MetLife Earnings Preview: Growth In U.S., But Investments And FX Concerns Loom

February 10th, 2015 by Trefis Team
+8.21%
Upside
72.72
Market
78.69
Trefis
MET: MetLife logo
MET
MetLife

MetLife (NYSE:MET) is scheduled to report earnings for the fourth quarter on Thursday, February 12. [1] In the third quarter, the company saw business growth across regions, especially in Asia, Latin America and the Middle East, leading to a 22% year-over-year (y-o-y) gain in operating income. The company also benefited from improved underwriting results and higher net investment income during the third quarter.

In this note, we review the key trends that will drive MetLife’s fourth quarter results. The company’s stock has fallen by over 10% since December, after it was formally designated as a non-bank systemically important financial institution (SIFI). The company is challenging the decision in federal court. We have a price estimate of $59 for the company’s stock, which is about 20% higher than the current market price.

See our full analysis of MetLife

Relevant Articles
  1. Dropping 5% Since The Start Of 2023, Can MetLife Stock Rebound?
  2. Trailing The S&P Index By 30% YTD, Can MetLife Stock Recoup Its Losses?
  3. Where Is MetLife Stock Headed?
  4. MetLife Stock Has A 44% Upside To Its Pre-Inflation Peak
  5. Is MetLife Stock Fairly Priced?
  6. What To Expect From MetLife Stock?

Expect Growth In The U.S.

The Americas region accounts for three-quarters of MetLife’s revenues and around 80% of MetLife’s operating income. MetLife is the largest life insurance group in the U.S., with a market share of over 8% in terms of premiums earned. [2] The company’s operations in the country are divided into retail, group voluntary and worksite benefits and corporate benefit funding. Both the retail and group voluntary and worksite benefits divisions saw healthy growth in premiums during the first nine months of 2014. Within retail, MetLife held just under 4% of the individual annuity market in terms of sales in the U.S. as of September 2014. [3] The company has continued to scale back its variable annuities business, thereby losing nearly 2% in market share in the U.S. during the first three quarters of 2014, and we expect that trend to continue. [4]

Investment Income Is Crucial

Income from investments is important for insurance companies. MetLife invests in bonds, fixed maturities and also equities. MetLife’s loss ratio (average expenses to premiums) of over 100% in the U.S. means the company is reliant on generating sufficient returns on its investments to make up for losses that it would otherwise incur. Improving investment results have allowed the company to offset mixed underwriting performances and FX headwinds of late. However, the persistent low rate environment coupled with uncertain conditions in key international markets could pressure the company’s Q4 investment returns.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Notes:
  1. Q4 2014 MetLife, Inc. Earnings Conference Call, Investor Relations [↩]
  2. NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS LIFE AND FRATERNAL INSURANCE INDUSTRY 2013 TOP 25 GROUPS AND COMPANIES BY COUNTRYWIDE PREMIUM [↩]
  3. U.S. Individual Annuity Sales (2014, 3rd Quarter), LIMRA [↩]
  4. U.S. Individual Annuity Sales (2013, 4th Quarter, YTD), LIMRA [↩]