MetLife Continues To Languish In An Out-Of-Favor Sector

Maybe the nicest thing I can say about MetLife (MET) is that it has suffered no worse than its sector, with the shares down 4% over the past year and more or less in line with Lincoln (LNC) and Prudential (PRU), while Unum (UNM) has fallen more than 20%. The issues for investors remain more or less the same – worries about spread pressure, worries about credit quality risk in fixed income, worries about the growth potential of mature markets, and probably most importantly, worries about the status of reserves in long-term care insurance books.

I continue to believe MetLife is undervalued, but it’s hard to identify a catalyst for a turnaround in sentiment. A successful/benign completion of its actuarial review of its LTC business would certainly help, but I think investors are firmly in the “we’ll believe it when we see it” camp when it comes to the potential of the LTC business, as well as the company’s cost-cutting targets and growth initiatives. I continue to see fair value in the low-to-mid $50s, which when combined with the dividend, suggests a pretty good return for this unpopular name.

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MetLife Continues To Languish In An Out-Of-Favor Sector

MetLife Moving Past Some Self-Inflicted Challenges And Toward Unlocking Value

MetLife's (MET) performance over the past year hasn't been all that good, but it has at least been better than that of many of its peers. Although MetLife has done a lot to clean up and improve its business, the company still has a track record of inconsistent results (often punctuated by large charges) and headwinds like lower returns on equity from its run-off business and spread compression in its U.S. retirement business.

I think expectations for MetLife are low and that the shares could be positioned to outperform as a result. The company's earnings growth outlook is rather modest, and that is a concern, but I do believe book value growth should improve from here and exceed core earnings growth. If and as that happens, the multiple should expand and MetLife should get more of its due, but investors should appreciate that this name is highly likely to be more tortoise than hare.

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MetLife Moving Past Some Self-Inflicted Challenges And Toward Unlocking Value

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.

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MetLife Muddling Through For Now

Seeking Alpha: Uncertainties Weighing A Little Too Heavily On MetLife

For a company that has been either a group leader or solidly above peer averages for quite some time, MetLife (MET) doesn't get a lot of benefit of the doubt these days. Some of that can be tied to the weak rate environment as well as uncertainties as to how large insurance companies like MetLife will be regulated in the future. I believe investors are too worried about the negatives on this name and are underrating the growth potential of the company's overseas businesses and the value of its strategic shift toward more protection-oriented and less capital-intensive business. These shares could be as much as 25% undervalued today, making it a very worthwhile name to consider at these levels.

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Uncertainties Weighing A Little Too Heavily On MetLife

Investopedia: MetLife's Guidance Reflects A Wider Problem

For readers who think that the United States government bends over backwards to accommodate the financial industry, MetLife's (NYSE:MET) discussion of guidance for the remainder of 2012 and 2013 is a must-read. While the troubled asset relief program and a variety of other government programs clearly allowed financial companies to shore up their capital, the reality is that the zero interest rate policy and "QE infinity" are taking a toll on companies that earn their living on interest rate spreads.

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http://www.investopedia.com/stock-analysis/2012/MetLifes-Guidance-Reflects-A-Wider-Problem-MET-USB-PRU-ZION1214.aspx

Investopedia: MetLife Keeps On Keeping On

It's too much of a stretch to say that the financial sector is healthy again, but banks and P&C insurers have largely recovered a lot of lost value. Conditions are not so strong in the life insurance industry, though, where low rates and volatile markets have done a number on many aspects of the business. Tough times tend to highlight the best operators, though, and I believe MetLife (NYSE:MET) continues to demonstrate why it is a top-notch company that is meaningfully undervalued.

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http://stocks.investopedia.com/stock-analysis/2012/MetLife-Keeps-On-Keeping-On-MET-PRU-PUK-LNC0803.aspx

Investopedia: Hartford's Transformation Is A Multi-Year Proposition

At a time when many insurance companies are looking to diversify and enter new markets to stimulate growth, Hartford Financial Services (NYSE:HIG) is looking to go in the other direction. Although exiting life insurance, retirement and annuities should both improve and stabilize returns over the long term, but it's likely going to take many years for the benefits to show up. While Hartford's current valuation seems to understate the core value in the business, investors could be looking at dead (or at least very sleepy) money for a while.

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http://stocks.investopedia.com/stock-analysis/2012/Hartfords-Transformation-Is-A-Multi-Year-Proposition-HIG-MET-LNC-PRU0618.aspx

Investopedia: When Will Genworth's Turnaround Come?

There's still ample economic wreckage from the housing bubble and crash, but many participants have clawed their way back and are starting to see signs of normalization. Major mortgage issuers like Wells Fargo (NYSE:WFC) are back to paying dividends and thinking about long-term growth strategies, while insurance companies like MetLife (NYSE:MET) are largely secure from a capital standpoint (even if U.S. regulators don't completely agree).
Genworth (NYSE:GNW) is a different case. While the stock and company are clearly back from the brink of complete ruin (the stock traded for less than 90 cents just over three years ago), the company is not exactly strong or thriving again. The resignation of the company's CEO may facilitate a better turnaround strategy, but investors considering these shares are going to have to have patience to see the investment work out.

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http://stocks.investopedia.com/stock-analysis/2012/When-Will-Genworths-Turnaround-Come-GNW-MET-UNM-PRU0615.aspx

Investopedia: MetLife Seems Seriously Underestimated

Even accepting that the credit crunch and recession changed a lot of views on just how strong even the best financial institutions actually are, it seems like MetLife (NYSE:MET) still carries too much doubt and skepticism with it. Granted, regulatory burden and low interest rates are certainly near-term challenges, but patient investors could reap outsized gains if and when MetLife can return to more normal performance.

Pretty Solid Fourth Quarter Results  
MetLife delivered a good end to the fiscal year. At the bottom-most of bottom lines, operating earnings came in at $1.31; not only up 15% from last year, but comfortably ahead of an average expectation of 1.24.

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http://stocks.investopedia.com/stock-analysis/2012/MetLife-Seems-Seriously-Underestimated--MET-PRU-GNW-SLF0216.aspx