MetLife, Inc. (MET) Earnings Call Transcript & Summary

Hello, and thank you for joining me today. I'm pleased to be speaking with you from MetLife's headquarters in New York City, where I'll discuss our results for the third quarter of 2020. MetLife delivered a strong third quarter, driven by variable investment income, balanced underwriting and expense discipline. Third quarter net income was $633 million compared to net income of $2.2 billion in the third quarter of 2019. The decline is primarily a result of mark-to-market losses on derivatives that hedge our liabilities. On a year-to-date basis, net income was $5.1 billion compared to net income of $5.2 billion a year ago. Adjusted earnings were $1.6 billion, up 33%, and up 35% on a constant currency basis. On a per share basis, adjusted earnings were $1.73, up 36% from the prior year period. During the third quarter, MetLife conducted its annual global review of actual assumptions underlying the estimate of certain insurance assets and liabilities. Actual assumption review reduced net income by $301 million, of which $203 million impacted adjusted earnings. Primary driver was the change in our long-term interest rate assumption. We reduced the rate by 100 basis points to 2.75% over 12 years. Now let's turn to our business results. Starting with the U.S. Adjusted earnings were $900 million, up 27%, driven by an increase in variable investment income and volume growth. Group Benefits adjusted earnings were $392 million, up 7%, driven by volume growth. Underwriting was mixed, with favorable results in non-medical health, largely offset by higher mortality. In Retirement and Income Solutions, adjusted earnings were $490 million, up 73%, driven by favorable investment margins, including increased variable investment income as well as favorable underwriting and volume growth. In Property & Casualty, adjusted earnings were $18 million, down 68%, driven by the highest catastrophe losses in nearly a decade. In our non-U.S. segments, Asia adjusted earnings were up 33% and up 31% on a constant currency basis. Excluding notable items from both periods, adjusted earnings were up 34% and up 32% on a constant currency basis, driven by an increase in variable investment income as well as favorable underwriting, expense margins and volume growth. Adjusted earnings in Latin America were down 75% and down 71% on a constant currency basis. Excluding notable items from both periods, adjusted earnings were down 67% and down 62% on a constant currency basis, primarily driven by unfavorable COVID-related underwriting and lower Chilean encaje returns. In EMEA, adjusted earnings were down 2%, while on a constant currency basis, adjusted earnings were up 2%. Excluding notable items from both periods, adjusted earnings were up 26% and up 30% on a constant currency basis, driven by favorable underwriting, expense margins and volume growth. And finally, in MetLife Holdings, which contains the closed block businesses from our former U.S. Retail segment, adjusted earnings were up 70%. Excluding notable items from both periods, adjusted earnings were up 35%, driven by an increase in variable investment income and favorable long-term care underwriting. Further details regarding the performance of our business segments can be found in our earnings release dated November 4. Looking at some key ratios. MetLife's adjusted return on equity was 13.2%, up 250 basis points year-over-year. Book value per common share was $53.10, up 9% from a year ago. Turning to cash and capital management. Cash and liquid assets at the holding companies was approximately $7.8 billion at September 30, well above our target cash buffer of $3 billion to $4 billion. In the third quarter, we resumed share repurchases and bought back $80 million of our common stock. In addition, we announced the acquisition of Versant Health in an all-cash deal totaling $1.7 billion. We paid over $400 million in common stock dividends in the quarter. And our Board of Directors declared a fourth quarter 2020 common stock dividend of $0.46 per share. All these actions reflect the ongoing confidence we have in our financial strength. In the face of what remains a highly uncertain environment, MetLife continues to perform well. We remain focused on and committed to consistent execution. And we are a simpler company with the right mix of differentiated businesses. Thank you for watching.