MetLife Inc

NYSE:MET

Earnings Call Analysis

MetLife's Strong Q1 2024 Performance

MetLife reported robust results for Q1 2024, with net income surging to $800 million from $14 million a year prior, driven by higher adjusted earnings and lower net investment losses. Adjusted earnings rose to $1.3 billion, attributed to higher variable investment income from private equity returns. Key business segments showed mixed results: Group Benefits saw a 7% decline, while Retirement Solutions remained stable. Internationally, Asia's earnings surged 51%, Latin America's grew 8%, and EMEA's increased 28%. MetLife maintained a strong balance sheet with $5.2 billion in liquid assets and announced a 4.8% dividend increase for Q2. The company emphasized its focus on responsible growth and value creation in 2024.

Introduction

MetLife kicked off the first quarter of 2024 with impressive results, exhibiting strength across its core businesses. The discussion highlighted robust top-line growth, disciplined expense management, and consistent execution, which were key drivers of their solid performance.

Financial Performance

Net income surged to $800 million from a mere $14 million in the same quarter last year, fueled by higher adjusted earnings and reduced net investment losses. Adjusted earnings rose to $1.3 billion from $1.2 billion, and on a per share basis, this equaled $1.83 compared to last year's $1.52. A revival in private equity returns notably boosted variable investment income.

Segment Analysis

MetLife's business segments presented a mixed bag of results. The Group Benefits segment saw a 7% decline in adjusted earnings to $284 million, primarily due to weaker non-medical health underwriting margins, although sales climbed 25%. The Retirement and Income Solutions segment remained steady with $399 million in adjusted earnings, matching last year's figure. Sales nearly doubled, driven by robust corporate-owned life insurance and structured settlement sales, powered by higher interest rates.

International Operations

Internationally, MetLife continued to excel. In Asia, adjusted earnings soared 51% on a reported basis and 57% on a constant currency basis, credited to higher investment income, strong underwriting, and lower tax obligations. Latin America's adjusted earnings rose 8% on a reported basis and 5% on a constant currency basis, thanks to improved Chilean encaje returns, increased volume, and favorable underwriting. EMEA's performance was also strong, with adjusted earnings up 28% on a reported basis and 35% on a constant currency basis, despite higher expenses.

Key Metrics and Capital Management

MetLife's adjusted return on equity was 13.8%, aligning with their target range. The company's book value per common share stood at $53.13. Liquid assets and cash at holding companies reached $5.2 billion, comfortably exceeding the target buffer of $3 to $4 billion. Strong free cash flow allowed for continued investment in growth and capital returns to shareholders, exemplified by the repurchase of nearly $1.2 billion in common shares and $400 million in dividend payments.

Shareholder Returns

Shareholders enjoyed a positive quarter as MetLife’s Board of Directors declared a second-quarter dividend of over $0.54 per share, marking a 4.8% increase from the previous quarter. Additionally, a new share repurchase authorization was approved, accentuating management's confidence in the company's trajectory.

Conclusion

MetLife's strong first-quarter performance underscores the firm's ability to drive value through cycles with disciplined strategy execution. The company’s diversified business model, robust cash reserves, and flexible capital position solidify its strength and readiness to maintain responsible growth and deliver on stakeholder value in 2024 and beyond.

Earnings Call Transcript 2024-Q1

[John McCallion, executive]

Hello, and thank you for joining as I discussed MetLife's results for the first quarter of 2024.

MetLife delivered a strong quarter maintaining momentum in our underlying businesses through robust topline growth, expense discipline and consistent execution. Variable investment income was improved from recent periods led by a partial rebound in private equity returns.

For the first quarter, net income was $800 million compared to $14 million in the first quarter of 2023, driven by higher adjusted earnings and lower net investment losses. Adjusted earnings were $1.3 billion compared to adjusted earnings of $1.2 billion a year ago. The increase was driven by higher variable investment income from private equity returns.

Lower recurring interest and expense margins provided a partial offset. On a per share basis, adjusted earnings were $1.83 compared to $1.52 a year ago.

Now let's turn to our business segments. Group Benefits adjusted earnings were $284 million. The 7% decline from the prior year period was primarily driven by lower nonmedical health underwriting margins. Sales were up 25% with strong growth across core and voluntary products.

Retirement and Income Solutions adjusted earnings were $399 million, essentially flat compared to a year ago. Higher variable investment income was offset by lower recurring interest margins and less favorable underwriting. Sales were up 49%, driven by corporate-owned life insurance and structured settlements. Higher interest rates drove demand across the board for our compelling suite of products.

In Asia, adjusted earnings were up 51% on a reported basis and up 57% on a constant currency basis. Higher variable investment income, favorable underwriting and lower taxes were drivers. Adjusted PFOs were up 5% on a constant currency basis, led by solid results in Korea.

In Latin America, adjusted earnings were $233 million, up 8% on a reported basis and up 5% on a constant currency basis. The primary drivers were higher Chilean encaje returns, volume growth and favorable underwriting. Adjusted PFOs were up 8% on a constant currency basis, driven by strong sales and solid persistency across the region.

In EMEA, adjusted earnings were up 28% on a reported basis and up 35% on a constant currency basis, driven by favorable underwriting, volume growth and higher recurring interest margins, partially offset by higher expenses.

EMEA sales were up 16% on a constant currency basis, driven by strong volume growth.

And finally, in MetLife Holdings, adjusted earnings were up 1% driven by higher variable investment income offset by foregone earnings as a result of the reinsurance transaction that became effective in November. Further details regarding the performance of our business segments can be found in our earnings release dated May 1.

Here are some key enterprise metrics. MetLife's adjusted return on equity was 13.8%, which is within our target range. And book value per common share was $53.13.

Turning to cash and capital management. Cash and liquid assets at our holding companies was $5.2 billion as of March 31, above our target cash buffer of $3 billion to $4 billion.

Our ability to generate strong free cash flow enables us to invest in our growth, as well as return capital to shareholders. This was clear in the first quarter, we bought back nearly $1.2 billion of our common shares and paid approximately $400 million in common stock dividends.

In addition, our Board of Directors recently declared a second quarter common stock dividend of more than $0.54 per share, an increase of 4.8% from the first quarter of 2024 dividend. And approved a new share repurchase authorization, reflecting our ongoing confidence in our business.

In closing, our first quarter results built on the momentum of 2023 and demonstrated our continued ability to drive value across cycles through the disciplined execution of our strategy. The underlying fundamentals of our diversified set of businesses remain strong. Our robust cash and capital position offers us financial flexibility and further signals our strength.

We will continue in 2024 to be laser-focused on responsible growth, consistent execution and creating value for our stakeholders.

Thank you for watching.