MetLife Posts $2.13 Billion Loss, Misses Estimates

By Leslie Scism 

MetLife Inc. posted a $2.13 billion fourth-quarter net loss, hit by mark-to-market losses primarily tied to its hedging program to protect against low interest rates.

Although the results took a hit under accounting rules as rates edged up at year end, the rise in interest rates is a development that bodes well in the long term for MetLife and peers. Few American industries are as hurt by low rates as life insurers, which invest the premium that steadily flows in until the money is needed to pay claims. The money is typically invested in higher quality bonds, so insurers' profits have been pressured as they put new money to work at the ultralow levels in place since 2008.

At MetLife, operating income rose to $1.42 billion, or $1.28 a share, compared with $1.38 billion, or $1.23 a share, in the year-earlier quarter. The results missed analysts' consensus expectation of $1.34 a share.

Operating income excludes the effect of the hedging program as well as realized capital gains and losses in the investment portfolio and some other items. The metric is closely watched by Wall Street as a measure of an insurer's ability to earn profit on a recurring basis.

MetLife said its operating earnings in its big U.S. segment increased 19% year over year, 22% in Asia and 33% in the smaller Europe, Middle East and Africa business. It cited volume growth, cost improvement, a tax-related item in Japan and a claims-reserve release in one location.

But operating profit fell in Latin American by 22%, where MetLife said it enjoyed a one-time tax benefit in the year-earlier period.

MetLife has one of the biggest international networks of any U.S. life insurer, which it acquired from American International Group Inc. in 2010 when AIG was slimming down to repay its government bailout.

The net loss in the period compared with a profit of $785 million a year earlier and included $3.2 billion in derivative losses tied to changes in interest rates, currencies and other things.

Under generally accepted accounting principles, life insurers must mark their derivatives to market, and when rates rise, the value of the protection they buy to protect results from low rates falls.

The New York company's most recent results reflect one of its last quarters as the nation's biggest life insurer by assets. In the next few months, it aims to complete a spinoff of most of its U.S. retail life-insurance operations. Long the core of the nearly 150-year-old company, the assets are being divested because MetLife believes they will be slower growing and more capital intensive than parts it is retaining.

The divestiture will leave MetLife focused on insurance sold to employers for their group-benefits programs, pension and retirement products and the large overseas unit.

Write to Leslie Scism at [e-mail]

(END) Dow Jones Newswires

February 01, 2017 16:40 ET (21:40 GMT)

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