Strong results from its international businesses enabled MetLife Inc. to limit its losses in a mediocre third quarter.
The New York insurer's international units generated $134 million of operating earnings, up 86% from a year earlier. C. Robert Henrikson, MetLife's chairman, president, and chief executive, said solid Asia-Pacific and Latin American sales and MetLife's buyout of a partner in a Hong Kong joint venture at the end of the second quarter were instrumental.
But net earnings fell 1.4%, to $985 million, or $1.29 a share, as MetLife suffered losses related to its investments in hedge funds and subprime mortgages. Operating earnings rose 21%, to $1.16 billion, or $1.52 a share. Analysts on average had expected $1.39 a share, according to Thomson Financial Inc.
The company had $215 million of investment losses and after-tax hedge fund losses of $25 million in its investment portfolio. Steven A. Kandarian, MetLife's chief investment officer, said during an earnings conference call Thursday that the losses were a result of "unusual volatility in the equity and fixed-income markets."
Mr. Kandarian said MetLife had $2.2 billion of subprime securities in its portfolio as of Sept. 30, down from $2.3 billion in the second quarter, but that was still less than 1% of total invested assets. He said the company remains comfortable with the amount and quality of its subprime and hedge fund holdings.
Analysts said these investment losses were minimal, considering that MetLife has overall assets of $563.1 billion. The international business offsets domestic losses.
Mr. Henrikson said the results in Japan and Korea were particularly strong. He said MetLife's joint venture in Japan generated $1.7 billion of annuity sales, up 10% from a year earlier, and the company increased its sales force in Korea by 8%, to 3,500 agents, and annuity sales have tripled in that market. Overall, MetLife's annuity sales rose 22%, to $4.4 billion. It announced its results Wednesday.
Mr. Henrikson said international earnings of $375 million for the first nine months exceeded the full-year goal MetLife set at its Investor Day in December.
"Our [international] growth prospects are very compelling," he said. "There are substantial opportunities" in Japan and Korea. "We are very excited about MetLife's future in this region."
Craig Weber, a senior analyst with Celent LLC, a financial research and consulting firm in Boston, said international growth was the "real star of the show" for MetLife and helped it at least post flat earnings.
"Met's investments in emerging markets look like a winner, at least this quarter," Mr. Weber said. "It's a little like a basketball team. It doesn't matter who scores your points in a given game, as long as someone does."
MetLife executives said there are numerous opportunities for continued international growth. William J. Toppeta, the president of the international business, said during the call that Japan's annuity market will expand two- or threefold in the next three or four years.
He said regulatory changes that require more disclosure about investment products will help MetLife increase sales in the market. MetLife is distributing its products through 81 companies in Japan, including banks.
Mr. Henrikson said the company will consider making more international acquisitions to expand its market share.
"We are very comfortable with the countries we are in," he said. "We are doing well there, but we would like to accelerate that growth. … We have not been shy about speaking in these marketplaces about our interest in growth there."
There are still domestic acquisition opportunities, especially in the group insurance business, Mr. Henrikson said.
"We have to find a willing seller, and that would be someone that doesn't have the size or scale to move forward" in the group insurance market, he said. "We continue to do very well in that business, so an acquisition would be attractive to us especially if it enhances our offering there."
He said MetLife's agreement to buy SafeGuard Health Enterprises Inc., announced in August, is a good example of the type of deal it is seeking.
SafeGuard, of Dallas, provides dental and vision benefit products in California, Florida, Texas, and Nevada through HMO subsidiaries and through SafeHealth Life Insurance Co. The deal is expected to close by yearend.
The company's group life and retirement and savings segments reported increases in operating income, while its individual business operating earnings were down 1.1%, to $363 million. Its auto and home earnings rose 1.9%, to $109 million.
