MetLife Profit Climbs to $1.37 Billion on Chile, Derivatives

Jul 30, 2014 4:52 pm ET

(Updates with book value in the seventh paragraph, Americas results in the 10th.)

July 30 (Bloomberg) -- MetLife Inc., the largest U.S. life insurer, said second-quarter profit more than doubled on gains from derivatives and the Chilean business acquired last year.

Net income climbed to $1.37 billion from $502 million a year earlier, New York-based MetLife said today in a statement. Operating earnings, which exclude some investment results, were $1.39 a share, missing by two cents the average estimate of 20 analysts surveyed by Bloomberg.

Chief Executive Officer Steve Kandarian has expanded in Latin America and Asia while retreating from some capital- intensive businesses. MetLife acquired Chilean pension provider AFP Provida SA in September for about $2 billion after spending $16 billion in 2010 for American Life Insurance Co., which had operations in more than 50 countries.

“The growth is going to be in the international business,” Steven Schwartz, an analyst at Raymond James Financial Inc., said by phone before results were announced.

In Latin America, profit climbed 28 percent to $160 million, fueled by the Provida acquisition. MetLife posted a 3.3 percent drop in operating profit in Asia, to $319 million. Results included a decline in surrender fees, which the company collects when clients exit their contracts with the insurer. MetLife said sales increased in China and South Korea, while declining in Japan.

MetLife slipped 0.7 percent to $54.05 in extended trading at 4:35 p.m. in New York. The stock advanced about 1 percent this year. Results were released after the close of regular trading.

Book value, a measure of assets minus liabilities, rose to $59.96 per share on June 30 from $56.65 three months earlier.

Derivative Gains

Net investment income fell 0.4 percent to $5.26 billion. Low interest rates have pressured earnings from MetLife’s portfolio of $505 billion, which is mainly invested in bonds.

Net derivative gains added $202 million to profit, fueled by declining interest rates. MetLife recorded derivative losses of $1.1 billion a year earlier, tied to rising interest rates, currency fluctuations, and changes in the company’s creditworthiness.

In the Americas business, run by Bill Wheeler, operating profit climbed 4.8 percent to $1.39 billion. The retail business, which offers life insurance and annuities in the U.S., posted operating profit of $652 million, 12 percent higher than a year earlier as clients’ investments gained.

MetLife in June announced its first stock buyback since 2008, saying it would repurchase as much as $1 billion of common stock. Kandarian had refrained from buybacks while preparing for the prospect of increased oversight from U.S. regulators.

The company is in the final stage of consideration to be designated a systemically important financial institution. The designation would put MetLife under Federal Reserve supervision and could subject the firm to stricter capital, leverage and liquidity standards.

Prudential Financial Inc., the No. 2 U.S. life insurer, has already been deemed systemically important. The Newark, New Jersey-based insurer is scheduled to report second-quarter results on Aug. 6.