MetLife, AIG Beat Analysts' Estimates -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 3, 2017).

American International Group Inc. posted better-than-expected second-quarter operating results, as new Chief Executive Brian Duperreault took over midway into the period, while MetLife Inc. had a different turning point: the last quarter before the spinoff of its historic core life-insurance unit.

MetLife, the largest U.S. life insurer by assets before the divestiture is set to occur on Friday, also reported higher and better-than-anticipated operating income. It posted improved results in the U.S. and at overseas locations, though the U.S. retail operations to be spun off, named Brighthouse Financial, had a 5% decline.

Prudential Financial Inc.'s operating income also rose, but it missed analyst expectations.

All three insurers' per-share results were aided by share-buyback programs.

AIG's net income dropped 41% to $1.13 billion from $1.91 billion in the year-earlier period, when the insurance conglomerate had net realized capital gains of about $1 billion, mostly from the sale of shares in a Chinese insurer. On an operating basis, AIG had income of $1.45 billion, up from $1.31 billion. Investors and analysts track operating results because they exclude realized capital gains and losses and other nonrecurring items.

The $1.53 a share in operating income was well ahead of the consensus expectation of analysts at $1.20 and was up from $1.15 a share in the year-earlier period.

Mr. Duperreault was hired in mid-May, after the former chief executive, Peter Hancock, pushed back some profit-improvement deadlines set in January 2016 and lost support from the company's board. A longtime veteran of the property-casualty insurance industry, the 70-year-old Mr. Duperreault has said he wants AIG to begin growing again, after years of selling assets to repay a 2008 U.S. bailout and to finance share buybacks.

In the release Wednesday, he said, "We will build on AIG's strong franchise by maximizing the value of our international footprint," adding that the goal is "investing in profitable growth."

Much of Mr. Hancock's effort was focused on the company's core business of selling property-casualty insurance to midsize-to-large businesses globally, and the latest results showed the work in process that Mr. Duperreault has inherited.

The unit posted pretax operating income of $716 million, or 24% below the year-earlier period. Much of the deterioration came as AIG used higher loss estimates, which it unveiled earlier this year, for setting up claims reserves, after repeated reserve boosts.

The unit also continued to shrink, with a 15% reduction in net premiums written. Industrywide, rates are flat to declining for many product lines, and AIG has been shedding some business that isn't judged profitable enough.

The company's consumer insurance business had flat year-over-year revenue from premiums and fees, but operating profit surged 33%, to $1.26 billion. The business includes life insurance, annuities, group retirement and sales of car, home and other policies to wealthy people.

Another key piece of Mr. Hancock's turnaround plan was the two-year return of $25 billion capital to shareholders, ending Dec. 31. AIG said it had bought back $2.4 billion of shares during the second quarter, and its board authorized a quarterly dividend payable Sept. 29. Including that dividend, the company will reach about $20 billion of returned capital.

The company said it has a remaining share-buyback authorization of approximately $2.5 billion.

Analysts are expected to push for detail in Thursday's earnings call about whether the company will stick with Mr. Hancock's target.

Meanwhile, MetLife's spun-off insurance business -- Brighthouse Financial -- is set to begin trading Monday on the Nasdaq Stock Market. Brighthouse, which will become home to about a quarter of MetLIfe's total assets, will be focused heavily on annuities for retirement income and other savings. The remaining MetLife will get about 40% of its income from international life insurance operations, and it will continue to be one of the nation's leading sellers of insurance for employee benefits programs. It also is keeping an asset-management unit and will sell pension products, among other operations.

MetLife's operating income increased 52% to $1.41 billion, or $1.30 a share, up from $924 million, or 83 cents a share, in the year-earlier period. Analysts had expected operating income of $1.28 a share. MetLife CEO Steven A. Kandarian said the company is on track to return about $4.5 billion to shareholders this year in dividends and share repurchases.

Its net income, which includes realized capital gains and losses and mark-to-market changes in derivatives used for risk-management hedging, totaled $838 million, up from $64 million. The company reported $284 million in derivative losses this quarter, which it said reflected changes in foreign currencies, equity markets and interest rates.

MetLife cited strong underwriting and volume growth for its U.S. operations, including a 30% year-to-date increase in sales for its group-benefits business. It also reported double-digit operating-earnings gains in operations in Asia, Latin America and other parts of the word.

Prudential's operating income rose to $919 million, or $2.09 a share, missing analyst expectations for $2.70 a share and compared with $829 million, or $1.84 a share, a year earlier. It reported $491 million in net income, down from $921 million the prior year, hurt by charges following its annual review of actuarial assumptions.

Write to Leslie Scism at leslie.scism@wsj.com and Nicole Friedman at nicole.friedman@wsj.com

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August 03, 2017 02:47 ET (06:47 GMT)