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MetLife: A Capital Return Story That Has Legs

Nov. 06, 2017 3:32 AM ETMetLife, Inc. (MET)BHF9 Comments


  • The company reported impressive Q3 2017 results that beat the top- and bottom-line estimates.
  • One of the main reasons to be bullish on MET is the company's capital return story that keeps getting better.
  • MET shares are a long-term buy at today's price.

MetLife (NYSE:MET) is an insurance company that has a bullish setup but investors have only recently started to realize that this insurance company has a legitimate long-term story to tell. MET shares have outperformed the broader market over the last year (up 31% vs S&P 500 being up only 24%) and shares are up an impressive 16% over just the last six months.

(Source: Nasdaq)

Too far, too fast? I do not think so. In early 2016, I wrote an article on MetLife and stated that one of the main reasons to remain bullish about this insurer was the company's capital return story. I believe that MetLife's story has improved since that point in time so, in my opinion, long-term investors should continue to accumulate shares, even at today's price.

A Capital Return Story that Has Legs

On November 1, 2017, MetLife reported Q3 2017 results that beat the top- and bottom-line estimates. For the quarter, MetLife reported adjusted EPS of $1.09 (vs $0.90 estimate) on revenues of $16.1B (vs $15.9B estimate). There was a lot to like about the company's Q3 2017 results but it is important to remember that there was also a lot of noise in the numbers.

(Source: Q3 2017 Earnings Presentation)

The BrightHouse Financial (BHF) spin resulted in MetLife spending approximately $1.1B in separation-related expenses so it had a material impact on the quarterly numbers. Additionally, as shown above, MetLife's book value per share was 'negatively' impacted by the spin. On the other hand, a positive development for the quarter was an actuarial assumption review that increased operating earnings by ~$153MM. These non-recurring events skewed the quarterly results.

The company, however, reported strong underwriting results and the international businesses, most notably Latin America, were again key growth drivers.

MetLife's Q3 2017 operating results show that

This article was written by

Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Analyst’s Disclosure: I am/we are long MET, BHF, AIG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

RUWC profile picture
08 Nov. 2017
I took large stakes in both MET and PRU 18 months ago. There is no doubt that PRU to date has been the better investment. Additionally your above table showing dividend payout ratios assumes a constant 2018 payout to 2017. For MET that remains likely but for PRU I fully expect a 7% to 10% increase in Q1 of 2018. On the share repurchase standpoint PRU has bought back more shares and will probably do so again in 2018.
Don't get me wrong I am very happy with my return on MET but clearly PRU has been better in the last year and will probably be better in 2018.
One last comment every 0.25% increase in the FED funds rate adds roughly $250 million to the bottom line of PRU and about $180 million to the bottom line of MET.
WG Investment Research profile picture
Thanks for sharing your insight, RUWC.

I look forward to digging into PRU.

SleepyInSeattle profile picture
PRU was a better buy months ago. MET is a better buy now, imo. -
Biological profile picture
Also, if they intend to dump BHF, why be long the latter?
WG Investment Research profile picture
BHF is a small position that I haven't spent much time researching. I plan to stay long the small position (no plans to add to it in the near future). What are your thoughts on BHF?

ijeff profile picture
I don't know what to make of BHF. I also have a small position from the spinoff and wondering if I should just dump and move on?
WG Investment Research profile picture
There are a few BHF articles here on Seeking Alpha...I plan to hold onto my small position and will decide to either increase my stake or dump it after I complete my research. I will most likely post an article describing my thoughts on BHF in the near future so stay tuned.

where do you better long term prospects - MET vs PRU? Is investment in PRU dead money relative to MET? Thanks
WG Investment Research profile picture
I haven't looked into PRU in a while but the company is actually on my watch list. I will post something in the near future. Thanks for the comment.

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