Life insurer MetLife (NYSE:MET) reported first quarter earnings on Thursday after the market close that demonstrated it has seen almost a full recovery from the credit crisis. The potential for further improvements and a major global acquisition bode well for shareholders, though there is no hurry to jump in with both investment feet.
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Premium and fee revenue increased a robust 12% to $8.8 billion while total operating revenue, which includes net investment income and other policy fees, improved 17% to $13.1 billion. The U.S. accounted for the bulk of premium revenue and grew 11%. Annuity sales continued to be strong and were the primary reason that retirement products saw a 27% increase.
MetLife swung to a strong profit in the quarter and reported $834 million in operating earnings. Net income came in at $805 million after a $574 million loss in last year's first quarter, or 97 cents per share versus negative 71 cents, respectively. A major difference was a reversal of unrealized losses in the investment portfolio as liquidity has returned to financial markets. Net unrealized gains were $1.5 billion as opposed to a $2.2 billion loss last year.
The marked reversal in unrealized investment losses pushed reported book value ahead 60% to $41.21 per share. MetLife's stock is currently trading at 113% of book value, which is well within levels seen before the credit crisis. Rivals such as Prudential Financial (NYSE:PRU) and Manulife (NYSE:MFC) are trading at similar percentages as fears over permanent impairments in industry investment portfolios have subsided.
MetLife's book value a year ago was a deeply depressed 25.75. In other words, reported book has almost completely recovered to pre-crisis levels. The wild card is the firm's upcoming purchase of ALICO, an international life insurance arm of beleaguered AIG (NYSE:AIG) that does most of its business in Japan. Prudential plc (NYSE:PUK) is also acquiring an international life insurance segment from AIG.
Analysts expect MetLife to report earnings north of $5.30 per share in 2011 once ALICO is fully integrated into the corporate fold. At a forward P/E below 9 and a reasonable multiple of book value, MetLife is worth keeping a close eye on, though it's a good idea to wait and see if there are any hiccups to the merger integration. (Learn how much - if any - insurance you really need. Refer to How Much Life Insurance Should You Carry?)
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