QUOTE AND NEWS
Benzinga  Sep 22  Comment 
Metlife Inc (NYSE: MET) shareholders are holding on and collecting their dividends right now. Technicians say they should continue to do so at least until the stock hits $61.62. What the bulls see in Metlife: A blue chip company with...
Forbes  Sep 19  Comment 
The New York Giants may soon enter crisis mode as the NFL season reaches Week 3. Following an 0-2 start to the season, they will head home to MetLife Stadium this Sunday to host the Houston Texans for a game that will see secondary ticket prices...
Market Intelligence Center  Sep 19  Comment 
After closing Thursday at $55.89, Metlife Inc. (MET) presents an attractive opportunity to get a 5.14% return in just 64 days, which is an annualized return of 29.30% (for comparison purposes only). To enter this trade, sell one Nov. '14 $57.50...
Benzinga  Sep 19  Comment 
Stephanie Link said CI) on Thursday. Cigna gained 1.19 percent and it closed at $95.21. Pete Najarian thinks that Metlife Inc (NYSE: MET) is going higher. The stock gained 1.10 percent on Thursday. Jon Najarian bought NetApp Inc. (NASDAQ:...
Benzinga  Sep 18  Comment 
Tim Seymour said on CNBC's Fast Money that he is a buyer of Baidu Inc (ADR) (NASDAQ: BIDU). He likes the company because of its proven track record. Baidu jumped 1.63 percent on Wednesday. Pete Najarian thinks that there is more upside to come...
Jutia Group  Sep 16  Comment 
[Business Wire] - MetLife has earned a spot on the 2014 Working Mother magazine’s 100 Best Companies list for outstanding leadership in establishing policies, programs and a corporate culture that supports working moms. Read more on this. ...
Finance Asia  Sep 16  Comment 
After a tricky integration MetLife’s $16.12b Japan purchase is paying off and fuelling the insurer’s growth in Asean.
New York Times  Sep 15  Comment 
Issues like domestic abuse didn’t seem to impinge on Giants fans’ eager expectation of a game against the Cardinals at MetLife Stadium.
SeekingAlpha  Sep 13  Comment 
By Abba's Aces: The last time I analyzed MetLife, Inc. (NYSE:MET) on August 4, 2014, I stated, "I'm glad that I did this review today, because I believe this is a good entry point for me in the stock to catch some more of that dividend, with the...
TheStreet.com  Sep 12  Comment 
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. aTheStreet Ratings quantitative algorithm...




 

MetLife (NYSE: MET) is one of the largest insurance and financial services companies in the U.S; the company collected $26.5 billion in premiums for 2009.[1] It has a very diverse range of products and services, including many different kinds of insurance, savings plans, and retirement plans.

MetLife's main source of revenue comes from insurance premiums. The company takes the money paid by those who buy insurance policies and invests it in a number of different ways. If the return on investment (the "spread") plus the premiums is greater than the payout to policy holders, the company profits. This business model while common in the insurance industry is especially vulnerable to natural disasters and swings in the equity markets. The former in form of hurricanes, earthquakes and forest fires, can result in hundreds of millions to billions of dollars in losses in a single year. The company paid out $333 million in homeowners insurance in 2006 related to Hurricane Katrina. A poorly preforming market on the other hand can result in a loss of investment income which is often a crucial component of profitability.

Over the past several years, MetLife has focused on organic growth and cost reduction. While it has experienced some success in this area its expenses still continue to be high compared to those of the insurance industry.

Corporate Overview

The Metropolitan Life Insurance Company, MetLife, began in 1863 to insure "life and limb" with only $100,000. It has since expanded to a multi-billion dollar diverse financial institution. MetLife provides insurance and financial services for individuals and institutions throughout the US, and is currently pursuing international opportunities. Services include life, auto and home insurance, annuities, and retirement and savings planning.

Business Financials

In 2009, MET earned a total of $41 billion in total revenues.[1] This was a decline from its 2008 total revenues of $dsdsds51 billion. This had a negative impact on MET's net income. Between 2008 and 2009, MET's net income went from a net profit of $3.3 billion in 2008 to a net loss of $2.3 billion in 2009.

Business Segments

Metlife breaks its operations into four segments.

