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February 12, 2015 at 04:15 AM
(Bloomberg) – MetLife Inc., the largest U.S. life insurer, said profit climbed 68 percent in the fourth quarter as results improve in the company’s home country.
Net income rose to $1.52 billion from $908 million a year earlier, the New York-based insurer said Wednesday in a statement. Operating profit, which excludes some investing results, was $1.38 a share, beating the $1.34 average estimate of 14 analysts surveyed by Bloomberg.
Chief Executive Officer Steve Kandarian, 62, has focused on cutting costs in the U.S. and limiting risks from market-linked retirement products while also expanding overseas. MetLife is targeting return on equity of 12 percent to 14 percent by 2016.
“They’ve been transitioning away from capital-intensive annuity-type business to asset-management type businesses,” Tom Jalics, an investment analyst at Key Private Bank who helps oversee $25 billion including MetLife shares, said by phone before results were announced. “They’ve got a diverse business model.”
MetLife has declined 6.8 percent this year to $50.41 at 4:15 p.m., while Newark, New Jersey-based rival Prudential Financial Inc. has dropped 12 percent. Results were released after the close of regular trading in New York.
Book value, a measure of assets minus liabilities, rose to $61.85 a share on Dec. 31 from $61.44 three months earlier. MetLife said its operating return on equity was 11.3 percent in the fourth quarter.
Prudential, the second-largest U.S. life insurer, said Feb. 4 that its quarterly loss widened to $1.46 billion on costs tied to restructuring, currency fluctuations and reserves.
Bond Yields
Declining bond yields are weighing on life insurers, which invest in fixed-income assets to back future obligations to policyholders. The yield on the 10-year Treasury has declined this year to about 2 percent.
Net investment income fell 6.8 percent to $5.45 billion. Variable investments, which include private equity and hedge funds, added $325 million before taxes, compared with $460 million a year earlier.
In a December presentation, MetLife said it assumed the 10- year Treasury would end this year yielding 3.24 percent. At the time, the insurer said that if the rate instead held at 2 percent, earnings this year would be cut by about $80 million this year and $180 million in 2016.
