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On Jul 23, 2013, we reiterated our recommendation on MetLife Inc. (MET - Analyst Report) at Neutral based on the steady improvement in operations and capital position, partially offset by higher competition and low interest rates generating higher derivative losses.

Why the Retention?

Estimates for MetLife have remained steady since the company reported its first-quarter 2013 results on May 1. The company’s respective earnings per share and revenues of $1.48 and $16.98 billion exceeded both the Zacks Consensus Estimate and the year-ago results.

Results reflected growth across MetLife’s operating regions along with expense control that also drove the return on equity (ROE) and book value per share. These were partially offset by higher derivative losses driven by the unfavorable impact of foreign exchange rates and low interest rate.

Management also guided operating earnings growth to be in line with 2012-levels, higher than prior estimate of (3%) to 4% over 2012, reflecting consistent focus on growth in emerging economies amid difficult comps.

Following the release of the first-quarter results, the Zacks Consensus Estimate for 2013 inched up 0.3% to $5.48 per share in the last 60 days. However, the Zacks Consensus Estimate for 2014 remained intact at $5.70 a share. With the Zacks Consensus Estimate for both 2013 and 2014 showing slight upward pressure on the stock in the near term, the company now has a Zacks Rank #2 (Buy).

MetLife’s capital position remains one of the sturdiest in the industry, cushioned by a diversified portfolio mix and a leading brand, as reflected by its strong book value growth and healthy ratings. The successful divestiture of the banking operations further enhanced operating leverage and aided dividend increment. However, tepid-growth guidance for 2013 amid challenging interest rates and competition raise caution. Overall, MetLife has the potential to outperform the peer group once the economy regains buoyancy.

Other Financial Stocks That Warrant a Look

While we remain on the sidelines for MetLife, other stocks in the insurance sector that are outperforming include State Auto Financial Corp. (STFC - Snapshot Report), ProAssuarnce Corp. (PRA - Analyst Report) and American Equity Investment Life Holding Co. (AEL - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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