Is MetLife Stock A Buy?

MetLife’s stock (NYSE: MET) has gained roughly 12% YTD as compared to the 7% drop in the S&P500 index over the same period. Further, at its current price of $70 per share, it has an upside potential of 8% to its fair value of $76 – Trefis’ estimate for MetLife’s valuation. The insurance giant surpassed the consensus estimates in fourth-quarter results, with total revenues increasing 3% y-o-y to $20.1 billion. The rise was primarily driven by a 32% y-o-y gain in other revenues, followed by a favorable decrease in net derivative losses from -$1.56 billion to -$196 million. Notably, the premiums and fees income declined 5% y-o-y to $14.5 billion, primarily driven by lower revenue in U.S. business. Overall, the adjusted net income increased from $124 million to $1.2 billion in the quarter, leading to a quarterly EPS of $1.39. The profitability numbers improved due to a decrease in total benefits & expenses as a % of revenues from 99.2% to 93.5%.

The company’s total revenues increased 5% y-o-y to $71.1 billion in 2021. This was primarily driven by a 2% growth in the premiums, fees, and other income to $50.4 billion coupled with a 25% increase in the net investment income to $21.4 billion. The premiums, fees, and other income increased 14% in the Latin America segment, partially offset by negative growth in all other units. Further, the net investment income mainly benefited from higher investment yields due to strong returns in private equity and real-estate portfolios. Altogether, the adjusted net income grew 22% y-o-y to $6.4 billion. It could be attributed to the revenue growth, followed by a slight dip in total benefits & expenses as a % of revenues and lower provisions for income tax.

The interest rates are anticipated to increase in 2022, benefiting the net investment income of MetLife. Further, the recovery in the economy is likely to improve the premiums, fees, and other income. Overall, MetLife revenues are expected to remain around $69.5 billion in FY2022. Additionally, MET’s adjusted net income margin is likely to see a slight increase from the 2021 levels, resulting in an adjusted net income of $6.6 billion and an annual EPS of $8.10. This coupled with a P/E multiple of just above 9x will lead to the valuation of $76.

Here you’ll find our previous coverage of MetLife stock, where you can track our view over time.

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[1] Month-to-date and year-to-date as of 4/13/2022
[2] Cumulative total returns since the end of 2016

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