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MetLife (MET) Announces Share Buyback Program Worth $3B

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Zacks Equity Research
·4 min read
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MetLife, Inc.’s MET board of directors recently authorized a share buyback program in a bid to return more value to shareholders. The latest authorization will allow the company to spend up to $3 billion to repurchase its common stock.

Shares of MetLife have lost 0.8% in the last day’s trading as of Dec 11.

The company has a strong history of returning value to shareholders via share buybacks since 2014. The company recommenced share buybacks in 2014 after six long years. Notably, prior to that the insurer had last resorted to share buybacks in 2008. Following resumption of share buybacks in 2014, it was enhanced further in each of the succeeding years with the recent share buyback authorization of $3 billion being the latest one.

However, its worth mentioning that the COVID-19 induced market volatilities had compelled most insurance companies to temporarily halt their share buyback programs and MetLife was no exception to the trend. Nevertheless, as the markets started recovering gradually, MetLife recommenced share buybacks in third-quarter 2020. During the first nine months of 2020, MetLife bought back shares worth $580 million.

As of Sep 30, 2020, the company had $405 million left under the share repurchase program, which was approved on July 2019. The company intended to buy back those remaining shares by the end of this year, which has been successfully executed. Hence, the company has completed buying back shares under its previous buyback authorization.

Other insurers, namely Aon plc’s AON board of directors approved a $5 billion share buyback program last month while the board of Chubb Limited CB approved a buyback program worth $1.5 billion in the same month itself.

Not only share buybacks, MetLife also remains committed to enhancing shareholder value through dividend hikes. This Zacks Rank #3 (Hold) multiline insurer has increased dividends for seven consecutive years except 2017, with the latest hike of 4.5% being announced this year in April. Notably, its dividend yield of 3.9% is higher than the industry average of 2.2%

Moreover, a solid financial standing backed by a robust balance sheet and sufficient cash generation capabilities over the years has enabled MetLife to not only pursue growth initiatives such as buyouts and collaborations but has also paved the way for accelerated and prudent capital deployment measures. The company had $24.4 billion in cash and cash equivalents at the end of third-quarter 2020, which surged 47% from 2019-end.

Also, its return on equity — a profitability measure of how tactically the company is utilizing its shareholders funds — is 8.2%, higher than the industry average of 7.8%. Case in point, MetLife has not only invested around $3 billion toward new business growth but also deployed about $1.7 billion for growth-related and accretive mergers and acquisitions (M&A) by the end of this year. While it has kept a liquidity buffer well above the target of $3-4 billion, MetLife expects to have returned a minimum of $2.6 billion to shareholders via share buybacks and dividend payments by 2020-end.

Shares of this multiline insurer have gained 23.9% in the past six months compared with the industry’s growth of 17.7%. Moreover, we believe the company is well-poised to gain from numerous growth initiatives, cost-control efforts and strong capital position, which are likely to sustain the stock’s existing momentum in the days ahead.

A Stock to Consider

A better-ranked stock in the insurance space is Old Republic International Corporation ORI, which carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old Republic has a trailing four-quarter earnings surprise of 49.02%, on average.

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Aon plc (AON) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
MetLife, Inc. (MET) : Free Stock Analysis Report
 
Old Republic International Corporation (ORI) : Free Stock Analysis Report
 
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