May 3, 2010

MetLife Swings to $835 Million Profit on Investments for structured settlement investment

April 29 (Bloomberg) -- MetLife Inc., the biggest U.S. life insurer, swung to a profit in the first quarter as investments improved. The company gained in extended trading in New York.
Net income was $835 million, or 97 cents a share, compared with a loss of $544 million, or 71 cents, in the year-earlier period, New York-based MetLife said in a statement. Excluding some investment results, profit was $1.01 a share, beating the 98-cent average estimate of 17 analysts surveyed by Bloomberg.
MetLife, which lost $2.25 billion last year, is seeking to expand as profits return. Chief Executive Officer Robert Henrikson agreed in March to buy a non-U.S. life insurer from American International Group Inc. for about $15.5 billion. He’s tapping debt and equity investors for the purchase, which will bring MetLife business in emerging economies including Brazil and Russia.
“They didn’t ever stop expanding,” said Steven Schwartz, an analyst with Raymond James & Associates Inc., who has a “market perform” rating on MetLife. “They had the capital, they had the high quality name and they rode it.”
Book value per share, a measure of assets minus liabilities, increased by about 9 percent since Dec. 31 to $41.21 at the end of March. The figure increased by about 60 percent in 12 months on the rebound of fixed-income holdings including corporate bonds.
Investment Gains
Gross unrealized losses on fixed-maturity securities, which include portfolio declines that aren’t counted against earnings, narrowed to $8.3 billion from $10.5 billion on Dec. 31, the company said in a separate document on its Web site today. Unrealized gains advanced to $9.8 billion, giving the insurer more gains than losses for the first time since March 2008.
First-quarter results include an investment gain of $72 million, compared with a loss of $906 million in the year- earlier period when the company wrote down the value of holdings.
MetLife climbed 51 cents to $46.13 at 4:34 p.m. in New York. The insurer has advanced about 54 percent in the last 12 months on the New York Stock Exchange, the second-worst performer of the 7-company Standard and Poor’s 500 Life & Health Insurance Index. Prudential Financial Inc., the second-biggest U.S. life insurer, has more than doubled in the same period.
Net investment income, which includes dividends and payments on bonds advanced about 31 percent from the year- earlier period to $4.3 billion after the company drew down the cash hoard it built at the depths of the recession to buy corporate debt and structured securities. It was the second quarterly increase after seven declines.
Cash and short-term investments fell 7 percent to $17.2 billion on March 31 from $18.5 billion at the end of December. That total stood at $30.3 billion at the end of last year’s first quarter.
Private Equity
MetLife said results from so-called variable holdings, which include private-equity and hedge-fund assets, were $71 million above the company’s plan. In December, MetLife said it expected $100 million to $200 million of variable income each quarter.
Operating earnings in the U.S. business quadrupled to $757 million on gains at the unit that includes pension-closeout businesses and structured settlements.
Operating earnings at the international business climbed 15 percent to $151 million on premium growth, fueled in part by currency fluctuations.
Non-U.S. Expansion
The acquisition of AIG’s American Life Insurance Co. will add to the non-U.S. businesses MetLife acquired in 2005 with the purchase of Travelers Life & Annuity from Citigroup Inc. That deal helped MetLife double its international revenue in three years, reducing reliance on a U.S. life insurance market that contracted 15 percent last year.
Alico will make about $2.4 billion in profits in 2010, MetLife has projected. Henrikson plans to sell $2 billion in common stock and $3.1 billion of senior debt to fund the deal. MetLife recorded revenue of $5.5 billion outside the U.S. in 2009, compared with $42.1 billion in its home market.
MetLife returned to profit in the fourth quarter after losses in each of the first three periods of 2009. The stock market rally, in which the Standard & Poor’s 500 surged more than 40 percent in the 12 months ended March 31, trimmed MetLife’s potential payouts to savers on equity-linked retirement products called variable annuities.
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