Despite posting strong fourth-quarter results, MetLife Inc. maintained relatively low expectations for this year as executives and analysts remained wary about the year ahead for the insurance industry.
The country's largest insurer posted operating earnings of $5.21 a share for last year but said it expected to earn $5.05 to $5.25 per share this year. William J. Wheeler, an executive vice president and the chief financial officer at MetLife, said during an earnings conference call Wednesday that his company "overperformed" in terms of variable income last year and is not forecasting similar results this year.
"We don't view the fourth quarter as the last hurrah of great returns, but it was very robust," Mr. Wheeler said.
Fourth-quarter net income rose over 400% from a year earlier, to $3.86 billion, or $4.95 a share. Excluding the $3 billion gain from the sale of a Manhattan apartment complex, operating profits rose 32%, to $1.05 billion, or $1.36 a share. The average estimate of analysts polled by Thomson Financial called for earnings of $1.18 a share.
Mr. Wheeler said his company expects "nice" expense momentum this year and is "silent but hopeful" about next year.
"In 2008, we expect continued good performance from our businesses, and international growth will be strong," he said. "Our group [life insurance] business will pick up a lot in terms of earnings growth and we will be in a more favorable interest rate environment, and that will be an accelerator for earnings."
MetLife expects "good, solid continued performance," he said. "There isn't a magic bullet, but we'll have good results."
Profits soared after MetLife sold the 80-acre Stuyvesant Town-Peter Cooper Village property in Manhattan in November
"I am surprised that because of the shape of the yield curve that we have been able to grow in some of our business the way that we have," C. Robert Henrickson, MetLife's chairman, president, and chief executive officer, said in the conference call.
Revenue increased 12%, to $12.9 billion, as premiums, fees and other revenue increased 10%, to $8.6 billion, but MetLife's stock rose only 1.25% to $65.66 as of midday on Wednesday.
Marsh & McLennan Cos. Inc., the nation's largest insurance brokerage firm, reported Tuesday that fourth-quarter profits increased sixfold, to $226 million, or 40 cents a share, in the fourth quarter on strong revenue growth, but its stock was flat, rising 0.03% to $29.35 by midday on Wednesday.
The New York company, which sold Putnam Investments in January, spent last year recovering from a sharp loss of income after its $850 million settlement with New York state regulators in January 2005 over allegations of bid-rigging, price-fixing, and the use of contingent commissions.
Insurance prices, which determine how much companies can collect in brokerage commissions, are continuing to decline everywhere except the Gulf Coast, Bijan Moazami, an analyst with Friedman, Billings, Ramsey Group Inc., wrote in a note.
Though the fourth quarter was good for insurance companies, challenges remain, Mr. Moazami wrote. "It is difficult to dispute that the overall property and casualty insurance market is softening. Barring any major catastrophe, the property and casualty market will continue to soften."
Mr. Henrickson said the yield curve will take time to turn around.
"Obviously, we'll let it play out," he said. "We won't see a normal sloping yield curve till 2008. That is when we think conditions will be at their best. We haven't seen optimal conditions in about four years."
MetLife's fourth-quarter net income from annuities rose 38%, to $164 million. Assets held in variable annuities increased 17%, to $83.9 billion at yearend, but sales of variable annuities increased only 2%, to $2.53 billion, lagging competitors that increased sales on average 38%, according to data compiled by Nigel Dally, an analyst with Morgan Stanley.
"It was a reasonably solid quarter," Mr. Dally wrote in a research report, but annuities sales are "one of the areas of concern."
Lisa M. Weber, the president of MetLife's individual businesses, said the company is pleased with its current level of variable annuity sales. She said sales increased 10% from the previous quarter.
She said MetLife's lifetime withdrawal guarantee rider, launched during the fourth quarter, is the fastest-growing rider in terms of sales in the company's history. She said she expects substantial growth from the rider this quarter, because it became available this year through several larger distributors and in several new states.
Ms. Weber also said she expects MetLife to introduce more products this year.
Mr. Henrickson said he thinks MetLife has strong business momentum, which he hopes to maintain this year through organic growth and, potentially, some acquisitions.
"I think we are in an excellent position, particularly now in terms of the capital that we have, to take advantage of the consolidating forces that are going on in the marketplace, both in the United States and outside the United States," he said. "As you know, we are not scattered around the place. & We will look to extend our strengths in the businesses that we are in and continue to move to different markets or to broader base of manufacturing capabilities."
He also said, "Our story hasn't changed, but opportunities & may become more clear in terms of pricing."
