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Derivatives hit contributes to $2.1 billion MetLife net loss

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Rising interest rates contributed to a $3.2 billion after-tax loss on MetLife Inc. and its derivatives in the fourth quarter, but higher rates should be good for company fundamentals, overall.

Fluctuations in currency exchange rates and stock prices also contributed to the derivatives loss, executives at the New York-based company said.

MetLife executives talked about the derivatives loss today during a conference call they held to discuss the company’s fourth-quarter earnings with securities analysts.

MetLife is reporting a $2.1 billion net loss for the quarter on $12 billion in revenue, compared with $785 million in net income on $12 billion in revenue for the fourth quarter of 2015.

Operating income, which excludes the effects of the derivatives loss and some other unusual items, increased to $1.42 billion, from $1.38 billion.

The financial services giant is in the process of putting its retail life and annuity operations in a spinoff company, Brighthouse Financial. But, for now, MetLife still includes Brighthouse results in its own results. The company posted information about cash flows but little information about U.S. product sales.

Related: MetLife profit falls 52% on costs of retail unit’s spinoff

MetLife says overall group benefits operating earnings increased 14 percent, to $174 million, due partly to volume growth.

Retirement and income solutions earnings increased 27 percent, due to higher investment margins and favorable underwriting.

Brighthouse earnings fell 15 percent, $330 million, due to life reserve changes and lower separate account fees.

At Brighthouse, a drop in single-premium income annuity sales caused premiums, fees and other revenue to fall to $1.3 billion, from $1.6 billion.

Eric Steigerwalt, the head of the Brighthouse unit, said sales of the company’s Shield Level Selector single-premium deferred annuity have been fantastic.

The U.S. Department of Labor fiduciary rule effort has hurt variable annuity sales, but the company now sees momentum in ordinary variable annuity sales.

“The life business was clearly weak,” Steigerwalt said.


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