MetLife’s (NYSE:MET) earnings for the first quarter of 2013 were helped by margin expansion. Premiums and fees collected by the company grew by 2% over the prior year period as did operating revenue while operating earnings increased by 12%. The insurer reported net income of $956 million for the quarter compared to a loss of $174 million in the first quarter of 2012. Over 75% of the insurer’s revenues came from the U.S. and Latin America, where it reported a 12% increase in operating income.
Our $39 price estimate for MetLife’s stock is in line with the current market price.
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Americas Take The Lead
The company reported a 4% year-on-year increase in premiums and fees from the Americas driven by an 8% increase in premiums from group, voluntary and worksite benefits, which included growth in dental insurance. MetLife is the biggest life insurer in the U.S., with a market share of 10%, in terms of direct premiums.  The company’s market share has risen steadily from 8.8% in 2009.  We expect it to maintain its position as the market leader in the coming years. Please read our article: A Closer Look At The U.S. Life Insurance Market for more.
MetLife was the highest seller of variable annuities in 2011, but decided to cut back on the product in 2012 to reduce risk and exposure.  The company lost its market position to Prudential Financial (NYSE:PRU) in 2012. It continued to cut down on equity linked variable annuities in the first quarter of 2013 with the product sales down 29% from the prior year. Variable annuities are a popular retirement solutions product in the U.S., accounting for 80% of the annuities market.
International Growth On Track
MetLife reported a 20% increase in insurance sales in Latin America driven by strong sales in Mexico. Premiums and fees collected from the region increased by 3% on a constant currency basis and by 2% on actual currency basis. As a result, operating income from the region increased by 3%.
Increased market volatility and uncertainty due to stimulus measures undertaken by Prime Minister Shinzo Abe  led to a 13% decline in insurance sales. This was offset by business growth in Korea, India and Australia – leading to a 2% increase in premiums and fees from Asia. Operating income from the region increased by 11%.
Insurance sales in Europe, the Middle East and Africa increased by 13% helped by growth in emerging markets in Russia and Turkey. MetLife reported a 21% increase in operational income from the region helped by expense discipline.
We believe that international markets, particularly in Asia, hold the key for MetLife in the future. Please read our articles: An Overview Of The Japanese Life Insurance Market and A Look At The Indian Life Insurance Market for more on MetLife’s international prospects.Notes:
- NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS LIFE AND FRATERNAL INSURANCE INDUSTRY 2012 TOP 25 GROUPS AND COMPANIES BY COUNTRYWIDE PREMIUM [↩]
- 2009 Market Share Reports for the Top 125 Life and Fraternal Insurance Groups and Companies By State and Countrywide [↩]
- LIMRA [↩]
- Japan GDP Decline Strengthens Abe’s Case for Stimulus: Economy, Feb 14, 2013, Bloomberg [↩]