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Lower Expense Aid MetLife's Earnings Beat

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MetLife Inc. (MET - Free Report) reported first-quarter 2013 operating earnings per share (EPS) of $1.48, modestly beating both the Zacks Consensus Estimate of $1.30 and the year-ago quarter’s EPS of $1.37. Operating earnings improved 12% year over year to $1.64 billion.

Including extraordinary items, GAAP net income spiked to $956 million or 87 cents per share against a net loss of $174 million or 16 cents per share in the prior-year quarter.

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 unfavourable impact of foreign exchange rates and low interest rate.

During the reported quarter, MetLife’s total operating expenses inched up 0.7% year over year to $14.66 billion, whereas total expenses also climbed 0.7% year over year to $16.44 billion.

Total operating revenue for the reported quarter climbed 2% year over year to $16.98 billion and slivered past the Zacks Consensus Estimate of $16.73 billion. Moreover, total revenue jumped 11.1% year over year to $17.7 billion. MetLife’s premiums climbed 0.5% year over year to $9.15 billion, whereas fee revenue improved 10.1% to $2.21 billion and net investment income was up 1.1% year over year to $5.13 billion. Other revenues also grew 6.4% year over year to $481 million.

Segment Details

The Americas’ operating earnings jumped 12% year over year to $1.3 billion. Premiums, fees and other revenues climbed 4% to $8.6 billion, while excluding pension close-out sales it improved 5%. Operating revenues grew 3.2% to $12.75 billion.

The segment witnessed improvements in Retail business, although lower underwriting results weakened the Group, voluntary and worksite benefits. Meanwhile, operating earnings in Latin America dipped 3% year over year driven by lower investment income across the region, partially offset by sales growth of 20%.

Operating earnings from Asia were up 11% year over year to $333 billion, while premiums, fees and other revenues grew 2% to $2.5 billion, driven by sales in Australia and Korea along with higher fee income, partially offset by the consistent uncertainty in Japan. Operating revenue grew 2.9% to $3.19 billion.

Operating earnings from EMEA surged 21% year over year to $87 million. Premiums, fees and other revenues in this segment decreased 11% to $685 million due to the withdrawal from some businesses in UK. Operating revenues declined 12.1% to $813 million. However, total sales improved 13%, reflecting augmented growth in Turkey, Russia and the Gulf countries.

Separately, Corporate & Other operating loss was recorded at $83 million, higher than the loss of $67 million in the prior-year quarter.

Financial Update

At the end of the reported quarter, MetLife’s net investment income inched up 1% year over year to $5.1 billion, while net investment portfolio gain was $161 million, better than a loss of $145 million in the year-ago quarter. In addition, post-tax derivative losses shrunk to $493 million from $1.3 billion in the year-ago quarter. The losses were driven by volatility in interest rate and foreign exchange.

Meanwhile, under the company’s variable annuity hedging program, pre-tax variable investment income was $337 million in the reported quarter against $239 million in the year-ago period.

As of Mar 31, 2013, MetLife’s book value per share, excluding AOCI, grew 2% year over year at $47.37. However, reported book value (including AOCI) per share rose 7% to $57.03. Operating ROE stood at 12.7%, up from 11.3% at 2012-end.

At the end of Mar 2013, MetLife had total investments of $512.5 billion, up from $517.1 billion at 2012-end. As well, cash and cash equivalents decreased to $10 billion, total assets increased to $841.69 billion and long-term debt inched down to $18.72 billion, while total equity edged up to $64.9 billion, from 2012-end.

Dividend Update

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.

Accordingly, the hiked dividend will be paid on Jun 13, 2013 to the shareholders of record as on May 9, 2013. From now, the company will shift to a quarterly dividend payment structure against the previous practice of annual dividend payouts.


Along with MetLife, its peers American International Group Inc. (AIG - Free Report) , Cigna Corp. (CI - Free Report) and Prudential Financial Inc. (PRU - Free Report) carry a Zacks Rank #2 (Buy). AIG is slated to release its first-quarter results after the closing bell on May 2, 2013.

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