MetLife (NYSE:MET) is the biggest life insurance company in the U.S., with market share of 10% in the country’s life insurance market. However, with the financial downturn of 2008 leading to a slowdown in the U.S. market, the insurer is looking for international growth, particularly in Asian emerging markets.
MetLife’s premiums from the U.S. declined from $17.17 billion in 2008 to $16 billion in 2012. In contrast, premiums from international operations grew from $2.88 billion in 2008 to $13.29 billion in 2012. Much of this growth came from the 2010 acquisition of ALICO from AIG (NYSE:AIG), which helped MetLife establish a foothold in Asia. Asian markets now account for more than 60% of the company’s international premiums and will be the focus of our discussion for the next two articles.
- MetLife Q4 Earnings: Lower Profits, Moratorium On Share Buybacks
- MetLife Earnings Preview: FX Headwinds, Low Investment Income To Offset Business Growth
- FX Headwinds, Lower Interest Rates Soften MetLife’s Q1 Earnings
- MetLife Earnings Preview: Business Growth In Sight Despite Challenges
- India Opens Insurance Sector To Foreign Players
- Business Growth, Lower Investment Income Drive MetLife’s Earnings
MetLife has operations in some of the fastest growing economies in Asia, including China, Japan, Hong Kong, South Korea and Australia. The company has recently entered an agreement with Punjab National Bank (PNB) to expand into the Indian market and also has operations in UAE, Nepal, Bangladesh and Pakistan.
Japan Is The Key
Japan is the second biggest life insurance market in the world after the U.S.  More than 20% of the world’s premiums and half of Asia’s premiums originate in the country. There are only 43 life insurance companies in Japan, a very small number for a mature market. In comparison, the U.S. has more than 800 life insurers while France has more than 250.
Japan Post Insurance (JPI) dominates the Japanese life insurance market with more than 20% market share.  Nearly half of the insurers in the country are foreign-owned operating as subsidiaries. Domestic companies with foreign capital include Allianz Life, AXA Life, AEGON Sony Life, ING Life, Manulife (NYSE:MFC) Life, MassMutual Life, MetLife ALICO and Prudential Financial (NYSE:PRU) Gibraltar Life. Foreign-owned companies have a combined market share of close to 20% in the Japanese life insurance.
Insurance penetration measured by taking premiums as a percentage of GDP is quite high in Japan at close to 10%.  In comparison, the U.S. has an insurance penetration of 4%. Premium growth, measured in U.S. dollar equivalents, was close to 15% in 2010 and 2011. But monthly statistics from The Life Insurance Association of Japan indicate a 3% year-on-year decline in premiums, measured in Yen, in 2012.
MetLife has a market share of around 5% in the Japanese insurance market with around 7 million policies in force and over $75 billion in assets.  The company offers Yen whole life products like low cash value whole life, Yen interest simplified whole life and simplified issue whole life as well as foreign currency whole life products like USD interest sensitive whole life and Euro interest sensitive whole life. Bancassurance is the main distribution model for the company, accounting for 33% of the sales. MetLife has around 100 banking partners in the country with over 42 tier 1 regional banks and five mega banks.
Traditional segments comprising of individuals approaching retirement or retired in their 50s account for 76% of the Japanese insurance market  MetLife has a market share of 5% in this segment. The company’s market share is higher, around 6.5%, in the growing segments comprising of individuals in the 30 to 40 age group that account for 11% of the Japanese market. MetLife has a low penetration amongst the younger generation comprising of individuals in their 20s, with a market share of just 3.5%.
As we discussed in our article, An Overview Of The Japanese Life Insurance Market, we expect the Japanese market to grow to $533 billion by the end of the decade. We also expect MetLife to maintain its market share in the country.
Our $39 price estimate for MetLife’s stock is at a discount of 10% to the current market price.Notes: