MetLife Inc., the biggest U.S. life insurer, said fourth-quarter profit surged on earnings from derivatives.
Net income advanced to $1.16 billion, or $1.06 a share, from $82 million, or 5 cents, a year earlier, the New York-based company said today in a statement distributed by Business Wire. Excluding some investment results, profit was $1.31 a share, beating the $1.24 average estimate of 19 analysts surveyed by Bloomberg.
MetLife expanded in Asia, Europe and South America with the $16 billion acquisition of American Life Insurance Co. in November 2010. The company’s derivatives, used to generate income and guard against interest-rate declines, produce losses when bond yields rise, as they did in the last quarter of 2010.
“MET marks its derivative portfolio to market each quarter,” Suneet Kamath, an analyst with Sanford C. Bernstein & Co., said in a Jan. 30 research report. The insurer “excludes derivative gains and losses from operating earnings, but underlying performance is captured” in net income, said Kamath.
MetLife has gained 20 percent in New York since Dec. 31, beating the 19 percent advance of Prudential Financial Inc., the second-biggest U.S. life insurer. MetLife fell 30 percent last year, the second worst decline in the Standard and Poor’s 500 Life & Health Insurance Index. Newark New Jersey-based Prudential slipped 15 percent in 2011.
MetLife Chief Executive Officer Steven Kandarian, promoted to the top spot in May, is integrating Alico and spending on advertising. Kandarian put the name MetLife Stadium on the home of the National Football League’s New York Jets and Giants last year. The company’s blimps, with depictions of the cartoon dog Snoopy, fly over sporting events in the U.S. and Japan.
Kandarian is exiting banking to reduce federal oversight and scaling back variable-annuity sales to ease liabilities on the equity-based products. MetLife agreed in December to sell about $7.5 billion of bank deposits to General Electric Co. after the insurer’s plan for a dividend increase was rejected by the Federal Reserve. MetLife is shutting a mortgage-origination business and eliminating most of the 4,300 jobs.
MetLife, which had more than $270 billion of derivative contracts at the end of September, guards against interest-rate declines because the company depends on bond coupons to help fund customer obligations and record profits. MetLife held more than $350 billion of fixed-maturity securities as of Sept. 30.
The yield on two-year U.S. Treasuries slipped 1.6 percent in the fourth quarter, compared with a surge of 41 percent in the same period of 2010.