PPT

SEC  Paper   1  

SEC  Paper  

Intermediate  Accounting  II,  Acct  311  6380  

Sandra  Rivera  

The  University  of  Maryland  University  College    

 

 

 

 

 

 

                       

  This  SEC  Paper  was  prepared  for  Intermediate  Accounting  II,  Acct  311  6380  Professor  Hutton    

SEC  Paper   2  

MetLife Inc. SEC 10-K Analysis By: Sandra Rivera

This SEC 10-K research will cover my financial analysis on MetLife Inc. after careful review and presentation of the firm’s financial documents and records. For 140 years, MetLife Inc. has been insuring the lives of the people who depend on them. Their success is based on a long history of social responsibility, strong leadership, sound investments, and innovative products and best of all they make their services available worldwide. I will present authentic information to the readers and an interpretation of their data to assist with making more informed decisions about MetLife Inc. I chose to study MetLife Inc. because of the long-standing commitment to identify issues and innovative solutions for the challenges of the Elder life that MetLife Inc. focuses on. It seems they are meeting the challenges of today by drawing upon a long history of success. MetLife’s Inc. trusted brand, capital strength, and existing relationships with millions of individuals and their established customers around the globe, uniquely position MetLife Inc. among its competitors. Today is a time that consumers like myself are feeling a greater financial burden than ever before in history. MetLife Inc. is helping millions of customers create their own personal safety net. They are well positioned to capitalize on its history, its reputation for security and stability, and its innovative products and services.

MetLife (Review)

In 1909, MetLife Inc. Vice President Haley Fiske announced that their future policy would be "insurance, not merely as a business proposition, but as a social program”. Insurance was visualized as a powerful means toward improving the lives of the underprivileged. Their work was centered on the prevention of tuberculosis, the 'white plague' responsible for 20 percent of all death claims. At that time the key was public education, MetLife Inc. agents delivered over 10,000 pamphlet 'A War Upon Consumption' to millions of urban poor, who were most at risk for tuberculosis. This legal paper was the first of an ongoing series of MetLife Inc. health publications; by 1929, their company was distributing more than 50 million brochures and pamphlets a year. MetLife’s public health campaigns were conducted by agents, and became the largest effort launched by a public and private entity. For nearly a half of century, approximately 20 million policyholders…in more than 7,000 cities and towns in the U.S. and Canada received free nursing care. At its peak of service in 1935, 35 out of 1,000 policyholders were treated for illnesses such as diphtheria, influenza, smallpox, and tuberculosis.

SEC  Paper   3  

Products & Services

MetLife Inc. has made a huge difference by supporting urban renewal projects and community financing. The company's social commitments to their policyholders have proven to be good business. The financial strength of the company has always allowed MetLife Inc. to pay out cash surrenders to its policyholders, and the company even honored requests from policyholders whose premiums had lapsed. For many, these payments made the difference between financial failure and survival. In response to changing conditions, the company made loans for commercial real estate. In 1931 MetLife Inc. also provided the outside capital to financially help build Rockefeller Center. It also contributed funds to construct the Empire State Building in 1929, and virtually saved the project from bankruptcy. To bring its products and services closer to customers, they expanded their presence, and refocused its career agency to serve all segments of the free market. MetLife Inc. developed new group products and marketed them to employers and institutions. By the end of 1979, MetLife Inc. concentrated on four main businesses categories: group insurance, personal insurance, pensions, and investments. MetLife Inc. true qualities came to life in the year 2001. Their core values, is what MetLife Inc. does every day, were never more evident than in their response to the terrorist attacks of September 11. They did not only paid claims extraordinarily quickly, but also invested $1 billion in public trading common stocks to help rebuild confidence in shaken the financial markets.

MetLife competitors

SEC  Paper   4  

MetLife is the largest life insurer in the United States…by offering life insurance, annuities, auto and home insurance and other financial services to individuals. Including group insurance, retirement, and savings products to corporations. MetLife Inc. has established a strong global presence through organic growth, acquisitions, joint ventures and other partnerships. They are working on strengthening their global brand by extending core products and competencies to markets around the world…an important driver of growth for the enterprise. Providing solutions that offers financial guarantees… the name is recognized and trusted worldwide and over 40 of top 100 FORTUNE 500® companies in the United States. MetLife Inc. believes that competition is faced by their segments which is based on a number of factors, including service, product features, scale, price, financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition. Daily MetLife Inc. compete globally with other insurance companies, as well as non-insurance financial services companies, such as banks, broker-dealers and asset managers, for individual consumers, employer and other group customers, as well as agents and other distributors of insurance and investment products. Some of these companies offer a broader array of products; they have more competitive pricing and have higher claims paying ability ratings. In the U.S. and Japan, MetLife competes with a large number of domestic and foreign life insurance companies…many of which offer products in different categories. MetLife, Inc. is recognized by the Hispanic Association on Corporate Responsibility for they commitment to transparency on Hispanic.

Revenue Recognition

Like most other companies, MetLife Inc. uses accrual accounting for revenue recognition in accordance with the American Institute of Certified Public Accountants. According to the SEC 10-K, which recognize the imputed reinvestment of dividends on deferred shares in the person's deferral account pursuant to the MetLife Non-Management Director Deferred Compensation Plan. Their deferred Shares represent shares of MetLife, Inc. common stock that have become payable, but that remain unpaid because payment has been deferred. The amount of shares beneficially owned following the reported transaction might include adjustments to reflect the accumulation of fractional deferred shares. Each of their U.S. insurance subsidiaries is subject to state laws and regulations that require diversification of their investment portfolios and limit the amount of investments in certain asset categories, such as investment grade fixed income securities, equity real estate, other equity investments, and derivatives.

