MetLife (NYSE: MET) is scheduled to report its fiscal Q4 2021 results on Thursday, February 3, 2022. We expect MetLife to miss the consensus estimates. The insurance giant outperformed the street estimates in the last quarter, with revenues increasing by 6% y-o-y to $16.9 billion. While the U.S. segment was down in the quarter, growth in other segments, especially, Latin America, Asia, and MetLife holdings, more than compensated for it. We expect the fourth-quarter results to be on similar lines.
Our forecast indicates that MetLife’s valuation is $70 per share, which is 6% above the current market price of around $66. Our interactive dashboard analysis on MetLife’s Earnings Preview has more details.
(1) Revenues expected to miss the consensus estimates
MetLife’s revenues decreased 3% y-o-y to $67.8 billion in 2020 due to lower net investment income (NII) and a slight decline in total premiums.
- Premiums are the single largest source of revenue for any insurance company, and MetLife is no different – MET derives 60% of revenues from premiums. It suffered a slight drop in 2020 due to the Covid-19 crisis. That said, the premiums have seen some improvement over the first three quarters of 2021, with a recovery in the economy. Notably, the cumulative nine-month premiums increased 3% y-o-y to $28.9 billion. It was mainly due to growth in Latin America and EMEA segments. We expect the same trend to continue in the fourth quarter.
- Net investment income is very important for the profitability of any insurance company. Notably, MET drives close to 25% of the total revenues from NII. The stream suffered a 9% y-o-y drop in 2020 due to lower investment yields. That said, the NII has made a significant recovery in the first three quarters of 2021. The cumulative figure improved 36% y-o-y to $16.2 billion. It was due to strong returns in the private equity portfolio and growth in invested assets. We expect the same momentum to continue in the fourth quarter as well.
- Overall, we expect MetLife’s revenues to remain around $68 billion for FY2021.
Trefis estimates MetLife’s fiscal Q4 2021 revenues to be around $17.2 billion, 3% below the $17.7 billion consensus estimate. We expect the growth in net investment income to drive the fourth-quarter results.
The Federal Reserve is expected to make multiple interest-rate hikes in 2022. This will likely increase the investment yields. Further, the premiums are likely to benefit from the economic recovery. Our dashboard on MetLife’s revenues offers more details on the company’s operating segments along with our forecast for FY2022.
2) EPS is likely to remain slightly behind the consensus estimates
MetLife Q4 2021 adjusted earnings per share (EPS) is expected to be $1.41 per Trefis analysis, almost 4% below the consensus estimate of $1.47. The company’s adjusted net income decreased 9% y-o-y in 2020, primarily due to a higher effective tax rate. Further, the same trend continued in the first quarter of 2021, with the figure declining by 93% y-o-y. This was due to an increase in operating expenses and negative growth in the top line. That said, the pattern reversed in the second and third quarters, because of lower policyholder benefits and claims and revenue growth. Notably, the cumulative nine-month adjusted net income in 2021 increased 2% y-o-y to $5.2 billion. We expect the fourth-quarter results to follow the same trend. Overall, MetLife’s annual EPS figure is expected to remain around $7.37 for FY2021.
(3) Stock price estimate 6% higher than the current market price
We arrive at MetLife’s valuation, using an EPS estimate of around $7.37 and a P/E multiple of just below 10x in fiscal 2021. This translates into a price of $70, which is 6% above the current market price of approximately $66.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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|S&P 500 Return||-7%||-7%||98%|
|Trefis MS Portfolio Return||-11%||-11%||248%|
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