MetLife (NYSE:MET) is the largest life insurer in the U.S. and just finalized an acquisition that makes it a leading player internationally. Cost-cutting moves and more appealing growth prospects overseas should boost total returns for shareholders going forward. Fourth quarter results released late last week also suggested that the domestic business has fully recovered from the credit crisis. IN PICTURES: 5 Tips To Reading The Balance Sheet

Fourth-Quarter Recap
The insurance company's total revenues increased 4% to $12.8 billion. Insurance premiums made up the bulk of the top line and grew 2.2% to $7.3 billion. Fees from universal life and investment products rose 9% to $1.7 billion to round out most of the operating revenues. Net investment income rose 22.2% to $4.8 billion while other net investment losses and a large $1.5 billion derivatives loss lowered reported revenue.

From management's estimation of operating results, total revenues rose 7% to $14.2 billion while operating earnings jumped 46% to $1.2 billion. Earnings per share increased 19% to $1.14 per share. In addition to the derivatives loss related to hedging activities related to its variable annuities and other insurance products, MetLife acquired Alico, one of American International Group's (NYSE:AIG) former international insurance divisions. Alico results were included during the last month of the quarter.

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Annual Review
MetLife's operating revenue increased 5% to $35.8 billion and earnings jumped 65% to $3.9 billion, or $4.38 per share. Book value ended the year at $44.18 per share for a return on equity (ROE) of 9.9%. (To learn more about book value, see Digging Into Book Value.)

Outlook
At a recent investment conference, MetLife provided sales and profit guidance for the coming year. It expects premium, fee and other revenues in a range of $45.8 billion and $47 billion and operating earnings between $4.75 and $5.15 per share. Book value should be around $47 per share for a return on equity between 10.6% and 11.4%. Comparability from 2010 is difficult as the Alico results will be included going forward.

Bottom Line
Given the rally in MetLife's share price in recent months, it now trades at a slight premium to book value - so do archrivals Prudential (NYSE:PRU) and Manulife (NYSE:MFC). As a result, profit growth will likely drive share price appreciation going forward. Fortunately for MetLife, management plans to boost ROE to between 12% and 14% by 2013, and to 13-15% by 2015.

Using the forward projection for book value as a rough gauge suggests earnings of more than $7 within four years. A modest P/E of 10 suggests a share price of $70 for appealing potential total shareholder returns of more than 12% annually. Lincoln National (NYSE:LNC) trades for less than 83% of book and a single-digit multiple of earnings, but its year-end ROE of 6.7% was well below that of MetLife and it makes it less appealing from an operations standpoint.


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