George Putnam, III
as part of our
MET Stock Offers Strong Brand Recognition, Management
Prowess & Global Diversification-at a
200 Park Ave., New York, NY 10166; 212-578-2211
Large-Cap ($40.3 Bil.)
$70.26 Bil. (12/31/11)
12 month Range:
Max. Rec Price:
Est Dividend Yield:
Founded in 1864 as the National Union Life and Limb Insurance
Company, MetLife (
) has grown into the largest life insurance company in the U.S. It
currently has about $4.2 trillion of life insurance in force.
The stock rose gradually to a high of 71 in 2007. Then, like
many financial companies, MetLife saw its stock get hit hard in
2008, and it has never really recovered.
MetLife has long had one of the strongest franchises and best
recognized brands in the life insurance business. The company is
now shedding other business lines so that it can focus more on its
core competency. For example, MetLife recently completed the sale
of its banking business to GE. This not only removes the
distraction of the banking business, but it also gets the company
out from under the more stringent capital requirements that apply
to bank holding companies.
The company is also shifting its business mix to improve its
risk profile. One example of this is management's decision to move
away from the capital intensive and market sensitive variable
In addition to its strength in the U.S., MetLife has a
substantial and growing presence abroad. It is particularly strong
in emerging markets which are likely to offer much greater growth
opportunities than the U.S. and Europe. The company greatly boosted
its global and emerging market exposure when it purchased AIG's
ALICO unit in 2010.
Despite the strength of the franchise, the stock looks cheap on
a valuation basis as investors continue to spurn old line financial
companies. The stock currently trades at just 0.62 times book
value, compared to well above 1.0 where it traded for many years
before 2008. Moreover, the stock has a forward price/earnings ratio
of only about 7x.
While MetLife has extricated itself from bank holding company
regulation, it is still subject to the non-bank Systematically
Important Financial Institution rules created by the Dodd-Frank
legislation. Since those rules are still evolving, the company has
been cautious about buying back stock or increasing its dividend.
However, I expect MetLife to take one or both of those shareholder
friendly steps once the regulatory fog begins to clear.
I believe that Wall Street's current aversion to financial
stocks creates an opportunity to buy a powerful and growing
insurance franchise at a depressed price and recommend buying
MetLife up to 45.