Why Shares Of MetLife Inc. (MET) Are Down Today

Shares of MetLife Inc. (NYSE:MET) , the largest U.S. life insurer, were down around 9% Thursday after the release of its second quarter 2016 earnings report, which carried some pretty poor results and negative statements from the company.

MetLife posted second quarter EPS of $0.83, far below the Zacks Consensus Estimate of $1.39, a miss of 39%. Earnings dropped a staggering 47% for the quarter when compared to the same period last year. MetLife also missed the Zacks Consensus Estimate for Revenue of $17.07 billion, as it posted revenues of $16.95 billion. This represented a decline of 2.4% year-over-year.

The insurance company also announced that it plans to cut expenses by 11%, as low interest rates continue to squeeze investment income. During its second quarter, MetLife’s total operating expenses increased 4.5% year-over-year to $15.7 billion.

The company’s plan is to reduce annual costs by about $1 billion by the end of 2019, which will include job cuts, according to Chief Executive Officer Steve Kandarian, though he did not specify how many workers will be dismissed. According to its most recent annual report for 2015 the company had 69,000 total employees.

Central bank policies to keep interest rates low have reduced the income MetLife makes on a bond-dominated portfolio that’s valued at more than $500 billion. “In light of the significant headwinds our industry is facing, MetLife must do even more to avoid simply running in place,” Kandarian said. “We know this will require us to reduce headcount, which is never an easy step for an organization to take. Our overall goal is to be more efficient, so that we can better serve our customers and provide a fair return to shareholders.”

Bottom Line

Low interest rates around the world continue to pressure companies in the financial industry, which includes insurance-providers like MetLife, AllState (NYSE:ALL) , and Prudential (NYSE:PRU) , as well as banks and lending corporations. This is MetLife’s second large drop in share price in the past few months, as it also took a major tumble after the Brexit decision earlier this summer. The company can still get by in a low-rate environment such as the one we’re currently seeing, but it will not be easy, as such conditions aren’t conducive to the company’s business.

MetLife is currently a Zacks Rank #4 (Sell), and shares of the company are down more than 18% since the start of the year.