MetLife, Inc. MET released its third-quarter 2023 financial results, reporting adjusted operating earnings of $1.97 per share. While the bottom line increased by an impressive 44% compared to the previous year, it missed the Zacks Consensus Estimate by 1%. Adjusted operating revenues for MetLife totaled $18.2 billion, a decline of 22.3% year over year, but still beating the consensus mark by 1.7%. The weaker-than-expected earnings were primarily due to higher net derivative losses, although the negatives were partially offset by lower expenses, higher investment returns, volume growth, and improved contributions from the U.S., Latin America, and EMEA businesses.

Behind the Headlines

MetLife’s adjusted premiums, fees, and other revenues, excluding pension risk transfer (PRT), were $11.7 billion, showing an 8% increase year over year. The company also reported a 21% year-over-year rise in adjusted net investment income to $5.1 billion, driven by high interest rates, asset growth, and strong private equity returns. Total expenses decreased to $15.3 billion compared to $20.9 billion in the previous year due to lower policyholder benefits and claims. However, the adjusted expense ratio increased by 40 basis points to 20.6%.

Although MetLife’s net income plunged by 62% to $422 million and missed expectations, the adjusted return on equity improved by 430 basis points to 14.9%.

Inside MetLife’s Segments

U.S.: MetLife’s U.S. segment reported adjusted earnings of $980 million, which represents a 30% increase year over year. The segment outperformed expectations due to higher recurring interest margins, growing volumes, and favorable underwriting margins. Adjusted premiums, fees, and other revenues, excluding PRT, rose by 9% to $6.9 billion.

Asia: The Asia segment recorded adjusted earnings of $275 million, a modest 3% increase year over year. While the figure missed estimates, it was attributed to increased variable investment income. Adjusted premiums, fees, and other revenues declined by 3% to $1.7 billion in the third quarter.

Latin America: Adjusted earnings in the Latin America segment amounted to $199 million, marking a significant 25% increase from the previous year and beating expectations. Adjusted premiums, fees, and other revenues advanced by 32% to $1.5 billion, driven by growing sales in Mexico and Chile.

EMEA: The EMEA segment reported adjusted earnings of $88 million, a remarkable 38% increase year over year. The segment outperformed expectations due to higher volumes, recurring interest margins, and favorable underwriting. Adjusted premiums, fees, and other revenues climbed by 9% to $588 million, mainly driven by solid sales.

MetLife Holdings: MetLife Holdings saw adjusted earnings rise by 78% to $208 million due to increased variable investment income, although it missed expectations. Adjusted premiums, fees, and other revenues in this segment fell by 8% to $910 million.

Corporate & Other: MetLife’s Corporate & Other segment reported an adjusted loss of $262 million, slightly larger than the loss of $258 million in the prior-year quarter.

Financial Update (as of September 30, 2023)

MetLife ended the third quarter with cash and cash equivalents of $14.9 billion, a decrease from $20.2 billion at the end of 2022. Total assets also declined from $663.1 billion to $652.1 billion. Long-term debt increased to $15.5 billion, while short-term debt stood at $161 million. Total equity fell to $25.9 billion from $30.1 billion at the end of 2022.

Capital Deployment Update

During the third quarter, MetLife repurchased shares worth $800 million and an additional $250 million in October.

Previous Outlook

MetLife previously provided guidance for its future performance. The company expects pre-tax variable investment income of around $2 billion for 2023. The projected adjusted losses for Corporate & Other were within $650-$750 million, with an effective tax rate of 22-24%. MetLife expects adjusted premiums, fees, and other revenues for MetLife Holdings to decline by 12-14% in 2023 and then decline by 6-8% annually thereafter. The company aims to achieve an adjusted return on equity of 13-15% within three years and maintain free cash flows within 65-75% of adjusted earnings. MET also expects its group benefits’ adjusted premiums, fees, and other revenues to grow by 4-6% annually in the near term.

Zacks Rank & Key Picks

MetLife currently holds a Zacks Rank #3 (Hold). Other stocks in the Finance sector that are performing well include Trupanion, Inc., Employers Holdings, Inc., and AMERISAFE, Inc. Trupanion and Employers Holdings are currently ranked as a Zacks Rank #1 (Strong Buy), while AMERISAFE holds a Zacks Rank #2 (Buy).

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