MetLife Inc. (MET) Annual Valuation

moneyCompany Profile (obtained from Google Finance): MetLife, Inc. (MetLife) is a provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife operates in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. It is organized into six segments: Insurance Products, Retirement Products, Corporate Benefit Funding and Auto & Home (collectively, U.S. Business), and Japan and Other International Regions (collectively, International). U.S. Business provides insurance and financial services products, including life, dental, disability, auto and homeowner insurance. In September 2013, MetLife Inc and Thayer Lodging Group acquired the 365-room Hilton Los Cabos Beach & Golf Resort in Cabo San Lucas, Mexico in a joint venture. In October 2013, Banco Bilbao Vizcaya Argentaria SA sold its entire 64.3% interest in Administradora de Fondos de Pensiones Provida SA (AFP Provida) to Metlife Inc’s subsidiaries.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

  1. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $55.52
MG Opinion Fairly Valued
Value Based on 3% Growth $41.63
Value Based on 0% Growth $24.41
Market Implied Growth Rate 4.97%
PEmg 18.44
PB Ratio 0.97

Balance Sheet – 9/30/2013 

Total Debt $21,445,000,000
Total Assets $822,643,000,000
Intangible Assets $9,509,000,000
Total Liabilities $761,716,000,000
Outstanding Shares 1,120,850,000

Earnings Per Share

2013 (estimate) $3.38
2012 $1.08
2011 $6.27
2010 $2.99
2009 -$2.94
2008 $4.54
2007 $5.44
2006 $3.85
2005 $4.16
2004 $3.59
2003 $2.57

Earnings Per Share – ModernGraham 

2013 (estimate) $2.87
2012 $2.54
2011 $3.27
2010 $2.10
2009 $2.11
2008 $4.53


MetLife Inc. would be suitable for the Enterprising Investor if it had not posted a loss in 2009.  The company has demonstrated at least some growth in its earnings over the five year period, and pays a dividend, but Enterprising Investors require stable earnings for at least five years.  Note, however, that assuming all other things stay the same, next year the company will have achieved the requisite number of stable earnings years to qualify for the Enterprising Investor.  Defensive Investors are not interested in the company because of the lack of earnings stability or earnings growth over the ten year period.  As a result, Enterprising Investors should keep an eye on MetLife while researching other opportunities this year, perhaps beginning with a review of ModernGraham’s analysis of AFLAC Corporation (AFL).  From a valuation side of things, MetLife has grown its EPSmg (normalized earnings) from $2.11 in 2009 to an estimated $2.87 for 2013.  The market is currently implying a growth rate estimate of 4.97%, and the historically demonstrated growth supports the market’s estimate.  Therefore the company would appear to be fairly valued presently.

What do you think?  What value do you place on MetLife Inc.?  Is the company suitable only for Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in MetLife Inc. (MET) or any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

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