MetLife following Wednesday's market close reported fourth-quarter earnings of $877 million, or 77 cents a share, compared to net income of $96 million, or 9 cents a share, during the fourth quarter of 2012.
The fourth-quarter results were lowered by $242 million after tax from losses on derivatives, while results for the fourth quarter of 2012 included an after-tax charge of $752 million for deferred policy acquisition costs, "of which $342 million, after tax, was reflected in the after tax total of $855 million in net derivative losses."
On an operating basis, MetLife reported fourth-quarter earnings of $1.6 billion, increasing 14% from $1.4 billion during the fourth quarter of 2012. Operating earnings-per-share were up 10% to $1.37 from $1.25 a year earlier.
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Premiums, fees and other revenue declined 1% from a year earlier to $13.077 billion during the fourth quarter, while total operating revenues were flat at $18.382 billion.
For all of 2013, net income totaled $3.246 billion, or $2.91 a share, increasing from $1.202 billion, or $1.12 a share, during 2012. Operating earnings for 2013 totaled $6.287 billion, up 11% from $5.686 billion in 2012, while operating EPS for the year totaled $5.63, rising 7% from $5.28 in 2012.
The company's fourth-quarter return on common equity was 11.5%, improving from 10.8% a year earlier. The return on common equity for all of 2013 was 12.0%, improving from 11.3% in 2012.
MetLife's shares were down 1.8% in morning trading Thursday, to $48.97.
One of the catalysts analysts expect eventually for MetLife is a significantly higher deployment of excess capital. The company during 2013 nearly doubled its quarterly dividend to 27.5 cents a share, for a yield of 2.21%, based on Thursday's closing price of $49.88.
But MetLife hasn't been buying back shares, as so many other financial firms have been doing at this stage of the economic recovery.
"The acquisition of Provida [a pension fund administrator in Chile] is a great example of what we believe is a prudent approach to capital management, given the uncertain regulatory environment," MetLife CEO Steven Kandarian said during the company's earnings conference call Thursday morning. "We use cash to acquire a fee-based business with limited market sensitivity and strong free cash flow. We priced the acquisition to create value based on our stock price in the high 30s. So the assumed cost of capital was higher than it is today."
"I also want to provide a framework for how we think about share buybacks versus dividends during this period of regulatory uncertainty. We are not repurchasing shares at this time because we want to avoid the potential need to issue equity if there is an adverse regulatory outcome," Kandarian said, according to a transcript provided by Thomson Reuters.
The CEO was referring to MetLife's status as a non-bank global systemically important financial institution (SIFI). The company doesn't know what regulators' ultimate capital requirements will be, and is keeping its powder dry, for now.
MetLife's shares at Wednesday's close traded just above their reported Dec. 31 book value of $48.49, excluding accumulated other comprehensive income. The shares trade for 8.2 times the consensus 2015 EPS estimate of $6.12. The consensus 2014 EPS estimate is $5.79.
What Analysts Are Saying
JPMorgan Chase analyst Jimmy Bhullar rates MetLife "overweight," with a $58 price target, and in a note to clients Thursday wrote, "In our view, low rates and regulatory uncertainty present risks, but the risk-reward seems attractive given potential for ROE expansion, MetLife's improving risk profile, and attractive valuation."
Looking ahead, Bhullar expects MetLife to see slow growth during 2014. "On the other hand, the integration of ALICO and Provida should drive an uptick in top-line growth in the foreign business over time. Meanwhile, U.S. division margins should benefit from recent price hikes in the individual and group insurance businesses, and top-line growth is poised to improve as the economy recovers further," he wrote.
KBW analyst Jeffrey Schuman is even more upbeat on MetLife, with an "outperform" rating and a $64 price target, implying 28% upside potential over the next 12 months.
Schuman in client note late Wednesday said his research team calculated MetLife's core fourth-quarter earnings to be $1.40 a share, "with the variance to our model explained largely by strong variable investment income. On a geographic basis, the beat was distributed as follows: Americas +$0.08, International +$0.05, Corporate -$0.02.
Credit Suisse analyst Thomas Gallagher rates MetLife "outperform," with a price target of $59, and in a note late Wednesday called the company's results "a solid quarter with strong mortality in the US and beats relative to our estimates in MET's international businesses, which came as somewhat of a relief after mixed international results from [Prudential (PRU) and Principal Financial Group (PFG)]"
"Looking ahead to 1Q, we still think our $1.41 estimate looks good as we expect higher earnings from Corporate Benefit Funding from higher spread income to offset our expectation for some near-term follow-through softness in annuities and Group Benefits, both likely subdued by quarter to date equity markets and adverse seasonal mortality," Gallagher wrote.
This chart shows the performance of MetLife's stock against the Dow Jones U.S. Life Insurance Index and the S&P 500 (^GSPC) since the end of 2011:
data by YCharts
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