Barrons is bullish on MetLife in a June 19, 2010 feature article about the insurance company stating that they " might have written the right policy to ensure future growth".
The Pluses
- The acquisition of ALICO from AIG is expected to double the percentage of operating profits the company gets from abroad and give it a foothold in Japan, China and Brazil.
- MetLife is taking share in the variable-annuity and structured-settlement markets from rivals.
- MetLife boasts $7.5 billion of capital above the total that it's required to hold.
- MetLife is benefiting from insurance consumers' flight which has been a factor in achieving double-digit premium growth.
The Question Marks
- Alico's $81 billion investment portfolio has considerable exposure to financials, lower-rated commercial mortgage-backed securities and sovereign debt, such as $1.3 billion in Greek bonds.
- MetLife has $35 billion of commercial mortgages. It could be hurt if defaults on commercial real estate rise, as many expect.
Barrons reports that company officials counter with MetLife having s a 432% risk-based capital ratio—meaning its total capital equals four times its risk-based capital, a sign of financial strength. MetLife did not participate in the Troubled Assets Relief Program (TARP) in 2008 or 2009. ( For background on TARP read MetLife CEO Says Insurer Bailouts were Bad PR Bloomberg June 10, 2010)
Ironically, the testament to insurer financial strength and declinaton of TARP (financial assistance to banks) comes just a day after USA Today carried this headline about the banking industry: "Bank failure is 83rd in '10; pace more than double last year's".
MetLife, which is 147 years old, is the largest life insurance company in the United States with over $539 billion in assets.
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