MetLife Profit Tops Forecast on Rising Private Equity Income

(Bloomberg) -- MetLife Inc. shares surged after its private equity investments boosted earnings above analysts’ expectations in the third quarter, despite a sluggish economy.

• The biggest U.S. life insurer reported adjusted earnings of $1.73 a share, beating the $1.59 median estimate of 11 analysts and up from $1.27 a year earlier.

Key Insights

• Variable investment income doubled from a year earlier to $652 million in the third quarter, driven by a rebound in private equities.
• “In what continues to be a challenging environment, MetLife delivered strong financial performance,” Chief Executive Officer Michel Khalaf said in a statement. “We were also pleased to resume share repurchases in the third quarter.”
• Covid-19 claims are expected to stay elevated in the group benefits business, Chief Financial Officer John McCallion told analysts during a conference call Thursday. “We expect the group life mortality ratio in the fourth quarter to be modestly above the annual target range as fourth quarter tends to have higher seasonal life claims,” he said.
• The Federal Reserve’s interest-rate policy has been weighing on MetLife and other insurers. The company reduced its long-term interest-rate assumption to 2.75% from 3.75% and extended the time horizon to 2032.

Market Reaction

• MetLife shares rose 6.9% to $41.68 as of 12:06 p.m. in New York, the biggest intraday gain since June. The stock is down 18% this year.

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• MetLife’s statement is here. Its presentation is here.
• Net income, which includes derivative losses and some hedges, declined to $633 million from $2.2 billion a year earlier.
• Earnings for the MetLife Holdings unit, which contains a closed block of business, surged 70% in the quarter, while profit rose 33% in Asia and 27% in the U.S. Latin America was a laggard, with earnings dropping 75% in the region.
• Earlier this week, Prudential Financial Inc. said it would keep share buybacks on pause amid lingering uncertainty over the impact of the Covid-19 outbreak.

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