MetLife Inc

NYSE:MET

Earnings Call Analysis

MetLife Reports Robust Q2 2024 Performance

MetLife reported strong growth in Q2 2024, with net income rising to $912 million from $370 million last year. Adjusted earnings were $1.6 billion, driven by favorable underwriting and private equity returns. Group Benefits hit a record $533 million in adjusted earnings, while Asia and Latin America saw solid growth. However, MetLife Holdings' earnings fell by 27% due to a reinsurance deal. The firm’s return on equity was 17.3%, and book value per share was $53.12. Strong cash flow supported $900 million in share buybacks and $400 million in dividends, positioning MetLife for sustained growth.

Introduction

In their recent earnings call for the second quarter of 2024, MetLife reported a commendable performance. The company witnessed significant growth and disciplined execution, driven by a rebound in private equity returns and favorable underwriting results.

Financial Highlights

MetLife's net income for the quarter stood at $912 million, a substantial increase from $370 million in the same period last year. This growth was attributed to higher adjusted earnings and the absence of previous year’s net losses linked to reinsurance-related accounting adjustments. Adjusted earnings grew to $1.6 billion from $1.5 billion year-over-year, mainly driven by improved underwriting, volume growth, and higher variable investment income. On a per share basis, adjusted earnings were $2.28, marking an 18% increase.

Group Benefits

The Group Benefits segment achieved record adjusted earnings of $533 million, up 43% from the prior year. This impressive growth was largely due to favorable underwriting, particularly in Life. Additionally, sales increased by 11% year-to-date, thanks to strong growth in core and voluntary products.

Retirement and Income Solutions

Adjusted earnings for the Retirement and Income Solutions segment were $410 million, reflecting a 2% decline due to lower recurring interest margins. However, this segment saw higher variable investment income and strong volume growth. Sales surged by 62% year-to-date, primarily driven by pension risk transfers and U.K. longevity reinsurance.

Asia Region

In Asia, adjusted earnings increased by 4% on a reported basis and 8% on a constant currency basis, supported by favorable underwriting and higher variable investment income. Sales rose by 4% year-over-year on a constant currency basis, despite a reduction in Japan’s sales compared to the previous year.

Latin America

Latin America reported adjusted earnings of $226 million, up 3% on a reported basis and 8% on a constant currency basis. This growth was driven by strong volume growth and favorable underwriting, albeit partially offset by lower Chilean encaje returns. Adjusted PFOs (premiums, fees, and other revenues) in the region rose 12% on a constant currency basis.

EMEA Region

In the EMEA (Europe, the Middle East, and Africa) region, adjusted earnings rose 10% on a reported basis and 20% on a constant currency basis, supplemented by increased volumes and improved recurring interest margins. Adjusted PFOs were up 12% on a constant currency basis due to robust sales across the region.

MetLife Holdings

Adjusted earnings in MetLife Holdings declined by 27%, primarily due to foregone earnings as a result of the previous year’s reinsurance transaction.

Key Metrics

MetLife’s adjusted return on equity stood at 17.3%, exceeding their target range of 13% to 15%. The book value per common share was $53.12. The company had $4.4 billion in cash and liquid assets as of June 30, well above their target cash buffer.

Capital Management

MetLife’s strong cash flow allowed them to repurchase approximately $900 million of common shares and pay around $400 million in dividends during the second quarter. Furthermore, their Board declared a third-quarter common stock dividend of $0.545 per share.

Conclusion

In summary, MetLife’s strong balance sheet, diversified business segments, and strategic capital management position the company well for sustainable growth and long-term value creation for stakeholders.

Earnings Call Transcript 2024-Q2

[John McCallion, executive]

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

MetLife reported another strong quarter that included healthy growth, disciplined execution and improved variable investment income led by a continuing rebound in private equity returns. Our diversified set of market-leading businesses maintained and, in many cases, increased their momentum, with favorable underwriting and volume growth, powering an outstanding quarter results.

Net income for the second quarter stood at $912 million, a significant increase from the $370 million reported in the same period last year, mainly due to increased adjusted earnings this year and the impact of net losses last year related to accounting adjustments necessitated by the reinsurance deal announced in May of 2023.

Adjusted earnings were $1.6 billion compared to adjusted earnings of $1.5 billion a year ago. The increase was driven by favorable underwriting, volume growth and higher variable investment income from private equity returns. Lower recurring interest margins were a partial offset. On a per share basis, adjusted earnings were $2.28, up 18% on a reported basis and up 20% on a constant currency basis.

Now let's turn to our business segments. Group Benefits adjusted earnings were $533 million, a record. The 43% increase from the prior year period was primarily driven by favorable underwriting, particularly in Life. Year-to-date, sales increased by 11%, mainly due to strong growth in both core and voluntary products.

Retirement and Income Solutions adjusted earnings were $410 million. The 2% decline was driven by lower recurring interest margins, offset by higher variable investment income and strong volume growth. Sales were up 62% year-to-date, largely driven by pension risk transfers and U.K. longevity reinsurance.

In Asia, adjusted earnings were up 4% on a reported basis and up 8% on a constant currency basis, driven by favorable underwriting and higher variable investment income. On a constant currency basis, sales increased by 4% compared to the prior year's solid performance, with expansion seen in most parts of the region. This growth was somewhat balanced out by reduced sales in Japan compared to the strong quarter in the previous year.

In Latin America, adjusted earnings were $226 million, up 3% on a reported basis and up 8% on a constant currency basis. The primary drivers were strong volume growth and favorable underwriting, partially offset by lower Chilean encaje returns.

On a constant currency basis, adjusted PFOs increased 12%, driven by strong sales and solid persistency across the region. Within the EMEA region, adjusted earnings increased by 10% as reported and 20% when accounting for constant currency. This growth was attributed to increased volumes and improved recurring interest margins, partially offset by less favorable expense margins relative to the same period in the previous year. EMEA adjusted PFOs were up 12% on a constant currency basis due to strong sales across the region.

And finally, in MetLife Holdings adjusted earnings were down 27%, primarily driven by foregone earnings as a result of the reinsurance transaction previously mentioned. Further details regarding the performance of our business segments can be found in our earnings release dated July 31.

Here are some key enterprise metrics. MetLife's adjusted return on equity was 17.3%, which is above our target range of 13% to 15%. And book value per common share was $53.12.

Turning to cash and capital management. Cash and liquid assets at our holding companies was $4.4 billion as of June 30, 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 second quarter. We bought back about $900 million of our common shares and paid approximately $400 million in common stock dividends.

In addition, our Board of Directors recently declared a third quarter common stock dividend of $0.545 per share, reflecting our ongoing confidence in our business.

To conclude, our steadfast commitment to execution resulted in an outstanding quarter. Our diversified set of market-leading businesses are achieving steady growth, offering differentiated products and solutions to a growing customer and client base. Our efficiency mindset continues to free up capacity, allowing us to invest in new capabilities and growth opportunities. Backed by a strong balance sheet and free cash flow, MetLife is surging forward. All of this positions us to deliver sustainable growth and long-term value for all of our stakeholders.

Thank you for watching.