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Investment Overview for MetLife (NYSE:MET)
Below we look the key drivers of the US life & non medical health insurance division with potential upside/downside to the Trefis price estimate.
- MetLife's Share of the International Insurance Market MetLife's share of the international market increased substantially over the last few years, from 0.1% in 2007 to 0.5 % in 2011. The company is expanding aggressively in high growth markets in Asia. The acquisition of Travelers Life & Annuity from Citigroup (NYSE:C) in 2005 and ALICO in 2010 helped it establish a foothold in the Asian market. We expect MetLife to increase its share of the market to around 0.7% through the Trefis forecast period. There is a 35% upside to the Trefis price estimate for MetLife's stock if its market share increased to 1% by 2019.
- Total International Insurance Premiums . The insurance market has seen substantial growth over the last few years, from $2.5 trillion in 2006 to $34 trillion in 2011. Developing economies in Asia have been the main drivers behind this growth. The middle class populace, the target demographic for insurance companies has seen a huge boom during the period. Asia is expected to account for 85% of the world’s middle class populace in the next five years. We expect the international market to grow at a steady pace over the next few years, breaching $5 trillion by 2017.
- MetLife's Share of US Life & Health Insurance Market MetLife's share of US life & health insurance market increased consistently from 6% in 2006 to 7% in 2011 due to its strong sales and distribution capabilities. The company is the largest life insurer in the U.S. with a strong brand image which has been built by serving customers for over 140 years of operation. We expect MetLife to maintain its share of the market at around 7% through the Trefis forecast period. There is a 10% upside to the Trefis price estimate for MetLife's stock if its market share increased to 10% by 2019.
MetLife is a leading provider of insurance, employee benefits and financial services with operations throughout the United States and the Latin America, Asia Pacific and Europe, Middle East and India regions. MetLife offers life insurance, non-medical health insurance (disability, long-term care, dental), retirement products (fixed/variable annuities), property and casualty insurance (auto, home insurance), retail banking and other financial services to individuals, groups and institutions.
MetLife's most valuable business is collecting premiums and fees from its customers, worldwide. The company invests insurance premiums collected across all its insurance products in assets such as bonds, equities and mortgages.
0.5% Share in $3.36 Trillion International Insurance Market
MetLife's international insurance business is the company's main source of value. This is due to the significance of the market, which we estimate will approach $5.5 trillion by 2019.
4% Yield on $493 billion in Invested Insurance Premiums
Insurance companies like MetLife invest the insurance premiums that they collect in order to generate growth in their insurance assets and better finance potential future insurance claims.
The value generated by MetLife's investment business is significant due to the size of the insurance assets that MetLife manages. We estimate that MetLife will have about $362 billion in insurance assets invested in fixed maturity investments (like bonds) in 2012 and generate about 3.5% yield on those assets. Furthermore, the company will have smaller, but potentially higher-returning investments in assets such as equities and mortgages.
Modest Growth in Life and Health Insurance Market
Growth in the life and health insurance business continues to be impacted by the current higher levels of unemployment and it is possible that people may further reduce or eliminate coverages in response to the financial pressures they are experiencing. Thus, any significant growth in the life and health insurance market in the near term is unlikely.
Acquisition of ALICO Expanded Footprint
Prior to the acquisition of ALICO, MetLife was the leading insurer in the U.S. and Mexico and now it is expected to become a leading insurer in Japan. ALICO will also lead to a position amongst the top five insurers in many emerging markets in Europe, the Middle-East and Latin America.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
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