) announced its projected operating earnings growth to falter in
2013 on an annual basis, which is guided in the range of $5.5-5.9
billion or $4.95-5.35 per share based on average shares
outstanding of about 1.11 billion. This guidance does not assume
share buybacks, which is expected to be withheld next year.
However, management raised the earnings projection for full
year 2012 in the band of $5.5-5.6 billion or $5.15-5.25 per share
from the prior estimation of the range of $5.14-5.57 billion or
$4.80-5.20 per share based on average shares outstanding of about
1.074 billion. This indicates growth of about 19% from $4.7
billion or $4.38 per share in 2011.
Management further evaluated premiums, fees and other revenues
in the range of $47.3-47.7 billion for 2012, reflecting a 5%
growth over $45.4 billion recorded in 2011. Excluding accumulated
other comprehensive income, book value is expected to be within
$46.97-47.41 per share in 2012, increasing 0.6-1.5% from $46.69 a
share in 2011.
Meanwhile, return of equity (ROE) is estimated to be around
11.0-11.1%, rising from 10.1% in 2011. In May this year, MetLife
had charted out its long-term ROE growth goals of 12-14% to be
achieved by 2016, driven by higher operating earnings.
Additionally, the company projects fourth-quarter 2012
operating earnings, excluding adjustments, in the range of
$1.2-1.3 billion or $1.12-1.22 per share based on average shares
outstanding of about 1.085 billion. This mirrors a growth ranging
from negative 4% to 4% from $1.2 billion or $1.17 a share
reported in the fourth quarter of 2011.
International Growth to Defy Low-Rate
As indicated earlier, MetLife continues to focus on growth
through higher penetration in the rapidly growing international
emerging markets. In 2011, the company's international business
generated earnings of $2.21 billion against $780 million in 2010,
followed by consistent growth thus far in 2012, primarily backed
by American Life Insurance Co. (ALICO), which was acquired from
American International Group Inc.
) in November 2010.
Moreover, favorable investment spreads and insurance margins
have supported the growth this year, thereby validating
management's raised guidance for 2012. The company also benefits
from strong risk management by hedging against low interest
rates, disciplined expense control as well as price accretion of
retirement products, which has been validated by the ratings
agencies from time to time.
Going forward, MetLife seeks to achieve growth through its
customer-oriented business model and by reducing its product-risk
and capitalizing on its global employee benefits
business.Additionally, MetLife is focusing on strategically
shifting its product mix toward protection products and away from
more capital-intensive products, in order to generate more
predictable operating earnings and cash flows, thereby improving
its risk profile and free cash flow.
However, management views moderated growth in 2013 based on
the inflationary pressure and an extended low interest rate
scenario across economies. These factors deter higher returns
from the investment of premiums. Meanwhile, the low interest
rates in the US are expected to continue for next 2-3 years.
Moreover, failure to pass the capital stress test earlier this
year has swallowed MetLife's scope of deploying any capital
through share buybacks or dividends in 2013. This may adversely
affect the investor sentiment.
The Federal Reserve (Fed) extended the company's deadline to
submit a refurbished capital plan from June 2012 to September-end
2012 to January 5, 2013. Another rejection in the future could
gravely raise the risk of rating downgrades. The ongoing
regulatory challenges and risk of being acknowledged as a
systemically important financial institution could put MetLife
under Fed's supervision again and also pose hindrance in the
completion of the target of repurchasing shares worth about $8
billion from 2014-2016.
The company also plans to shed off its banking status as soon
as possible. On Wednesday, it received an approval from the
Office of the Comptroller of the Currency for its long pending
General Electric Co.
) GE Capital Bank, which is buying MetLife's bank deposits for
about $7 billion. However, its culmination day is yet to be
Consequently, the shares of MetLife closed at $32.83 on
Thursday, down 2.3%, at the New York Stock Exchange.
Estimate Trend Revision
Over the last 30 days, four of the 17 analysts covering the
stock have raised their estimates for the fourth quarter of 2012
and full year 2012, while no upward revision was witnessed.
Currently, the Zacks Consensus Estimate for the fourth quarter
2012 is operating earnings of $1.24 per share, which would be
down by 5.7% from the year-ago quarter.
The Zacks Consensus Estimates for full-year 2012 are currently
pegged at $5.26 per share (up 4.8% over 2011), at upper-end of
the latest guidance. For 2013, earnings are pegged at $5.49 per
share (4.4% over 2012), which is at the lower-end of the
guidance. MetLife retains a Zacks #3 Rank, which translates into
a short-term Hold rating and a long-term Neutral
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