This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

MetLife Hedges Its Way onto a Perilous Path

Stocks in this article: MET AIG STI

NEW YORK ( TheStreet) -- Once upon a time, there was an insurance company that was so irresistible, it even had Snoopy the dog of "Peanuts" fame as its mascot.

In fact, this insurance company still uses quite a few "Peanuts" characters to project a consistent and friendly image about its line-up of insurance products. For years it's proved to be a very smart move.

Late in 2006, it signed an international agreement -- the first ever for this company -- with Peanuts Worldwide. This agreement gave it exclusive worldwide rights to use the PEANUTS characters to promote the company.

Like the smiling, dancing Snoopy, MetLife (MET) frolicked its way to becoming one of the prominent brand names in the insurance industry.

In 2010 MetLife decided to purchase a global life insurance business from the then critically-wounded American International Group (AIG), a behemoth insurer now infamous for losing big bucks selling credit default swaps.

AIG's fiscal profligacy and enormous derivatives business caused the then largest insurance company in the world to implode in 2008. It took the federal government to rescue it from insolvency.

MetLife's purchase from AIG is part of its plan to sell life insurance products in areas that are considered emerging markets. China, for example, looked promising and turned out to be profitable.

Yet when MetLife stepped into the earnings confessional last week it stunned investors with the news that in the second quarter its year-over-year earnings had plunged over 78%. That kind of stumble can be disastrous for a publicly-traded insurance company.

The company blamed the big earnings miss on net derivates losses it had booked during the quarter. MetLife utilizes derivatives to hedge a host of risks and unexpected natural and unnatural events.

For example many insurance companies like MetLife use futures and options contracts to protect itself or create a "hedge", against changes in interest rates, currency volatility or fluctuations in its investment portfolio.

One of the negatives that hurt MetLife and its earnings-per-share was a change in the company's credit standing during the second quarter.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs