Replies to post #21288 on The Rising Influence of Rising Affluence

[DewDiligence]

Re: MET’s surprising (45%) sell-off

There must be fear of exposure to payouts on policies.

There’s an investor misconception based on the company’s name (MetLife) that MET is primarily a life-insurance company. MET was primarily a life-insurance company for many years, but it is now a diversified financial-services company. In 2017, MET spun off its US life-insurance business to BHF (https://www.metlife.com/about-us/newsroom/2017/august/metlifecompletesspin-off-of-brighthouse-financial/ ), leaving Japan as the only major country where MET continues to sell life insurance. All told, life insurance is now a small part of the overall corporate pie.

So, investors who think MET will be on the hook for outsized COVID-19 death payments are mistaken.

What would be the worse case hit for them?

Prolonged very low (or negative) interest rates. MET’s asset portfolio that provides the actuarial support for future claims is heavily weighted in bonds. As the bonds in MET’s portfolio mature, declining interest rates have forced MET to reinvestment at lower and lower coupon rates, thereby reducing earnings.

Still, even the historic collapse in interest rates we’ve recently seen doesn’t fully justify the 45% sell-off MET has experienced in the past 30 days.

[DewDiligence]

MET’s stock has recovered, in part, due to Fed stabilization of the bond market and recent bullishness in the stock market (which may be misguided).

From the 2/12/20 high to the 3/23/20 low, the stock fell 57%. From the 3/23/20 low to yesterday’s close, the stock gained 55%, but that still leaves it 33% below the 2/12/20 high. That’s not a typo—do the arithmetic!

I thought about adding near the bottom, but I never pulled the trigger.

Please see #msg-154310158 for related info.