10-QPeriod: Q2 FY2011

METLIFE INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:METMET-PEMET-PFMET-PA

Summary

MetLife Inc. reported its second quarter 2011 results, highlighting a significant increase in operating earnings, largely driven by the acquisition of ALICO completed in late 2010. The company saw growth in premiums and policy fees, particularly in its international segments and retirement products, supported by favorable equity market performance which boosted separate account balances. However, net income available to common shareholders declined year-over-year, primarily due to a substantial unfavorable swing in net derivative gains (losses) and increased net investment losses. While the ALICO acquisition contributed positively to operating earnings, the broader financial results were impacted by challenging market conditions, including increased catastrophe losses from severe weather in the U.S. and the earthquake in Japan, as well as a less favorable derivatives performance. The company continues to manage its investment portfolio with a focus on ALM principles to support its liabilities.

Financial Highlights

34 data points
Beta

Revenue

$17.15B

Net Income

$1.10B

6.4% Net Margin

EPS (Diluted)

$1.00

Total Assets

$771.48B

Cash & Equivalents

$9.63B

Free Cash Flow

$3.29B

Financial Statements
Beta
Revenue$17.15B
Operating Expenses$4.70B
Operating Income$1.78B
Net Income$1.10B
EPS (Basic)$1.01
EPS (Diluted)$1.00
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Total revenues increased by 21.3% to $17.15 billion, driven by the ALICO acquisition and improved market conditions leading to higher net investment income and policy fees.
  • 2Income from continuing operations, net of income tax, decreased by 21.8% to $1.20 billion, primarily due to an unfavorable $1.13 billion change in net derivative gains (losses) and a $141 million increase in net investment losses.
  • 3Operating earnings available to common shareholders increased by 45% to $1.33 billion, largely due to the ALICO acquisition, improved market conditions for separate accounts, and growth in international businesses.
  • 4The company's total assets grew to $771.48 billion as of June 30, 2011, compared to $730.91 billion at December 31, 2010, driven by the ALICO acquisition and investment portfolio growth.
  • 5MetLife's equity increased to $53.71 billion from $48.99 billion, reflecting net income and other comprehensive income, partially offset by the repurchase of convertible preferred stock.
  • 6The company repurchased and canceled all of the convertible preferred stock received in the ALICO acquisition for $2.95 billion and issued $3.0 billion in common stock to fund this repurchase.
  • 7The company is exploring the sale of MetLife Bank's depository business while continuing its residential mortgage business.

Frequently Asked Questions

MetLife's net income for the three months ended June 30, 2011, was $1.23 billion, a decrease from $1.55 billion in the same period of 2010. This decrease was primarily due to unfavorable changes in net derivative gains (losses) and increased net investment losses.

The acquisition of ALICO, completed in November 2010, significantly contributed to the growth in operating earnings, primarily through increased premiums, fees, and net investment income. The acquisition's impact is visible across several segments, particularly in Japan and Other International Regions.

The unfavorable change in net derivative gains (losses) was primarily driven by changes in freestanding derivatives, influenced by equity market movements, a decrease in equity market volatility, falling long- and mid-term interest rates, and foreign currency exchange rate movements.

MetLife continued to manage its investment portfolio using disciplined Asset/Liability Management (ALM) principles, focusing on cash flow and duration to support liabilities. The portfolio remained heavily weighted towards fixed income investments, with over 80% in fixed maturity securities and mortgage loans, while also utilizing derivatives to hedge certain risks.

MetLife expected a significant improvement in operating earnings for 2011 compared to 2010, driven by premium growth (largely from the ALICO acquisition), continued organic growth in international businesses, higher fees on separate accounts due to improved equity markets, disciplined underwriting, expense management including ALICO integration synergies, and a generally stronger investment portfolio performance compared to 2010.