The annuities review cut operating earnings by $161m, while reserve adjustments, resulting primarily from modelling improvements, decreased earnings by $257m.
As a result, the company reported a non-cash charge of $2bn, which was recorded against net income.
MetLife brought forward its 2016 actuarial assumption review, where it calculates how much it has to pay in premiums and/or benefits based on customer life expectancy and other conditions, to the second quarter as part of its preparations to sell a substantial portion of its US retail business.
US retail separation
“Second quarter results were negatively impacted by market factors, our annual variable annuity actuarial assumption review, and reserve adjustments resulting from modelling improvements in our reserving process.”
The company confirmed in January 2016 that it intends to sell its roughly 4,000-strong adviser force MetLife Premier Client Group. In February, it was reported that Massachusetts-based MassMutual was in talks to buy the group.
“Second quarter results were negatively impacted by market factors, our annual variable annuity actuarial assumption review, and reserve adjustments resulting from modelling improvements in our reserving process,” said Steven A. Kandarian, chairman, president and chief executive of MetLife.
“At the same time, we continued to make significant progress on actions intended to create long-term shareholder value, including our accelerating value initiative and the planned separation of a substantial portion of the US retail business.”
2Q16 vs 2Q15
Revenue decreased by 6% during the second quarter to $15.2bn, while operating earnings dropped by 48% to $924m.
Geographically, the US was the only region to report a net loss during the second quarter, with the retail business recording a net of $1.6bn in 2Q16 against an income of $587m in 2Q15.
Strong growth in MetLife’s US Group, Voluntary & Working Benefits division and US Corporate Benefit Funding business were unable to offset the decline in US retail.