(Bloombeg) — MetLife Inc., the largest U.S. life insurer, posted first-quarter profit that missed analysts’ estimates as investment income declined on a slump in hedge fund holdings.
Net income rose 2 percent to $2.2 billion from $2.16 billion a year earlier, bolstered by gains on derivatives, the New York-based insurer said Wednesday in a statement. Operating profit, which excludes the benefit from those contracts and some other one-time items, was $1.20 a share, missing by 18 cents the average estimate of 17 analysts surveyed by Bloomberg.
Chief Executive Officer Steve Kandarian has been battling low interest rates and market swings that have weighed on investment returns in recent quarters. He’s planning to separate a U.S. retail unit through a sale, spinoff or public offering, a move that he said will improve the insurer’s ratio of free cash flow to earnings.
“While market headwinds remain, we experienced volume growth, and underwriting results were solid,” Kandarian said in the statement.
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MetLife joins insurers including American International Group Inc. in citing pressure from holdings beyond the bond portfolio. So-called variable investment income dropped 56 percent to $165 million “mostly due to weak hedge fund performance,” MetLife said in the statement.
AIG posted its third straight quarterly loss on Monday. Prudential Financial Inc., the second-largest U.S. life insurer, said Wednesday that net income slipped 34 percent to $1.34 billion.
MetLife’s operating return on equity was 9.3 percent in the quarter, compared with 11.7 percent in the first three months of 2015.