MetLife (MET) Q4 Earnings Miss on High Costs & Weak EMEA Unit

Core Insights - MetLife, Inc. reported fourth-quarter 2023 adjusted operating earnings of $1.93 per share, a 21% year-over-year improvement, but fell short of the Zacks Consensus Estimate by 1% [1] - Adjusted operating revenues increased by 21.5% year over year to $18.7 billion, exceeding the consensus mark by 3.6% [1] - The results were impacted by high expense levels, market risk benefit remeasurement losses, and weak contributions from the EMEA segment, although offset by improved investment returns and solid performances in Group Benefits and RIS businesses [1] Financial Performance - Adjusted premiums, fees, and other revenues (PFOs), excluding pension risk transfer (PRT), were $11.8 billion, an 8% year-over-year increase [2] - Adjusted net investment income grew 11% year over year to $5 billion, driven by increased returns from the private equity portfolio [2] - Total expenses rose 33.2% year over year to $18.1 billion, primarily due to higher policyholder benefits and claims [2] - Net income dropped 63% year over year to $574 million, while adjusted return on equity improved by 170 basis points to 13.8% [2] Segment Performance - Group Benefits segment adjusted earnings increased 19% year over year to $466 million, surpassing the consensus estimate [4] - RIS segment recorded adjusted earnings of $421 million, a 10% year-over-year rise, driven by improved investment and underwriting margins [4] - Asia segment adjusted earnings were $296 million, a 12% year-over-year improvement, but missed the consensus estimate [4] - Latin America segment adjusted earnings rose 13% year over year to $207 million, although it lagged the consensus mark [5] - EMEA segment adjusted earnings declined 27% year over year to $47 million, below the consensus estimate [5] - MetLife Holdings segment adjusted earnings fell 15% year over year to $156 million, also missing the consensus mark [6] Financial Position - As of December 31, 2023, MetLife had cash and cash equivalents of $20.6 billion, a 2.2% increase from the end of 2022 [7] - Total assets increased by 3.7% to $687.6 billion, while total equity inched up 0.4% to $30.3 billion [7] - Long-term debt rose 6.2% to $15.5 billion, and net cash from operations for 2023 was $4.2 billion, down 4.5% year over year [7] Capital Deployment - MetLife repurchased shares worth approximately $900 million in the fourth quarter and an additional $500 million in January 2024 [8] Full-Year Update - Adjusted earnings per share for 2023 were $7.33, a 4% increase from 2022, while adjusted revenues decreased by 3.5% to $71.7 billion [9] - Adjusted PFOs, excluding PRT, improved by 6% year over year to $46.6 billion, but net income plunged 73% to $1.4 billion [9] 2024 Outlook - Management anticipates variable investment income of around $1.5 billion for 2024 and expects adjusted losses in Corporate & Other to be between $750 million and $850 million [10] - Adjusted earnings in the Asia segment are projected to grow around 20%, while EMEA unit earnings are expected to remain within $60-$65 million per quarter [10] Near-Term Targets - Over the next three years, MetLife projects adjusted PFOs in Group Benefits to rise by 4-6% and anticipates similar growth in MetLife Holdings [11] - The company aims for an adjusted return on equity within 13-15% and a free cash flow ratio of 65-75% of adjusted earnings [11]