MetLife Beats Analysts’ Estimates as Non-U.S. Profit Climbs

MetLife Inc. (MET), the biggest U.S. life insurer, posted second-quarter results that beat analysts’ estimates as profit climbed outside its home market. The stock gained in extended trading.

Operating profit was $1.24 a share, beating the $1.11 average estimate of 18 analysts surveyed by Bloomberg.

Chairman Robert Henrikson paid about $16 billion for American Life Insurance Co. in November to add clients in more than 50 countries from Japan to Russia to Chile. MetLife has said it was considering further deals to increase sales in economies growing faster than the U.S.

“The Alico deal will enhance the company’s long-term growth profile,” Suneet Kamath, an analyst with Sanford C. Bernstein & Co., said in a July 22 research report.

Operating earnings in the international business more than tripled to $507 million. Net income slipped 21 percent to $1.24 billion on catastrophe costs in the U.S. that the company had previously announced.

MetLife advanced 2.5 percent to $40.80 in late trading at 4:56 p.m. in New York.

Derivative gains plummeted to $352 million before tax from $1.48 billion in the year-earlier period. MetLife uses derivatives to produce income and guard against market risks, such as interest-rate declines and currency fluctuations.

Private Equity

Book value per share, a measure of assets minus liabilities, advanced 7.2 percent in three months to $48.48 at the end of June. Net investment income gained about 25 percent to $5.1 billion, MetLife said.

Variable investment income, which includes holdings beyond bonds, was $425 million on “strong performance” from securities lending and private equity funds, the company said. MetLife said previously that variable investment income in the second quarter of 2010 was $296 million.

The insurer has said it holds more capital than it needs and will weigh acquisitions and a dividend increase. In a February conference with investors, Chief Financial Officer William Wheeler estimated MetLife had so-called excess capital of about $4 billion at its U.S. insurance units and said, “We will do something with that money.”

Steven Kandarian, 59, was promoted to MetLife’s chief executive officer in May after six years heading the company’s investment portfolio. He replaced Henrikson, 64, who served as CEO since 2006 and reaches MetLife’s mandatory retirement age next year.

Alico Integration

“Our Alico integration work is proceeding on plan, and we’re well positioned for continued profitable growth,” Kandarian said in the statement. Alico was purchased from American International Group Inc. (AIG), which sold assets to help repay a U.S. bailout.

The U.S. business posted a 12 percent gain in operating earnings, to $908 million. U.S. sales of variable annuities, the equity-based retirement products, jumped 55 percent to almost $7 billion. The Auto & Home business had an operating loss of $56 million, compared with profit of $73 million a year ago as it reported catastrophe costs of $174 million, after tax.

Kandarian is expanding MetLife’s home lending in the U.S. as banks scale back and the country’s insurance market contracts. He’s also seeking to sell MetLife’s bank deposit- gathering business to avoid tighter regulation imposed by the Federal Reserve following the 2008 credit crunch.

MetLife Bank’s second-quarter operating earnings dropped 79 percent to $14 million.

Reverse Mortgages

MetLife is poised to become the biggest seller of home equity-backed loans to elderly borrowers, a product known as reverse mortgages, after Wells Fargo & Co. and Bank of America Corp. announced plans to leave the market. In June, MetLife replaced Bank of America in a mortgage-distribution deal with KB Home that gives the insurer access to younger home buyers.

The U.S. market for life insurance shrank 0.7 percent in 2010 to premium of $506 billion, according to a study by Swiss Reinsurance Co. The Japanese market, which is the biggest contributor to MetLife’s international business, was flat last year. Premium in Latin America and the Caribbean rose 12 percent last year. The advance in Russia was about 34 percent.

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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