Morningstar | MetLife Holds Steady in 2Q, Fully Divests Brighthouse
MetLife's second-quarter results marked a slight step back from a particularly strong first quarter, but we still think the company is performing reasonably well. Moreover, we expect a less adverse capital market situation to be a tailwind for the firm over time, which should allow the franchise to move toward an adequate return. Reported annualized return on equity was only 7% for the quarter, but 12% on an adjusted basis. We will maintain our $52 fair value estimate and no-moat rating.Once again, MetLife's domestic operations were the main point of strength, with adjusted earnings up 36% year over year. Even after excluding the major contribution from tax reform to results, adjusted earnings were up 13% when compared with the year-ago quarter. Exclusive of the tax benefit year over year, the company's property-casualty operations saw the strongest earnings growth, with the firm benefiting from a favorable pricing environment at the moment.
International results were a mixed bag, with strong adjusted earnings growth in Asia and Europe, the Middle East, and Africa offset by a decline in Latin America due to tax issues. While we still believe that international markets offer opportunities for growth, we remain skeptical that this growth will be value-creative, noting that returns on allocated capital in international markets remain well below the domestic level, in aggregate.
During the quarter, MetLife divested its remaining stake in Brighthouse. We like that the company has avoided dragging out this progress, and we think management's efforts to move MetLife toward more stable operations is wise from a long-term point of view. The company returned $1.5 billion to shareholders during the second quarter, in line with the level that was returned during the first quarter. Given the lack of value-creative growth opportunities, we think actively returning capital to shareholders is the right move.
MetLife, through its subsidiaries and affiliates, provides insurance, annuities, employee benefits and asset management. The company's segments include: United States; Asia; Latin America; Europe, the Middle East and Africa; and MetLife Holdings. In the United States, the company provides a variety of insurance and financial services products, including life, dental, disability, property and casualty, guaranteed interest, stable value and annuities to both individuals and groups. Outside the United States, the company provides life, medical, dental, credit and other accident and health insurance, as well as annuities, endowment and retirement and savings products to both individuals and groups.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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