MetLife (NYSE:MET), one of the largest insurance providers in the US, competes with AIG (NYSE:AIG) and Hartford Financial (NYSE:HIG) to provide life insurance, health insurance, retirement planning products and auto and home insurance to both consumers and corporations.
MetLife’s most valuable business is its collection of premiums and fees on US life and non-medical health insurance policies, from which it derives about 36% of the Trefis price estimate of $43.12 for MetLife. The company also derives an estimated 25% of its value from the investment of insurance premiums, and 13% of its value from international insurance.
MetLife recently announced guidance for 2011, citing an expectation for 38% growth in operating earnings. The raised optimism is due to the company’s major acquisition of American Life Insurance Co. (ALICO) from AIG last month for $16.2 billion. The company also expects premiums, fees and other revenues to increase by 30% in 2011. 
ALICO is one of the largest and most diversified international life insurance companies in the world, providing consumers and businesses with products ranging from life and health insurance to retirement and wealth management solutions. ALICO has operation in more than 50 countries and serves 20 million customers worldwide.
With the acquisition of ALICO, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East, serving roughly 90 million customers in over 60 countries.
MetLife to Gain International Insurance Market Share
Prior to the acquisition of ALICO, MetLife held about 0.15% of the $2.9 trillion insurance premium market outside of the US in 2009. We estimate that MetLife’s share can increase 10% post-acquisition to about 0.16% in 2011, and project flat market share beyond 2011.
MetLife’s aggressive plans to increase its international operations and encouraging guidance into 2011 could present further upside to our estimates. If MetLife’s international market share increases to 0.3% by the end of our forecast period, it could generate 9% upside to our $47.67 price estimate.
Drag the trend-line in the chart above to assess the impact of MetLife’s international market share on the company’s stock value.
MetLife’s Investment Portfolio Could Increase by 25%
MetLife will also acquire the invested assets of ALICO which could reportedly increase its investment portfolio by 25%.  MetLife has nearly $250 billion invested in fixed maturity securities which we estimate to increase modestly by 3% to $256 billion in 2011.
Drag the trend-line in the chart above to assess the impact of MetLife’s fixed maturity investment growth on the company’s stock value.
Although we are positive on MetLife’s outlook post acquisition, we remain cautious regarding MetLife’s risks in integrating ALICO’s business and managing its growth, as ALICO faces turbulent times post AIG bailout.
Disclosure: No position