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How Long Can MetLife's Strength In The U.S. Keep It Ahead Of Peer Prudential Financial?

MetLife (NYSE: MET) is a leading provider of life insurance, accident & health insurance, retirement & savings, and credit insurance services to retail customers & corporates with operations throughout the United States and the Latin America, Asia Pacific and Europe, Middle East and India regions. Its business model faces stiff challenges and competition from offerings by its global competitors like AIG, HIG, Prudential Financial, Travelers etc., which can impact MetLife’s stock.

Trefis has analyzed changes in different revenue streams for MetLife vs Prudential over the last 4 years in an interactive dashboard, along with our forecast for 2019. While MetLife generates more revenues, its international business has fared worse than Prudential. If Prudential continues its strong growth trajectory in U.S. and abroad, it could close the revenue gap with MetLife in a few years.

Trefis estimates MetLife’s valuation to be $52 per share, which is roughly 15% higher than the current market price. Additionally, you can see more Trefis data for Insurance companies here.

MetLife has higher total revenues, although it offers fewer products than Prudential

  • Prudential Financial reported total revenues of $63 billion in 2018, which was 7% less than MetLife.
  • Revenues for both MetLife and Prudential have grown by roughly 10% over the last four years.
  • We expect MetLife revenues to drop by 3.9% y-o-y in 2019, whereas Prudential revenues would decrease by 2.3% to $61.5 billion.

MetLife has higher U.S Insurance premiums & policy fees, although its segment account balance is significantly lower

  • MetLife reported $22.6 billion in revenues for its U.S. insurance segment in 2015, which was 13% more than Prudential’s figure.
  • However, this difference has increased over the last 4 years – MetLife reported revenues of $30.1 billion in 2018 which was 17% more than its peer.
  • Its segment revenues have grown 33% from $22.6 billion in 2015 to $30.1 billion in 2018, whereas Prudential’s figure has grown 28% over the same period.
  • Although MetLife’s average account balance for the segment was roughly one-fourth than its peer over the period, its segment premium as % of account balance was significantly higher.
  • Further, this segment is the highest contributor to total revenues for both the companies.

Other Points to consider

  • Prudential Financial has seen steady growth in International Insurance premiums & policy fees over the last four years, whereas MetLife has struggled in this segment. It reported $14.8 billion in segment revenues in 2015, which was 1% less than Prudential’s figure. However, this difference has widened considerably over the last 4 years.
  • MetLife has higher investment income, although it is growing at a slower pace than Prudential. It reported $17.2 billion in investment income in 2018, which was 33% more than Prudential’s figure.
  • Prudential Financial’s operating margin over 2015-2017 was higher than its peer. However, MetLife surpassed Prudential’s figure in 2018 primarily due to a one-time gain for the year. This implies that Prudential’s operations have historically been more efficient than MetLife’s.

You can see how international revenues, investment income and operating margins for MetLife and Prudential have trended over the years in our interactive dashboard.

Conclusion

  • While Prudential has more offerings as compared to its peer, MetLife has generated higher revenues. This could be attributed to higher premiums and superior investment income as compared to Prudential.
  • That said, Prudential’s stronger international growth could potentially make it the larger insurance company over coming years.

Per Trefis, MetLife’s Revenues (shows key revenue components) are expected to cross $65.3 billion in 2019 – leading to an EPS of $5.64 for the year. This EPS figure coupled with a P/E multiple of 9.3x, works out to a price estimate of $52 for MetLife’s stock (shows cash and valuation analysis), which is 15% higher than the current market price.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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