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MetLife profit misses on weak returns from hedge funds, bonds

Reuters
The MetLife building is seen in New York, in this March 8, 2010 file photo. REUTERS/Shannon Stapleton/files

(Reuters) - MetLife Inc (MET.N), the largest U.S. life insurer, reported a quarterly operating profit that fell far short of expectations as income from investments in hedge funds and bonds declined.

American International Group Inc (AIG.N), the No. 1 U.S. commercial insurer, earlier reported a lower-than-expected profit for the third straight quarter as poor returns from hedge funds hurt investment income.

Both companies, like their rivals, have been hurt by near-zero interest rates since the financial crisis.

New York-based MetLife, whose shares were down 1.6 percent in after-hours trading on Wednesday, said its net operating profit fell 19 percent to $1.33 billion, or $1.20 per share, in the three months ended March 31.

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Analysts, on average, had expected earnings of $1.38 per share, according to Thomson Reuters I/B/E/S. It was the third straight quarter of lower-than-expected earnings.

Prudential Financial Inc (PRU.N), the No. 2 U.S. life insurer, reported a 23.2 percent fall in operating profit on Wednesday as its revenue from premiums fell.

MetLife's net investment income, which includes returns from investments in bonds, fell 5.5 percent to $4.71 billion in the quarter. Variable investment income more than halved to $109 million, hit by weak returns from hedge fund investments.

MetLife won a major battle in March when a judge struck down the U.S. government's determination that it was "too big to fail", a designation that would likely require the insurer to boost its capital. The government is appealing.

Chief Executive Steven Kandarian said in January that the "regulatory environment" had driven MetLife to consider splitting off its retail business as higher capital requirements could put the company at a "significant competitive disadvantage."

MetLife shares were trading at $43.24 after the bell. Up to Wednesday's close, the stock had fallen nearly 9 percent this year.

(Reporting By Sudarshan Varadhan in Bengaluru; Editing by Kirti Pandey and Ted Kerr)