Late yesterday, MetLife (NYSE: MET) announced a second-quarter net loss of $1.74 per share, compared to earnings of $1.26 per share a year ago. The company blamed the loss on derivative losses of $1.8 billion, $1 billion of which was related to an increase in the company's own debt in the second quarter. Excluding charges, MET earned 88 cents per share for the quarter, topping the consensus estimate by 20 cents. The insurer's premiums, fees, and other revenue increased 4% to $8.38 billion thanks to a record amount of money spent in variable annuity products.
Variable annuities can be described as a contract between the purchaser and the insurance company. The insurer agrees to make payments to the purchaser either immediately or at a future date. Investment options for variable annuities are usually a mutual fund that invests in stocks, bonds, money market instruments, or a combination of the three.
Bottom line: the earnings report was strong, so watch for the stock to advance. That said, one should be concerned that the company managed to lose $1.8 billion in the last quarter. Yes, $1 billion was attributed to the company's own debt, but the company still lost $1.74 per share including charges. The company finds itself further in debt, and we are supposed to be encouraged about the earnings results? I caution against irrational exuberance here -- remember that the company's debt is increasing. Furthermore, the company realized a $2.6-billion loss on investments in the last quarter, with $1 billion attributed to the difference between interest rates on its debt and Treasury bonds narrowed. Variable annuity or not, that is one heck of a loss, ladies and gentlemen.
Technically, the stock is butting up against resistance in the $36 region. This level has turned the stock away several times in the past and may serve to do the same again. Is a move atop this level a sign of long-term strength from MET? Only time will tell.
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Reader Comments (Page 1 of 1)
9-12-2009 @ 6:32AM
bjtewks57 said...
Ok on your comments.
What about the fact that Met has refused to go the
Obama stimulas thing.
It's an incentive to invest isn't it?
I hope so because anything American interests me.
Bob Tewksbury