MetLife Inc, the largest U.S. life insurer, reported a better-than-expected operating profit on Wednesday, driven by higher net investment income and a tighter leash on costs. New York-based MetLife’s shares were up 2.8 percent in trading after the bell. Insurers have benefited from higher U.S. interest rates, which were raised in December and March. The Federal Reserve has indicated more hikes this year.
MetLife said its net investment income rose 14 percent to $5.20 billion in the first quarter ended March 31. Operating costs were little changed at $14.91 billion. MetLife aims to save a gross $1 billion a year, through its cost-cutting plan, which also includes job cuts.
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The company, which has been streamlining its businesses in response to a strict regulatory environment, plans to spin off its U.S. retail business, Brighthouse Financial, this year. The company’s net profit fell to $820 million, or 75 cents per share, in the first quarter, from $2.20 billion, or $1.98 per share, a year earlier.
The insurer recorded $602 million in net derivative losses in the quarter, reflecting changes in equity markets and interest rates. Metlife had recorded derivative gains of $868 million in the prior-year quarter.
The insurer uses its derivatives program to hedge against risks such as volatile currency exchange rates, equities markets and interest rate changes.
On an operating basis, MetLife earned $1.41 per share, beating the analysts’ average estimate of $1.27, according to Thomson Reuters I/B/E/S.
The company’s total operating revenue rose 1.6 percent to $16.88 billion.
Metlife’s shares had slipped 3.3 percent this year through Wednesday’s close.
Fellow U.S. insurer Prudential Financial Inc also reported a better-than-expected quarterly profit on Wednesday, helped by growth in its international insurance and retirement businesses. (Reporting by Nikhil Subba in Bengaluru; Editing by Maju Samuel and Sai Sachin Ravikumar)