MetLife’s stock (NYSE: MET) has lost 13% YTD as compared to the 18% increase in the S&P500 index over the same period. Further, at its current price of $63 per share, it is trading 18% below its fair value of $77 – Trefis’ estimate for MetLife’s valuation.
Interestingly, MetLife stock had a Sharpe Ratio of 0.2 since early 2017, which is lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.31 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
The insurance giant outperformed the consensus estimates in the second quarter of 2023. It reported total revenues of $16.62 billion – up 7% y-o-y. It was mainly due to a 42% jump in the net investment income (NII), which benefited from growth in income from mortgage loans and fixed-maturity securities. Further, total premiums marginally increased in the quarter. That said, net investment losses rose from $682 million to $1.04 billion, hurting the top line. On the cost front, total expenses as a % of revenues witnessed an unfavorable increase, leading to an adjusted net income of $371 million – down 58% y-o-y.
The company’s total revenues grew 4% y-o-y to $32 billion in the first half of FY 2023. The growth was mainly due to higher net investment income, partially offset by lower total premiums. Notably, the premiums primarily suffered in the U.S. and Asia segments. That said, the firm reported a significant increase in the expense figure over the same period. It resulted in an 84% y-o-y drop in the adjusted net income to $384 million.
Moving forward, MetLife revenues are estimated to remain around $69.7 billion in FY2023. Additionally, MET’s adjusted net income margin is likely to improve from the 2022 levels, resulting in an annual GAAP EPS of $7.47. This coupled with a P/E multiple of just above 10x will lead to a valuation of $77.
|S&P 500 Return||-2%||18%||102%|
|Trefis Reinforced Value Portfolio||-4%||32%||576%|
 Month-to-date and year-to-date as of 8/31/2023
 Cumulative total returns since the end of 2016