Bloomberg News

MetLife Profit Beats Estimates as Japan Fuels Expansion

August 01, 2012

MetLife Profit Doubles as Insurer Reports Derivatives Gains

MetLife Inc. fell 1.1 percent to $30.43 at 4 p.m. in New York trading. Photographer: Scott Eells/Bloomberg

MetLife Inc. (MET:US), the largest U.S. life insurer, said second-quarter profit more than doubled on derivatives gains and growth in its international businesses including Japan.

Net income (MET:US) available to common shareholders increased to $2.26 billion, or $2.12 a share, from $1.07 billion, or $1, a year earlier, the New York-based company said yesterday in a statement. Profit excluding some investing results was $1.33 a share, 9 cents more than the average estimate (MET:US) of 19 analysts surveyed by Bloomberg.

Chief Executive Officer Steven Kandarian is counting on global expansion as he looks to cut costs and limit sales of capital-intensive products in the U.S. Operating profit climbed in the firm’s three geographic regions (MET:US), led by a 61 percent jump in Asia as Japan life-insurance sales rose, the company said.

“Our underwriting discipline is paying off,” Kandarian, 60, said in the statement. “We’re successfully managing through the low-interest-rate environment.”

Operating earnings from Asia were $275 million as premiums, fees and other revenue in the region climbed 6 percent from a year earlier, when results were hurt by the March 2011 tsunami and earthquake in Japan, the insurer said.

MetLife bought American Life Insurance Co., with about 12,500 employees and operations in 50 countries, from bailed-out insurer American International Group Inc. (AIG:US) in 2010 to expand beyond the U.S.

Currency Fluctuations

Prudential Financial Inc. (PRU:US), the second-biggest U.S. life insurer, also benefited in the second quarter from growth in Asia. Profit more than doubled to $2.2 billion as international business improved and the Newark, New Jersey-based company recorded gains on derivatives that protect it against currency fluctuations.

Prudential has been combining its Japan operation with two life insurers it bought from New York-based AIG in February 2011 for more than $4 billion. Prudential’s international insurance business posted $681 million in adjusted operating income, compared with $500 million a year earlier.

The Japanese yen strengthened against the U.S. dollar in the quarter, contributing to a $2.03 billion pretax net realized investment gain, Prudential said yesterday in a statement.

MetLife’s book value (MET:US) rose to $56.83 a share from $53.37 as of March 31, according to its statement. Net investment income climbed to $5.2 billion from $5.1 billion a year earlier.

Derivatives Gains

MetLife reported $1.4 billion of net derivatives gains as interest rates fell and the company’s credit spreads widened, compared with a gain of $189 million in the second quarter of 2011. The insurer uses derivatives to guard against interest- rate declines and currency fluctuations. The contracts can produce gains when rates fall.

Operating earnings in the Americas were $1.13 billion, compared with $1.02 billion a year earlier, as severe-weather losses fell.

Second-quarter U.S. annuity sales were $4.84 billion, a 33 percent drop from a year earlier. MetLife is scaling back sales of the equity-linked retirement products to limit risk tied to stock market declines.

Kandarian is working to complete a sale of MetLife Bank assets to General Electric Co. to limit U.S. oversight after the Federal Reserve rejected his plan to raise the dividend (MET:US) and repurchase shares.

The insurer hasn’t boosted the payout to shareholders since 2007, while Prudential increased its dividend in 2009, 2010 and 2011 and announced stock buybacks. Prudential isn’t subject to the same Fed oversight

MetLife fell 1.1 percent to close at $30.43 yesterday and was little changed at 6:40 p.m. in New York in extended trading after results were announced. The shares have dropped 2.4 percent this year, compared with a gain of 6.7 percent for the 22-company Standard & Poor’s 500 Insurance Index. (S5INSU)

To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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Companies Mentioned

  • MET
    (MetLife Inc)
    • $52.65 USD
    • 0.86
    • 1.63%
  • AIG
    (American International Group Inc)
    • $54.5 USD
    • 0.48
    • 0.88%
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