This Insurance Giant Beats Analyst Expectations
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Metlife (NYSE: MET), with a history of over 140-years has grown to become a leading global insurance provider to over 90 million customers in over 50 countries. Besides holding leading market positions in the US, it has large presence in Japan, Latin America, Asia Pacific, Europe and Middle East. For the purpose of reporting, the company is divided into six segments; Insurance Products, Retirement Products, Corporate Benefit Funding and Auto & Home, and Japan and Other International Regions.
Recent Quarter’s Performance
The company reported better than expected 2012 fourth quarter performance on Feb. 13. Both the revenues and the net income advanced their respective estimates. While the top line of $13.36 billion was $1.1 billion ahead of its estimate, the bottom line of $1.25 per share beat its estimate by $0.07.
Most recent quarter’s earnings were up 10% over the fourth quarter of 2011 primarily on 21% higher operating earnings in the Americas and a 26% increase in the Europe, Middle East and Africa segment. Operating earnings in the Asian region were down 24% due to the annual review of actuarial assumptions.
The operating revenues of $18.36 billion during the most recent quarter were up 12% from a year ago. Much of the improvement in the latest operating revenues was a result of a surge in premiums and net investment income during the quarter. The company earned $10.59 billion in premiums during the fourth quarter of 2012, up 16%, while net investment income of $5.18 billion was up 6% from a year ago.
Operating expenses of $16.4 billion during the most recent quarter were up 12% year over year on 20% higher policyholder benefits and claims and policyholder dividends. As a result, the company posted operating earnings of $1.4 billion, up 10.5% from a year ago.
Retail Life & Other reported operating earnings of $171 million. Mortality was weaker than expected, coming in at 99% of expected, vs. 91.3% last quarter and 81.1% in 4Q11, but was offset by better spread income and lower operating expenses. Total Life Premiums, fees and other revenues of $1.5 billion were up from $1.4 billion in both 2Q and 3Q. Spreads continued to show strength at 2.45% in the quarter vs. 2.15% last quarter and 1.93% in 2Q12.
Retail Property and Casualty premiums of $433 million were up 2.5% year over year. The combined ratio improved to 84.5% in the quarter but does contain some favorable prior year development, while the all-in combined ratio of 100.4% reflects catastrophe losses from Sandy totaling around $67 million in the segment.
The Annuities segment reported operating income of $462 million, while Latin America, Asia, EMEA and Corporate and Other reported $148 million, $198 million, $59 million and $137 million, respectively.
The company is competing with other insurance giants with major global footprint, including Prudential Financial (NYSE: PRU). Prudential has a market cap of around $26.5 billion and posted a bottom line of $1.69 per share for the fourth quarter, below $1.74 consensus mean estimate. PRU’s fourth quarter could be characterized a mixed with solid underwriting quarter across the US businesses and strong flows in Asset Management.
Metlife has continued to show strength in its core business, and its vast global footprint gives the company advantage on its peers. Therefore, I am bullish on Metlife and recommend investors buy the stock.
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