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MetLife profit misses analysts' estimates

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(Bloomberg) — MetLife Inc., the largest U.S. life insurer, reported a 35 percent increase in first-quarter profit amid derivatives gains and international growth. The stock declined in extended trading as results missed analysts’ estimates.

Net income rose to $1.33 billion from $986 million a year earlier, New York-based MetLife said today in a statement. Operating profit, which excludes some investing results, was $1.37 a share, 3 cents below the average estimate in a Bloomberg survey of 18 analysts.

Chief Executive Officer Steve Kandarian, 62, has turned to markets outside the U.S. to boost profits as he scales back from some capital-intensive businesses. The insurer added Chilean pension provider AFP Provida SA last year, after the acquisition in 2010 of American Life Insurance Co., which had operations in 50 countries.

“MetLife is shifting its business mix to products with lower capital requirements,” Jay Gelb, an analyst at Barclays Plc, said in an April 16 research note. “MetLife views emerging markets business as attractive despite near-term volatility. There is some near-term currency translation risk.”

MetLife slipped 1.1 percent to $51.75 at 4:59 p.m. in New York. The company has declined 2.9 percent this year, compared with the 12 percent drop of Prudential Financial Inc., the No. 2 U.S. life insurer. Results were released after the close of regular trading.

Derivative gains

Net investment income was little changed at about $5.1 billion. Book value, a measure of assets minus liabilities, rose to $56.65 per share on March 31 from $53.04 three months earlier.

MetLife recorded $78 million in gains tied to derivatives, compared with a loss of $591 million a year earlier. The insurer uses the contracts to guard against fluctuations in currency values and interest rates.

Operating profit at the retail segment in the Americas declined about 2 percent to $612 million on underwriting results. The region’s segment for group, voluntary and worksite benefits saw profit slump 18 percent to $188 million.

Capital destruction

MetLife has been scaling back from businesses such as annuities while expanding sales of accident and health coverage and targeting growth in emerging markets. Kandarian’s company agreed in February to sell a U.K. annuity unit to Rothesay Life Ltd. MetLife booked a $343 million loss on the deal. “Businesses that cannot earn their long-term cost of capital destroy shareholder value and do not belong in our portfolio,” Kandarian wrote in a March 18 letter to shareholders.

He said Provida, which the insurer bought for about $2 billion, is “a great strategic fit,” because profits from the business are linked to fees on salaries, rather than assets under management. MetLife has said Provida will add about $200 million to operating profit this year.

Latin America

Latin America earnings increased 28 percent to $183 million, fueled by the Provida deal. Operating profit in Asia declined 1.5 percent to $328 million as Japan’s yen weakened against the dollar. Kandarian’s company reached deals last year to expand in Vietnam and Malaysia.

MetLife bought Alico from American International Group Inc. in a $16 billion deal. MetLife was fined $60 million by New York regulators in March after the watchdogs found that subsidiaries it acquired in the deal solicited business in the state without a license.

MetLife said today that the settlement reduced operating earnings by 5 cents a share. Regulators are still probing AIG, which has criticized the investigation.

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