By Leslie Scism and Nicole Friedman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 3, 2017).
American International Group Inc. posted better-than-expected
second-quarter operating results, as new Chief Executive Brian
Duperreault took over midway into the period, while MetLife Inc.
had a different turning point: the last quarter before the spinoff
of its historic core life-insurance unit.
MetLife, the largest U.S. life insurer by assets before the
divestiture is set to occur on Friday, also reported higher and
better-than-anticipated operating income. It posted improved
results in the U.S. and at overseas locations, though the U.S.
retail operations to be spun off, named Brighthouse Financial, had
a 5% decline.
Prudential Financial Inc.'s operating income also rose, but it
missed analyst expectations.
All three insurers' per-share results were aided by
share-buyback programs.
AIG's net income dropped 41% to $1.13 billion from $1.91 billion
in the year-earlier period, when the insurance conglomerate had net
realized capital gains of about $1 billion, mostly from the sale of
shares in a Chinese insurer. On an operating basis, AIG had income
of $1.45 billion, up from $1.31 billion. Investors and analysts
track operating results because they exclude realized capital gains
and losses and other nonrecurring items.
The $1.53 a share in operating income was well ahead of the
consensus expectation of analysts at $1.20 and was up from $1.15 a
share in the year-earlier period.
Mr. Duperreault was hired in mid-May, after the former chief
executive, Peter Hancock, pushed back some profit-improvement
deadlines set in January 2016 and lost support from the company's
board. A longtime veteran of the property-casualty insurance
industry, the 70-year-old Mr. Duperreault has said he wants AIG to
begin growing again, after years of selling assets to repay a 2008
U.S. bailout and to finance share buybacks.
In the release Wednesday, he said, "We will build on AIG's
strong franchise by maximizing the value of our international
footprint," adding that the goal is "investing in profitable
growth."
Much of Mr. Hancock's effort was focused on the company's core
business of selling property-casualty insurance to midsize-to-large
businesses globally, and the latest results showed the work in
process that Mr. Duperreault has inherited.
The unit posted pretax operating income of $716 million, or 24%
below the year-earlier period. Much of the deterioration came as
AIG used higher loss estimates, which it unveiled earlier this
year, for setting up claims reserves, after repeated reserve
boosts.
The unit also continued to shrink, with a 15% reduction in net
premiums written. Industrywide, rates are flat to declining for
many product lines, and AIG has been shedding some business that
isn't judged profitable enough.
The company's consumer insurance business had flat
year-over-year revenue from premiums and fees, but operating profit
surged 33%, to $1.26 billion. The business includes life insurance,
annuities, group retirement and sales of car, home and other
policies to wealthy people.
Another key piece of Mr. Hancock's turnaround plan was the
two-year return of $25 billion capital to shareholders, ending Dec.
31. AIG said it had bought back $2.4 billion of shares during the
second quarter, and its board authorized a quarterly dividend
payable Sept. 29. Including that dividend, the company will reach
about $20 billion of returned capital.
The company said it has a remaining share-buyback authorization
of approximately $2.5 billion.
Analysts are expected to push for detail in Thursday's earnings
call about whether the company will stick with Mr. Hancock's
target.
Meanwhile, MetLife's spun-off insurance business -- Brighthouse
Financial -- is set to begin trading Monday on the Nasdaq Stock
Market. Brighthouse, which will become home to about a quarter of
MetLIfe's total assets, will be focused heavily on annuities for
retirement income and other savings. The remaining MetLife will get
about 40% of its income from international life insurance
operations, and it will continue to be one of the nation's leading
sellers of insurance for employee benefits programs. It also is
keeping an asset-management unit and will sell pension products,
among other operations.
MetLife's operating income increased 52% to $1.41 billion, or
$1.30 a share, up from $924 million, or 83 cents a share, in the
year-earlier period. Analysts had expected operating income of
$1.28 a share. MetLife CEO Steven A. Kandarian said the company is
on track to return about $4.5 billion to shareholders this year in
dividends and share repurchases.
Its net income, which includes realized capital gains and losses
and mark-to-market changes in derivatives used for risk-management
hedging, totaled $838 million, up from $64 million. The company
reported $284 million in derivative losses this quarter, which it
said reflected changes in foreign currencies, equity markets and
interest rates.
MetLife cited strong underwriting and volume growth for its U.S.
operations, including a 30% year-to-date increase in sales for its
group-benefits business. It also reported double-digit
operating-earnings gains in operations in Asia, Latin America and
other parts of the word.
Prudential's operating income rose to $919 million, or $2.09 a
share, missing analyst expectations for $2.70 a share and compared
with $829 million, or $1.84 a share, a year earlier. It reported
$491 million in net income, down from $921 million the prior year,
hurt by charges following its annual review of actuarial
assumptions.
Write to Leslie Scism at leslie.scism@wsj.com and Nicole
Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
August 03, 2017 02:47 ET (06:47 GMT)
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