MetLife Inc., the largest U.S. life insurer, said second-quarter profit tumbled 90% on a review of the prospects of a variable annuity business that Chief Executive Officer Steve Kandarian is seeking to exit. The stock declined in extended trading.
Net income dropped to $110 million from $1.12 billion a year earlier, the New York-based company said Wednesday in a statement. Operating profit, which excludes some investment results, was $0.83, missing the $1.35 average estimate of 13 analysts surveyed by Bloomberg.
Kandarian, whose term was extended in June, is looking to retreat from a U.S. retail business that sells individual life insurance and variable annuities, a capital-intensive operation that wasn’t generating the cash flow he desired. He sold a network of about 4,000 advisors to Massachusetts Mutual Life Insurance Co. in July. The goal is to focus on international operations and U.S. offerings that are provided through the workplaces, such as disability and dental coverage.
“Results were negatively impacted by market factors, our annual variable annuity actuarial assumption review and reserve adjustments,” Kandarian said in the statement. There has been significant progress, however, on the “planned separation of a substantial portion of the U.S. retail business,” he said.
The variable annuity review resulted in a non-cash charge of $2 billion. Lower interest rates can require the company to change its assessment of future profitability on the retirement products, as can changes in customer behavior, such as when policyholders maintain contracts longer than the insurer had expected.
MetLife dropped 4% to $41.96 in late trading at 5:04 p.m. in New York. The insurer had declined about 9.4% this year to $43.70 as of 4 p.m. Results were released after the close of regular trading.
Life insurers have been pressured by the decline in U.S. Treasury yields, especially after U.K. voters decided to leave the European Union. The companies hold the bulk of their investment portfolio in bonds.