It has been about a month since the last earnings report for MetLife (MET). Shares have added about 4.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MetLife due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
MetLife Q3 Earnings Beat Estimates on Strong Volume Growth
MetLife reported third-quarter 2022 adjusted operating earnings of $1.21 per share, which outpaced the Zacks Consensus Estimate of $1.18. However, the bottom line declined 49% year over year.
Adjusted operating revenues of MetLife amounted to $23,690 million, which increased from $17,087 million in the year-ago quarter. The top line surpassed the consensus mark by 19.1%.
The better-than-expected third-quarter results were driven by volume growth across segments, solid contributions from the Latin America segment and increased interest rates aiding core spreads. However, the upside was partly offset by reduced private equity returns and increased expenses.
Behind the Headlines
Adjusted premiums, fees and other revenues, excluding pension risk transfer (PRT), were $11,061 million, down 3% year over year. Adjusted net investment income fell 27% year over year to $4,163 million in the quarter under review, primarily due to reduced variable investment income stemming from decreased private equity returns.
Total expenses of $21,851 million increased from $14,863 million a year ago, due to higher policyholder benefits and claims. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 140 basis points (bps) year over year to 20.1%.
Net income plunged 78% year over year to $331 million due to derivative and investment losses. Adjusted return on equity, excluding AOCI other than FCTA, deteriorated 810 bps year over year to 8.9%.
U.S.: The segment reported adjusted earnings of $744 million, which declined 17% year over year in the third quarter due to reduced variable investment income. However, it beat the Zacks Consensus Estimate of $719.8 million on lower COVID-19 life insurance claims. Adjusted premiums, fees and other revenues, excluding PRT of $6,500 million, climbed 1% year over year.
Asia: Adjusted earnings in the segment amounted to $197 million, which fell 65% year over year in the quarter under review and missed the consensus mark of $418.4 million, due to reduced variable investment income and unfavorable underwriting. This was partially offset by volume growth. Adjusted premiums, fees & other revenues declined 14% year over year to $1,789 million in the third quarter.
Latin America: Adjusted earnings of $171 million increased significantly from $29 million a year ago and beat the Zacks Consensus Estimate of $150.5 million, due to lower claims regarding COVID-19, volume growth and increased interest margins stemming from the inflation in Chile. Adjusted premiums, fees & other revenues advanced 14% or 21% on a cc basis year over year to $1,123 million in the segment, due to growing sales.
EMEA: The segment’s adjusted earnings were $60 million, which plunged 36% year over year in the third quarter, but beat the consensus mark of $59 million. At cc, adjusted earnings fell 20% year over year due to less favorable underwriting. Adjusted premiums, fees & other revenues of $545 million declined 19% year over year. On a cc basis, the same slid 7% year over year due to refinements in some unearned revenue reserves.
MetLife Holdings: Adjusted earnings in the segment slumped 90% year over year to $59 million due to decreased variable investment income. The reported figure also missed the Zacks Consensus Estimate of $269.4 million. Adjusted premiums, fees & other revenues fell 11% year over year to $1,016 million in the quarter under review.
Corporate & Other: Adjusted loss of $265 million widened from the prior-year quarter’s loss of $131 million.
Financial Update (as of Sep 30, 2022)
MetLife exited the third quarter with cash and cash equivalents of $22,200 million, which increased from $20,047 million at 2021-end. Total assets of $650.1 billion declined from $759.7 billion in fourth-quarter 2021 end.
Long-term debt totaled $14,520 million, up from $13,933 million at 2021-end. It also had a short-term debt of $183 million. Total equity of $25,330 million decreased from $67,749 million at 2021-end.
Capital Deployment Update
MetLife bought back shares worth $674 million during the third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
Currently, MetLife has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MetLife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
MetLife is part of the Zacks Insurance - Multi line industry. Over the past month, American International Group (AIG), a stock from the same industry, has gained 9.5%. The company reported its results for the quarter ended September 2022 more than a month ago.
American International Group reported revenues of $11.33 billion in the last reported quarter, representing a year-over-year change of -2.9%. EPS of $0.66 for the same period compares with $0.97 a year ago.
For the current quarter, American International Group is expected to post earnings of $1.15 per share, indicating a change of -27.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -10% over the last 30 days.
American International Group has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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