MetLife (NYSE:MET) recently issued guidance for 2012 and the fourth quarter of 2011. The company expects fourth quarter operating earnings to be between $1.2 billion and $1.3 billion, an increase of 7% from $1.2 billion in the fourth quarter of 2010. A volatile macro economic environment, several natural disasters and an uncertain regulatory environment pressured earnings in 2011. For 2012, the company expects operating earnings to be between $5.1 billion and $5.6 billion, again about 7% increase over the 2011 adjusted results. In addition to the earnings growth in 2012, the company expects a 5% increase in revenues in 2012 over 2011. Growth in international operations after the acquisition of Alico should be the main driving factors of the company’s 2012 results.  This growth should allow the company to better compete on an international level with peers such as Manulife (NYSE:MFC).
We have a price estimate of $36 on MetLife’s stock, about 13% above the current market price. The company’s stock price is down by about 25% so far this year and the company expects the improvement in 2011-2012 to provide about $7 billion of capital that could be used to buyback shares or raise dividends in order to boost its stock price. Last quarter the Federal Reserve rejected the company’s bid to raise dividends, given its bank holding status. The company is now looking to restructure to bypass the Fed’s veto power. 
Below we look at two major divisions of MetLife that should fuel its growth in 2012.
The acquisition of Alico has strengthened MetLife’s position in the global insurance market. MetLife can now reach a much wider set of customers across different geographies, and should be able to leverage its existing products and brand to gain market share. MetLife can now concentrate on the growing life and health insurance market in Asia without worrying too much about the slowdown back home. We estimate that the international insurance market will grow 4-5% annually the next couple of years, making the international insurance division MetLife’s most valuable division.
U.S Retirement Annuities
The need for retirement products in the U.S. has grown substantially over the last few years driven by the growth in the number of people reaching retirement age. This trend will only grow stronger in the coming 2-3 years and MetLife, the largest seller of variable annuities in the U.S., is well positioned to benefit from this trend. In 2012, we expect a 10% increase in MetLife’s variable annuity assets and a 5% increase in annuity premiums. This should help the company realize its growth targets for 2012.Notes:
- MetLife Announces 2012 Guidance & Expected 2011 Financial Results, Press Release, MetLife Inc., Dec 5, 2011 [↩]
- UPDATE: MetLife Execs See Profit Improvement Despite Headwinds, WSJ, Dec 5, 2011 [↩]