MetLife, Inc. (MET) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Record Group Benefits Earnings

  MetLife's Group Benefits business reported an all-time quarterly record of $533 million in adjusted earnings, driven by favorable underwriting and Group Life mortality experience.

• Strong Overall Performance

  The company reported adjusted earnings of $1.6 billion or $2.28 per share, up 18% from the prior year, showcasing strong underwriting, volume growth, and higher variable investment income.

• High Return on Equity

  MetLife posted a 17.3% adjusted return on equity in the quarter, significantly above the target range of 13% to 15%.

• Improved Expense Ratio

  The direct expense ratio improved year-over-year to 11.9%, below the annual target of 12.3%, indicating efficient cost control and revenue growth.

• Significant Capital Management Activities

  MetLife was active in capital management, paying common stock dividends of approximately $400 million and buying back around $900 million of its common shares in the second quarter.

Pessimistic Highlights

• Challenges in Real Estate Funds

  The performance of real estate funds saw significantly narrower losses, indicating some challenges despite the recovery in private equity returns.

• Sales Impact in Japan

  Sales in Japan were impacted by currency fluctuations, with a noted decline in single premium foreign currency products due to yen weakness.

• Surrender Activity in Japan

  Higher-than-expected surrender activity in Japan was observed, influenced by the weaker yen as some customers chose to lock in gains.

Company Outlook

• Continued Growth and Efficiency

  MetLife is focused on accelerating growth, boosting returns, and fostering consistency through investments in technology and leveraging its large pool of data.

• Healthy Pipeline for Pension Risk Transfers

  A healthy pipeline for jumbo pension risk transfer deals is observed, indicating sustained business momentum in this segment.

• Strategic Focus on Next Horizon

  MetLife is developing its next five-year strategy, New Frontier, building on the core pillars of the Next Horizon strategy to further enhance its competitive position.

Q & A Highlights

• Q: Can you unpack the non-medical health results and comment on pricing for both disability and dental products? (Tom Gallagher, Evercore)

  A: The overall non-medical health ratio was 70.8%, with dental utilization rates coming down from Q1 due to seasonality. Disability results were in line with expectations, showing slight increases in incidents but strong recoveries. Renewal pricing across the book is hitting target, maintaining strong persistency. (Ramy Tadros)

• Q: How are you feeling about the level of competition in the market, especially with new entrants? (Tom Gallagher, Evercore)

  A: The market is competitive but largely rational. New entrants have not had a meaningful impact on our book, as we compete on a range of factors beyond price, leveraging our scale and capabilities. (Ramy Tadros)

• Q: Is the improved earnings power in the Group Benefits business sustainable? (Suneet Kamath, Jefferies)

  A: The Group Life ratio was historically low this quarter, driven by lower volume and favorable mortality experience. Mortality is expected to moderate back to historical levels, with year-to-date Group Life benefit ratio at 84.7%. (Ramy Tadros)

• Q: Can you provide color on the sales environment in Japan and the impact of yen volatility on foreign currency products? (Ryan Krueger, KBW)

  A: Japan sales were impacted by yen weakness, affecting the overall market for foreign currency products. However, MetLife maintains its market position and is rebalancing product mix between yen and US dollars. Sales in the rest of Asia were strong, contributing to overall performance. (Lyndon Oliver)

• Q: With the capital regime change in Japan, is there an opportunity to broaden out the Bermuda platform? (John Barnidge, Piper Sandler)

  A: Bermuda has been an optimization tool for MetLife, used successfully with some Japan products. The transition to ESR allows for reevaluation of strategies, continuing to use Bermuda as a tool for capital optimization. (John McCallion)

• Q: On private credit, how do you balance direct origination versus investing in boutique shops? (Mike Ward, Citi)

  A: MetLife has been in private credit for 150 years, with a disciplined approach to origination and investment. The company uses its origination platforms and evaluates opportunities carefully, mindful of the competitive landscape. (John McCallion)