MetLife Inc. posted an 11% increase in second-quarter operating profit despite weaker revenue, as low interest rates continue to pressure the results of the U.S. life-insurance industry.
The New York company's net income declined 22%, as the company booked net derivative losses of $593 million tied to a broader risk-management hedging strategy. MetLife's hedging activity often generates gains or losses in net income in quarters when interest rates or currencies move abruptly because the risk being hedged may not have the same mark-to-market accounting treatment.
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The company said the second-quarter derivative losses mostly stemmed from rising interest rates, as well as the weakening of the U.S. dollar against certain currencies. The 10-year Treasury rose just under half a percentage point during the three months, and is down slightly since then.
MetLife has hedged extensively against the dangers of declining interest rates. In general, life insurers are hoping for interest rates to increase, because so much of their profit comes from buying high-quality bonds with the premiums paid by their customers.
Insurance-industry analysts track operating results, because they exclude investment-portfolio realized capital gains and losses, the mark-to-market derivative changes and some other items that aren't judged as recurring on a quarterly basis.
MetLife's $1.56 a share in operating profit--up from $1.39 a share in the same period a year ago--easily topped the expectation of $1.49 a share of analysts polled by Thomson Reuters.
Operating profit was $1.77 billion, up from $1.59 billion.
But revenue of $17.36 billion was short of an expected $17.64 billion and down 2% from the year-earlier $17.8 billion.
Net investment income was $5.2 billion, up 2%.
The insurer posted net income of $1.04 billion, down from $1.34 billion in the year-earlier period.
In the company's big Americas division, operating earnings were $1.4 billion, up 4%, though premiums, fees and other revenues were down 4%. Operating earnings for Asia were up 31% to $425 million. But Europe, Middle East and Africa results were down.
(By Leslie Scism)