MetLife(US:MET)2023-08-03 16:54Financial Data and Key Metrics Changes - Adjusted earnings for Q2 2023 were reported at $1.5 billion, or $1.94 per share, down from $1.7 billion, or $2.13 per share a year ago, reflecting a 10% decrease [6][20] - Net income for the quarter was $370 million, impacted by accounting adjustments related to a pending reinsurance transaction [7][19] - The adjusted return on equity was 14.6%, meeting the target range of 13% to 15% [6] Business Line Performance Changes - U.S. group benefits adjusted earnings totaled $372 million, down 8% year-over-year, with year-to-date sales up 13% and adjusted PFOs up 5% [8][20] - Retirement and income solutions (RIS) adjusted earnings were $417 million, up 11% from the prior year, driven by higher recurring investment margins [10][22] - Asia adjusted earnings were $431 million, down 11% year-over-year, but sales on a constant currency basis were up 34%, led by Japan [11][24] - Latin America adjusted earnings totaled $219 million, down 13%, with adjusted PFOs up 23% on a constant currency basis [12][25] Market Data and Key Metrics Changes - The company reported strong sales across various regions, with Asia and Latin America showing significant growth [10][11] - In Japan, sales increased by 42% year-over-year, driven by the introduction of a foreign currency life insurance product [11][24] - The EMEA region saw adjusted earnings of $70 million, up 6%, with adjusted PFOs up 4% on a constant currency basis [25] Company Strategy and Industry Competition - The company is focused on accelerating the runoff of its legacy business while maintaining strong risk management capabilities [5] - MetLife aims to sustain growth in capital-light businesses, leveraging strong relationships with national accounts and expanding its product portfolio [9] - The company is committed to returning capital to shareholders while investing in responsible growth [13][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the investment portfolio and the effectiveness of asset liability matching [5] - The company anticipates reaching a trough in variable investment income contributions to adjusted earnings [7][35] - Management highlighted the importance of disciplined underwriting and expense management in maintaining strong business fundamentals [35] Other Important Information - The company repurchased $672 million of its common stock in Q2 and an additional $300 million in July, with approximately $3.5 billion remaining on the repurchase authorization [13][14] - The company held $4.2 billion in cash at the end of the quarter, above its liquidity buffer target [15][32] - Steve Goulart, the Chief Investment Officer, announced his retirement, with leadership changes to follow [16][17] Q&A Session Summary Question: Further opportunities for risk transfer in MetLife holdings - Management indicated ongoing exploration of optimization opportunities, emphasizing the need for value-creative and risk-reducing transactions [38] Question: Details on office loans resolved year-to-date - 69% of loans scheduled to mature this year have been resolved, with 31% paid off and 57% extended, indicating a healthy portfolio [40] Question: Normalization of group benefits earnings - Management confirmed that the unfavorable items impacting earnings are not expected to recur, allowing for normalization in future earnings [44] Question: Buyback levels and subsidiary dividends - Management noted that July's buyback levels reflect a catch-up due to a blackout period, with expectations for continued buybacks post-transaction [46] Question: Non-medical health underwriting results - Favorable results were reported in disability, while dental claims costs have increased, prompting pricing adjustments [50] Question: Competitive dynamics in Japan - Strong sales in Japan were attributed to foreign currency products, with management optimistic about sustaining market position despite potential regulatory changes [52][61] Question: Long-term care claims trends - Management acknowledged some elevated claims but viewed them as a short-term aberration, with ongoing rate increases being implemented [64] Question: Update on commercial mortgage loans and credit migration - The portfolio remains well-positioned with minimal expected losses, and no material credit migration was reported in the CNBS portfolio [66]