) is one of the largest sellers of life insurance in the U.S. and
has started offering prepaid life policies through Wal-Mart (
) stores. Around 200 retail stores in South Carolina and Georgia
have started selling MetLife's products boosting the distribution
network for individual life insurance beyond the traditional
broker-dealer model. MetLife's target demographic has hitherto been
restricted to middle-income and more affluent customers, but the
partnership with Wal-Mart will help it reach all socioeconomic
strata given Wal-Mart's reach.
MetLife has also received an extension for a deadline to
resubmit capital plans to the Federal Reserve. The company is
looking to sell about $7.5 billion in U.S. deposits and its online
banking platform to General Electric (
) so as to avoid the classification as a bank holding company which
restricts its ability to pay dividends and buyback shares. The
deadline has been extended from September 30, 2012 to January 5
to allow the deal to go through.
$35 price estimate for MetLife's stock
, is 10% above the current market price.
See our full analysis of MetLife
An Innovative Distribution Network
MetLife currently relies on a network of financial advisers,
banks, consultants and brokerage agencies to distribute its
products in the U.S. Most of its competitors in the U.S., including
Prudential Financial (
) and AIG (
), employ a similar model for distribution. Manulife (MFC),
however, sells through retail chain, Costco (COST), in Canada but
still targets affluent customers. MetLife is looking to replicate
the model and use its popular Snoopy and Peanuts characters
trademark to reach out to retail store customers.
Life insurance products are generally bought by a more affluent
demographic as insurance companies generally target customers with
annual income above $100,000. The high cost of insurance is one of
the main reasons why penetration, measured by taking premiums as a
percentage of GDP, is around 8% in the U.S. In comparison, in the
U.K., the penetration is much higher at 14%.
The 2010 census in the U.S. revealed that about 50% of the
households in the country have an annual income less than $50,000
forming a huge customer base for MetLife and other insurance
companies to tap into. About 56% of Wal-Mart's customers make less
than $50,000 a year, and we believe that by distributing its
products through the retail chain, MetLife might be looking to
expand its reach to the aforementioned populace.
The pricing certainly looks affordable as the company is now
offering a one-year policy with a $10,000 death benefit through
Wal-Mart. The price for customers aged 18 to 44 is $69 whereas that
for customers above 60 is much higher at $429 for a single year
coverage of $25,000. Customers can purchase a pre-paid card at the
retail store, covering the policy fees, and activate the policy by
calling the telephone number provided. In the event, the customer
does not meet MetLife's minimal underwriting criteria to be
eligible for the policy, he or she can use the card for
Sales of MetLife's most popular product, Universal Life
Insurance, dropped by 31%, year-on-year in the second quarter of
2012. The product accounted for almost half of the sales of life
insurance products last year but has not struggled this year. We
believe that by expanding its distribution network and its target
demographic, MetLife stands to gain market share in the mature U.S.
economy and revive sales. We currently forecast MetLife's share to
reach 6.9% by the end of our forecast period. You can use the
interactive chart below to assess the impact a change in market
share will have on our price estimate.
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