MetLife reaches record adjusted EPS as all six segments grow

MetLife, Inc. (NYSE:MET) produced its strongest quarterly adjusted earnings per share on record in the third quarter, with adjusted EPS excluding notable items rising 22% to US$2.85. Net income available to common shareholders increased 187% to US$2.4 billion, although the statutory result was helped materially by US$551 million of after-tax net derivative gains.

Record adjusted earnings ride stronger investment income

Adjusted earnings rose 12% to US$1.8 billion, or US$2.78 a share, while adjusted earnings excluding notable items reached US$1.826 billion. MetLife attributed the underlying improvement to higher variable investment income, broad-based volume growth and favourable underwriting. Adjusted net investment income increased 10% to US$6.0 billion, with variable investment income rising 49% to US$720 million.

Revenue growth was not confined to one corner of the insurer. Premiums, fees and other revenues rose 12% to US$14.1 billion, while adjusted revenue excluding pension risk transfers increased 8% to US$13.5 billion. MetLife said all six business segments recorded growth in adjusted premiums, fees and other revenues.

Asia and EMEA lead segment momentum

On an adjusted basis excluding notable items, Asia earnings rose 17% to US$550 million, EMEA climbed 30% to US$114 million and Retirement and Income Solutions increased 12% to US$478 million. Group Benefits delivered a 14% increase to US$523 million, while MetLife Investment Management rose 9% to US$63 million.

Latin America was the more modest contributor beneath the headline growth, with adjusted earnings excluding notable items up just 3% to US$229 million on a reported basis and down 5% on a constant-currency basis. Retirement and Income Solutions also absorbed a US$65 million negative impact from the annual actuarial assumption review, while Asia received a US$52 million benefit from the review. Across the company, the review reduced adjusted earnings by US$46 million.

Capital returns remain substantial despite book value pressure

MetLife returned approximately US$1.0 billion to shareholders during the quarter, comprising US$650 million of share repurchases and US$380 million of common stock dividends. The company ended September with US$3.4 billion of holding company cash and liquid assets, within its stated target range, and reported expected U.S. statutory adjusted capital of about US$17.0 billion, up 3% from June.

The accounting picture is less uniformly buoyant. GAAP book value per share fell 22% year on year to US$30.73, while adjusted book value per share, which excludes several market-sensitive balance-sheet effects, rose 5% to US$59.41. The result leaves a familiar question for insurers: how much of the earnings strength can persist if variable investment income and derivative-related gains become less supportive?