MetLife’s stock (NYSE: MET) has gained roughly 13% YTD compared to the 20% drop in the S&P500 index over the same period. Further, at its current price of $71 per share, it has an upside potential of 8% to its fair value of $76 – Trefis’ estimate for MetLife’s valuation. The insurance giant posted better-than-expected results in the second quarter of 2022. It reported total revenues of $15.6 billion – down 16% y-o-y. The top line mainly suffered due to a 32% decrease in the net investment income, followed by a significant drop in net investment gains and net derivative gains. On the flip side, the premiums, fees, and other revenues increased 23% y-o-y, primarily driven by a 46% jump in the U.S. segment and a 21% rise in the Latin America unit. Overall, the adjusted net income decreased from $3.36 billion to $103 million in the quarter. It was partly due to negative growth in the top line and partly due to an increase in operating expenses as a % of revenues from 76% to 100%.
The company’s total revenues decreased 8% y-o-y to $31.3 billion in the first half of 2022. It was because of lower net investment income (NII), net investment gains, and net derivative gains as compared to the year-ago figure. However, the negative growth was partially offset by an improvement in premiums, fees, and other revenues. All in all, the adjusted net income decreased from $3.66 billion to $709 million.
We expect the premiums, fees, and other income to continue their growth trajectory in Q3. Notably, the consensus estimates of Q3 revenues and earnings are $20.58 billion and $1.17 respectively, which suggests a year-on-year growth in revenues but lower earnings. Overall, MetLife revenues are estimated to remain around $70.5 billion in FY2022. Additionally, MET’s adjusted net income margin is likely to see a slight increase from the 2021 levels, resulting in an annual EPS of $7.92. This coupled with a P/E multiple of just below 10x will lead to a valuation of $76.
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