MetLife shares fall on profit drop, weak forecast

By Lilla Zuill

NEW YORK (Reuters) - Shares of MetLife Inc (MET.N) fell more than 5 percent on Wednesday, a day after the largest U.S. life insurer reported lower quarterly earnings and cut its 2008 profit forecast.

After the stock market close on Tuesday, MetLife reported that second-quarter earnings fell 19 percent to $915 million on investment losses and a surge in catastrophe losses. Tornadoes and hailstorms triggered claims in its homeowners business.

It was MetLife's fourth straight quarter of lower net earnings.

Operating earnings, which exclude realized investment gains or losses, fell 27.5 percent to $942 million, or $1.30 a share, missing analysts' average forecast of $1.51 a share, according to Reuters Estimates.

MetLife had not fallen short of Wall Street expectations in five years, Goldman Sachs analyst Tom Cholnoky said in a research note.

Because of the continuing decline in stock market returns, MetLife said it was cutting its full-year earnings per share forecast to between $5.70 and $5.90, down from a previous view of $5.90 to $6.20. The average Wall Street view is $6.16.

MetLife shares were down $2.76 to $50.05 in trade on the New York Stock Exchange after falling as low as $49.97 earlier.

While MetLife's results were hit by market turmoil, Chief Investment Officer Steve Kandarian said in an investor call on Wednesday that the company holds few of the risky investments that have been the root cause of billions of dollars of write-downs for other financial firms.

At the end of June, Kandarian said, MetLife had cut its holding of "Alt-A" mortgages to $4.9 billion and was not buying any more, and had reduced ownership of subprime mortgage investments to $1.8 billion.

The company has $1.4 billion in collateralized debt obligations (CDO), a risky type of debt that has tripped up many major banks and some insurers. However, Kandarian said 98 percent of MetLife's holdings were rated investment grade, indicating a lower risk of default, and only $23 million of the underlying debt was from subprime mortgages.

MetLife has a $350 billion investment portfolio.

The company, which has a large commercial real estate business, is seeing more lending opportunities. Kandarian said this related more to attractive properties coming up for refinancing rather than new loans.

He said MetLife has lowered the amount it will loan in relation to the value of the properties to about 50 percent, based on its own assessment of what the value should be.

(Editing by John Wallace, editing by Gerald E. McCormick)