Why MetLife’s U.S. Segment Revenues Are Likely To Shrink $3 Billion In 2019

Growth in MetLife’s (NYSE: MET) U.S. segment has been key to its intrinsic value over the years, as it is the highest contributing segment with an average revenue share of 51% over the last three years. The segment is expected to contribute $34 billion to the company’s 2019 revenues, which is $3 billion short of the previous year’s figure. While this will weigh on MetLife’s total revenue figure for the year, the company’s top line should expand thanks to expected growth of $4.1 billion in MetLife Holdings & Corporate division. Trefis details the key components of MetLife’s Revenues in an interactive dashboard, along with our forecast for 2019-2020.

Although MetLife Holdings & Corporate would drive growth in 2019, the U.S. segment will contribute 49% of the company’s $69.5 billion in revenues for the year – more than double the revenues for MetLife Holdings & Corporate segment of $15.3 billion. Additionally, you can make changes to our forecast for individual revenue streams in the dashboard to arrive at your forecast for MetLife’s Revenues.

What To Expect From MetLife’s Revenues Over Coming Years

• MetLife’s Total Revenue has Jumped 12% from $60.8 billion in 2016 to almost $67.9 billion in 2018, mainly due to a 26% growth in U.S. Segment
• The company is expected to add $1.52 billion in 2019 which would be driven by a $4.12 billion increase from MetLife Holdings & Corporate, $254 million from Asia Segment and $147 million from Latin America Segment, partially offset by an expected drop of $3 billion in the U.S Segment.
• Thereafter, revenues are expected to decrease 3% y-o-y and cross $67.3 billion by 2020, mainly due to a decline in revenue from MetLife Holdings & Corporate division.

Details about how trends in MetLife revenues compare with peers AIG, Prudential Financial and Hartford Financial are available in our interactive dashboard.

(A) Although the U.S Segment has grown 26% over the last two years, we expect these revenues to drop by $3 billion in 2019.

• This is the largest segment in terms of revenue which provides insurance coverage to both businesses and individuals. It could be divided into three businesses:
  1. Group Benefits – offers solutions such as term, variable, and universal life insurance, disability coverage, and dental solutions
  2. Retirement & Income Solutions – includes pension risk transfers, and stable value products
  3. Property & Casualty – offers solutions for automobile, property, and small businesses
• The segment premiums increased 31% over the last 2 years from $21.5 billion in 2016 to $28.2 billion in 2018. This includes a 19% growth in segment premiums in 2018 primarily due to higher sales in Retirement & Income Solutions.
• However, we expect the revenues to decrease 12% in 2019 – a decrease of $3 billion in absolute terms.
• Universal Life and Investment-Type Product Policy Fees is expected to remain at the same level as the previous year figure over 2019-2020.
• Net Investment Income from investment of segment premiums has increased 12% over the last 2 years from $6.2 billion in 2016 to $7 billion in 2018. Further, it is expected to increase at an average annual rate of 3% and cross $7.4 billion by 2020.
• Other revenues constitute a minority portion of the segment revenues. It is expected to increase 13% over 2019-20 from $0.82 billion in 2018 to $0.93 billion by 2020.

(B) MetLife Holdings & Corporates segment revenues are expected to grow 37% from $11.1 billion in 2018 to $15.3 billion in 2019.

• It comprises of products such as term insurance, variable insurance, universal life insurance, and various annuities products that the company has stopped marketing actively.
• This spike in 2019 will primarily be driven by Net Derivative Gains.
• We expect segment revenues to normalize in the subsequent year and cross $10.9 billion – down 29% y-o-y.

(C) Asia Segment revenue have increased at an average annual rate of 3% over the last two years, which is expected to continue over 2019-2020.

• This segment offers life insurance, accident & health insurance, and retirement & savings plan to businesses and individuals in 10 Asian markets along with Japan.
• Segment revenues have grown 5% over the last two years from $11.2 billion in 2016 to $11.8 billion in 2018. Further, we expect it to continue its momentum and cross $12.6 billion by 2020.

Our interactive dashboard for MetLife details what is driving changes in revenues for MetLife’s Asia Segment.

 (D) Latin America Segment revenues are expected to cross $5.4 billion by 2020.

• It provides life insurance, accident & health insurance, retirement & savings, and credit insurance to businesses and individuals in 7 Latin American jurisdictions along with Mexico & Chile.
• The segment revenues have grown 9% over the last 2 years from $4.7 billion in 2016 to $5.1 billion in 2018.
• We expect the revenues to increase at an average annual rate of 3% over 2019-2020.
• This would mainly be driven by growth in segment premiums.

(E) EMEA Segment is expected to add around $100 million over 2019-2020.

• It offers life insurance, accident & health insurance, retirement & savings, and credit insurance to businesses and individuals and has its largest base in the Gulf region, Poland, the UK, and Turkey.
• Although EMEA segment has grown at an average annual rate of 2% over 2016-2018, segment revenues in 2019 are expected to remain at the same level as the 2018 figure.
• Thereafter, they are expected to record a slight growth in the subsequent year and cross the $3 billion mark.

Trefis estimates MetLife’s stock (shows cash and valuation analysis) to have a fair value of $51, which is slightly below the current market price (Our price estimate takes into account MetLife’s earnings release for the third quarter).

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams| Product, R&D, and Marketing Teams
All Trefis Data
Like our charts? Explore example interactive dashboards and create your own.