MetLife, the largest U.S. life insurer, posted first-quarter profit that missed analysts’ estimates as investment income declined on a slump in hedge fund holdings.
Net income rose 2 percent to $2.2 billion from $2.16 billion a year earlier, bolstered by gains on derivatives, the New York-based insurer said Wednesday in a statement. Operating profit, which excludes the benefit from those contracts and some other one-time items, was $1.20 a share, missing by 18 cents the average estimate of 17 analysts surveyed by Bloomberg.
Chief Executive Officer Steve Kandarian has been battling low interest rates and market swings that have weighed on investment returns in recent quarters. He’s planning to separate the company’s Charlotte-based U.S. retail unit through a sale, spinoff or public offering, a move that he said will improve the insurer’s ratio of free cash flow to earnings.
“While market headwinds remain, we experienced volume growth, and underwriting results were solid,” Kandarian said in the statement.
MetLife joins insurers including American International Group in citing pressure from holdings beyond the bond portfolio. So-called variable investment income dropped 56 percent to $165 million “mostly due to weak hedge fund performance,” MetLife said in the statement.
MetLife has also been contending with new regulations including Labor Department rules announced last month to protect retirement savers from getting conflicted advice. Kandarian struck a deal in February to sell a network of about 4,000 financial advisers to Massachusetts Mutual Life Insurance Co., a transaction that will help MetLife become “more agile” by separating the distribution arm from a unit that manufactures the retirement products, the CEO said at the time.
Kandarian prevailed in March in his fight against a U.S. government panel that labeled the insurer too big to fail. U.S. District Judge Rosemary M. Collyer in Washington rescinded that tag and said that the Financial Stability Oversight Council’s process to designate the insurer as a systemically important financial institution was “fatally flawed.” The government is appealing.
In January, MetLife cited the label in announcing plans to separate much of its U.S. retail business, which is headquartered in Charlotte’s Ballantyne Corporate Park. The insurer consolidated the retail operations in the hub in exchange for millions of dollars in incentives awarded in 2013 by North Carolina, the city of Charlotte and Mecklenburg County.
MetLife has repeatedly said it intends to keep the separated company headquartered in Charlotte, where roughly 1,500 people are employed in the hub.
MetLife slipped 8.9 percent this year through Wednesday. The insurer slumped 11 percent last year after gaining 0.3 percent in 2014. Results were released after the close of regular trading.