MetLife Inc

NYSE:MET

Earnings Call Transcript 2022-Q4

[John McCallion, executive]

Hello, and thank you for joining as I discuss MetLife's results for the fourth quarter and full year of 2022. Across our well-diversified portfolio of businesses, fundamentals were solid as underwriting strengthened, higher interest rates supported core spreads, and we continue to drive a disciplined approach to expenses. All of this contributed to offsetting the impact of lower private equity returns and underscores the resilience and consistent execution of our Next Horizon strategy.

For the full year, net income was $2.4 billion, down 63% from $6.4 billion in 2021. Full year adjusted earnings were $5.5 billion, down 30% from $8 billion in 2021. Here are a few additional highlights from the full year. Our underwriting margins continue to improve as we believe COVID becomes endemic. We saw solid growth across most businesses. Our direct expense ratio was below our annual target, and we delivered a full year adjusted return on equity in line with our 12% to 14% target.

Now turning to fourth quarter results. Fourth quarter net income was $1.3 billion compared to $1.2 billion in the fourth quarter of 2021, primarily driven by net investment and net derivative gains. Adjusted earnings were $1.2 billion, down 33% from the prior year period. The year-over-year decline was driven by variable investment income, partially offset by favorable underwriting margins. On a per share basis, adjusted earnings were $1.55, down 29% from the prior year period.

Now let's turn to our business segments, starting with the U.S. business. Group Benefits adjusted earnings were $400 million, up significantly from the prior year period, primarily driven by favorable underwriting and volume growth. While sales were down compared to record sales in 2021, the business produced strong top line growth in premiums, fees and other revenues, including continued momentum in voluntary products.

Retirement and Income Solutions adjusted earnings were $371 million, down 40%, largely driven by lower variable investment income. Sales were up 23% for the full year, primarily driven by pension risk transfers, stable value and structured settlement products.

In Asia, adjusted earnings were down 63% on a reported basis and down 62% on a constant currency basis. The primary driver was lower variable investment income. Asia sales were up 12% on a constant currency basis, primarily driven by Japan.

In Latin America, adjusted earnings were $181 million, up 45% on a reported basis and up 51% on a constant currency basis. The primary drivers were favorable underwriting and volume growth. Top line growth was strong with adjusted PFOs of 20% and sales up 22% on a constant currency basis.

In EMEA, adjusted earnings were up 67% on a reported basis and up 112% on a constant currency basis, primarily driven by favorable underwriting. EMEA sales were up 13% on a constant currency basis, primarily driven by growth across the region.

And finally, in MetLife Holdings, adjusted earnings were down 57%, largely driven by lower variable investment income. Further details regarding the performance of our business segments can be found in our earnings release dated February 1.

Here are some key enterprise metrics. MetLife's adjusted return on equity was 11.3% for the fourth quarter of 2022 and 12.3% for the full year. Book value per common share was $56.34.

Turning to cash and capital management. Cash and liquid assets at the holding companies amounted to $5.4 billion at the end of 2022, above our target cash buffer of $3 billion to $4 billion. In the fourth quarter, we bought back approximately $600 million of common shares and paid approximately $400 million in common stock dividends. And for the full year, we deployed approximately $5 billion in common stock dividends and share repurchases.

In summary, underlying fundamentals remain strong with good volume growth, underwriting margins and expense discipline. We are well capitalized and continue to generate sustainable free cash flow. As we begin 2023, we remain focused on consistent execution and creating value for all of our stakeholders.

Thank you for watching.