Yahoo Finance MetLife Inc (MET) (Q1 2024) Earnings Call Transcript Highlights: Strong Start with Robust ...
Adjusted Earnings: $1.3 billion, up 20% per share from the prior year.
Net Income: $800 million, significantly higher than $14 million from the prior year period.
Adjusted Premium Fees and Other Revenues (PFOs): $12 billion, up 4% year-over-year.
Adjusted Return on Equity: 13.8%, within the target range of 13% to 15%.
Direct Expense Ratio: Improved to 11.9% from 12.3%.
Group Benefits Adjusted Earnings: $284 million, impacted by high life mortality and health utilization.
Group Benefits Sales: Increased by 25% year-over-year.
Retirement and Income Solutions (RIS) Adjusted Earnings: $399 million, essentially flat compared to last year.
RIS Quarterly Sales: $2.7 billion, up 49% from the prior year.
Asia Adjusted Earnings: Increased by 51%, with strong performance in Japan.
Latin America Adjusted Earnings: $233 million, up 8% year-over-year.
Dividends and Share Repurchases: Paid $377 million in dividends and repurchased $1.2 billion of common stock.
Share Repurchase Authorization: Increased by $3 billion, total authorization now approximately $3.6 billion.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
MetLife Inc (NYSE:MET) reported a strong start to the year with adjusted earnings of $1.3 billion, reflecting a 20% increase per share from the previous year.
The company announced a $3 billion increase to its share repurchase authorization, highlighting confidence in its financial stability and commitment to returning value to shareholders.
MetLife Inc (NYSE:MET) demonstrated robust top line growth with adjusted premium fees and other revenues totaling $12 billion, marking a 4% increase compared to the first quarter of 2023.
The company's diversified portfolio and strategic focus on risk management continue to provide stability and drive growth across various markets and product lines.
MetLife Inc (NYSE:MET)'s Group Benefits and Retirement and Income Solutions segments showed solid performance, with notable increases in adjusted PFOs and strong sales growth.
Negative Points
Group Benefits' adjusted earnings were impacted by seasonally high life mortality and elevated nonmedical health utilization, which returned to historical trends post-pandemic.
The company's investment portfolio experienced net derivative losses primarily due to the strengthening of the U.S. dollar versus the yen and Chilean peso.
Real estate equity funds reported a negative return of 5.8% in the first quarter, reflecting ongoing pressures in the real estate market.
While the Retirement and Income Solutions segment maintained flat earnings, it faced challenges with lower recurring interest margins and less favorable underwriting margins.
MetLife Inc (NYSE:MET) faces ongoing competitive pressures in the Group Benefits market, requiring continuous innovation and investment to maintain and grow its market share.
Q & A Highlights
Q: Could you elaborate on the 5.8% real estate loss reported? Was it due to sales or appraisals, and what is the outlook for the rest of the year? A: (John Dennis McCallion, Executive VP, CFO & Head of Investment Management) The 5.8% loss was primarily due to appraisals and valuation adjustments. It's expected that there will be some pressure in Q2, but it should moderate and potentially improve towards the end of the year into 2025.
Q: What is the strategy for future share buybacks, and will the $3.6 billion authorization be exhausted in 2024? A: (Michel Abbas Khalaf, CEO, President & Director) The pace of share buybacks in Q1 will be more measured throughout the rest of the year. While MetLife moves expeditiously to return capital to shareholders, the exact pace will depend on the availability of high-value capital deployment opportunities.
Q: Can you clarify expectations for variable investment income for the rest of the year? A: (John Dennis McCallion, Executive VP, CFO & Head of Investment Management) The expectation is for variable investment income to potentially reach the higher end of the guidance range in the second half of the year, with a gradual improvement expected.
Q: How is the competitive environment in the Group Benefits business, especially regarding pricing and persistency? A: (Ramy Tadros, President of U.S. Business & Head of MetLife Holdings) The market remains competitive, but MetLife has been able to differentiate itself beyond pricing through scale and investment in the business. The company is pleased with the growth in sales and rate adequacy for new business and renewals.
Q: What are the dynamics in the pension risk transfer market, and how is pricing affecting competitiveness? A: (Ramy Tadros, President of U.S. Business & Head of MetLife Holdings) The pension risk transfer market remains robust, especially for large plan sponsors looking to derisk. MetLife is selective in deploying capital for these transactions, ensuring that risk-adjusted returns align with enterprise targets.
Q: How are higher interest rates affecting the attractiveness of MetLife's products, and how does this influence capital deployment towards growth versus stock buybacks? A: (Michel Abbas Khalaf, CEO, President & Director) Higher rates enhance the attractiveness of many products. MetLife aims to maintain a balance between supporting organic growth and returning capital to shareholders through dividends and share repurchases, focusing on deploying capital at attractive returns.
Q: Could you discuss the impact of interest rate caps expiring on RIS spreads and the expected trajectory? A: (John Dennis McCallion, Executive VP, CFO & Head of Investment Management) The expiration of interest rate caps is expected to result in a sequential decline in spreads, estimated at 8-10 basis points per quarter, stabilizing towards the end of the year. The overall strategy includes managing the total spread, considering both base spreads and variable investment income.
Q: What trends are you observing in dental claims within the Group Benefits business, and what are the expectations for the rest of the year? A: (Ramy Tadros, President of U.S. Business & Head of MetLife Holdings) Dental claims are typically higher in Q1 due to benefit resets at the start of the year. The expectation is for claims to moderate throughout the year, aligning with annual guidance ranges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
