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Insurance Stocks

MetLife Inc Valuation – March 2018 $MET

Company Profile (obtained from Marketwatch): MetLife, Inc. provides insurance and financial services to individual and institutional customers. It offers life insurance, annuities, automobile and homeowner’s insurance and retail banking services to individuals as well as group insurance, reinsurance and retirement and savings products and services. The company operates its business through six segments: Retail, Group, Voluntary and Worksite Benefits, Corporate Benefit Funding, Latin America, Asia, and Europe, the Middle East and Africa. The Retail segment organized into two businesses: Life and Other, and Annuities. The Life and Other business products include variable life, universal life, term life, whole life, disability, property and casualty. The Annuities business offers a variety of variable and fixed annuities that are primarily sold to individuals and tax-qualified groups in the education, healthcare and not-for-profit sectors. The Group, Voluntary and Worksite Benefits segment is organized into two businesses: Group, and Voluntary and Worksite. The Group insurance products and services include life, dental, group short- and long-term disability and accidental, death and dismemberment coverage. The Voluntary and Worksite products and services include long-term care, prepaid legal plans, critical illness and property and casualty products. The Corporate Benefit Funding segment provides funding and financing solutions that help institutional customers mitigate and manage liabilities primarily associated with their qualified, nonqualified and welfare employee benefit programs using a spectrum of life and annuity-based insurance and investment products. The Latin America segment engages in the accident and health insurance, savings oriented pension product and credit insurance. The Asia segment engages in the life insurance, accident and health insurance, retirement and savings products and credit insurance. The Europe, the Middle East and Africa segment operates in 31 countries across EMEA, which is engaged in the life insurance, accident and health insurance, retirement and savings products and credit insurance. Metlife was founded on 1999 and is headquartered in New York, NY.

MET Chart

MET data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MET – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,816,165,787 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 56.02% Pass
5. Moderate PEmg Ratio PEmg < 20 12.79 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.63
MG Growth Estimate -0.55%
MG Value $26.82
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.59
MG Value based on 0% Growth $30.83
Market Implied Growth Rate 2.15%
Current Price $46.39
% of Intrinsic Value 172.97%

Metlife Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.77 in 2014 to an estimated $3.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Metlife Inc revealed the company was trading below its Graham Number of $76.7. The company pays a dividend of $1.6 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.79, which was below the industry average of 22.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Metlife Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $76.70
PEmg 12.79
PB Ratio 0.84
Dividend Yield 3.45%
TTM Dividend $1.60
Number of Consecutive Years of Dividend Growth 5

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $18,830,000,000
Total Assets $719,892,000,000
Intangible Assets $9,590,000,000
Total Liabilities $661,216,000,000
Shares Outstanding (Diluted Average) 1,062,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2017 $3.62
Dec2016 $0.67
Dec2015 $4.62
Dec2014 $5.42
Dec2013 $2.91
Dec2012 $1.12
Dec2011 $5.76
Dec2010 $2.86
Dec2009 -$2.89
Dec2008 $4.14
Dec2007 $5.48
Dec2006 $7.99
Dec2005 $6.16
Dec2004 $3.65
Dec2003 $2.94
Dec2002 $2.20
Dec2001 $0.62
Dec2000 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.63
Dec2017 $3.23
Dec2016 $3.00
Dec2015 $4.10
Dec2014 $3.77
Dec2013 $2.61
Dec2012 $2.37
Dec2011 $3.02
Dec2010 $2.27
Dec2009 $2.71
Dec2008 $5.50
Dec2007 $5.87
Dec2006 $5.57
Dec2005 $3.95
Dec2004 $2.62
Dec2003 $1.89
Dec2002 $1.20

Recommended Reading:

Other ModernGraham posts about the company

10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016
10 Best Dividend Paying Stocks for the Enterprising Investor – September 2016
10 Low PE Stock Picks for the Enterprising Investor – September 2016
Best Stocks Below Their Graham Number – August 2016
10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016

Other ModernGraham posts about related companies

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Prudential Financial Inc Valuation – July 2017 $PRU
Assurant Inc Valuation – March 2017 $AIZ
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Torchmark Corporation Valuation – March 2017 $TMK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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