MetLife (MET:NYSE) is the largest provider by market share in the US life insurance market and has just released its Quarter 1 2023 results.
We recently reported on some of the largest companies in the life insurance market. The sector has shown itself to be remarkably resilient in the face of economic downturns. And with investors looking to diversify and hedge against future market turmoil, it provides ample opportunities. MetLife has been on many analysts watchlists rated as Buy in the last few months. With a market cap of $45.4 billion it is a significant player in the sector. MetLife’s Quarter 1 2023 Results just came out. We take a look at the most recent numbers stacked against last year’s return and consider some of the key actions the company is taking to seek continued growth.
What do MetLife’s financials look like at Quarter 1?
In its 2022 annual report, President and CEO Michel Khalaf said, “good growth prospects around the world, and the strength of our balance sheet and our free cash flow … [means] MetLife is very well-positioned for the future.” However, recent trading has seen it lagging the S&P 500. Its YTD performance of -18.79% is not resoundingly positive but hardly singular in the market. However, its 1-month performance rebound of +0.96% compares favourably against the SPX -0.28%.
First Quarter Results Summary
- Net income of $14 million, or $0.02 per share, compared to net income of $1.6 billion, or $1.89 per share, in the first quarter of 2022.
- Adjusted earnings of $1.2 billion, or $1.52 per share, compared to adjusted earnings of $1.7 billion, or $2.04 per share, in the first quarter of 2022.
- Book value of $36.89 per share, down 22 percent from $47.39 per share at March 31, 2022.
- Book value, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation adjustments (FCTA), of $53.83 per share, up 2 percent from $52.97 per share at March 31, 2022.
- Return on equity (ROE) of 0.2 percent.
- Adjusted ROE, excluding AOCI other than FCTA, of 11.3 percent.
- Holding company cash and liquid assets of $4.2 billion at March 31, 2023, which is above the target cash buffer of $3.0 – $4.0 billion.
Commenting on the company’s results, MetLife President and CEO Michel Khalaf said: “While 2023 is shaping up to be another year of uncertainty, the successful actions we’ve taken to focus, simplify and differentiate our business are reflected in this quarter’s strong underlying business fundamentals. We remain focused on managing risk across economic cycles and controlling what we can to deliver for our shareholders and our stakeholders.”
MetLife Losses and Share Repurchase
Losses have been incurred in net investment ($684 million) and net derivatives ($90 million). However, net investment income is up 8% compared to Q1 ’22 at $4.6 billion. MetLife put this down primarily to securities in Japan, strengthening mortgage loan allowance, and strengthening in the equity market. For those who want to look at where its investments have gone down, the global portfolio is here.
In spite of what may not look rosy at first glance, MetLife have now announced a share repurchase authorisation for $3 billion. This is in addition to the $202 million remaining from the last authorisation in May 2022. Mr Khalaf said: “This new share repurchase authorization combined with the common stock dividend increase we announced in April reflects MetLife’s financial strength and balanced approach to capital management.”
What actions has MetLife taken in Quarter 1?
The turn of the year saw two significant announcements in the company’s senior staffing. In March , Jeh Charles Johnson was elected to the board of directors. Previously Secretary of Homeland Security and General Counsel of the U.S. Department of Defence, Johnson was a clear choice for his risk strategy knowledge on a global scale. As MetLife looks to continue expansion in emerging markets, particularly China, his background should provide invaluable insight to the boardroom.
In the same month, MET named Bryan Boudreau executive vice president and Global Chief Actuary, effective May 11, 2023. . His predecessor, Andy Rallis, spent 11 years as Global Chief Actuary, underlining the importance of stability and knowledge at the top in this most vital of positions. Only time will tell if Boudreau is up to the challenge for the next decade.
MetLife’s positions in Asian markets
In October 2022, Brent Kao joined MetLife Investment Management (MIM) in Hong Kong as a managing director in the firm’s institutional client group. Mr. Kao had been head of Asia official institutions and consultant relations at BlackRock. MIM said he would “lead institutional client strategy and the delivery of investment solutions to clients in Asia, excluding Japan,” with a focus on Hong Kong, China, Korea and Southeast Asia.
This follows an increased drive in the Asian market which will be critical to any life insurer for future growth at a global scale. After the successful roll out of 360Health, in December 2022, China became the first market in Asia to launch MetLife’s new retirement solution, 360Future. The country has one of the world’s fastest aging populations and unmet demand for services, making the move look astute.
MET is clearly picking its targets in the region. In 2020 it unloaded its Hong Kong units to FWD Group Holdings Ltd. And in December 2022, Insurance Journal reported Zurich Insurance Group AG was lining up to buy a majority stake in the Malaysian insurance business of MetLife Inc. and AMMB Holdings Bhd. In further uncertainty, a Bloomberg report in February 2023 claimed the Bank for Investment and Development of Vietnam JSC was considering reviving the sale of its stake in a life insurance joint venture with MetLife in that country.
MetLife investment in ESG
As we recently wrote, ESG is a considerable concern for businesses in the life insurance market. Here MetLife seems to excel. In January, it was named one of America’s 100 “Most JUST Companies” (top spot in the insurance sector). This reflected its activities and the opinions of all its stakeholders.
In December 2022, MIM acquired Affirmative Investment Management (AIM), a specialist global environmental, social and corporate governance fixed income investment manager. In a press release, Macfarlanes, the law firm, said, “The transaction will combine AIM’s expertise in ESG with MIM’s commitment to sustainable investing to provide clients with complete insight and counsel on their ESG considerations.”
MetLife Investing for future investments
In February MIM announced that it had entered into a definitive agreement to acquire Raven Capital Management, a privately-owned alternative investment business. MIM expects the acquisition will advance its higher yielding private credit offerings and overall origination in the asset classes and sectors Raven concentrates on.
“We already have strong capabilities across investment grade credit, structured credit and private equity sponsored middle market private credit,” Nancy Mueller Handal, global head of private fixed income and alternatives at MIM, said. “But the addition of Raven will help differentiate MIM’s existing private credit strategies, and significantly advance its higher yielding credit offerings and ability to directly originate investments overall,” she added.
MetLife Quarter 1 2023 – buy, sell or hold?
Before MetLife’s Quarter 1 2023 results, the following funds have increased their positions: Price T Rowe Associates Inc. MD Nuveen Asset Management, Barclays plc, Charles Schwab Investment Management Inc. , LSV Asset Management. Hedge funds and other institutional investors own 88.15% of the company’s stock.
A market high of $77.04 in November 2022 hasn’t held. But, until the US banking sector uncertainty of March, shares had been fluctuating between $68 and $74. In the tumult of March, that plummeted back down to $53 but has been steadily coming back up. At market close 3 May, shares were trading at $58.74 after edging over $60 in earlier in the day.
It currently has an average price target of $81.16. Morgan Stanley has maintained coverage with an overweight recommendation and target price of $80.00. Barclays currently has a target price of $79.00; Goldman Sachs Group, $65.00; Wells Fargo & Company, $72.00. All set an “overweight” rating for the company. That said, on 1 May Nasdaq reported an unusual call option of $382.70K with a strike price of $67.50/share .
On 3 May, Trading View Analyst Rating was Buy. MetLife’s Quarter 1 2023 results can be found here. We’ll see in the next day or two whether today’s results reinforce that view or prompt reconsideration…
All share price and trade movements taken from TradingView at market close on 3rd May 2023 unless otherwise stated.
Author: Mike Davies
The article was updated on 4th May 2023 to include information on the share repurchase authorisation.
Disclaimer:
The Editorial Team at #DisruptionBanking have taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this Article. This Article is most definitely not Financial Advice.
