MetLife, Inc. (NYSE:MET) Q1 2024 Earnings Call Transcript

MetLife, Inc. (NYSE:MET) Q1 2024 Earnings Call Transcript May 2, 2024

MetLife, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the MetLife First Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, this conference is being recorded. Before we get started, I refer you to the cautionary note about forward-looking statements in yesterday’s earnings release and to risk factors discussed in MetLife’s SEC filings. With that, I will turn the call over to John Hall, Global Head of Investor Relations.

John Hall: Thank you, operator. Good morning, everyone. We appreciate your participation on MetLife’s first quarter 2024 earnings call. In addition to our earnings release, we issued a press release last night announcing a $3 billion increase to our share repurchase authorization. Before we begin, I’d point you to the information on non-GAAP measures on the Investor Relations portion of metlife.com, in our earnings release and in our quarterly financial supplements, which you should review. On the call this morning are Michel Khalaf, President and Chief Executive Officer; and John McCallion, Chief Financial Officer. Also participating in the discussions are other members of senior management. As usual, last night, we released our standard set of supplemental slides, which are available on our website.

John McCallion will speak to them in his prepared remarks if you wish to follow along. An appendix to the slides features disclosures GAAP reconciliations and other information, which you should similarly review. After prepared remarks, we will have a Q&A session. Given the busy morning, Q&A will end promptly just before the top of the hour. In fairness to everyone, please limit yourself to one question and one follow-up. With that, over to Michel.

Michel Khalaf: Thank you, John, and good morning, everyone. As you can see from last night’s report, MetLife is getting off to a good start for the year. We delivered another solid quarter of financial results reflecting strong top line growth, consistent execution and sustained momentum across our market-leading portfolio of businesses. We achieved this mindful that change and uncertainty remain constant in the current environment. Our resilience and consistency are made possible by the unwavering commitment of our associates our unabated confidence in our all-weather next horizon strategy and our unyielding focus on controlling those factors we can control to drive value for our shareholders and other stakeholders. With change as a persistent backdrop, MetLife’s 156-year track record of risk management is stable stakes for our customers and shareholders.

As I addressed in my shareholder letter, central to this notion is protecting our balance sheet so we can meet the promises we’ve made to our policyholders and shareholders regardless of economic or geopolitical conditions. Risk management extends across virtually everything we do, the way we invest and manage our capital and liquidity to the way we price, underwrite and reserve for the products we sell. Another element of risk management at MetLife lies in our diversification. We operate across a range of products and geographies, many that have offsetting risk characteristics such as mortality versus longevity among others. Even within our business segments, we have diversification. Our Group Benefits business serves employers across a wide range of business sizes and industries and has customers in every state.

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Q&A Session

A similar theme runs through retirement and income solutions and can be seen in the multiple liability streams we are able to originate, capital markets, pension risk transfers, structured settlements, stable value, corporate-owned life insurance and longevity reinsurance, among others. Our diversification is at the core of who we are and further differentiates MetLife. It is not coincident, but by design. We have constructed a platform to deliver for the long term and believe our diversification promotes both sustainable and responsible growth. Turning to the quarter. We reported adjusted earnings of $1.3 billion, or $1.83 per share, up 20% per share from the prior year period. This was aided by a partial rebound in variable investment income led by private equity gains, which delivered a positive return of 2.1%.

In the aggregate, net income for the first quarter was $800 million, well above $14 million from the prior year period. Top line growth was strong across our market-leading set of businesses with adjusted premium fees and other revenues, or PFOs, totaling $12 billion, up 4% compared to the first quarter of 2023. On a constant currency basis, PFOs were up 5%. Our unrelenting focus on execution continues to drive positive results across important key metrics. MetLife posted a 13.8% adjusted return on equity in the quarter, still within the 13% to 15% target range despite VII not yet hitting a more normal quarterly run rate. Our direct expense ratio of 11.9% improved from a year ago and was lower than our 12.3% annual target. The positive leverage captured by this ratio illustrates our ability to control costs as well as grow revenues at a faster rate than expenses.

