MetLife Posts Quarterly Profit, Sees ‘Modest’ Virus Impact

(Bloomberg) -- MetLife Inc.’s first-quarter profit exceeded analyst expectations as it forecast a “modest” impact on underwriting margins from the coronavirus pandemic.

• The largest U.S. life insurer reported adjusted earnings of $1.58 a share, surpassing the $1.43 estimate of 13 analysts in a Bloomberg survey.

Key Insights

• Results were driven by a 26% jump in profit from retirement and income solutions, and an 8% increase for MetLife’s U.S. unit, the New York-based insurer said Wednesday. Laggards included group benefits, the Latin American region and MetLife Holdings, which contains a closed block of business.
• “MetLife entered the current period of uncertainty from a position of strength,” Chief Executive Officer Michel Khalaf told analysts on an earnings call Thursday. After making changes to MetLife’s strategy and product portfolio, “we are now a less market-sensitive and capital-intensive company,” he said. In terms of investments, “we took early action in anticipation of a recession.”
• The company expects to see the biggest impact from the pandemic on its investments in the second quarter. Variable investment income will come under pressure, with private equity returns likely to be in the negative high single to low double digits. MetLife has been positioning its portfolio for a recession since 2018, and continued to trim holdings of bonds below investment grade.
• “We expect the impact of the pandemic to be an earnings event, not a balance-sheet event,” Khalaf said.
• Earlier, rival Prudential Financial Inc. said it expects coronavirus deaths to cut earnings by about $200 million this year after the company swung to a net loss in the first quarter. Sales are expected to decline in its individual and international units.

Market Reaction

• MetLife shares rose 5.6% to $34.82 at 12:53 p.m. in New York. They’ve declined 32% this year.

Get More

• Read the statement here and supplement here.
• U.S. life insurers may face as much as $7.2 billion in claims if coronavirus deaths rise to the high end of projections of 150,000, according to Samantha Chow, an analyst at Aite Group LLC. Still, the industry is in strong financial shape and should be able to manage surging costs, she wrote in a report last month.

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