Friday, June 5, 2015

Seeking Alpha: MetLife Muddling Through For Now

For all of the positives I can name about MetLife (NYSE:MET), only the pathetically low rate of return on money market funds keeps me from arguing that investors would have done better putting their cash there than in the shares of this leading life insurance company. I mentioned the risk of regulatory uncertainties weighing on the stock a year ago, but I underestimated the extent to which that would impact sentiment. Likewise, I had expected more action in interest rates by now, and MetLife sits with Prudential (NYSE:PRU), Lincoln National (NYSE:LNC), and AXA (OTCQX:AXAHY) in the part of the room that really needs to see higher rates to start performing better.

At the risk of making an "I wasn't wrong … just early!" call, I still do believe that MetLife shares are meaningfully undervalued today. I believe the company has done well in shifting its mix towards higher return products with lower capital requirements and I believe the shift toward more protection-oriented products has been a smart one. Additionally, I believe the company can do well both in emerging markets and with new annuity products that reduce the risk to the issuer. I've stretched out the timeline to MetLife achieving 12% ROE and have maintained a high discount rate to account for the regulatory uncertainty, but still believe fair value is in the mid-$60's today.

Read more here:
MetLife Muddling Through For Now

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