10-QPeriod: Q2 FY2013

METLIFE INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 7, 2013For Securities:METMET-PEMET-PFMET-PA

Summary

MetLife Inc.'s (MET) 10-Q filing for the period ending June 29, 2013, indicates a decrease in net income driven primarily by unfavorable changes in net derivative gains and losses. However, operating earnings available to common shareholders showed an increase, driven by higher asset-based fee revenue and net investment income. The company is navigating a challenging low-interest-rate environment, which is impacting investment yields but also lowering crediting rates. MetLife is actively managing these risks through asset-liability management strategies, including the use of derivatives and a focus on expense control. The company reiterated its outlook for a solid improvement in operating earnings for the full year 2013, with a strategic focus on expanding emerging market presence and improving operating return on equity by 2016 through cost efficiencies and a shift towards protection products.

Financial Highlights

35 data points
Beta

Revenue

$15.72B

Net Income

$502.00M

3.2% Net Margin

EPS (Diluted)

$0.43

Total Assets

$815.66B

Cash & Equivalents

$9.18B

Free Cash Flow

$4.58B

Financial Statements
Beta
Revenue$15.72B
Operating Expenses$4.03B
Operating Income$1.43B
Net Income$502.00M
EPS (Basic)$0.43
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.11B

Key Highlights

  • 1Operating earnings available to common shareholders increased to $1.59 billion for the three months ended June 30, 2013, up from $1.43 billion in the prior year period.
  • 2Net income from continuing operations decreased significantly to $508 million from $2.30 billion in the prior year period, primarily due to unfavorable changes in net derivative gains (losses).
  • 3The company experienced growth in premiums, fees, and other revenues, driven by pricing strategies in group insurance and organic growth in international businesses, particularly in Asia.
  • 4MetLife's outlook for 2013 projects a solid improvement in operating earnings over 2012, supported by premium growth, expansion in emerging markets, disciplined underwriting, and expense management.
  • 5The company is strategically shifting its product mix towards protection products and away from more capital-intensive products to generate more predictable operating earnings and improve its risk profile.
  • 6MetLife is planning a merger of three U.S.-based life insurance companies and an offshore reinsurance subsidiary, expected to occur by the end of 2014, to enhance transparency and risk management related to variable annuities.
  • 7The company continues to manage the impacts of the low interest rate environment through proactive investment and interest crediting rate strategies, and the use of derivatives to mitigate risks.

Frequently Asked Questions

The primary driver for the significant decrease in net income from continuing operations was an unfavorable change in net derivative gains (losses), which was largely impacted by changes in interest rates and foreign currency exchange rates, as well as a nonperformance risk adjustment on embedded derivatives.

MetLife is actively managing the low interest rate environment through disciplined asset-liability management strategies, including the use of derivatives (primarily interest rate swaps, floors, and swaptions) to mitigate risks. They are also lowering interest crediting rates on some products, adjusting dividend scales, and shifting their product mix towards less interest-rate-sensitive protection products.

Key growth drivers include increases in businesses outside the U.S. (notably accident & health), a rational pricing strategy in the group insurance marketplace, and expanding presence in emerging markets, with a goal of over 20% of operating earnings coming from emerging markets by 2016. Strategic initiatives include achieving $1 billion in efficiencies and shifting the product mix towards protection products.

MetLife was notified by the Financial Stability Oversight Council (FSOC) that it had reached Stage 3 in the process to determine whether MetLife would be named a non-bank SIFI. If designated, MetLife could be subject to regulation by the Federal Reserve Board and enhanced supervision, which could affect its business operations and capital requirements.