Growth In Emerging Markets And Higher Investment Income Drive MetLife’s Q3 Earnings

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MetLife (NYSE:MET) announced third quarter earnings last week, posting a 22% year-over-year increase in operating income. Strong performance across geographies, led by markets in Asia, Latin America and the Middle East, boosted MetLife’s earnings in the third quarter. [1] This is in contrast with flat results in the previous quarter. [2] The company’s operating income benefited from improved underwriting performance and favorable prior year developments. During the third quarter, MetLife also benefited from a 4% year-over-year rise in net investment income of $5.2 billion, primarily powered by strong growth in variable investment income from $236 million in 2013 to $424 million in 2014. ((MetLife Announces Third Quarter 2014 Results, MetLife Press Release))

We have a price estimate of $60 for MetLife’s stock, about 10% higher than the current market price.

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U.S. Operations

MetLife is the largest life insurance group in the U.S. with a market share of over 8% in terms of premiums earned. [3] In the third quarter, higher income annuity sales and separate account fee growth led to a 10% year-over-year increase in retail premiums and fees. (SEC-8K Filing))

International Operations

Asia-Pacific

During the third quarter, Australia and China were key contributors to a 19% year-over-year growth in earnings from the region. Total sales were up 10% year-over-year. Asia continues to be a high growth market for the company. As part of its long term strategy, the company plans to maximize earnings from Japan and Korea, expand its business network in India and China and expand into markets in Southeast Asia. [4]

Europe, Middle-East And Africa (EMEA)

A solid 31% year-over-year increase in sales from emerging markets, as well as strong employee benefits sales in the Middle East, boosted total sales in the EMEA region by 12%. Operating earnings from the region of $96 million were 20% higher than a year ago (on a constant currency basis) driven by growth in the Middle East.

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MetLife (NYSE:MET) announced third quarter earnings on last week. Strong business performance across geographies resulted into a solid 22% year-over-year growth in operating income of $1.8 billion for the company during the third quarter. Emerging markets in Asia, Latin America and Middle-East posted double digit growth in the third quarter. This is in contrast with flat results in the second quarter. Higher operating income included a favorable underwriting experience as well as prior year development. The company also benefitted by about $32 million from one-time tax adjustment. On the other hand, tax reforms in Chile led to a $41 million decrease in the operating income. The company also reported a 7% year-over-year rise in operating revenues on the back of increase in premiums and fees revenue.

MetLife’s stock regained over 7% in the past one week due to outstanding third quarter earnings, after a steep drop experienced in the month of October. The stock price had dropped to a low of $47. We have a price estimate of $60 for MetLife’s stock, about 10% higher than the current market price.

Notes:
  1. MetLife’s CEO Steven Kandarian on Q3 2014 Results – Earnings Call Transcript, Seeking Alpha []
  2. MetLife Q2 Earnings: Weak Underwriting, FX Headwinds Keep Earnings Flat, Trefis []
  3. NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS LIFE AND FRATERNAL INSURANCE INDUSTRY 2013 TOP 25 GROUPS AND COMPANIES BY COUNTRYWIDE PREMIUM []
  4. Asian Investor Conference Presentation, MetLife Investor Relations []