The credit crisis wreaked havoc on the market values of the investment portfolios of most life insurers. With financial markets and liquidity returning back to normal, the values of bonds, real estate, and equities on the balance sheet are returning to normalized levels. This was the case for MetLife (NYSE:MET) during its second quarter. Its core operations continued to perform well and an upcoming purchase will add very appealing international exposure. (To learn more about the credit crisis, see Credit Crisis: Introduction).

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Second Quarter Revenue Review
Total operating revenues improved 5% to $12.8 billion as premium, fee and other revenue from the core insurance and annuity operations grew 4% to $8.7 billion. The U.S. business accounted for the vast majority (nearly 83%) of operating revenue and grew 2% on the back of strong sales of retirement products due to "excellent underwriting results in group life; improved experience in dental and solid underwriting results in individual life."

The international business reported robust 13% growth on strong trends in each of its three key regions in Asia, Latin America and Europe. International is a small percentage of the existing operations but will increase greatly as MetLife expects to complete the acquisition of ALICO from AIG (NYSE:AIG) by the fourth quarter.

Net investment income from MetLife's investment portfolio grew 7% to $4.1 billion to account for the rest of total operating revenues. Most of this came from derivative gains, which the company uses to hedge its variable annuity risk as well as interest rate and foreign exchange volatility.

Profit Recap
Net income reached $1.5 billion and was a vast improvement from the $1.4 billion loss in last year's quarter that stemmed primarily from unrealized investment losses as a result of the credit crisis. This worked out to $1.23 per diluted share and handily beat quarterly analyst projections. (To learn more, see Predicting Investment Losses.)

For the full year, analysts expect revenue to grow 7.5% to nearly $52.5 billion and earnings to reach $4.32 per share. Profit comparability from last year is limited due to the volatility in the investment portfolio and hefty write-downs that have quickly reversed course.

Unrealized losses in the investment portfolio continued to reverse course during the quarter. Management detailed $14.2 billion in unrealized gains "as widening spreads were more than offset by declining interest rates."

Overall, this sent book value soaring 48% to $45.51 per share.

The Bottom Line
MetLife shares have returned nearly 20% so far this year and are back over $40 per share. However, they still trade below book value and at a reasonable 10x forward earnings projections. Archrivals including Prudential Financial (NYSE:PRU) and Lincoln National (NYSE:LNC) also trade below book value but operate primarily in the United States. MetLife will be much more international once it acquires ALICO. International rivals including China Life (NYSE:LFC) and Prudential plc (NYSE:PUK) trade well above book, which in China Life's case reflects its compelling growth potential. MetLife's top-line and profit growth potential will improve markedly with ALICO.

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