Outlook for Metlife’s US Life & Health Insurance Market Share

MetLife (NYSE:MET) is one of the leading providers of life and health insurance the U.S. and mainly competes with AIG (NYSE:AIG), Prudential Finance (NYSE:PRU), New York Life, Northwest Mutual, etc, many of which are comparable in size with MetLife. Its share in the U.S. life and health insurance market has steadily increased over the past few years from 6.0% in 2006 to an estimated 6.75% in 2010, due to its wide distribution network consisting of partnerships with various banks, brokerage firms, and financial planners.

Metlife provides a variety of insurance policies (individual life, group life and non-medical health) to individuals as well as corporations. The aging baby boomer demographic (people born between the years 1946 and 1964) is the U.S. can significantly benefit insurance companies like Metlife. According to a study by Metlife’s Mature Market Institute, baby boomers constitute around 26% of the U.S. population and have an estimated spending power of $1 trillion. ^[1]

Amid stiff competition, it will be challenging for Metlife to provide customers better service and more products without significantly increasing costs. Our price estimate for Metlife’s stock stands at $48.83, ahead of the current market price of $44.61.

Given the importance of life & health insurance business to Metlife, we pose the following question:

What % of Metlife’s Stock Value is U.S. Life & Non-Medical Health Insurance?

A) 28%

B) 42%

C) 60%

D) 75%

Metlife is Well-Placed in the Insurance Market

MetLife is the largest insurance company in the U.S. with total assets of over $730 billion as of December 31, 2010. It enjoys strong reputation and trust among its customers. MetLife has invested substantially over the years to build a robust distribution network and sales channels which it can now leverage to gain market share. In addition to enjoying trust from its customers, Metlife has time and again received strong ratings for its financial strength by agencies like A.M. Best, Fitch, Moody and Standard & Poor.

It recently introduced a new whole life insurance product, MetLife Promise Whole Life, after research by Life Insurance and Market Research Association (LIMRA) revealed that individual life ownership in the U.S. reached 50-year low in 2010, with only 44% of the US households owning individual life insurance. The new product provides traditional life insurance coverage and benefits of guaranteed cash value that grows each year. (see MetLife Pushes New Products to Add Life to Shares)

See our full analysis and $48.83 price estimate for Metlife stock

1. Selling to Baby Boomers: Debunking the Myths, Insureme.com [↩]