MetLife Inc. (MET - Analyst Report) posted third-quarter 2014 operating earnings per share (EPS) of $1.60, which exceeded the Zacks Consensus Estimate of $1.38, thereby leading to the first earnings beat for the company in 2014. The reported figure was also higher than the year-ago quarter EPS of $1.34. Operating earnings surged 22% year over year to $1.83 billion.

Metlife Inc - Quarterly EPS (BNRI) | FindTheBest

Additionally, including extraordinary items, GAAP net income soared to $2.06 billion or $1.81 per share from $942 million or 84 cents per share in the prior-year quarter. The significant upside primarily resulted from derivative gains of $478 million in the reported quarter against a loss of $546 billion in the year-ago quarter as well as higher net investment gains of $109 million versus loss of $85 million.

Results reflected improved premiums, sales and earnings across the Americas, Asia and EMEA along with higher derivative gains and investment income, leading to improved book value per share. These were partially offset by higher expenses and lower return on equity (ROE).

During the reported quarter, MetLife’s total operating expenses increased 4.5% year over year to $15.41 billion, while total expenses rose 3.5% to $15.89 billion.

Total operating revenue rose 7% year over year to $17.92 billion and beat the Zacks Consensus Estimate of $17.49 billion. Total revenue jumped 15.4% year over year to $18.85 billion, primarily due to higher investment and derivative gains.

MetLife’s premiums grew 7% year over year to $9.69 billion, while fee revenue improved 10.8% to $2.52 billion and net investment income rose 3.9% to $5.19 billion. However, other revenues dipped 6.7% year over year to $518 million.

Segment Details

The Americas’ operating earnings climbed 14% year over year to $1.5 billion. Premiums, fees and other revenues rose 9% to $9.5 billion. Operating revenues grew 7.6% to $13.75 billion.

The segment witnessed core improvements in Corporate Benefit Funding, Retail and Latin America sub-segments. The Provida acquisition and improvement in Mexico enhanced underwriting results in Latin America, partially offset by unfavorable impact of tax reforms in Chile.

Operating earnings from Asia grew 19% year over year to $306 million. Premiums, fees and other revenues rose 5% on a constant currency basis and 3% on a reported basis to $2.5 billion. Operating revenues climbed 3.4% to $3.18 billion. Total sales increased 10% driven by strong sales in Australia and China.

Operating earnings from EMEA jumped 13% year over year to $96 million. Premiums, fees and other revenues in this segment increased 3% (4% on constant currency basis) to $730 million. Operating revenues climbed 3.6% to $861 million. Moreover, total sales rose 12%, reflecting 31% growth from the emerging markets as well as increased employee benefit sales in the Middle East.

Separately, Corporate & Other operating loss was recorded at $73 million, narrower than a loss of $163 million incurred in the prior-year quarter due to higher costs on tax compliances and operational initiatives. Total revenue stood at $120 million, down from $122 million in the prior-year quarter.

Investment & Financial Update

At the end of the reported quarter, MetLife’s net investment income rose 4% year over year to $5.2 billion. In addition, post-tax derivative gains improved to $187 million from a loss of $493 million in the year-ago quarter. Decline in interest rate and changes in foreign exchange led to the gains.

Meanwhile, under the company’s variable annuity hedging program, pre-tax variable investment income was $424 million in the reported quarter against $236 million in the year-ago period.

As of Sep 30, 2014, MetLife’s book value per share, excluding AOCI, climbed 7% year over year to $49.69. However, reported book value (including AOCI) per share jumped 17% to $61.44. Operating ROE stood at 10.7% at Sep 2014-end, down from 12.0% at 2013-end.

At the end of Sep 2014, MetLife had total investments of $507.55 billion, up from $488.8 billion at 2013-end. Total assets increased to $908.63 billion while long-term debt decreased to $16.39 billion. Cash and cash equivalents rose to $8.78 billion and total equity increased to $71.3 billion, from 2013-end.

Dividend Update

On Oct 28, 2014, the board of MetLife announced a regular dividend of 35 cents a share, payable on Dec 12, 2014, to shareholders of record as on Nov 7.

On Sep 12, the company paid a regular dividend of 35 cents a share to shareholders of record as on Aug 8. The dividend payouts were last hiked by 27% in Apr 2014.

Zacks Rank

Currently, MetLife carries a Zacks Rank #3 (Hold).

Promising Stock Picks

Investors interested in the insurance sector could consider players like American International Group Inc. (AIG - Analyst Report), MGIC Investment Corp. (MTG -Analyst Report) and Kemper Corp. (KMPR - Snapshot Report). All these stocks have a Zacks Rank #2 (Buy).

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