Leading life insurance firm MetLife (NYSE:MET) reported third-quarter earnings last week that saw a nice boost in its annuity business and a continued recovery in market values of its investment portfolio from the credit crisis. The upcoming acquisition of an international division of an embattled rival and will add more exposure to appealing overseas markets. Overall, the stock is worth a close look.

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Third Quarter Sales Review
Total revenues grew 21.5% to $12.4 billion. Policy premiums accounted for nearly 53% of total revenues yet logged a 0.6% top-line decline. Policy fees grew 16.1% to account for almost 12% of revenues. Net investment income from MetLife's investment portfolio increased almost 12% to just over 35% of revenue. Other investment losses also declined and net derivative gains, which relate to the company's need to hedge minimum return targets that exist in its popular variable annuity products.

Highlights of the quarter include a 35% jump in variable annuity sales and 21% jump in operating earnings in the U.S. International premium, fee, and other revenue increased 16% as international operating earnings improved 25%. In the investment portfolio, net unrealized gains were $14.8 billion as the portfolio continues to recover from the depths of the credit crisis.

Profit Recap and Outlook
Total expenses increased 5.6% to $12.1 billion and therefore lagged the revenue improvement. As a result, net income reached a positive $316 after a loss of $620 million in last year's second quarter. GAAP operating earnings in the company's estimations reached 99 cents per share for a year-over-year improvement of 14%. Share outstanding jumped significantly as more than 86 million shares were sold as part of a move to raise more than $16 billion to fund the forthcoming purchase of Alico from beleaguered rival American International Group (NYSE:AIG).

Bottom Line
Quarter-end book value improved 24% to reach almost $49 per share and marks a full recovery from previous levels. At a current share price of $40, the stock trades that less than 82% of book value. From 2000 until 2008, the stock traded at a premium to book value.

Rivals including Prudential Financial (NYSE:PRU), Lincoln National (NYSE:LNC) and Manulife Financial (NYSE:MFC) also trade at a discount to book value. MetLife still stands out as the largest domestic life insurance firm and the current quarter demonstrates that it has maintained brand awareness that has helped drive an impressive recovery in annuity sales. The acquisition of Alico will also greatly boost its international results, adds exposure to Japan that isn't growing very fast but is one of the largest life insurance markets in the world, and also adds exposure to other faster-growing Asian markets. (Learn how to read one of the most important documents you own. Check out Insurance Tips For Homeowners.)

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Tickers in this Article: MET, PRU, AIG, LNC, MFC

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