MET MetLife Inc

By Leslie Scism 

MetLife Inc. posted a $2.13 billion fourth-quarter net loss, hit primarily by losses from its hedging program when interest rates edged up at year end.

In the long term, the rise in interest rates bodes well for MetLife. Few American industries are as hurt by low rates as life insurers, which invest huge sums of premium 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.

But MetLife's results took a hit in the latest period because life insurers must mark their derivatives to market under generally accepted accounting principles. When rates rise, the value falls of the protection they bought to protect results from low rates.

MetLife's report came as fellow insurers Lincoln National Corp. and Allstate Corp. also posted fourth-quarter results. MetLife's shares fell 1.5% in after-hours trading, while Lincoln was inactive and Allstate surged 4.9%.

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 net investment income edged up 3% in the latest quarter to $5.04 billion, driven by strong performance of a slice of the portfolio focused on private-equity investments.

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.

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.

At Lincoln National, operating earnings rose 7.1% to $409 million, or $1.77 a share, beating the $1.71 projected by analysts. The company said operating earnings in its annuities segment were flat from a year earlier, while profit in the retirement plan services, life insurance and group protection divisions edged slightly higher.

Meanwhile, Allstate's operating profit rose 29% amid a dropoff in catastrophe losses. Its per-share operating earnings of $2.17 came in much better than the estimate of $1.63 from analysts, while its net premiums written rose 2.3% to $7.72 billion. The property and casualty insurer posted $303 million in pretax net catastrophe losses, a 15% drop from a year earlier.

Anne Steele contributed to this article.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

February 02, 2017 02:47 ET (07:47 GMT)

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