MetLife Announces Third Quarter 2016 Results
Net income includes USD 683 million, after tax, in net derivative losses reflecting changes in interest rates, equity markets and foreign currencies, compared to USD 315 million, after tax, in net derivative gains in the third quarter of 2015. MetLife uses derivatives as part of its broader asset-liability management strategy to hedge certain risks, such as movements in interest rates and foreign currencies. This hedging activity often generates derivative gains or losses and creates fluctuations in net income because the risk being hedged may not have the same GAAP accounting treatment.
Net income for the third quarter of 2016 also includes a goodwill impairment of USD 223 million, after tax, related to the new Brighthouse Financial segment.
MetLife reported operating earnings of USD 1.4 billion, up 102 percent from the third quarter of 2015, and 98 percent on a constant currency basis. On a per share basis, operating earnings were USD 1.28, up 106 percent from the prior-year quarter.
Third quarter 2016 operating earnings included the following notable items:
• re-segmentation of MetLife's businesses that included the establishment of a Brighthouse Financial segment; as previously announced, this resulted in the loss of an aggregation benefit associated with the GAAP reserve testing of variable and universal life policies, which decreased operating earnings by USD 254 million, or USD 0.23 per share, after tax
• results of the annual actuarial assumption review completed in the third quarter, and other insurance adjustments, which decreased operating earnings by USD 65 million, or USD 0.06 per share, after tax
• variable investment income above the company's 2016 quarterly plan range by USD 22 million, or USD 0.02 per share, after tax, and the impact of deferred acquisition costs (DAC)
• favorable catastrophe experience and prior year development, which increased operating earnings by USD 16 million, or USD 0.01 per share, after tax
Adjusting for all notable items in both the third quarter of 2015 and the third quarter of 2016, operating earnings were up 11 percent in the third quarter of 2016, and 10 percent on a constant currency basis. On a per share basis, operating earnings were USD 1.53, up 13 percent from USD 1.36 in the third quarter of 2015, and 12 percent on a constant currency basis.
Operating earnings in the U.S. increased 8 percent. Operating earnings in Asia decreased 4 percent, and 11 percent on a constant currency basis. Operating earnings in Latin America decreased 27 percent, and 23 percent on a constant currency basis. Operating earnings in Europe, the Middle East and Africa (EMEA) increased 12 percent, and 19 percent on a constant currency basis. Operating earnings in MetLife Holdings increased 9 percent. Operating earnings in Brighthouse Financial decreased 80 percent, due to the re-segmentation of MetLife's business to establish a Brighthouse Financial segment.
The third quarter variance between operating earnings and net income reflects an unfavorable impact of USD 360 million, after tax, related to asymmetrical and non-economic accounting.
"MetLife had a solid third quarter of 2016 on an operating basis, driven primarily by improved market conditions and strong expense discipline," said Steven A. Kandarian, chairman, president and CEO, MetLife, Inc. "We continue to focus on long-term shareholder value by generating more predictable and higher free cash flow. Through our Accelerating Value initiative, we have been directing capital to businesses with strong risk-adjusted returns, low capital intensity and timely cash payback." Read the full story