Institutional Insurance

Insurance sold to businesses as group plans makes up about half of MetLife's revenue. This category includes group life insurance, retirement plans, and savings services sold to third parties, rather than directly to the customer. Insurance in this category generates less revenue per unit than individual insurance, but each plan has multiple units leading to greater overall revenue. This portion of MetLife's business has remained relatively stable over the past few years.

Individual Insurance

This is MetLife's retail department. The company sells individual life insurance plans and annuities directly to the end consumer. Although second in terms of revenue generated, this business is number one in terms of net income. It is MetLife's most profitable business. For more discussion of what might effect sales of individual policies, see the Trends and Forces section.

Auto and Home Insurance

Although this is a smaller portion of MetLife's business, auto and home insurance are still significant to the company's profits. Plans are bought by the individual consumer, like individual insurance, but for homes and cars. A booming economy with higher sales of new cars and homes, as well as state laws mandating auto or home insurance increase revenues in this category.

International Services

MetLife has a large operation in Mexico and several businesses in Korea and Japan selling financial services. MetLife also recently acquired Travelers Life & Annuity (mid-2005) which helped to open up channels for sales in Europe. As part of its plan for further international expansion the company is targeting developing economies such as China. Typically it will "seed" these countries by offering a few services on a small scale. Based on the outcome MetLife will than make a decision to expand its service offering or shut down its operations in that country.

Trends and Forces

Diversification & Scale Economies

Due to shifting demand and inherent risk in insuring and investment, diversification is essential to provide a "buffer" for market shocks. If each business area accounts for only a small portion of a company's revenue, the effects of fluctuations will be minimized. MetLife has a very diversified mix of businesses that are[spread-based, protection-based, and fee-based. This means that it is collecting revenues through different types of plans. MetLife's subsidiaries focus on institutional businesses, retail customers, as well as global interests.

In addition to diversification of products, economies of scale are essential to success in the insurance industry by providing a large number of services companies like MetLife can spread the fixed costs of running a business, such as technology, advertising, compliance, over multiple streams of revenue.MetLife is similar in theory to a conglomerate of many small businesses which have merged in order to share an office. Each additional customer or business is less of a proportional risk, and thus expansion of MetLife's business incurs little incremental cost.

Recognition and Brand Loyalty

Insurance and financial companies can easily be perceived as cold and uncompassionate; Over the years, movies and news stories, about insurance companies' attempts to defraud their customers have only strengthened this portrayal. MetLife has tried to combat this image with an innovative marketing campaign involving Snoopy and the MetLife Blimp. MetLife uses characters from the Peanuts cartoon strip in many of its advertisements, creating brand recognition that is associated with warmth. In addition, the company leases two blimps, Snoopy One and Two, which fly around the country to different events throughout the year. This combination of tactics creates name recognition and urges consumers to consider managing uncertainties today rather than waiting until problems arise. Brand recognition is very important, as there can often be little else to distinguish financial service companies, and so MetLife's friendly advertising campaign is definitely an innovative way to build recognition and then loyalty.

Market Pressures

  • Aging US Population: Over the next decade, aging baby boomers are expected to create robust demand for various insurance and wealth accumulation products. Increased longevity means that that this group will need to generate enough wealth to last decades into retirement. As a top insurance company with strong brand recognition and a diversified portfolio of products, MetLife is very well positioned to take advantage of this demographic shift.
  • Hurricanes: Natural disasters such as hurricanes can severely impact the profitability of insurance companies. One of the basic premises of insurance is that in most cases an insurance company will not have to pay out most of its policies at once. For instance if an insurance company insures 100,000 people in New Jersey, the expectation is that while there may be some claims each year, the company and most people will be fine. This means that insurance companies are able to not only continue receiving premiums over time, but are able to invest these premiums. Hurricane Katrina resulted in over $333MM in home insurance policy payouts in 2006. There were also smaller but still significant payouts on auto insurance policies.

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Comparison to Competitors

In the insurance industry there are three main determinants of profitability: premiums collected, investment performance, and losses incurred. Increasing the amount of premiums collected equals higher revenue. This revenue can then be invested, hopefully at a profit. Each year the company has to pay claims against the premiums that it has collected. The fewer payouts a firm has in a given year, the more money remains for investment. Ironically, in some years the payouts are greater than premiums received, and the firm has to rely on its investments for profitability.


Some of MetLife's top competitors are Allstate, Progressive, and Liberty Mutual.




References

  1. 1.0 1.1 MET 10-K 2009 Item 6 Pg. 61
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