This summary is based on the first quarter fiscal 2007 earnings call conducted by MetLife, Inc. (MET) on May 02, 2007.
Key Investors Issues
- Net income was $1.02 billion, up 36% from a year ago when the life insurer made $747 million.
- Net income available to common shareholders was $1.28 a share, vs. 93 cents a share a year earlier.
- Operating earnings available to common shareholders was $1.08 billion, or $1.41 a share.
First Quarter Highlights
Operating earnings were $1.1 billion or $1.41 per common share, an increase of approximately 6% over the first quarter of 2006.
- Return on equity was 14.1%. The company had top line growth of 6% from the prior year period and assets under management of $38 billion, good underwriting results in a number of businesses, strong investment income and expected sequential decline in expenses.
- The yield curve continues to present with a headwind, but growth initiatives are improving economies of scale and efficient capital management should allow achieving objectives for the year.
- In continuing effort to actively manage capital and improve shareholder value, the company entered into an accelerated share repurchase program for $750 million completing share repurchase target.
Institutional business recorded post-packed operating earnings of $452 million, representing a 9% increase versus the year ago period.
The results were characterized by strong across-the-board underwriting results in each of segments particularly in Group Life where claims experience remains favorable and in Disability where the company experienced marked improvement in incidents and favorable impact recovery. In addition to the good claims experience investment performance remains solid. In spite of the continued challenging interest-rate environment spreads in each of segments remained within the guidance ranges.
In the non-medical health segment, top line growth was driven primarily by organic growth in dental and disability bolstered by a large disability reserved buy out sale.
In Group Life Insurance the impact of the quarter’s favorable experience on participating business tempered the growth rate but the company expects to achieve overall growth target for the segment for the year. In R&S the company continues to see healthy activity in the mid-size pension close out business, recording $83 million in closeout related revenue.
The company continues to adhere to fundamental principles of sound risk selection and pricing discipline and it believes these have been the key contributors to the underwriting performance.
Individual business operating earnings were $319 million, down 22% from the year ago period due to unfavorable write-offs and a revision to the amortization of deferred acquisition costs.
- With respect to sales, while total life sales are down year-over-year the company believes independent channel sales have stabilized at their current level and the company is seeing positive momentum in agency channel.
- Agency distribution channel which constitutes 2/3 of Life Production grew sales 6% versus last year’s quarter. Fueling this increase is the growth in agency distribution sales power which is up 3% from the year-end 2006 level.
- Both MetLife and New England channels grew, fueled by strong retention of best agents.
- Based on recent industry developments, the company remains very confident in decisions to emphasize quality of sales as both a manufacturer and distributor of life insurance.
On the annuity side, total variable annuity deposits were down from the prior year quarter.
Agency channel showed a solid 4% growth year-over-year. The company is pleased to show strong growth in separate account fees and increase in variable annuity net flow sequentially due to higher sales and stable lapses.
Auto & Home reported operating earnings at $106 million.
The results were driven by favorable claims development related to prior accident year reserves and lower catastrophes than expected.
- Sales were up over 20% versus the prior year.
- The introduction of new metrics tiering program in the 35 states has sparked strong sales of auto and has also helped boost sales of Homeowner and Grand Protect.
- These strong sales are not reflected in revenues due to a premium accrual and higher seated premiums.
Operating earnings for International were $124 million, up 63% year-over-year.
This is strong result for International a while inclusive of some one-time tax and reserve benefits it was also reflective of an 18% increase in total revenue along with business fundamentals and good expense management.
