What To Expect From MetLife’s Q4 Results

January 31st, 2017 · by Trefis Team
METYTD+27.8%SPYYTD+12.0%XLFYTD+2.9%
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MetLife (NYSE:MET) is scheduled to report its fourth quarter earnings on Thursday, February 2nd. In Q3 2016, the insurer’s revenues declined 2% year-over-year (y-o-y) to $17.7 billion but beat market estimates of $17.2 billion. The lower-than-expected decline was attributed to a 38% rise in net investment income to about $5.5 billion. Aided by strong performances by the Retirement and Group Benefits businesses in the U.S., favorable underwriting in EMEA and a lower overall effective tax rate, the company’s operating earnings grew by a whopping 102% to over $1.4 billion or $1.28 per share, beating consensus estimates by 14 cents or 12%.

In the upcoming Q4 results, we expect MetLife’s revenues to decline in mid-single digits but earnings to increase in high single-digits, in line with consensus estimates compiled by Reuters.met-22
Factors Contributing To Earnings

  • Interest Rates: Interest rates have remained low since the start of last year and economic uncertainty due to the U.K.’s Brexit vote pushed government bond yields to extremely low levels. This is likely to have adversely impacted MetLife’s investment income in the fourth quarter as well. MetLife’s net investment income yields declined from 4.93% in Q2 2015 to 4.39% in Q1 2016 before rising back to 4.65% in Q3 2016. The yield on fixed maturity securities, which account for most of MetLife’s investments, dropped from 4.55% in Q3 2015 to 4.38% in Q3 2016.
  • Strong Yen: We expect MetLife’s results to be positively impacted by a stronger Japanese Yen (except in December’16), considering Japan contributes 85-90% of the company’s operating earnings in Asia, about half of which is earned in Yen. Asia contributed over 16% of MetLife’s revenues and 20% of its operating earnings in the first three quarters last year.

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