MetLife Inc. (MET - Analyst Report) reported second-quarter 2013 operating earnings per share (EPS) of $1.44, comfortably exceeding both the Zacks Consensus Estimate of $1.33 and the year-ago quarter’s EPS of $1.34. Operating earnings improved 11% year over year to $1.59 billion.
However, including extraordinary items, however, GAAP net income plunged to $471 million or 87 cents per share against $2.26 billion or $2.12 per share in the prior-year quarter.
Results reflected growth across the Americas and Asia along with expense control. These were partially offset by weakness in EMEA and higher derivative losses driven by the unfavourable impact of foreign exchange rates and low interest rate. The downsides also weighed on the return on equity (ROE) and book value per share.
During the reported quarter, MetLife’s total operating expenses inched down 0.7% year over year to $14.8 billion, whereas total expenses also dipped 0.7% year over year to $15.16 billion.
Total operating revenue for the reported quarter climbed 2% year over year to $17.04 billion, although it missed the Zacks Consensus Estimate of $17.06 billion. However, total revenue plummeted 14.6% year over year to $15.72 billion, primarily due to higher derivative losses. MetLife’s premiums inched up 2% year over year to $9.16 billion and fee revenue improved 14.1% to $2.28 billion, while net investment income dipped 1.3% year over year to $5.1 billion. Other revenues also grew 17.4% year over year to $500 million.
The Americas’ operating earnings jumped 18% year over year to $1.33 billion.
Premiums, fees and other revenues climbed 4% to $8.7 billion, while excluding pension closeout sales it improved 5%. Operating revenues grew 4% to $12.92 billion.
The segment witnessed improvements in Group, voluntary and worksite benefits and Retail business, although variable annuity sales declined 40% over the prior-year quarter. Meanwhile, operating earnings in Latin America dipped 7% year over year due to lower investment income across the region, partially offset by sales growth of 32%.
Operating earnings from Asia were up 18.3% year over year to $330 billion, while premiums, fees and other revenues grew 2% to $2.5 billion, driven by growth in Japan, China and India. Operating revenues were flat at $3.17 billion.
Operating earnings from EMEA declined 12.8% year over year to $68 million. Premiums, fees and other revenues in this segment decreased 5% to $688 million due to the withdrawal from some businesses in UK. Operating revenues slid 5.2% to $808 million. However, total sales improved 10%, reflecting augmented growth in Russia and the Gulf countries.
Separately, Corporate & Other operating loss was recorded at $136 million, wider than the loss of $53 million in the prior-year quarter. Total revenue stood at $146 million, down 50.7% from prior-year quarter due to low investment income.
Investment & Financial Update
At the end of the reported quarter, MetLife’s net investment income remained flat year over year at $5.1 billion, while net investment portfolio gain was $107 million, higher than $4 million in the year-ago quarter. In addition, pre-tax derivative losses inflated to $1.69 billion against gains of $2.09 billion in the year-ago quarter. Volatility in interest rate and foreign exchange led to the losses.
Meanwhile, under the company’s variable annuity hedging program, pre-tax variable investment income was $312 million in the reported quarter against $371 million in the year-ago period.
As of Jun 30, 2013, MetLife’s book value per share, excluding AOCI, fell 7% year over year at $52.85. Moreover, reported book value (including AOCI) per share dipped 2% to $47.20. Operating ROE stood at 10.6%, down from 11.3% at 2012-end.
At the end of Jun 2013, MetLife had total investments of $491.2 billion, down from $517.1 billion at 2012-end. Total assets increased to $815.66 billion and long-term debt inched down to $18.58 billion, whereas cash and cash equivalents decreased to $9.2 billion and total equity decreased to $60.4 billion, from 2012-end.
On Jun 25, 2013, the board announced a quarterly dividend of 27.5 cents per share, payable on Sep 13, 2013, to the shareholders of record as on Aug 9, 2013.
On Apr 23, 2013, the board of MetLife hiked the quarterly dividend per share by approximately 49% to 27.5 cents from the prior 18.5 cents. This marks the 1st dividend increment since 2007, bringing the total annual dividend to $1.10 per share.
The hiked dividend was paid on Jun 13, 2013 to the shareholders of record as on May 9, 2013. The company has shifted to a quarterly dividend payment structure from the previous practice of annual dividend payouts.
Along with MetLife, its peers Assured Guaranty Ltd. (AGO - Analyst Report), Cigna Corp. (CI - Analyst Report) and FBL Financial Group Inc. (FFG - Snapshot Report) carry a Zacks Rank #2 (Buy).