10-QPeriod: Q2 FY2015

METLIFE INC Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 6, 2015For Securities:METMET-PEMET-PFMET-PA

Summary

MetLife Inc.'s second quarter 2015 report (filed August 5, 2015) shows a mixed financial performance compared to the previous year. While total revenues decreased due to lower premiums and a significant drop in net derivative gains (losses), operating earnings available to common shareholders saw an increase of $175 million year-over-year, reaching $1.8 billion. This improvement in operating earnings was primarily driven by higher net investment income from a growing investment portfolio, positive underwriting results, and a one-time tax benefit in Japan. However, substantial losses from derivative activities, largely due to interest rate and foreign currency fluctuations, negatively impacted GAAP net income. Investors should note that while the company is managing its investment portfolio diligently, the sustained low-interest-rate environment continues to present challenges. The company also completed a significant preferred stock repurchase in June 2015, reducing its Series B preferred stock obligations.

Financial Highlights

35 data points
Beta

Revenue

$16.17B

Net Income

$1.11B

6.9% Net Margin

EPS (Diluted)

$0.92

Total Assets

$898.41B

Cash & Equivalents

$8.07B

Free Cash Flow

$4.20B

Financial Statements
Beta
Revenue$16.17B
Operating Expenses$4.07B
Operating Income$3.17B
Net Income$1.11B
EPS (Basic)$0.93
EPS (Diluted)$0.92
Shares Outstanding (Basic)1.12B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Operating earnings available to common shareholders increased by $175 million year-over-year to $1.8 billion.
  • 2GAAP Net Income decreased by $257 million year-over-year, largely due to unfavorable changes in net derivative gains (losses).
  • 3The company recognized a $174 million one-time tax benefit in Japan related to a change in tax rate.
  • 4Total assets decreased slightly from $902.3 billion at December 31, 2014 to $898.4 billion at June 30, 2015.
  • 5MetLife repurchased approximately $932 million of Series B preferred stock in June 2015.
  • 6The company's overall investment portfolio remained stable, with a strong emphasis on fixed maturity securities (70.7% of total assets).
  • 7Significant use of derivatives for hedging and other purposes, with a substantial portion not designated as hedging instruments, leading to potential earnings volatility.

Frequently Asked Questions

The primary drivers for the increase in operating earnings were higher net investment income resulting from portfolio growth, a one-time tax benefit in Japan related to a change in tax rate, and positive underwriting results. These factors were partially offset by increased expenses and the impact of lower investment yields.

The decrease in GAAP Net Income was largely due to an unfavorable change in net derivative gains (losses), amounting to $1.2 billion for the three months ended June 30, 2015 compared to the prior year. This was driven by changes in interest rates and foreign currency exchange rates.

In June 2015, MetLife, Inc. issued $1.5 billion of Series C preferred stock and completed a tender offer and redemption of its Series B preferred stock for approximately $1.5 billion in total, resulting in a preferred stock repurchase premium of $42 million.

MetLife continues to manage its investment portfolio with a focus on ALM principles, matching asset cash flows with liability cash flows. While the low interest rate environment impacts investment yields, the company is reinvesting maturing assets and managing risks through diversified holdings and the use of derivatives for hedging. The company also noted that its strategic initiatives to achieve higher operating ROE are being impacted by sustained low interest rates and regulatory uncertainty.