Shifting to MetLife’s business performance in the quarter, Group Benefits generated $6.3 billion of adjusted PFOs, up 5% or up 6% adjusting for participating policies from the prior year period, driven by solid growth across most products including further expansion and voluntary benefits. Our premier national accounts franchise continues to demonstrate its differentiation and deliver value to customers through its comprehensive range of products and a customer experience enhanced by innovative technology platforms. In the quarter, Group Benefits adjusted earnings of $284 million was impacted by seasonally high life mortality and seasonally elevated non-medical health utilization returning to a historical trend more recently masked by the pandemic.

Showing the continued vitality of this flagship business, sales were up 25% from the prior year, propelled by our sustained efforts to drive enrollment, which pushed growth across core and voluntary products. Last month, MetLife launched our 2024 employee benefit front study in its 22nd year the survey tracks evolving employer and employee dynamics and the impact that macro environment and other trends have on the workplace and the employee benefits ecosystem. Through the years, we’ve enjoyed tremendous engagement with our customers as a result of the survey demonstrated thought leadership and this year’s survey with its focus on employee care was no different. The business case for employee care is clear. Our research and other studies showed that one organizations offer a range of benefits, employees are more holistically healthy and business performance is stronger.

As the largest group benefits provider, this ties directly into our strategy to offer the widest array of products, which gives MetLife more opportunities to serve our customers and more avenues to drive growth. Our leading Retirement and Income Solutions business reported adjusted earnings of $399 million, essentially flat with last year. Higher interest rates continue to increase the attractiveness of many of the products we offer within RIS. Overall, quarterly sales in RIS were $2.7 billion, up 49% from the prior year, led by structured settlements and corporate-owned life insurance production. Our business in Asia posted a 51% increase in adjusted earnings on better variable investment income and favorable underwriting, particularly in Japan.

Sales while robust were down relative to a strong quarter a year ago. Yet illustrating the strength of recent quarters, assets under management in Asia are up 6% year-over-year on a constant currency basis. In Latin America, our momentum continues across the region, particularly in our two largest markets of Mexico and Chile. The segment generated another record quarter of adjusted earnings with $233 million, rising 8% and 5% on a constant currency basis. Moving to capital and cash. Our operative philosophy on capital deployment relies on a balance across investing in organic and inorganic growth and returning capital to shareholders via common dividends and share repurchase. During the first quarter, MetLife linked into capital management.

We paid $377 million to shareholders via common stock dividends, and we repurchased almost $1.2 billion of our common stock. After the quarter, we have repurchased about another $300 million of common stock in April. Also in April, we boosted our common dividend per share by 4.8%. Year-to-date through April, we have repurchased about $1.5 billion of our common shares. Along with reporting our first quarter results, you saw that we also announced the addition of $3 billion to our repurchase authorization. Our total share repurchase authorization now stands at approximately $3.6 billion, which allows us to proceed with repurchase at a more measured pace for the balance of the year. Shifting to governance, we announced during the quarter that Laura Hay joined our Board of Directors effective in February.

Most recently, she was the Global Head of KPMG’s insurance practice. We are excited to have Laura bring her broad set of actuarial and financial skills and her business experience to our board. In closing, as we near the conclusion of our five-year Next Horizon framework, we are engaged in a thoughtful process to chart the next course of our strategic journey, building on a strong well-established foundation. I don’t anticipate an abrupt departure from what has successfully delivered on our purpose always with you building a more confident future, but rather a further evolution. As we sought to raise the bar during Next Horizon, asking more of ourselves and delivering more than our stated goals, we’ve already started advancing towards the next phase of our strategy.

The core principles of Next Horizon anchor our future actions and we remain embedded in our strategic thinking as we move ahead. We are building on our strong foundation with a growth mindset and a range of opportunities that would not have been possible just a few years ago. We are well positioned to further differentiate ourselves and deliver additional value to customers fueling higher levels of growth. We have a tremendous opportunity to leverage our scale and harness emerging technologies to drive margin expansion, all the while achieving greater overall operating consistency. Taken together, we believe these powerful factors will result in greater returns for our shareholders. To that end, I look forward to discussing our refreshed strategy at an Investor Day here in New York on December 12 of this year.

Now I will turn it over to John to cover our first quarter performance in greater detail.