MetLife, Prudential profits rise on derivative gains

Wed Aug 1, 2012 4:56pm EDT
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(Reuters) - Profit at MetLife Inc (MET.N: Quote), the largest U.S. life insurer, doubled in the second quarter after a huge gain on derivatives tied to falling interest rates, and operating results at the company beat Wall Street expectations on double-digit growth in the Americas.

The company, like its peers, is heavily exposed to the persistently low interest rate environment. But it has long had a substantial derivatives program designed to counter that risk.

As rates fell in the quarter, the company booked a $1.4 billion gain on its derivatives positions and other items.

MetLife reported a profit of $2.26 billion, or $2.12 per share, compared with a year-earlier net profit of $1.07 billion or $1 per share.

On an operating basis it earned $1.33 per share. Analysts polled by Thomson Reuters I/B/E/S on average expected $1.24 per share.

The company said operating earnings at its Americas segment grew 11 percent on strength in retail life insurance and annuity sales as well as in its group and voluntary benefits unit.

Operating earnings also rose by double digits in the insurer's Asia and EMEA units, which have been growing in importance for MetLife since its 2010 acquisition of the international insurer Alico.

Despite the weak rate environment, the company also reported a 4 percent rise in net investment income. Analysts and actuaries have warned that insurers could suffer as they reinvest money at historically low returns.

MetLife shares rose 1.9 percent in after-hours trading.   Continued...

The MetLife building is seen in New York, March 8, 2010. REUTERS/Shannon Stapleton