MetLife Hits Targets

But the company takes a charge for Travelers' underwriting shortfalls.
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MetLife

(MET) - Get Report

beat fourth-quarter earnings targets but was light on revenue and took a charge to cover reserve additions at the newly acquired Travelers business.

For the quarter ended Dec. 31, the New York insurer made $677 million, or 88 cents a share, up from $511 million, or 68 cents a share, a year earlier. On an operating basis, excluding certain costs, latest-quarter earnings rose to $1.04 a share from 88 cents a year ago, beating the Thomson Financial estimate by 3 cents.

Revenue rose to $11.55 billion from $9.95 billion a year earlier but missed the Thomson Financial estimate of $12.1 billion.

During the quarter, MetLife had $64 million of expenses related to the Travelers integration.

"In 2005, MetLife once again demonstrated its ability to deliver strong results as we generated record full year net income and operating earnings," said CEO Robert H. Benmosche. "In addition to reaching our financial targets, we completed and integrated the acquisition of Travelers Life & Annuity and substantially all of Citigroup's international insurance businesses. With strong business fundamentals, leading market positions and a multitude of opportunities to leverage our strong brand in the marketplace, MetLife is well positioned to achieve further growth and success."

Institutional Business operating earnings rose to $389 million from $309 million. Group life earnings increased 24% largely due to business growth across the majority of products and favorable underwriting and investment results. Growth in the asset base for Retirement & Savings, due in large part to the Travelers acquisition, as well as higher net investment income, also contributed to the earnings growth in the segment. This was partially offset by an adjustment to deferred policy acquisition costs in the long-term care business.

During the quarter, group life premiums, fees and other revenues grew 6% over the prior-year period primarily due to sales growth and business retention. Retirement & Savings net investment income grew 53% compared to the prior-year period largely due to the Travelers acquisition and an increase in the asset base. In addition, non-medical health premiums, fees and other revenues increased 11% over the prior-year period primarily due to continued growth across all product lines.

Individual Business operating earnings jumped to $314 million from $207 million in the prior-year period. The strong growth in the segment was driven by the Travelers acquisition, as well as continued growth in the business and favorable mortality. Fees for investment-type products within the annuity business nearly doubled compared with the prior-year period as a result of growth in the separate account assets.

Annuity results also benefited from strong investment performance. In addition, combined life results increased 18% largely due to growth in the business and favorable mortality. Total first-year life premiums and deposits were up 61%, reflecting broader distribution, largely due to the Travelers acquisition.

In connection with MetLife's acquisition of Travelers, the company has performed reviews of Travelers' underwriting criteria in its effort to refine its estimated fair values for the purchase price allocation. As a result of these reviews and actuarial analyses, and to be consistent with MetLife's existing reserving methodologies, the company has established an excess mortality reserve on a specific group of policies. This resulted in an adjustment to the purchase price allocation, an increase to goodwill of $234 million, net of income taxes, and a charge of $20 million, net of income taxes, to fourth-quarter results. The company expects to complete its reviews and refine its estimate of the excess mortality reserve by June 30, 2006.

Auto & Home operating earnings available to common shareholders were $81 million in the fourth quarter of 2005, compared with $63 million in the prior-year period. Auto & Home's results benefited from an improved noncatastrophe combined ratio of 83.0% including favorable claim development related to prior accident years. These factors were partially offset by higher catastrophe losses and reinsurance reinstatement premiums of $42 million, net of income taxes, which included $32 million, net of income taxes, related to Hurricane Wilma.

International operating earnings available to common shareholders were $48 million in the fourth quarter of 2005, compared with $30 million in the prior-year period. International earnings increased due to continued business growth in Latin America and Asia Pacific, as well as a one-time $13 million tax benefit. The earnings increase was partially offset by higher one-time expenses, including certain costs of integrating the CitiInsurance operations.

MetLife was halted late Thursday after slipping 26 cents to $49.20 during regular trading.