By Leslie Scism
MetLife Inc. posted a 4.9% increase in first-quarter operating
profit despite a slight decline in revenue, as the life-insurance
industry wrestled with ultralow interest rates and companies with
global operations were stung by the strong dollar.
MetLife, the nation's largest life insurer by assets, said its
closely watched operating profit rose to $1.64 billion, or $1.44 a
share, up from $1.56 billion, or $1.37 a share, in the year earlier
period.
Insurance industry investors closely watch operating income,
which excludes realized capital gains and losses in the companies'
investment portfolios as well as derivatives gains and losses that
are part of strategies to hedge certain risks.
MetLife's operating profit was above the consensus analysts'
expectation of $1.41 a share.
The New York company's net income surged to $2.13 billion from
$1.3 billion, buoyed by $534 million in net derivative gains
reflecting the weakening of foreign currencies against the dollar
and lower interest rates, the company said.
Total operating revenue was $17.03 billion, compared with
analysts' expectation of $17.53 billion, and slightly below the
$17.12 billion in the year-earlier period. Net investment income
dipped 2% to $4.98 billion, while premiums, fees and certain other
revenues edged up slightly, to $12.05 billion.
Insurers have faced a major headwind in the protracted
low-interest-rate environment in the U.S. and many other parts of
the world. Insurers constantly have premium dollars to invest and
they earn a substantial portion of their income from interest on
their big bond-heavy investment portfolios.
Meanwhile, as foreign currencies have fallen against the dollar,
companies that make money in those currencies lose when they are
translated back into dollars.
MetLife said operating profit in its big Americas unit rose 4%
as reported but was up 6% on a constant-currency basis, even as
profit dropped in Latin America under both measures. Operating
earnings in Asia fell 2% as reported but were up 8% on a
constant-currency basis, while in Europe, the Middle East and
Africa such profit decreased 1% as reported, but jumped 35% on a
constant-currency basis.
MetLife's earnings' conference call Thursday morning will be its
second since the insurer in January challenged in federal court its
designation by a federal panel of regulators as a nonbank
"systemically important financial institution." Analysts will be
seeking as much insight as they can get into the lawsuit and how
the designation would affect MetLife's ability to buy back
shares.
Under the post-financial-crisis Dodd-Frank federal law, nonbank
SIFIs are subject to Federal Reserve oversight with
yet-to-be-determined requirements for such things as capital
cushions.
Write to Leslie Scism at leslie.scism@wsj.com
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