The Case for MetLife

| About: MetLife, Inc. (MET)
Overview: MetLife, Inc. (NYSE:MET), through its subsidiaries, provides insurance, employee benefits, and financial services in the United States, Latin America, the Asia Pacific, Europe, the Middle East, and India. It offers group life insurance products and services as employer-paid benefits, including variable life, universal life, and term life products, as well as employee paid supplemental life products; individual life insurance products and services comprising variable life, universal life, term life, and whole life products, as well as a range of mutual funds and other securities products; and non-medical health insurance products and services, such as dental insurance, group short- and long-term disability, individual disability income, long-term care, critical illness, and accidental death and dismemberment coverages, as well as employer-sponsored auto and homeowners insurance and administrative services-only arrangements to employers.
Prognosis: The stock is in the middle of its 52 week range. However, it is down 40% from its level just prior to Lehman. Given its increasing earnings, revenues, improving prospects, and solid credit rating; it is definitely worth a look.
Valuation: MetLife is selling for approximately 9 times this year’s consensus earnings and 7 times 2011’s projected earnings. It is selling at the low end of its five year range based on Price/Earnings, Price/Sales, and Price/Cash Flow. It pays a 2% dividend.
Catalysts: There are several factors that we believe should provide support for a higher stock price in the near and medium term:
1. The acquisition of Alico from AIG should substantially boost its international earnings
2. Credit impairment should trend down with an improving, if still anemic economy
3. Expense reduction initiatives should continue to yield impressive results
4. Customers' flight to quality financial names should help the insurer post double-digit premium growth
Recommendation(s): We believe the stock should be trading at a more reasonable rate of approximately 11-12 times this year’s projected earnings of $4.25. Given the growth in revenues and earnings expected to take place over the next 12 to 18 months; our target Price is $47-$51, up from the current price of $37.35

Disclosure: Long MET