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MetLife (MET) Q4 Earnings Miss on Lower Investment Income
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MetLife, Inc. (MET - Free Report) reported fourth-quarter 2022 adjusted operating earnings of $1.55 per share, which missed the Zacks Consensus Estimate of $1.74 and our estimate of $1.77. The bottom line declined 29% year over year.
Adjusted operating revenues of MetLife amounted to $15,836 million, which decreased 21.6% year over year. The top line missed the consensus mark of $16,996 million and our estimate of $16,303.1 million.
The weak fourth-quarter results were caused by reduced private equity returns. Lower investment income affected important metrics despite a rising interest rate environment. Reduced profit levels from Asia and MetLife Holdings businesses were concerning. The negatives were partially offset by lower expenses, volume growth across some segments and improved contributions from the U.S. and Latin America businesses.
MetLife generated adjusted operating revenues of $75.5 billion in 2022, up from $70.2 billion in 2021. Adjusted earnings per share of $6.85 fell 25% from the 2021 levels. Adjusted net investment income of $18.2 billion declined from $21.3 billion in 2021.
Behind the Headlines
Adjusted premiums, fees and other revenues, excluding pension risk transfer (PRT), were $11,375 million, down 1% year over year. Adjusted net investment income fell 13% year over year to $4,530 million in the quarter under review primarily due to reduced variable investment income stemming from decreased private equity returns.
Total expenses of $14,589 million decreased from $18,783 million a year ago due to lower policyholder benefits and claims. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 30 basis points (bps) year over year to 20.7%.
Net income increased 12% year over year to $1,314 million due to net derivative and investment gains. Adjusted return on equity, excluding AOCI other than FCTA, deteriorated 400 bps year over year to 11.3%.
Segmental Performances
U.S.: The segment reported adjusted earnings of $771 million, which increased 20% year over year in the fourth quarter due to higher volume and favorable underwriting, partly offset by reduced variable investment income. Also, it beat the Zacks Consensus Estimate by 3.9%. Adjusted premiums, fees and other revenues, excluding PRT of $6,735 million, rose 3% year over year.
Asia: Adjusted earnings in the segment amounted to $215 million, which fell 63% year over year in the quarter under review and missed the consensus mark of $363.7 million, due to reduced variable investment income. Adjusted premiums, fees & other revenues declined 12% year over year to $1,770 million in the fourth quarter.
Latin America: Adjusted earnings of $181 million increased 45% from a year ago and beat the Zacks Consensus Estimate by 13.1% due to volume growth, favorable underwriting and increased investment margins, partially offset by reduced variable investment income. Adjusted premiums, fees & other revenues advanced 20% on a cc basis year over year to $1,154 million in the segment due to growing sales.
EMEA: The segment’s adjusted earnings were $70 million, which surged 67% at reported basis and 112% at cc basis year over year in the fourth quarter, and beat the consensus mark by 16.1%. Favorable underwriting benefited the segment. Adjusted premiums, fees & other revenues of $562 million declined 10% year over year. On a cc basis, the same was up 2% year over year due to sales growth.
MetLife Holdings: Adjusted earnings in the segment slumped 57% year over year to $208 million due to decreased variable investment income. The reported figure also missed the Zacks Consensus Estimate by 18.8%. Adjusted premiums, fees & other revenues fell 13% year over year to $1,051 million in the quarter under review.
Corporate & Other: Adjusted loss of $219 million widened from the prior-year quarter’s loss of $37 million.
Financial Update (as of Dec 31, 2022)
MetLife exited the fourth quarter with cash and cash equivalents of $20,195 million, which increased from $20,047 million at 2021-end. Total assets of $666.6 billion declined from $759.7 billion in fourth-quarter 2021 end.
Long-term debt totaled $14,647 million, up from $13,933 million at 2021-end. It also had a short-term debt of $175 million. Total equity of $27,287 million decreased from $67,749 million at 2021-end.
Capital Deployment Update
MetLife bought back shares worth $596 million in the fourth quarter.
Outlook
MetLife expects pre-tax variable investment income of $2 billion for 2023. Corporate & Other adjusted losses are expected to be $650-$750 million for the year. The effective tax rate is likely to be 22-24%.
MET expects its MetLife Holdings’ adjusted premiums, fees and other revenues to decline 12-14% in 2023 and then 6-8% per annum. It expects to generate adjusted earnings of $1-$1.2 billion in 2023 from this segment.
Within three years, the company targets adjusted return on equity within 13-15%. It intends to keep free cash flows within 65-75% of adjusted earnings. Further, the company is aiming at a direct expense ratio of 12.6%. In the near term, MET expects its group benefits’ adjusted premiums, fees and other revenues to grow 4-6% per annum.
Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.
Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.
Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 18.1% year-over-year growth.
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MetLife (MET) Q4 Earnings Miss on Lower Investment Income
MetLife, Inc. (MET - Free Report) reported fourth-quarter 2022 adjusted operating earnings of $1.55 per share, which missed the Zacks Consensus Estimate of $1.74 and our estimate of $1.77. The bottom line declined 29% year over year.
