MetLife Misses Q4 Estimates But CEO Hopeful Of Turnaround

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MetLife (NYSE:MET) announced weak Q4 results Wednesday, with adjusted revenues flat year-over-year (y-o-y) at $17.2 billion and missing market estimates of $17.34 billion. The lower-than-expected revenue was attributed to a $243 million charge for investment hedge adjustments, partially offset by a 3% increase in net investment income.

In terms of the bottom line, strong performances by the Retirement and Group Benefits businesses in the U.S. and favorable underwriting in EMEA and Asia were offset by operating losses in Latin America, MetLife Holdings and Brighthouse Financial, and the company’s operating earnings grew by just 3% to $1.4 billion or $1.28 per share, missing consensus estimates by around 5%. MetLife’s net income tumbled from a profit of $785 million in Q4 2015 to a loss of $2.1 billion in the last quarter on net derivative losses of $3.2 billion, reflecting changes in interest rates, equity markets and foreign currencies.

However, MetLife’s CEO Steve Kandarian stated in the earnings call that he was hopeful of a turnaround under the Trump administration. He said that higher interest rates, capital management and a more favorable regulatory environment could help the company get back to profitability. met-24met-28
U.S. Business Results

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MetLife reorganized its U.S. retail business in the third quarter last year and its Brighthouse Financial division, consisting largely of variable annuities and individual life insurance products, is slated for separation in the first half this year. MetLife filed for a spinoff of this retail business unit on October 5, 2016 and cited low returns of the individual life product and high volatility of the variable annuity businesses as reasons for the same. In Q4 2016, Brighthouse Financial’s revenues declined 6% to $2.2 billion but operating earnings declined 15% to just $330 million largely due to life reserve changes and lower separate account fees.met-25MetLife Holdings, consisting largely of MetLife’s legacy retail and long-term care runoff businesses, reported a 25% decline in operating earnings to $199 million, owing to unfavorable underwriting and certain insurance adjustments.

Following the spinoff of Brighthouse Financial, MetLife’s U.S. retail division consists of three major businesses- Group Benefits (formerly known as Group, Voluntary & Worksite Benefits), Retirement & Income Solutions (represents major chunk of the segment formerly known as Corporate Benefit Funding) and Property & Casualty.

In the fourth quarter, the U.S. retail division reported earnings strong growth of 19% to $516 million, driven by favorable expense margins and volume growth in the Group Benefits business and higher investment margins in the Retirement & Income Solutions business.met-27
International Business Performance

MetLife’s international business revenues reported growth of 3.4% y-o-y to over $4.7 billion on the back of a strong performance in Asia. The company’s international operating earnings grew by over 9% to $548 million in the quarter.

MetLife’s operating earnings in Latin America declined over 22% on a reported basis, and 9% on a constant currency basis, to $122 million. Excluding all notable items, operating earnings were up 5 percent on a constant currency basis in the region. Asia was the star performer with operating earnings growing 22% on a reported basis and 17% on a constant currency basis driven by volume growth, favorable markets and a tax-related item in Japan.

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