesses, the company is buying operations that come with a strategic value. Recently, it bought the vision care company Versant Health for $1.675 billion. With this buyout, MetLife made inroads into the vision insurance market and expanded its bouquet of Group Insurance offerings.
In January this year, MetLife acquired PetFirst, which enabled it to foray into the growing pet insurance market.
The company also resumed its share buyback programs, which will provide a cushion to its bottom line.
We believe, these strategic initiatives coupled with the company’s operational excellence will help the stock regain its lost momentum in the coming quarters.
MetLife’s shares have lost 4.5% year to date compared with the industry’s decline of 8.5%.
Other stocks in the same space including Prudential Financial (NYSE:PRU), Inc. PRU, American International Group (NYSE:AIG), Inc. AIG and American Financial Group (NYSE:AFG), Inc. AFG have lost 12.9%, 22.3% and 18.6%, respectively, over the same time period.
MetLife carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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