The Statue of Mercury stands in front of the MetLife Building at dawn in New York. (Photographer: Michael Nagle/Bloomberg)

MetLife Profit Beats Estimates, Aided by U.S. Tax-Law Revamp

(Bloomberg) -- MetLife Inc. has tax-code changes and a deal with FedEx Corp. to thank for second-quarter profit that beat analysts’ expectations.

Earnings at the U.S. business surged 36 percent from a year earlier, fueled by a reduced corporate-tax rate and a pension-risk transfer contract won from FedEx, the New York-based life insurer said Wednesday in a statement. Adjusted earnings per share came in at $1.30, beating the $1.17 estimate from 17 analysts surveyed by Bloomberg.

Chief Executive Officer Steven Kandarian has been seeking to bolster the company amid regulatory investigations and financial-control weaknesses after MetLife lost track of about 13,500 customers owed pension payments. The $6 billion FedEx deal, announced in May, helped ease investor concern that the insurer would be hampered by the pension mishap.

“While there had been some concerns that MET’s issues that arose for missing payments for pension customers may negatively impact the sourcing of this business, so far MET has remained competitive,” Tom Gallagher, an analyst at Evercore ISI, said in a note to clients before earnings were released.

MetLife has been working to solve the accounting problems, one of which is tied to the pension mishap. The company said in March that it had another issue, this time because it had set aside too much money for a block of Japanese variable annuities. MetLife didn’t provide an update in its earnings release.

The insurer has said it’s working to locate and pay people owed money from pensions. It has also revamped management, naming John McCallion as chief financial officer to replace John Hele, who stepped down in May and agreed to work as a senior adviser until September.

The U.S. unit’s adjusted earnings surged to $671 million from $493 million a year earlier. Profit at the Asia business climbed 17 percent to $363 million, helped by higher income from investments and better sales in China and Japan.

In the second quarter, MetLife exchanged Brighthouse Financial Inc. shares to retire debt, exiting a stake in the U.S. retail business it spun off last year. Return on equity in the period was 6.5 percent, up from 5.2 percent a year ago. MetLife shares climbed 1.1 percent to $46.12 at 4:43 p.m. in extended New York trading after the announcement.

“We divested our remaining stake in Brighthouse and returned approximately $1.5 billion to shareholders through common stock repurchases and dividends,” Kandarian said in the statement. “We remain focused on improving our return on equity, maintaining strong free cash flow, meeting our expense targets and distributing capital to shareholders.”

Prudential Results

Prudential Financial Inc. also reported results Wednesday. Net income fell 60 percent to $197 million, partly tied to mark-to-market adjustments. The insurer had a $1.6 billion pretax loss as it boosted reserves for divested businesses, and reviewed assumptions for long-term care coverage, which helps cover the cost of home health aides or nursing-home stays.

Prudential’s adjusted earnings per share were $3.01, missing the $3.07 estimate from 15 analysts surveyed by Bloomberg. The stock fell after the insurer posted earnings, declining 1.5 percent to $99 a share at 4:40 p.m. in New York.

MetLife’s profit from Latin America fell 5.8 percent to $145 million amid higher taxes. The Europe, Middle East and Africa operations posted a gain of $86 million, up 19 percent.

Other second-quarter highlights for MetLife include:

  • Net income dropped 2.3 percent to $845 million.
  • Net investment income climbed 6.7 percent to $4.47 billion, even amid lower income from private equity and hedge fund bets.
  • In the U.S., the company’s group benefits operation posted profit of $261 million compared to $203 million a year earlier. Earnings at the property-casualty unit, which sells home and auto insurance, more than doubled to $63 million on better underwriting.

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