MetLife Says 2011 Earnings Will Climb After Alico Acquisition

MetLife Inc., the biggest U.S. life insurer, said earnings will climb in 2011 after the firm bought a non-U.S. business from American International Group Inc.

Next year’s operating profit, which excludes some investment results, will probably be $4.75 to $5.15 a share, compared with the average $5.02 estimate of 19 analysts surveyed by Bloomberg, the New York-based company said today in a statement. Profit for 2010 will be $4.26 to $4.36, MetLife said, compared with the $4 to $4.40 it predicted in December 2009.

Chief Executive Officer Robert Henrikson sold debt and issued stock to meet the $16.2 billion price for AIG’s American Life Insurance Co. last month. Alico, which has businesses from Chile to Japan, allows MetLife to add clients outside of a U.S. life insurance market that the 63-year-old Henrikson described in March as “relatively slow-growth.”

“They’re bolting on a different business,” said Randy Binner, an analyst at FBR Capital Markets, who has an “outperform” rating on MetLife stock. “What they are hoping to find in Alico is both higher growth potential and higher margin potential by writing insurance in less efficient, less regulated markets.”

MetLife gained 14 percent this year through Dec. 3, compared with the 17 percent jump in the 24-company KBW Insurance Index.

MetLife will probably post 2010 operating earnings of $4.27 a share, according to the average estimate of 19 analysts surveyed by Bloomberg.

Rivalry

MetLife is extending its rivalry with Prudential Financial Inc., the second-biggest U.S. life insurer, as bailed-out rivals including AIG and Hartford Financial Services Group Inc. scale back. In September, Newark, New Jersey-based Prudential agreed to buy two Japanese life insurers from AIG for $4.8 billion.

MetLife’s U.S. business posted operating revenue of $32.5 billion in the first nine months of the year, up 6 percent from the same period in 2009. International business revenue jumped 24 percent to $4.9 billion.

Henrikson is retreating from the market for long-term care insurance as he seeks to expand in more-profitable businesses. MetLife will halt new sales of the policies at the end of the year, while honoring previously written contracts, Henrikson said on Nov. 17.

Investments

The insurer, which had investments of $386 billion at the end of September, is making more from bond coupons and dividends this year after drawing down the cash holdings it built during the financial crisis. Net investment income rose 15 percent to $12.8 billion in the first nine months of the year.

Results have been helped by an improvement in so-called variable investments, including real estate, private equity and hedge funds and MetLife’s securities-lending program. Chief Investment Officer Steven Kandarian, who in December 2009 forecast $400 million to $800 million in variable investment income for 2010, has posted $902 million in the nine months through the end of September.

MetLife paid $7.2 billion in cash and $9 billion in securities for Alico. AIG will sell the securities subject to market conditions, “following the lapse of agreed-upon minimum holding periods,” the company said.

MetLife expects to receive a “very healthy dividend” from Alico late next year, Chief Financial Officer William Wheeler said in October.

U.S. life insurers extend loans to property owners as part of their investment strategy. MetLife’s portfolio included $35.5 billion of property loans and $15.5 billion of commercial mortgage-backed securities at the end of September. Combined, that accounted for about 13 percent of the firm’s investments. MetLife owned $45.9 billion of securities tied to home loans.

Life insurers, including Prudential and Lincoln National Corp., have said this year they’re seeking to lend more as the economy grows and helps relieve pressure on real estate owners. U.S. commercial property prices rose 4.3 percent in September, Moody’s Investors Service said last month. Prices are about 43 percent below October 2007 peaks, according to Moody’s.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

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