MetLife Growth on Track with ALICO - Analyst Blog
July 29 2011 - 1:04PM
Zacks
MetLife Inc. (MET) reported second quarter
operating earnings per share of $1.24, surpassing the Zacks
Consensus Estimate of $1.11 per share and $1.10 per share in the
year-ago quarter. Operating earnings jumped 45% year over year to
$1.33 billion from $914 million in the year-ago period.
During the reported quarter, operating earnings per share were
adversely impacted by net investment losses of 14 cents and other
adjustments of 41 cents. These were partially offset by net
derivative gains of 33 cents, income tax benefit of 6 cents and
gain from discontinued operations of 3 cents.
As a result, GAAP net income came in at $1.21 billion or $1.13
per share as compared with $1.53 million or $1.84 per share in the
prior-year quarter, based on higher share count.
The upside was primarily due to a robust growth in the
International business segment, strong underwriting results as well
as higher variable annuity deposits and net investment income. This
was partially offset by underperformance at its Banking and the
Auto & Home segments, higher expenses and lower-than-expected
derivative gains. During the reported quarter, MetLife’s total
expenses shot up 31% year over year to $15.43 billion.
Total operating revenue for the reported quarter increased 33%
year over year to $16.89 billion and also exceeded the Zacks
Consensus Estimate of $15.78 billion. MetLife’s premiums grew 41.2%
year over year to $9.3 billion, led by ALICO acquisition. Net
investment income surged 25.5% year over year to $5.1 billion,
while fee revenue substantially grew 32.9% to $1.97 billion.
Segment Details
Total operating earnings from the U.S.
business climbed 12% year over year to $908 million.
The ascent was attributable to higher earnings from Insurance and
Retirement Products and Corporate Benefit Funding (CBF). The U.S.
business premiums, fees and other revenues climbed 6% year over
year at $7.6 billion driven by modest premium growth in CBF coupled
with higher fee revenue in Retirement Products.
Besides, operating earnings surged 22% in Insurance Products
coupled with a 48% increase in Retirement Products. Even the CBF
witnessed 34% earnings growth based on higher net investment
income. These were, however, partially offset by loss in Auto &
Home premiums. This segment under MetLife’s U.S. business declined
23.3% year over year to $56 million based on higher-than-expected
catastrophe losses of $174 million.
The International segment's operating
earnings spiked up $507 million from $142 million in the year-ago
quarter. The results reflect strong performance after the ALICO
acquisition coupled with growth in Latin America and Japan.
In addition, 28% sales growth was witnessed in Japan while 25%
growth was witnessed across all international operations. Despite
the catastrophe claims and expenses, Japan contributed about 48% to
the international segment’s operating earnings.
MetLife Bank’s operating
earnings were $14 million, down 79% from the year-ago quarter,
primarily owing to lower mortgage servicing revenue. However,
Corporate & Other operating loss was
recorded at $100 million, slightly lower from a loss of $108
million in the prior-year quarter, benefiting from higher net
investment income.
Financial Update
MetLife’s net investment income increased 24% year over year to
$5.1 billion, while net investment portfolio loss was $38 million,
down from a year-ago loss of $41 million. Besides, derivative gains
shrank to $189 million against $782 million in the year-ago
quarter.
MetLife’s total investment portfolio was recorded at $466.2
billion at the end of the reported quarter, up from $359.6 billion
at the end of prior-year quarter, primarily due to the influx of
ALICO.
As of June 30, 2011, MetLife’s book value per share excluding
AOCI increased slightly to $45.31 compared with $44.50 as of June
30, 2010. Reported book value (including AOCI) per share climbed 7%
to $48.48 versus $45.51 at the end of year-ago period.
Our Take
We believe that MetLife’s solid earnings growth also helps it
return wealth to shareholders from time to time. Besides,
amalgamation of ALICO has immediately become accretive to earnings,
although related debt cost will weigh on the bottom line for some
time.
While we think MetLife should continue to benefit from its
diversified business mix as well as its leading brand, losses in
the investment portfolio are likely to impact the results in the
upcoming quarters. However, management is also mulling over
shedding its banking unit in the near future.
Besides, MetLife’s prime peer, American International
Group Inc. (AIG), is expected to release its financial
results after the market close on August 4, 2011. Another close
competitor, Prudential Financial Inc. (PRU), is
scheduled to release its earnings after the market closes on August
3, 2011.
AMER INTL GRP (AIG): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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