Adjusted operating revenues of MetLife amounted to $15,836 million, which decreased 21.6% year over year. The top line missed the consensus mark of $16,996 million and our estimate of $16,303.1 million.
The weak fourth-quarter results were caused by reduced private equity returns. Lower investment income affected important metrics despite a rising interest rate environment. Reduced profit levels from Asia and MetLife Holdings businesses were concerning. The negatives were partially offset by lower expenses, volume growth across some segments and improved contributions from the U.S. and Latin America businesses.
MetLife, Inc. Price, Consensus and EPS Surprise
MetLife, Inc. price-consensus-eps-surprise-chart | MetLife, Inc. Quote
2022 Performance
MetLife generated adjusted operating revenues of $75.5 billion in 2022, up from $70.2 billion in 2021. Adjusted earnings per share of $6.85 fell 25% from the 2021 levels. Adjusted net investment income of $18.2 billion declined from $21.3 billion in 2021.
Behind the Headlines
Adjusted premiums, fees and other revenues, excluding pension risk transfer (PRT), were $11,375 million, down 1% year over year. Adjusted net investment income fell 13% year over year to $4,530 million in the quarter under review primarily due to reduced variable investment income stemming from decreased private equity returns.
Total expenses of $14,589 million decreased from $18,783 million a year ago due to lower policyholder benefits and claims. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 30 basis points (bps) year over year to 20.7%.
Net income increased 12% year over year to $1,314 million due to net derivative and investment gains. Adjusted return on equity, excluding AOCI other than FCTA, deteriorated 400 bps year over year to 11.3%.
Segmental Performances
U.S.: The segment reported adjusted earnings of $771 million, which increased 20% year over year in the fourth quarter due to higher volume and favorable underwriting, partly offset by reduced variable investment income. Also, it beat the Zacks Consensus Estimate by 3.9%. Adjusted premiums, fees and other revenues, excluding PRT of $6,735 million, rose 3% year over year.
Asia: Adjusted earnings in the segment amounted to $215 million, which fell 63% year over year in the quarter under review and missed the consensus mark of $363.7 million, due to reduced variable investment income. Adjusted premiums, fees & other revenues declined 12% year over year to $1,770 million in the fourth quarter.
Latin America: Adjusted earnings of $181 million increased 45% from a year ago and beat the Zacks Consensus Estimate by 13.1% due to volume growth, favorable underwriting and increased investment margins, partially offset by reduced variable investment income. Adjusted premiums, fees & other revenues advanced 20% on a cc basis year over year to $1,154 million in the segment due to growing sales.
EMEA: The segment’s adjusted earnings were $70 million, which surged 67% at reported basis and 112% at cc basis year over year in the fourth quarter, and beat the consensus mark by 16.1%. Favorable underwriting benefited the segment. Adjusted premiums, fees & other revenues of $562 million declined 10% year over year. On a cc basis, the same was up 2% year over year due to sales growth.
MetLife Holdings: Adjusted earnings in the segment slumped 57% year over year to $208 million due to decreased variable investment income. The reported figure also missed the Zacks Consensus Estimate by 18.8%. Adjusted premiums, fees & other revenues fell 13% year over year to $1,051 million in the quarter under review.
Corporate & Other: Adjusted loss of $219 million widened from the prior-year quarter’s loss of $37 million.
Financial Update (as of Dec 31, 2022)
MetLife exited the fourth quarter with cash and cash equivalents of $20,195 million, which increased from $20,047 million at 2021-end. Total assets of $666.6 billion declined from $759.7 billion in fourth-quarter 2021 end.
Long-term debt totaled $14,647 million, up from $13,933 million at 2021-end. It also had a short-term debt of $175 million. Total equity of $27,287 million decreased from $67,749 million at 2021-end.
Capital Deployment Update
MetLife bought back shares worth $596 million in the fourth quarter.
Outlook
MetLife expects pre-tax variable investment income of $2 billion for 2023. Corporate & Other adjusted losses are expected to be $650-$750 million for the year. The effective tax rate is likely to be 22-24%.
MET expects its MetLife Holdings’ adjusted premiums, fees and other revenues to decline 12-14% in 2023 and then 6-8% per annum. It expects to generate adjusted earnings of $1-$1.2 billion in 2023 from this segment.
Within three years, the company targets adjusted return on equity within 13-15%. It intends to keep free cash flows within 65-75% of adjusted earnings. Further, the company is aiming at a direct expense ratio of 12.6%. In the near term, MET expects its group benefits’ adjusted premiums, fees and other revenues to grow 4-6% per annum.
Zacks Rank & Key Picks
MetLife currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader finance space are Cboe Global Markets, Inc. (CBOE - Free Report) , American International Group, Inc. (AIG - Free Report) and Ares Capital Corporation (ARCC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.
Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.
Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 18.1% year-over-year growth.