Income Statement (SEC 10-K, 2013)

A vertical analysis of MetLife Inc. their income statement results in every amount being presented on the SEC 10-K as a percentage of sales. For example, if sales were $1,000,000 they would be restated to be 100 ($1,000,000 divided by $1,000,000). If the cost of goods sold is $780,000 it will be presented as 78 ($780,000 divided by sales of $1,000,000). If Interest expense is $50,000 it will be presented as 5 ($50,000 divided by $1,000,000). The restated amounts are known as a common-size income statement. A

SEC  Paper   5  

common-size income statement allows MetLife Inc. to compare their company's income statement to another company's or to the industry as an average. Another consideration of the income statement is the Cost of Good Sold (COGS) or Cost of revenue percentage and earnings growth is one of the primary determinants of MetLife Inc. share price performance, but it remains a subjective measure that is open to manipulation. In particular, the corporation has a fair amount of latitude on the timing and impact of quarterly and annual charges and other expenses. Overall, I would say that the income statement for MetLife Inc. shows promise for the future. Net income has increased over time; gross profit margin has also remained consistent and shows profitability. I do not consider the COGS percentage to be negative as the company prides itself on its higher priced goods and all other percentages prove strong volume.

Balance Sheet Analysis

The balance sheet information captured from the SEC 10-K. shows the liquidity of MetLife Inc. and the ability of the corporation to pay debt in the short term or the current ratio. In other words, an example is for every $1.00 of current liability due in the next year; the company has $2.46 in current assets that will convert to cash during the year to pay the debts. A current ratio of 2.0 or higher is considered healthy for a business. Another consideration from the balance sheet and income statement is the Return on Assets (ROA) ratio, or the company’s ability to generate profit. MetLife Inc. leveraged impairments on their balance sheet were $26 million, $203 million and $4 million for the years ended December 31, 2013, 2012 and 2011, respectively. The tax credit and renewable energy partnerships are established for the purpose of investing in low-income housing, other social causes and renewable energy generation facilities, where a significant source of the return on investment is in the form of income tax credits or other tax incentives, and are accounted for under the equity method or under the effective yield method. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. MetLife Inc. units originated $6.7 billion and $8.1 billion of private investments, comprised primarily of certain privately placed fixed maturity securities, tax credit and renewable energy partnerships and lease investments, during the years ended December 31, 2013 and 2012, respectively. The carrying value of such private investments included within our consolidated balance sheets was $50.6 billion and $52.9 billion at December 31, 2013 and 2012, respectively. The carrying value of short-term investments, which approximates estimated fair value, was $14.0 billion and $16.9 billion, or 2.8% and 3.2% of total cash and invested assets, at December 31, 2013and 2012, respectively. The carrying value of cash equivalents, which approximates estimated fair value, was $3.8 billion and $6.1 billion, or 0.8% and 1.1% of total cash and invested assets, at December 31, 2013 and 2012, respectively.

Cash flows (SEC 10-K, 2013)

The cash flow statement shows how much actual cash the corporation has generated, whereas the income statement shows accrual accounting of revenues and expenses. It is

SEC  Paper   6  

important for investors and managers to pay attention to the cash flow statement because it shows the ability of the corporation to actually pay for its operations and growth. The ability MetLife Inc. has to produce cash shows and how well the corporation will do if the business gets into financial trouble. Their cash flows from financing activities have significantly increased over the past few years while overall change in cash and cash equivalents decreased by (2,585) in 2011. The balance of the two numbers shows that although the change in cash flow has decreased, the company has increased its activities and is improving revenue from that aspect. As an investor, this would be promising and should not cause alarm because of other totals on the cash flow statement such as the cash flow from operating activities increasing significantly over the past few years. The cash flow statement proves that MetLife Inc. is more than capable of paying down debt should the future present any more challenges. Based on my analysis of MetLife Inc. financial statements, and SEC 10-K I would say that the Corporation has a strong handle on the market and is ahead of its competitors in clever thinking about their future operations and investments. As well as having a definite ability to handle adverse financial situations. Investors can be fairly certain that MetLife Inc. is a sound investment option as a company with a plan for maintaining its stronghold in the current market as well as in the future. Finally, from an accounting perspective, the numbers on the financial statements show sound accounting practices over time and the statements and company objectives on the SEC form 10-K seem to line up with the company’s overall financial reporting.

References:

Direct Competitors Comparison. (2014). Direct Competitors data from MetLife Inc. Retrieved from http://finance.yahoo.com/q/co?s=MetLife

McClure, B. (2009). Fundamental Analysis: The Cash Flows

Statement. Investopedia. Retrieved from http://www.investopedia.com/university/fundamentalanalysis/fundanalysis8.asp

Metlife Inc: (MET) Balance Sheet. (2014, September 30). In Zacks our research, your

success. Retrieved from Zacks.com website:

http://www.zacks.com/stock/quote/MET/balance-sheet

United States Securities and Exchange Commission. (2013, December 31). In Annual

Report Pursuant to section 13 for the fiscal year ended Dec 31,2013. Retrieved

from Sec.gov/ MetLife Inc website:

http://www.sec.gov/Archives/edgar/data/1099219/000093783414000011/met

-12312013x10k.htm