MET MetLife Inc

Yesterday, MetLife Inc. (MET) intimidated about a string of charges worth about $275 million that it expects to incur in the third quarter of 2011, as per the statement filed with the Securities and Exchange Commission (SEC) and other federal authorities.

The bulk of the extraordinary expenses include a post-tax charge of $115–135 million to make necessary alterations to its insurance reserves. This primarily requires reaching out to those insurance policies and other contracts where the policyholders may have died but a claim is yet to be filed with MetLife.

The effort to identify deceased cases where claims are yet to be paid out follows from the subpoena received from the regulators in California. This subpoena is primarily aimed at auditing the benefit payout practices of MetLife and its peers. Accordingly, the company aims to track down these cases by using the databases from the Social Security Administration and other sources.

Catastrophe (CAT) losses of $80–100 million are expected based on the hurricane Irene and other brutal storms that hit the US during the recent third quarter. The CAT losses are way higher than $38 million that MetLife management had previously projected.

MetLife also expects to incur a post-tax charge of about $40 million related to a liquidation plan filed by the New York State Insurance Department for Executive Life Insurance Co. of New York. MetLife has been one of the state life and health insurance guarantee associations who vowed to support Executive Life Insurance’s financial obligations, which was put under rehabilitation about 20 years ago.

MetLife is expected to release its third quarterly results after the market closes on October 27, this year. However, it is likely that these extraordinary charges are going to adversely affect the operating earnings of MetLife.

These charges including the ongoing weak rate environment and volatile macro dynamics will negate the progress that the company has been achieving from ALICO to some extent, as the acquisition soon completes its first anniversary in MetLife.

In separate news, the regulators in China have approved the proposed divestment of MetLife’s Taiwan unit to Chinatrust Financial. The parties had agreed for $180 million deal in March this year. This move is expected to aid MetLife in streamlining its operations efficiently.

 
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