It has been about a month since the last earnings report for MetLife (MET). Shares have lost about 1.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MetLife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
MetLife Q4 Earnings Miss Estimates on Weak RIS Unit
MetLife reported fourth-quarter 2024 adjusted operating earnings per share (EPS) of $2.08, which missed the Zacks Consensus Estimate by 2.4%. However, the bottom line rose 7.8% year over year.
Adjusted operating revenues of $19.7 billion increased 5.4% year over year. The top line beat the consensus mark by 2.7%.
Weaker-than-expected quarterly earnings were affected by reduced non-medical health underwriting margins in the Group Benefits segment, a decline in recurring interest margin and less favorable underwriting in the Retirement and Income Solutions (RIS) segment, and a decrease in adjusted premiums, fees and other revenues (PFOs) in Asia and Latin America. These headwinds were partially offset by higher investment income and lower expenses.
Adjusted PFOs, excluding pension risk transfer (PRT), grew 0.3% year over year to $11.8 billion.
Adjusted net investment income of $5.3 billion increased 5% year over year on the back of growth in assets and higher variable investment income.
Total expenses were $17.3 billion, down 4.4% year over year due to lower interest credited to policyholder account balances, policyholder dividends and interest expense on debt. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 130 basis points year over year to 21.9%.
Net income more than doubled year over year to $1.2 billion. Adjusted return on equity, excluding accumulated other comprehensive income (loss) other than foreign currency translation adjustments, of 15.4%, improved 160 bps year over year.
Group Benefits: The segment recorded adjusted earnings of $416 million, which declined 11% year over year but outpaced the Zacks Consensus Estimate of $409.5 million. Reduced non-medical health underwriting margins impacted this metric. Adjusted PFOs increased 3% year over year to $6.2 billion.
RIS: Adjusted earnings in the segment declined 8% year over year to $386 million and missed the consensus mark of $427.9 million. The metric was impacted by a decline in recurring interest margin and less favorable underwriting, partially offset by better variable investment income. However, adjusted PFOs, excluding PRT, rose marginally year over year to $1 billion.
Asia: The unit’s adjusted earnings were $443 million, which grew 50% year over year and beat the Zacks Consensus Estimate of $388 million. The metric was aided by favorable underwriting and improved variable investment income. However, adjusted PFOs of $1.6 billion fell 4% year over year.
Latin America: The segment reported adjusted earnings of $201 million, which decreased 3% year over year but increased 10% on a constant currency basis due to expanding volumes. The figure lagged the consensus mark of $222 million. Adjusted PFOs declined 3% year over year to $1.4 billion, attributable to solid sales and persistency rates.
EMEA: In the fourth quarter, adjusted earnings of the segment increased 26% year over year to $59 million, lower than the Zacks Consensus Estimate of $73.3 million. The metric gained from volume growth. Adjusted PFOs of $652 million grew 10% year over year on the back of increasing sales across the region.
MetLife Holdings: The segment’s adjusted earnings declined 2% year over year to $153 million and missed the consensus mark of $172.4 million. The decrease was due to a reinsurance transaction closed in 2023. Adjusted PFOs were $793 million, which declined 10% year over year.
Corporate & Other: The unit incurred an adjusted loss of $199 million, narrower than the prior-year quarter’s loss of $232 million.
MetLife exited the fourth quarter with cash and cash equivalents of $20.1 billion, which declined 2.8% from the 2023-end level. Total assets of $677.5 billion fell 1.5% from the 2023-end figure.
Long-term debt totaled $15.1 billion, which declined 3% from the figure as of Dec. 31, 2023. Short-term debt amounted to $465 million.
Total equity of $27.7 billion tumbled 8.4% from the 2023-end level.
Book value per share was $34.28 as of Dec. 31, 2024, down 4.4% year over year.
MetLife bought back shares worth $0.4 billion in the fourth quarter. It pursued additional repurchases of roughly $470 million in January 2025.
Management expects a variable investment income of $1.7 billion for 2025. Corporate & Other adjusted losses are anticipated to be between $850 million and $950 million. The effective tax rate is projected to be 24-26%.
Over the next three years, MetLife projects adjusted PFOs in the Group Benefits business to rise in the range of 4-7%. Adjusted PFOs in the MetLife Holdings segment are anticipated to decrease in the range of 4-6% per year, while the same in the Latin America and EMEA units are forecasted to witness high-single-digit growth and mid to high-single-digit growth, respectively.
MetLife aims to achieve an adjusted return on equity in the range of 15-17%. It is expected to keep the free cash flow ratio in the 65-75% range of adjusted earnings. It expects to achieve double-digit adjusted EPS growth in the near term.
In the past month, investors have witnessed a downward trend in estimates review.
At this time, MetLife has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, MetLife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
MetLife belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, Everest Group (EG), has gained 8.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
Everest Group reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +26.7%. EPS of -$18.39 for the same period compares with $25.18 a year ago.
Everest Group is expected to post earnings of $7.39 per share for the current quarter, representing a year-over-year change of -54.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -44.3%.
Everest Group has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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This article originally published on Zacks Investment Research (zacks.com).
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