MetLife Earnings Fall 87% Amid Declining Interest Rates
Northern, WI 02/14/2013 (gdpwatch) – MetLife Inc. (NYSE:MET) an S&P500 insurance index component announced its results 2012 full year and Q4 results , after the close of regular trading yesterday.
The company’s (GAAP basis) annual profits declined to $127 million from last years’ earnings of $990 million. Operating profit per share were $1.25 beating the analysts estimate of $1.18.
Q4 profits (GAAP basis) fell 89% to $96 million against $959 million for 2011, as interest rates and costs related to annuities hiked. EPS declined to $0.09 a share, compared t 2011 Q4 EPS of $0.90.
The insurer invests its premiums received in a $500 billion portfolio. Returns from those plan assets shrunk amid bond yields nearing an all time low and extra pressure from the fixed return retirement products.
A decline in interest rates leads to decline in investment earnings and also causes “profit compression” which is not a good sign for insurers even when they have arranged hedging, said Neil Strauss a Moody’s insurance analyst said.
Net profits for 2012 declined to $1.2 billion as against $6.16 billion last year. Latin American markets reaped operating income as much as $148 million (20% above the last year), due to increase in revenues in Brazil, Chile and Mexico.
The company is expanding with a narrower focusing on the emerging economies of the world including Turkey, India, with a target of generating at least 20% of group profits from those regions by 2016. This month it also entered an $2 billion deal to take over AFP Provida SA, a pension management fund based in Chili, told CEO Steven Kandarian in his statement.
Over the last quarter the company’s Net Book Value declined from $58.35 to $57.17 a share; profits in emerging markets including Africa, Middle east and Europe grew 26% to $59 million.
The company has benefited from the acquisition of American Life Insurance Co. ad Delaware American life insurance (collectively known as ALICO) from American International Group Inc (NYSE:AIG) in 2010 for about $16 billion.
In Asia annual revenues including fees and premiums, hiked 11% over the last year, ignoring the impact of foreign exchange differences that increase goes as high as 14% compared to last year’s revenues. Despite this upward move in sales operating profits in Asia dropped 24% to $198 million mostly due to the $62 million charge on account of actuarial losses (net of taxes) which the company had to record after the annual review of actuarial assumptions,. Actuarial assumptions are those scenarios on the basis of which future insurance liabilities are estimated for booking in financial statements. These are subject to periodic reviews in all accounting jurisdictions.
All in all the company’s shares declined 0.5% during the last year while the S&P500 Insurance Index hiked 18%.
The shares of MetLife Inc. (NYSE:MET) were down by 2.99% and currently trading at $36.38. The shares of American International Group Inc (NYSE:AIG) were down by 0.36% and currently trading at $38.73.