WRAPUP 1-Insurers' profits up, regulatory worries persist
+ Insurance companies report stronger results
+ Profit up on investments, key insurance businesses
+ Top executives wary of regulatory reform in 2010
+ MetLife shares up 3.6 pct, Hartford down 2.1 pct
By Joe Rauch and Jonathan Spicer
CHARLOTTE, N.C./NEW YORK (Reuters) - Two major U.S. insurers saw profits jump in the first quarter, setting a bullish earnings tone for 2010 despite fears of a changing regulatory landscape.
Late Thursday, Hartford Financial Services Group Inc and MetLife Inc both reported increases in net income from a year ago, amid stronger investment income and better performance from their various lines of insurance business.
"Compared to where we were last year you definitely expected (results) to be significantly better," said Drew Woodbury, equity analyst at Morningstar. "The insurers were exposed to the lows in the market and the economy has obviously improved, so they're sensitive to that."
MetLife shares were up 3.6 percent at $47.24 in late morning on the New York Stock Exchange. Hartford shares were down 2.1 percent at $29.02, after closing up 2.5 percent on Thursday.
Both companies reported better-than-expected results, signaling the losses that dogged U.S. insurers through the financial crisis may be easing.
Hartford Financial reported net income of $319 million, up from a $1.2 billion loss a year prior, while MetLife's operating income increased six-fold to $834 million, or $1.01 per share, from $131 million, or 16 cents, the year prior.
But executives for both companies said during conference calls with analysts on Friday it is difficult to predict how potentially broad financial sector reform will affect U.S. insurers.
"We're aware of the primary categories that could impact us and our industry," said Hartford Chief Executive Liam McGee. "But there's just not enough guidance and information yet to comment on the impact to us or our industry."
MetLife CEO Robert Henrikson said the insurance sector "needs to be protected from the unintended consequences of bank regulation," but said he does not expect the industry to receive specific exemptions from reform.
Rather, he said he expected the activities of insurance companies to receive so-called carve outs from any financial sector regulatory overhaul.
OPTIMISTIC OUTLOOK
But top executives for both companies were optimistic about the remainder of the year.
Hartford raised its 2010 earnings outlook by 10 cents, from a $2.60 to $2.90 per share range, to $2.70 to $3.00.
"It's a function of actual first-quarter results," said Hartford CFO Christopher Swift of the company's improved outlook during the company's Friday morning earnings call with analysts. "It's the result of the favorable tailwinds in the market and the improvement we're experiencing."
Henrikson said in a statement his company was well positioned to report "continued revenue and earnings growth during the remainder of 2010."
"MetLife was early in raising capital ... getting out ahead of everybody else, so they weren't hit as much in the downturn," Woodbury said. "Hartford on the other hand tried to do some hedging but it either broke down or was not effective."
MetLife's fees, premiums and other revenue increased 12 percent during the quarter to $8.8 billion.
Much of the income improvements at both companies came from gains in their investment income.
At MetLife, investment income jumped 31 percent, as the peak of the financial crisis was hammering the largest U.S. life insurer.
Hartford's net investment income increased 15 percent year-over-year. Its life insurance operations -- hurt by losses during the financial crisis -- posted its second consecutive quarter of profitability at $186 million, up from a $1.3 billion loss the previous year.
ANNUITIES
Meanwhile, MetLife's U.S. annuity sales were $4.4 billion, including an 8 percent increase from last year in variable annuity sales.
Hartford, one of the world's largest annuities companies, reported $153 million in net income in its U.S. annuities business, after reporting a $746 million loss a year ago.
Some challenges still remain, however.
Hartford recorded several one-time charges during the quarter, including a previously announced $20 million related to the new U.S. healthcare reform legislation passed earlier this year.
But the Hartford, Connecticut-based insurer also recorded a $440 million charge for repurchasing preferred shares from the U.S. government's TARP program, creating a 42 cents per share loss. (Reporting by Joe Rauch and Jonathan Spicer; Editing by Bernard Orr and Matthew Lewis)
