MetLife Net Falls 12% on Losses From Hedge Funds, Real Estate

By Andrew Frye
Bloomberg News
February 3, 2009

Feb. 3 (Bloomberg) -- MetLife Inc., the largest U.S. life insurer, said fourth-quarter profit declined 12 percent on losses from hedge funds and real estate ventures. Shares gained in extended trading as the company beat analysts' estimates.

Net income slipped to $985 million, or $1.20 a share, from $1.12 billion, or $1.44, in the year-earlier period, the New York-based insurer said today in a statement. Excluding some investment results, the company made 19 cents a share, six cents better than the average estimate of 17 analysts surveyed by Bloomberg.

MetLife joins Allstate Corp., Chubb Corp. and Travelers Cos. in posting losses on so-called alternative investments, a category that includes private equity and hedge funds. MetLife's holdings underperformed company targets by $540 million as equity markets plunged and funding for buyouts dried up. MetLife said in 2007 that return from the assets would be about $305 million a quarter.

"The most challenging economic environment we have experienced in decades" weighed on results, Chief Executive Officer Robert Henrikson said in the statement.

Henrikson braced for a deepening U.S. recession and an increase in corporate-bond defaults by selling $2.3 billion in new stock in October and stockpiling cash. That bolstered MetLife's finances and may allow the company to bid for money- losing rivals as investment losses accumulate across the industry.

The insurer gained 2.1 percent to $29.13 at 4:28 p.m. in New York.

MetLife "seems well-positioned to weather the tough market conditions," Andrew Kligerman, an analyst with UBS AG, said in a research note on Jan. 23.

Share Slump

MetLife has slipped about 53 percent in the last 12 months in New York Stock Exchange composite trading, better than the 69 percent decline in No. 2 Prudential Financial Inc. and the 82 percent drop in Hartford Financial Services Group Inc. Results were released after regular trading ended.

Book value per share, a measure of assets minus liabilities, fell 23 percent over three months to $27.33

Life insurers lost $77 billion in surplus in 2008, erasing six years of gains, on investment declines and costs guaranteeing retirement products, according to consulting firm Conning & Co. Newark, New Jersey-based Prudential and Hartford have cut jobs, reduced dividends and applied for government aid to replenish capital as private investors shun industry stocks. Life insurers may undergo "significant" consolidation, Conning said.

'Lot of Opportunities'

MetLife has "a lot of opportunities" to make acquisitions because of its capital position, Henrikson told investors on Jan. 28. Chief Financial Officer William Wheeler said in September that MetLife is "very aggressively" seeking expansion outside of the U.S.

"We would not be surprised to see MetLife pursue a transformational deal in 2009," Suneet Kamath, an analyst with Sanford C. Bernstein & Co. said on Jan. 16. The company has "a better quality balance sheet relative to most peers and significant excess capital and liquidity."

Revenue from outside the U.S. fell to $1 billion from about $1.1 billion a year earlier because of lower sales in Latin America and currency exchange rates, the firm said.

(To hear MetLife's first-quarter conference call tomorrow at 8 a.m. New York time, visit LIVE GO .)

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