Updated Aug 14 at 11:02am ET.
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The interest rate on 30-year US government bonds reached its highest level since 2001. This matters for an insurer like MetLife because it manages a massive pool of money, which it invests to ensure it can pay out future insurance claims.
When these rates rise, MetLife can invest its incoming cash into new bonds that pay more interest. While the company has been moving toward businesses that rely less on interest rates, a large portion of its profit still comes from the gap between what it earns on its investments and what it pays out to policyholders. Higher rates generally make that gap wider and more profitable over time.
MetLife reported adjusted earnings of $2.43 per share, topping the $2.30 analysts expected. The results were driven by strong underwriting, which is the company's ability to price its insurance policies accurately so it pays out less in claims than it collects in premiums. Total revenue reached about $19.1 billion, and while that was slightly below targets, the underlying business showed momentum with a 7 percent rise in premiums and fees.
This quarter supports the view that the company is successfully shifting away from unpredictable life insurance toward steadier businesses like employer-sponsored dental and disability plans. Growth was particularly strong in Latin America and Asia, which provides a helpful cushion against any slowdown in the U.S. market. With a 17 percent return on equity, the company is proving it can generate high profits from the capital it holds.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
MetLife announced a new $3 billion authorization to buy back its own shares. This comes on top of roughly $400 million left over from its previous plan. A buyback is when a company uses its cash to purchase its own stock from the market, which reduces the total number of shares and makes each remaining share own a larger piece of the business.
For a company like MetLife, these buybacks are a key part of the investment story. Because the business generates a lot of cash that it doesn't need for daily operations, returning that money to shareholders is a steady way to increase the stock's value over time. This new plan confirms that management sees plenty of excess capital ahead.
Source: Business Wire
MetLife Investment Management closed its third private equity partners fund with $1.2 billion in commitments. This division manages money for large institutions like pension funds rather than just for MetLife's own insurance accounts. By growing this arm, the company earns more steady fees for managing other people's money, which is a less risky way to grow than taking on more insurance liabilities.
Source: Business Wire
MetLife declared a dividend of $0.5925 per share for the third quarter, payable in September. This is a routine move that aligns with the company's history of returning cash to owners. While not a new increase, it confirms the company's steady financial position and its commitment to paying out a portion of its earnings every few months.
Source: Business Wire
Analysts recently raised their price expectations for MetLife following the company's strong second-quarter earnings report. Most analysts, 25 of 33, rate the stock a buy, and the average target of $99 is roughly equal to today's price.
The company has beaten profit expectations for four straight quarters. This shows management is doing a good job managing costs and growing its international business faster than analysts expected.
| Expectation | |
|---|---|
| EPS | $2.55 |
| Revenue | $20.10B |
