MetLife, the largest life insurance company in the U.S., said on Tuesday fourth-quarter earnings rose fivefold from a year ago on gains from the sale of New York apartment complexes and higher revenues.
MetLife said fourth-quarter net income was $3.83 billion, or $4.95 a share, compared with year ago earnings of $677 million, or 88 cents a share. Operating earnings, the yardstick for analysts, were $1.05 billion, or $1.36 a share. They had expected operating earnings, which exclude one-time gains and losses, to be $1.18 a share, according to Reuters Estimates.
Analysts and investors had expected the apartment sale to boost earnings, but were surprised by the 10% gain in revenues, which enabled MetLife to beat their estimates by 18 cents a share.
In aftermarket trading, MetLife shares rose to $65.50 a share from their closing price of $64.85 on the New York Stock Exchange. In the past 12 months, its shares have risen more than 27%, compared with a 10.8% gain in the Standard & Poor's Insurance Index. "The big stars were life and annuities," said Donald Light, an analyst with Celent LLC.
MetLife was also able to make more on its investment income, even in a low interest environment, analysts said.
In the year ago fourth quarter, the insurance giant reported operating income of $799 million, or $1.04 a share. The biggest boost to net earnings was an after-tax gain of $3 billion on
MetLife's sale in November of Peter Cooper Village and Stuyvesant Town, two of the largest apartment complexes in Manhattan.
But the New York City-based insurer also said total premiums, fees and other revenues rose to $8.6 billion in the latest quarter, up 10% year over year.
Several of the insurer's units reported record earnings, including its individual business unit, where total life insurance earnings almost doubled year over year due to favorable mortality statistics and higher investment income.
"The low interest rate environment has been a challenge for MetLife, but it looks like they have repositioned their portfolio, possibly with investments in private equity," said Douglas Meyer, an analyst with FitchRatings.
Also hitting a record were earnings at MetLife's smaller auto and home division, which rose 42% to $115 million.
"It was a benign year for catastrophes and it helped MetLife along with everyone else," said Dafina Dunmore, an analyst with Morningstar.
Institutional business, MetLife's largest unit, saw operating earnings rise 13% to $441 million.
The one dark spot was MetLife's international unit, where earnings plunged to $15 million from $48 million, partly because of start-up expenses, but also because of low interest rates in Taiwan.
Analysts expect that MetLife may use the $3 billion from the sale of the New York apartment buildings for a share buyback or an acquisition. MetLife may also have another $2.2 billion in real estate that it could sell, according to Goldman Sachs analyst Joan Zief.
During the fourth quarter, MetLife settled a suit with former New York Attorney General and now Governor Eliot Spitzer on brokers compensation. It agreed not to pay "contingent commissions" to brokers who brought in more business clients. Spitzer claims these commissions are a kickback arrangement by insurers to preempt brokers from representing clients. MetLife paid $19 million in restitution to policyholders and civil penalties.