RBC Just Upgraded MetLife For These 3 Reasons

In a report published Monday, RBC Capital Markets analyst Eric N. Berg upgraded the rating on Metlife Inc MET from Sector Perform to Outperform, while raising the price target from $57 to $68.

In the report RBC Capital Markets noted that the upgrade was based on three reasons:

1. Developments in the regulatory arena: Meetings with the management indicated that the company may initiate another share repurchase in addition to the $1 billion buyback completed in Q1. “Because Met has been noncommittal on the topic, the beginning of another buyback would be a positive surprise,” analyst Eric Berg said.
2. MetLife appears to be “better positioned than any other publicly traded life insurer to benefit from the rise in interest rates.” The reason is that the company had to establish reserves worth billions of dollars of when interest rates were at their lows. Therefore, it is now in a position “to release some of these reserves into earnings should rates rise further,” Berg explained.
3. Currently a larger number of investors seem to be focusing on cash earnings in the life insurance sector, rather than on accounting results. The portion of MetLife’s earnings that are cash “has been increasing steadily – and we expect the ratio of cash earnings to total earnings at Met will continue to increase,” the report stated.

The upgrade reflects the 21 percent upside “we see to our upwardly revised one year price target of $68,” Berg added.