Japanese market and lower RBC ratio will lead to better long-term opportunities
Japan has a large life insurance market that generates about 50% of Asia’s premiums. Metlife Inc (NYSE:MET) earns more than half of its international premiums from the Asian market. The number of life insurance companies in Japan is only 5% as compared to those in the U.S. The Japanese insurance market is growing with 136 million individual insurance policies in April 2013 from 125 million in 2011.
Life insurance penetration was about 10.5% in Japan this year. With 2.5% GDP growth forecast for fiscal year 2014, the Japanese insurance market provides growth potential. Note that Metlife Inc (NYSE:MET) has low exposure to the younger age group with a market share of only 4%; this provides an opportunity for the company to expand further in Japan.
MetLife is planning to merge its four subsidiaries into one new entity. The new entity includes Metlife Inc (NYSE:MET) Insurance Company of Connecticut, MetLife Investors USA Insurance Company, Metlife Inc (NYSE:MET) Investors Insurance Company, and Exeter Reassurance Company. The transaction is expected to be complete by 2014. With this, the Risk Based Capital, or RBC ratio, will decrease from 466% in fiscal year 2012 to a projected ratio of around 400%.
RBC is used to measure the minimum amount of capital required to support the business operations of a company. The ratio takes into account the risk profile of the company and hence the limits on the amount of risk it can take. By lowering the RBC ratio, MetLife has reduced its risk profile. This will free some of its capital required to back up its operations and, in effect, will allow it to use existing capital in other entities.
Conclusion
Boeing is gradually increasing the production rate of its 787 Dreamliner. The company has also received orders for its new 787-10 aircraft. This will lead to additional earnings for The Boeing Company (NYSE:BA).
BlackRock’s acquisition of MGPA will increase its presence in Asia-Pacific and Europe. BlackRock, Inc. (NYSE:BLK) is also aiming to ease up the settlement process of ETFs in Europe. These plans will drive the company’s profitability.
Metlife Inc (NYSE:MET) is eyeing more revenue from the potential Japanese insurance market and is reducing its RBC ratio. This will make the company’s future bright.
All three of these stocks are worth buying.
Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends BlackRock, Inc. (NYSE:BLK).
The article You Can Benefit From the Explosive Growth of These Companies originally appeared on Fool.com.
Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
