MetLife Inc. (MET) reported fourth-quarter 2012 operating earnings per share (EPS) of $1.25, modestly beating both the Zacks Consensus Estimate of $1.18 and the year-ago quarter’s EPS of $1.17. Operating earnings improved 10% year over year to $1.37 billion.
During the reported quarter, operating EPS were negatively affected by net derivative losses of $1.20, net investment losses of 18 cents and other adjustments of 85 cents. These were partially offset by an income tax benefit of $1.05 and income from discontinued operations of 3 cents. Including these, GAAP net income plummeted to $96 million or 9 cents per share against $959 million or 90 cents per share in the prior-year quarter.
The upbeat results were primarily due to higher net investment income, premiums and fees that drove the top line, return on equity (:ROE) and book value per share. These were partially offset by higher-than-expected operating expenses and higher derivative losses driven by the unfavorable impact of foreign exchange rates and low interest rate.
During the reported quarter, MetLife’s total operating expenses increased 12.5% year over year to $16.39 billion, whereas total expenses escalated 15.2% year over year to $17.81 billion.
Total operating revenue for the reported quarter increased 12% year over year to $18.36 billion and also topped the Zacks Consensus Estimate of $17.22 billion. Moreover, total revenue climbed 3.6% year over year to $17.33 billion. MetLife’s premiums soared 15.7% year over year to $10.6 billion, whereas fee revenue improved 14.6% to $2.16 billion and net investment income was up 5.8% year over year to $5.18 billion. Other revenues also grew 5.5% year over year to $443 million.
The Americas’ operating revenue increased 14.6% year over year to $14.1 billion.
Premiums, fees and other revenue jumped 18% to $9.9 billion, while excluding pension close-out sales it improved 5%. Further, operating earnings surged 22% year over year to $1.25 billion.
The segment witnessed improvements in all businesses except the group, voluntary and worksite benefits along with favorable claims experience. Particularly, Latin America posted operating earnings growth of 20% year over year and total sales of 26%, driven by improved growth channels across the region. The upsides were partially offset by higher catastrophe losses of $70 million due to Superstorm Sandy.
Operating revenue from Asia were up 11% year over year to $3.27 billion, while premiums, fees and other revenue grew 11% to $2.5 billion, driven by sales in Australia and Korea along with improved persistency in Japan as well as high investment income. However, operating earnings decreased 23.6% year over year to $198 million due to the negative impact of the annual review of actuarial assumptions.
Operating revenue from EMEA was almost flat year over year at $807 million. Premiums, fees and other revenue in this segment slipped 3% to $678 million. However, operating earnings improved 25.5% year over year to $59 million, reflecting augmented growth in Turkey, Russia and the Gulf countries. However, growth remained sluggish in the Western Europe.
Separately, Corporate & Other operating revenue was recorded at $213 million, down 20% from the year-ago period. Additionally, this segment incurred an operating loss of $137 million, higher than the loss of $95 million in the prior-year quarter.
Full-Year 2012 Highlights
For full-year 2012, MetLife’s operating EPS stood at $5.28, exceeding both the Zacks Consensus Estimate of $5.21 and $4.38 recorded in 2011. Operating net income escalated 21.6% year over year to $5.69 billion. On a GAAP basis, including losses from derivatives, investments, goodwill impairment and other adjustments, net income plunged to $1.20 billion or $1.12 per share in 2012 from $6.16 billion or $5.76 per share in 2011.
Operating revenues of $68.35 billion climbed 5% over 2011, lagging the Zacks Consensus Estimate of $66.72 billion. However, total revenues dipped 3% to $68.15 billion. Total operating expenses inched up 3.1% year over year to $60.22 billion, while total expenses increased 9.3% year over year to $66.71 billion.
At the end of the reported quarter, MetLife’s net investment income increased 6% year over year to $5.2 billion, while net investment portfolio loss was $2 million, down from loss of $213 million in the year-ago quarter. In addition, post-tax derivative losses surged to $924 million ($1.3 billion pre-tax), in stark contrast to a gain of $351 million ($591 million pre-tax) in the year-ago quarter. The downside was driven by volatility in interest rate and foreign exchange.
Meanwhile, under the company’s variable annuity hedging program, pre-tax variable investment income was $376 million in the reported quarter against $135 million in the year-ago period.
As of Dec 31, 2012, MetLife’s book value per share, excluding AOCI, was almost flat year over year at $46.73. However, reported book value (including AOCI) per share grew 9% to $57.17 versus $52.43 at the end of 2011. Operating ROE stood at 11.3% at 2012-end.
At the end of 2012, MetLife had total investments of $517.1 billion, up from $511.4 billion at 2011-end. Also, cash and cash equivalents surged to $15.7 billion, total assets increased to $836.8 billion and long-term debt inched down to $19.1 billion, while total equity increased to $64.8 billion, from 2011-end.
MetLife carries a Zacks Rank #3 (Hold). Other strong performers in the insurance sector include XL Group Plc (XL), First American Financial Corp. (FAF) and RLI Corp. (RLI), all of which carry a Zacks Rank #1 (Strong Buy).
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