MetLife Says Strongly Capitalized, Poised To Grow

By Lilla Zuill
December 8, 2008

NEW YORK, Dec 8 (Reuters) - MetLife Inc (MET.N: ) on Monday forecast fourth-quarter and 2009 operating earnings below Wall Street expectations, but said it was strongly capitalized and expects to grow faster than its rivals.

The largest U.S. life insurer, whose shares were up 4 percent, said net profit in the fourth quarter would be up from a year earlier, helped by investment gains.

"Big carries opportunities -- we have used that to our advantage. We will continue to grow faster than the market," Chief Executive Robert Henrikson said at an investor event. But executives said in the short-term MetLife could be hurt by investment market volatility.

"There is no need for anyone to taint our (investment) portfolio with the same taint that others" have suffered, Henrikson added.

He said the company was strongly capitalized, echoing comments last week from competitors Prudential Financial (PRU.N: ) and Hartford Financial (HIG.N: ). MetLife declined to say if it plans to apply for funds under the $700 billion financial industry rescue program, as have a handful of its rivals.

MetLife forecast fourth-quarter net income of $1.2 billion to $2 billion, or $1.50 to $2.55 a share, up from $1.1 billion, or $1.44 a share, a year earlier.

Premiums, fees and other revenue are expected to rise to between $7.9 billion and $8.5 billion from $7.7 billion.

The company expects net realized investment gains of $1.2 billion to $1.8 billion, reflecting relatively modest credit losses and substantial derivative gains.

MetLife sees fourth-quarter operating results ranging from a loss of $50 million to a profit of $150 million, or a loss of 5 cents a share to a profit of 20 cents a share. Analysts on average expect a profit of 83 cents a share, according to Reuters Estimates.

Operating results exclude net investment gains and losses.

MetLife forecast 2009 operating earnings of $3 billion to $3.3 billion, or $3.60 to $4.00 a share. The average Wall Street estimate is $4.59 a share.

The company's outlook does not include an expected after-tax charge of $70 million, and assumes revenue growth of 4 percent to 5 percent, solid underwriting results, low variable investment income, and a 5 percent rise in the S&P 500 index during the year.

"Our earnings power is very much intact," said Chief Financial Officer William Wheeler, although the company does not expect a quick improvement in investment markets. Wheeler said MetLife expected 25 percent earnings growth in 2010, or better, as markets gradually improve.

Fourth-quarter operating results are expected to worsen because of a "significant decline in variable investment income and the poor equity markets." Variable annuities are a popular investment-linked retirement product sold by life insurers.

Wheeler said he expects MetLife to "be in the middle of" merger and acquisition activity in the life insurance sector, which is expected to pick up.

Any deals would significantly add to MetLife's earnings, he added. For a domestic deal, an acquisition would boost earnings by a minimum of 20 percent, he said.

MetLife posted sharply lower third-quarter profit, hurt by investment losses. Since then, the company and others in the life insurance sector have seen their shares battered as investors fretted that losses on investments could grow.

The company has reduced the size of its securities lending portfolio, to minimize liquidity concerns. The balance of that portfolio stood at $26.8 billion at the end of November, nearly half the balance in July 2007.

MetLife is also "pruning" its commercial mortgage loan portfolio in geographic areas that may be especially vulnerable to economic recession.

MetLife shares have fallen 45 percent since the end of September. The shares rose last week after Prudential and Hartford said they was strongly capitalized, something that has concerned investors since large third-quarter investment losses.

MetLife could also benefit from some changes to regulatory capital requirements.

The insurer's shares were up $1.23 cents to $31.99 in morning trade on the New York Stock Exchange. They were worth more than double that a year ago.

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