By Katherine Chiglinsky
(Bloomberg) --MetLife Inc., the largest U.S. life insurer, said third-quarter profit tumbled 52 percent on derivative losses and costs tied to the spinoff of a U.S. retail business as Chief Executive Officer Steve Kandarian reorganizes the company.
Net income slipped to $571 million from $1.2 billion a year earlier, New York-based MetLife said Wednesday in a statement. Profit excluding some investment results was $1.28 a share, beating the $1.15 average estimate of 10 analysts surveyed by Bloomberg.
Kandarian is reshaping the insurer as it copes with heightened regulatory scrutiny and low interest rates that weigh on investment income. He filed in October to spin off Brighthouse Financial Inc., and is phasing out the cartoon character Snoopy as the face of MetLife’s marketing. He also sold a network of about 4,000 advisers to Massachusetts Mutual Life Insurance Co., and announced plans in August to reduce annual costs by about $1 billion by the end of 2019 -- a move that will include job cuts.
“MetLife had a solid third quarter of 2016 on an operating basis, driven primarily by improved market conditions and strong expense discipline,” Kandarian said in the statement. “We continue to focus on long-term shareholder value by generating more predictable and higher free cash flow.”
MetLife dropped 1 percent to $46.34 at 4:01 p.m. in New York, extending its loss for the year to 3.9 percent. Results were released after the close of regular trading.
MetLife reorganized its business units, breaking out the Brighthouse segment. That decreased operating earnings by $254 million in the quarter. The insurer also posted $683 million in net derivative losses tied to swings in equity markets, foreign currencies and interest rates.
Brighthouse, the U.S. retail business slated for separation, reported operating earnings that plunged 80 percent to $68 million from the same period a year earlier. The operation to be led by Eric Steigerwalt consists largely of variable annuities and life insurance sold to individuals. Annuity sales dropped 34 percent and life-insurance sales tumbled 46 percent, the firm said.
The U.S. business that MetLife is retaining includes property-casualty insurance, the retirement and income solutions division and a group offering coverage through employers. Its profit rose 8 percent to $552 million from a year earlier.
Operating earnings in Asia fell 4 percent to $324 million on a sales decline and the withdrawal of some products in Japan. The Europe, Middle East and Africa operations had a profit of $74 million, up from $66 million.
Earnings at the Latin American business slipped 27 percent to $133 million after a one-time tax benefit in the year-ago period. Sales in the region fell 6 percent on a constant currency basis, partly due to lower sales through employers and pensions in Mexico.
MetLife’s investments have been hit over the past year by slumping returns on hedge fund holdings, and pressure from low interest rates. Investment income gained 38 percent to $5.46 billion on “strong performance” by private equity holdings and the sale of a real-estate joint venture interest, the insurer said.
The company reported return on equity of 3 percent, compared with 7.1 percent during the same period a year earlier. Book value, a measure of assets minus liabilities, slipped to $69.35 a share from $70.18 in the second quarter.
The company also carved out its long-term-care business and the reinsurance deal tied to a previous Japan joint venture into a new unit called MetLife Holdings. That division reported that profit climbed 9.5 percent to $266 million.
Prudential Financial Inc., the second-largest U.S. life insurer, reported Wednesday that third-quarter net income rose 25 percent to $1.83 billion on gains at its asset-management operation and individual annuities business.
To contact the reporter on this story: Katherine Chiglinsky in New York at [email protected] To contact the editors responsible for this story: Dan Kraut at [email protected] Dan Reichl