MetLife’s earnings surge, but Covid-19 limits insurer’s latest results

High levels of COVID-19 deaths hurt fourth-quarter results in MetLife Inc.’s business of providing employer-sponsored life insurance as the Delta variant persisted in the U.S., but the outsize payouts were more than offset by unusually strong investment gains.

Ticker	Security	Last	Change	Change %
MET	METLIFE INC.	78.56	+0.13	+0.17%
CB	CHUBB LTD.	276.06	-1.41	-0.51%
ALL	THE ALLSTATE CORP.	182.37	-1.78	-0.97%

The New York company’s net income soared to $1.18 billion, up from $124 million in the year-earlier period, when results were hurt by mark-to-market losses on financial hedges that aim to protect against falling interest rates. MetLife’s adjusted earnings, which analysts track as a measure of recurring profitability, were flat at $1.84 billion.

Another household-name insurer, Allstate Corp. reported a 70% drop in net income to $790 million, and a 50% decline in adjusted net income to $796 million, primarily driven by worsened car-insurance underwriting income. Accident volume increased on more-crowded roads, and inflation pushed repair costs higher.

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Catastrophe costs were also higher. U.S. property insurers ended the year with two high-profile catastrophes: deadly tornadoes in and around Kentucky, and devastating wildfire between Denver and Boulder, Colo.

Allstate, one of the nation’s biggest car and home insurers by market share, faced a tough comparison with the year-earlier quarter, when pandemic-related business shutdowns and work-from-home arrangements contributed to a steep drop in miles driven. That, in turn, led to a steep drop in traffic accidents and plumper profit margins.

Drivers began returning to U.S. roads in large numbers in early 2021, as miles driven were rebounding "toward pre-pandemic levels," Allstate said. As wrecks have grown in frequency, the cost of repairing them has emerged as a worry. U.S. inflation hit its fastest pace in nearly four decades in December.

Allstate cited higher costs for used cars, vehicle parts and labor as factors pressuring its car-insurance profit margins, along with medical inflation and greater attorney representation in claims. It also noted higher costs for materials and labor on the homeowners side of the company.

It all amounted to a 92% decline in fourth-quarter underwriting income for the core property-liability unit, to $113 million from $1.42 billion a year earlier, even as premiums written surged 20% to $10.3 billion. That growth came from market-share expansion and an acquisition last year.

"Obviously, we’re not pleased" with the most recent results, Allstate Chief Executive Tom Wilson said. "So we’ve begun to raise prices pretty aggressively, starting in the third quarter. And I would expect that to continue into next year. We don’t think the inflationary impacts are temporary."

At MetLife, adjusted earnings in its big U.S. group-benefits unit plummeted 95% to $20 million, from $383 million, the carrier said. The year-earlier quarter reflected favorable results for its dental policies, as lockdowns and people’s fear of the pandemic led to postponed appointments.

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MetLife said the Delta variant, which also cut into its third-quarter group-benefits results, was claiming more younger people—defined as those under age 65—than earlier variants had, but "a lower percentage of Covid-19 deaths under age 65" occurred in the fourth quarter relative to the third quarter.

Younger victims are more likely to still be in the workforce and hold employer-sponsored policies. These typically pay a death benefit equivalent to an employee’s annual pay.

In the fourth quarter, MetLife paid out $1.06 for each $1 of premium it collected in its group-life-insurance business. In contrast, it paid out 96.3 cents in the fourth quarter of 2020.

The higher payouts were more than offset by another quarter of heady gains in the company’s big investment portfolio, thanks to a tiny slice held in private-equity funds. Investment income was roughly flat at $5.23 billion compared with the year-earlier period, which also enjoyed robust private-equity returns, as have some other recent quarters.

Life insurers invest customers’ premiums until needed to pay claims, often for decades, and they hold the majority of money in high-quality bonds. MetLife and some others invest relatively small amounts in private-equity funds for extra yield.

MetLife Chief Executive Michel Khalaf said the company’s 2021 results benefited from "strategic decisions and consistent execution," including investing in private-equity funds and reducing expenses.

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The earnings reports from Allstate and MetLife came on the heels of Chubb Ltd. earnings on Tuesday afternoon. In an earnings call Wednesday, Chubb Chief Executive Evan Greenberg ticked off double-digit-percentage premium growth across many product lines at the global property-casualty insurer, reflecting market-share gains and premium-rate increases.

Greenberg cited an 11% increase in costs to repair and rebuild homes in Chubb’s high-net-worth homeowners business. Chubb’s shares rose 3.8% on Wednesday.