Factors Likely To Shape MetLife (MET) This Earnings Season
Zacks Investment Research | Feb 03, 2019 10:33PM ET
MetLife, Inc. (NYSE:MET) fourth-quarter 2018 earnings due on Feb 6, 2019, is expected to gain from favorable underwriting, solid volume growth, better expenses and investment margins as well as lower taxes primarily due to the U.S. tax reform.
Factors Affecting Q4 Results
MetLife’s Group Benefits business should benefit from strong growth across its business lines — Large Case, Middle Market and Small Group. Also, favorable underwriting results, particularly in non-medical health and solid expense management should aid the segment’s margins. The Zacks Consensus Estimate for adjusted earnings in the Group Benefits segment stands at $265 million.
The Retirement and Income Solutions is expected to gain from favorable volume growth, expense margins and underwriting. Strong pension risk transfer sales should also provide a boost to the segment. The Zacks Consensus Estimate for adjusted earnings is pegged at $330 million.
At the Property and Casualty business, the quarter is expected to witness higher contribution from Auto business driven by targeted rate increases and underwriting actions to reduce loss trends. Meanwhile, MetLife’s another business line, Homeowners, is likely to have suffered from catastrophe losses. The Zacks Consensus Estimate for adjusted earnings for this segment is $103 million.
Net investment income is likely to improve backed by higher account balances and increase in interest rates. The Zacks Consensus Estimate for net investment income is pinned at $4.3 billion.
Region-wise, Asia revenues should gain from increase in Japan sales driven by foreign currency denominated products. Sales from China and Australia are also likely to contribute toward overall segment’s sales. The Zacks Consensus Estimate for net income from Asia is pegged at $343 million, down 7.5% year over year.
Higher direct marketing and group sales should provide a boost to Latin America sales. However, net income will be impacted by the tax reform.
Currently, the company is making investments in technological improvement.
It anticipates initiative costs of roughly $330 million pretax in 2018 and plans to spend $1.0 billion by 2020. These costs will put pressure on margins before generating benefits and the effect of the same will be felt in the impending quarterly results.
Shares bought back in the quarter will provide an extra cushion to the bottom line.
Earnings Surprise History
MetLife boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters with an average positive surprise of 9.67%. This is depicted in the chart below:
MetLife, Inc. Price and EPS Surprise
Radian Group Inc. (NYSE:RDN) has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is set to release fourth-quarter earnings on Feb 8.
Lincoln National Corp (NYSE:LNC) has an Earnings ESP of +0.45% and a Zacks Rank #3. The company is set to report fourth-quarter earnings results on Feb 6.
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