Is MetLife Stock Fairly Priced?

+21.52%
Upside
74.22
Market
90.19
Trefis
MET: MetLife logo
MET
MetLife

MetLife’s stock (NYSE: MET) has made negligible gains YTD as compared to the 6% increase in the S&P500 index over the same period. Further, at its current price of $73 per share, it is trading 13% below its fair value of $84 – Trefis’ estimate for MetLife’s valuationThe insurance giant posted lower-than-expected results in the fourth quarter of 2022. It reported total revenues of $16.3 billion – down 19% y-o-y. The top line mainly suffered due to a 15% drop in the net investment income (NII), followed by a 29% decline in total premiums. That said, the adjusted net income grew 12% y-o-y to $1.3 billion due to a favorable drop in the policyholder benefits and claims as a % of revenues in Q4.

The company’s total adjusted revenues increased 8% y-o-y to $75.5 billion in FY 2022. Notably, total GAAP revenues were down 2% y-o-y to $69.9 billion. The growth was mainly due to higher total premiums – which increased 18% y-o-y to $49.4 billion, partially offset by a 26% decrease in the net investment income. In terms of operating segments, U.S. segment revenues rose by 24% y-o-y coupled with a 20% growth in the Latin America division. However, all the other units posted negative growth. On the flip side, the adjusted net income was reduced by 63% y-o-y to $2.35 billion in the year, primarily because of a significant jump in the total expenses figure. 

Moving forward, we expect the net investment income to see some improvement over the subsequent quarters. Overall, MetLife revenues are forecast to remain around $69.8 billion in FY2023. Additionally, MET’s adjusted net income margin is likely to increase from the 2022 levels, resulting in an adjusted net income of $6.17 billion and an annual GAAP EPS of $8.21. This coupled with a P/E multiple of just above 10x will lead to a valuation of $84.

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 Returns Feb 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 MET Return -1% 0% 47%
 S&P 500 Return 0% 6% 82%
 Trefis Multi-Strategy Portfolio 0% 11% 250%
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[1] Month-to-date and year-to-date as of 2/20/2023
[2] Cumulative total returns since the end of 2016

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