MetLife Earnings: Softer Underwriting Margins in Group Benefits and Lower VII Weighs on Earnings

No-moat-rated MetLife reported a lackluster set of numbers in the third quarter as profitability was adversely impacted by softer underwriting margins in the group benefits business, lower variable investment income, and a lower rate outlook. The firm reported adjusted earnings of $1.38 billion, or $1.93 per share, down 1% compared with $1.95 per share in the third quarter of the previous year. The company reported an annualized adjusted return on equity of 14.6% during the quarter, which was in management’s target range of 13% to 15%. The third-quarter results were impacted by weaker investment margins and a materially unfavorable underwriting experience in the group benefits business primarily driven by a liability refinement during the annual actuarial assumption review. Shares were trading about 5% lower after MetLife reported results. We do not plan on changing our $68 per share fair value estimate for MetLife after incorporating the third-quarter results and continue to believe that shares are slightly overvalued.