MetLife Inc. (MET): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
MetLife's third quarter earnings outpaced the Zacks Consensus Estimate banking on higher investment and derivative gains. Enhanced growth across Americas, Asia and EMEA also boosted results, while book value and financial leverage improved. These were partially offset by slightly higher expenses and lower ROE. The company's leading brand is cushioned by diversified business mix and strong capital position, also reflected by its healthy ratings, dividend hike and resumption of share buybacks. However, tepid growth guidance, challenging interest rates, currency fluctuations, anticipated SIFI status and competition remain lingering concerns. Going ahead, consistent focus on international growth should enhance operating leverage, increasing MetLife's potential to outperform the peer group, thereby justifying our Neutral recommendation.

Overview:

Founded in 1868 and headquartered in New York, MetLife, Inc. is a leading provider of insurance and financial services to a broad spectrum of individual and institutional customers. Through its various subsidiaries and affiliates, the company provides individual insurance, annuities, and investment products. The company also offers group insurance as well as retirement & savings products and services to corporations and other institutions. Through its domestic and international subsidiaries and affiliates, MetLife serves more than 90 million customers in over 60 countries around the world. Based on life insurance in-force, it is the largest life insurer in the U.S. Some of its prominent subsidiaries and affiliates include Gen America, State Street Research, Metropolitan Property and Casualty, and Texas Life. Outside the U.S., the company serves customers through direct insurance operations in Japan, Latin America, Asia Pacific, Europe and the Middle East.

Since the first quarter of 2012, MetLife reported results under its new regionally distributed segments: The Americas (including the U.S. and Latin America) contributed 76% to the revenues in 2013, while Asia and EMEA (Europe, the Middle East and Africa) contributed 18% and 5%, respectively. The new segregation is based on the company's expansion into 64 countries with the ALICO acquisition, up from 17 countries previously. Additionally, MetLife is also creating a new global employees benefits unit under the Corporate & Other segment (1%).

Significantly, on Nov 1, 2010, the company acquired American Life Insurance Company (ALICO) unit of AIG for $16.4 billion. The payment made to AIG consisted of $7.2 billion in cash and $9.0 billion in MetLife equity and other debt securities. ALICO is a leading provider of life insurance, accident and health insurance, retirement and wealth management solutions to consumers and businesses.

Further, on Apr 1, 2011, MetLife sold half of its stake in Japan-based Mitsui Sumitomo MetLife Insurance Co. to its joint venture partner MS&AD Insurance Group Holdings Inc. for $267 million ( 22.5 billion) in cash. Alongside, on Nov 1, 2011, MetLife disposed of MetLife Taiwan Insurance Company Limited, in a third-party sale, for $180 million. Further, on Nov 9, 2011, MetLife approved the sale of its Caribbean operations to Pan-American Life Insurance Group, which was closed in 2012.

Additionally, MetLife divested its banking business in parts, based on the stringent regulations attached and a consistent operating underperformance. Accordingly, on Jan 10, 2012, MetLife announced the closure of its forward residential mortgage business, which originated under MetLife Home Loans. The termination in turn is projected to lay off about 4,300 employees associated with this business.

On Jan 30, 2012, MetLife announced a contract to acquire the life insurance and pension businesses of London-based Aviva plc in Eastern Europe regions of Hungary, Romania and Czech Republic. These three European units up for sale had total assets of 57 million ($75 million) and accounted for less than 0.5% of total profits of Aviva at Jun 2011-end. The transaction was culminated in Aug 2012.

On Feb 9, 2012, MetLife further agreed to vend its Warehouse Finance business to the financial firm EverBank Financial Corp. The deal was culminated in the first half of 2012 with undisclosed terms and conditions.

On Apr 26, 2012, Nationstar Mortgage LLC agreed to purchase MetLife Bank's reverse mortgage servicing portfolio for net worth of $25 million. The transaction was closed in Jun 2012. Further, in Jan 2013, MetLife Bank closed the long-pending deal with General Electric Co.'s financial services unit GE Capital Retail Bank and sold its bank deposits worth $6.4 billion, which included certificates of deposit and money market accounts. MetLife also vended its mortgage-servicing portfolio to JPMorganChase Bank.

In Feb 2013, MetLife de-registered itself as a bank holding company after receiving due approval from the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC). Henceforth, MetLife Bank is a divested operation.

In Sep 2013, MetLife formed a life insurance joint venture (JV) with Bank for Investment & Development of Vietnam (BIDV) and Bank for Investment and Development of Vietnam Insurance Corporation (BIC). The JV is scheduled to be functional in 2014.

In Oct 2013, MetLife culminated the purchase of 64.3% of the pension-management wing of Banco Bilbao Vizcaya Argentaria SA (BBVA) AFP Provida SA based in Chile. The transaction was valued at $1.3 billion along with dividends from AFP of about $230 million. Net capital gains of about 500 million euros ($676.28 million) are also projected from the deal.

In May 2014, MetLife completed the divestment of its leading specialist bulk annuity pension provider in U.K., MetLife Assurance Ltd., to Rothesay Life Ltd. MetLife Assurance was armed with over 20,000 member and assets under management worth 3 billion. However, MetLife will continue to conduct its European operations, primarily the U.K. wealth management and employee benefits business (MetLife Europe Ltd.) and MetLife's U.S. pension risk transfer business. The divestment was announced in Feb 2014.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: BBVA , MET

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