MetLife Announces Plans to Raise Capital, Cut Jobs; Sees Shares Drop
The biggest U.S. life insurer, MetLife Inc., plans to raise capital and cut jobs after saying third-quarter profit fell as much as 48 percent.
In a statement yesterday, the New York-based MetLife announced that it is selling 75 million shares, valued at $2.8 billion at current prices. The insurer wants to assure investors it has liquidity to meet obligations and enable the company "to take advantage of potential opportunities,'' Chief Executive Officer Robert Henrikson said. Last week, Atlantic Equities analyst Alan Devlin predicted MetLife could raise capital to bid on assets of American International Group Inc.
The New York-based company is "in great shape,'' Henrikson said today.
Henrikson withdrew his full-year earnings forecast after falling equity markets hurt returns in the company's annuity business and the housing slump pushed down the value of fixed- income investments. The insurer was stung in the quarter by losses on stakes in failed companies including Lehman Brothers Holdings Inc. and Washington Mutual Inc. It also said hedge-fund and private-equity returns performed worse than expected.
Devlin cut MetLife's stock recommendation to "underweight,'' in an Oct. 2 note to investors, citing "concerns of the impact of credit and equity markets on the balance sheet and earnings.''
Operating earnings for the quarter that ended in September declined to between $600 million and $675 million, or 83 cents to 93 cents a share, the company said. That compares with year-earlier profit of $1.16 billion, or $1.52 a share. The company will report full results on Oct. 29.
The 9 percent decline in the Standard & Poor's 500 Index in the third quarter lowered variable annuity results by about $105 million net of tax, MetLife said. Variable-investment income, which includes hedge-fund and private-equity returns, was about $117 million below forecast.
MetLife fell $2.37, or 6 percent, to $34.50 before the official open of New York Stock Exchange trading, adding to yesterday's 17 percent plunge. The company, which has dropped about 40 percent in New York trading this year, recorded profit declines in the first two quarters that prompted Henrikson in July to lower the earnings outlook.
Severance contributed to a charge of $48 million in the third quarter, MetLife said. The company said it expects to have $130 million in annual savings related to these charges. MetLife also signaled today in a regulatory filing that it will cut jobs this quarter.
"Those associates who will be directly impacted will be told beginning in late October and concluding by the end of this month,'' the company said. "This is a turbulent time for the credit markets.''
Published on October 8, 2008
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