Morgan Stanley’s Best Overweight & Quality Stocks: Top 25 Stocks

22. MetLife, Inc. (NYSE:MET)

Number of Hedge Fund Holders In Q2 2024: 37

Average Analyst EPS % Revision: -0.9%

MetLife, Inc. (NYSE:MET) is an insurance company based out of New York City. It is one of the biggest companies of its kind, and along with life and health insurance, the company also offers pensions, retirement benefits, and other associated products. Because of their business models, insurance companies are particularly vulnerable to changes in interest rates. Roughly 97% of MetLife, Inc. (NYSE:MET)’s H1 2024 revenue came from premiums and investment activities, with premiums alone reflecting 65% of the revenue. This means that if premiums drop, then the insurance company stands to take a sizeable hit to its income statement. Insurance companies are also often forced to raise rates if interest rates drop as their investment earnings drop. For MetLife, Inc. (NYSE:MET), this could mean that the firm’s investment income drops in the future as it involves its asset and investment portfolio. However, pension risk transfer activity in the US is growing as firms look to cut costs. This could create some tailwinds for MetLife, Inc. (NYSE:MET) and help it buffer against potential revenue drops.

During its Q2 2024 earnings call, MetLife, Inc. (NYSE:MET) shared key details about how interest is affecting its business:

“Recurring investment income has benefited from higher interest rates, partially offset by the roll-off from higher interest rates caps. In addition, we have seen VII improvement driven by higher private equity returns. Turning your attention to the right side of the page. This shows our new money yield versus roll-off shows our new money yield versus roll-off yields since second quarter of 2021. Over the last nine quarters, new money yields have outpaced roll-off yields, consistent with higher interest rates. In the second quarter of 2024, our global new money rate achieved the yield of 6.27%, 63 basis points higher than the roll-off rate. We anticipate that the new money yields will remain above roll-off yields given the prevailing interest rate environment.

However, the spread can fluctuate depending on the mix of sales across our businesses.”