Final Industry Analysis Paper

Market inefficient cost structure opportunities

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Market Inefficient cost structure OPPORTUNITIES Expanding Medicare business Positive outlook on global and health insurance THREATS Price pressure Increasing medical cost Weakening financial markets Outlook for the Healthcare Industry: Short-term & Long-term Short-Term In the short-term, the Healthcare Industry is at a standstill Many healthcare mandates are not set to take affect until a couple of years The Supreme Court will rule on the legality of The Patient Protection & Affordable Care Act before the 2012 election. Each Healthcare company should prepare as if the Supreme Court will rule this law legal Long-Term In the long-term, the outlook for the Healthcare industry looks stormy . Each company will be heavily regulated. The companies will not have as high revenues like years before. Many healthcare leaders believe newly imposed taxes will create massive layoffs. 15
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The Insurance Industry 16
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The Insurance Industry deals with a form of risk management primarily used to hedge against uncertain losses. There are many types of insurance one could buy including health insurance, life insurance, home insurance, car insurance, and flood insurance. The reason why one buys insurance is incase of an unexpected event, such as a house fire or car accident. Insurance companies make a lot of money from their customer’s fear of the unknown, meaning customers pay a lot of money in insurance to safeguard themselves against unexpected events. Revenue Return on Equity Return on Investment Earnings Per Share Market Capitalization Stock Price MetLife Inc. $36.4B 12.7% 8.0% $6.3 $39.6B $37.4 Prudential $24.3B 10.5% 6.0% $7.2 $29.8B $63.4 Aflac $20.4B 16.0% 13.7% $4.2 $21.5B $46.0 Unum Group $7.5B 2.7% $2.1% $0.78 $7.1B $24.5 Lincoln National Corp. $2.3B 2.2% 1.5% $0.92 $7.7B $26.4 Insurance *B=Billion **Financials as of 4 th quarter 2011 ***Market Capitalization & Stock Price as of Monday April 2, 2012 Top Three Issues Facing Top Three Companies MetLife Inc. Problem Solution Share Price has fallen 18% Within the last year, share price has fallen 18% In order to raise share price, MetLife should cut superfluous businesses and programs that they are involved in. This will save the company money and improve results of stock price. Failed Stress Test MetlLife Inc. failed the governments “stress test” The stress test that was performed by the government was one that is usually given to large banks and not insurance companies. MetLife performed their own 17
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analysis, which they passed, and they should show the public and government their results. MetLife takes charge of up to $135M to pay death benefits There are many people who die each year, and their family never put in the paperwork to receive the deceased death benefits. MetLife is currently trying to figure out who died so that they can pay the families.
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