(Updates stock price and corrects date in last paragraph.) As MetLife Inc.'s second-quarter net dropped 21% on catastrophe losses, its chief executive officer said the company doesn't think it's appropriate "for the overwhelming majority of our business to be governed by regulations written for banking institutions."
Net income dropped to $1.2 billion, as MetLife saw a $56 million operating loss from severe storms causing $174 million in catastrophe losses in its homeowners and auto business after tax -- $137 million higher than planned.
Operating earnings grew by 45% to $1.3 billion, and the company generated record premiums, fees and other revenues of $11.8 billion, a 38% increase, said Steven Kandarian, MetLife's president and CEO, on a conference call.
"We achieved these results despite losses of $218 million related to the natural disasters in the United States and Japan," said Kandarian, who took the helm on May 1.
Earlier this month, MetLife said it plans to exit the banking business in order to focus on its insurance operations. It's exploring the sale of MetLife Bank, which includes savings accounts, certificates of deposit and money market accounts (BestWire, July 21, 2011).
In the competitive global insurance market, "it is imperative that we be able to operate under the same regulatory framework as other insurance companies," Kandarian said. "Even if we are designated a systemically important financial institution, it would be as an insurance company, not as a bank."
Aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act place new oversight over commercial banks and thrift institutions insured by the Federal Deposit Insurance Corp., a category that includes many insurance groups (BestWire, July 21, 2011)
In November 2010, MetLife (NYSE: MET) completed its $16.2 billion acquisition of American International Group Inc.'s (NYSE: AIG) American Life Insurance Co. international subsidiary, which expanded its geographic footprint, especially in Japan.
Earlier this year, MetLife expected between a $45 million to $65 million hit to second-quarter operating earnings on insurance claims and higher operating expenses as a result of the earthquake that struck Japan in March. Most of the claims are on life insurance policies, with a portion from accidental death and hospital coverage riders and polices also (BestWire, May 5, 2011).
However, the claims and higher operating expenses came in just under its initial projection, at $44 million.
Premiums, fees and other revenues in Japan were up 5% over the first quarter at $1.8 billion and reflected strong sales in life and accident and supplemental health insurance.
At June 30, total assets for MetLife Bank were $16.5 billion, including deposits of $10 billion, up 13%.
MetLife expects the sale of the bank's depository business to occur in the second quarter of 2012, and would require approval by the Fed, Kandarian said.
Also hurting MetLife's net income was an investment portfolio loss of $38 million, including impairments of $77 million, after tax. But it also recorded $189 million in gains on derivatives, due mostly to lower interest rates.
Since the start of the year, MetLife sold its businesses in Venezuela and Taiwan, and a portion of its businesses in the United Kingdom and Japan, Kandarian said. "The specific reasons vary, from political uncertainty to asset liability mismatches to integration costs," he said, noting these divestitures will free up about $1 billion in capital that can be redeployed.
Total operating revenues jumped 33% to $16.8 billion.
Metropolitan Life Insurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).
On the afternoon of July 29, shares of MetLife were trading at $40.96, up 2.89% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
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