MetLife Misses on Q1 Earnings and Revs - Analyst Blog

MetLife Inc. MET reported first-quarter 2014 operating earnings per share EPS of $1.37, which lagged the Zacks Consensus Estimate of $1.40 and the year-ago quarter EPS of $1.47. Operating earnings dipped 4% year over year to $1.56 billion.

However, including extraordinary items, GAAP net income soared to $1.3 billion or $1.14 per share from $956 million or 87 cents per share in the prior-year quarter.

Results reflected growth across the Americas, Asia and EMEA along with higher investment income, strong expense control and derivative gains, leading to improved book value per share and dividend hike. These were partially offset by declined return on equity (ROE) and higher legal costs.

During the reported quarter, MetLife's total operating expenses edged up 2.3% year over year to $14.92 billion, while total expenses decreased 7.2% to $15.26 billion.

Total operating revenue inched up 1% year over year to $17.12 billion but underperformed the Zacks Consensus Estimate of $17.5 billion. However, total revenue declined 3.4% year over year to $17.09 billion, primarily due to higher investment losses.

MetLife's premiums inched up 1.3% year over year to $9.22 billion, while fee revenue improved 5.1% to $2.32 billion and net investment income stood flat at $5.09 billion. Other revenues also rose 2.1% year over year to $491 million.

Segment Details

The Americas' operating earnings rose 3.9% year over year to $1.34 billion. Premiums, fees and other revenues climbed 3.8% to $8.91 billion. Operating revenues grew 3.6% to $13.12 billion.

The segment witnessed core improvements in Corporate Benefit Funding and Latin America. The Provida acquisition improved underwriting results in Mexico.

Operating earnings from Asia dipped 1.5% year over year to $328 million. Premiums, fees and other revenues grew 6% on a constant currency basis to $2.31 billion, although it dipped 6.1% on a reported basis. Operating revenues sank 6% to $3.0 billion.

Operating earnings from EMEA rose 1.1% year over year to $88 million. Premiums, fees and other revenues in this segment increased 5.4% (5% on constant currency basis) to $722 million. Operating revenues climbed 3.9% to $845 million. Moreover, total sales rose 4%, reflecting 9% growth from the emerging markets of Gulf, Turkey and Poland.

Separately, Corporate & Other operating loss was recorded at $192 million, wider than the loss of $86 million incurred in the prior-year quarter due to higher legal costs and lower investment income. Total revenue stood at $156 million, plunging 27.8% from the prior-year quarter.

Investment & Financial Update

At the end of the reported quarter, MetLife's net investment income stood flat year over year at $5.1 billion, while net investment portfolio gain was $131 million compared with $160 million in the year-ago quarter. In addition, post-tax derivative gains improved to $78 million from a loss of $591 million in the year-ago quarter. Decline in interest rate and changes in foreign exchange led to the gains.

Meanwhile, under the company's variable annuity hedging program, pre-tax variable investment income was $429 million in the reported quarter against $337 million in the year-ago period.

As of Mar 31, 2014, MetLife's book value per share, excluding AOCI, climbed 4.2% year over year at $49.34. However, reported book value (including AOCI) per share edged down 0.7% to $56.65. Operating ROE stood at 10.1% at Mar 2014-end, down from 12.0% at 2013-end.

At the end of Mar 2014, MetLife had total investments of $493.2 billion, down from $488.8 billion at 2013-end. Total assets increased to $890.9 billion while long-term debt decreased to $16.79 billion. Cash and cash equivalents increased to $8.57 billion and total equity increased to $66.3 billion, from 2013-end.

Dividend Update

On Apr 22, 2014, the board of MetLife announced a 27% hike in its regular dividend payout to 35 cents per share from the prior 27.5 cents. The raised dividend will be paid on Jun 13, 2014 to shareholders of record as on May 9.

On Mar 13, 2014, MetLife had paid a quarterly dividend of 27.5 cents per share to the shareholders of record as on Feb 6.

Others

While MetLife carries a Zacks Rank #3 (Hold), some better-ranked insurers Symetra Financial Corp. SYA, Protective Life Corp. PL and Primerica Inc. PRI, all bearing a Zacks Rank #2 (Buy), appear impressive.