MetLife(US:MET)2023-02-02 17:49Financial Data and Key Metrics Changes - In Q4 2022, adjusted earnings were $1.2 billion or $1.55 per share, down 28% year-over-year from $1.8 billion or $2.17 per share [8][17] - For the full year 2022, adjusted return on equity was 12.3%, meeting the target, and the target range has been increased to 13% to 15% [6][7] - Free cash flow generation for 2022 was strong, enabling a return of $4.9 billion to shareholders [6][12] Business Line Data and Key Metrics Changes - U.S. Group Benefits adjusted earnings were $400 million in Q4 2022, significantly up from $20 million in Q4 2021, driven by improved underwriting margins and lower COVID claims [17] - Retirement and Income Solutions (RIS) adjusted earnings were down 40% year-over-year, primarily due to lower variable investment income [19] - Asia segment adjusted earnings decreased by 63% year-over-year, impacted by lower variable investment income and a write-down of a deferred tax asset [20][21] - Latin America adjusted earnings increased by 45%, driven by favorable underwriting and solid volume growth [22] Market Data and Key Metrics Changes - Group Benefits PFOs grew approximately 5% year-over-year, bringing full year PFOs to about $23 billion [9] - Asia sales grew 11% year-over-year, exceeding guidance, while Latin America sales were up 22% on a constant currency basis [11][22] - EMEA adjusted earnings were up 67%, reflecting favorable underwriting compared to elevated COVID claims in the prior year [23] Company Strategy and Development Direction - The Next Horizon strategy has proven resilient, with commitments to generate $20 billion in free cash flow over five years, expected to be exceeded [5][7] - The company is focused on responsible growth and capital deployment, with a commitment to return excess capital to shareholders [12][62] - Investments in digital transformation and product diversification are expected to drive future growth [68] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from rising inflation and a potential recession but expressed confidence in the company's resilience and growth prospects [5][31] - The outlook for 2023 includes expectations for interest rates to rise and continued uncertainty around inflation [31][32] - The company anticipates maintaining a free cash flow ratio of 65% to 75% of adjusted earnings [32] Other Important Information - The effective tax rate on adjusted earnings was approximately 19% for Q4 2022, influenced by favorable tax benefits [24] - The company has a strong capital position, with cash and liquid assets at holding companies totaling $5.4 billion [27][28] Q&A Session Summary Question: Impact of layoffs on group business and PFO growth outlook - Management noted no current impact from layoffs, citing a tight labor market and strong sales momentum [41][42][44] Question: Resilience of MetLife Holdings earnings despite PFO decline - Management explained that earnings resilience is due to LDTI accounting changes and optimization efforts [47][48] Question: Update on VA risk transfer deals - Management stated no change in strategy regarding VA risk transfer deals, focusing on internal optimization [51][52] Question: Mortality experience compared to pre-pandemic levels - Management indicated a shift to an endemic environment with reduced COVID-related mortality impacts [54] Question: RIS spread outlook beyond 2023 - Management discussed the contribution of interest rate caps and the expectation for healthy spreads in 2023 [57][58] Question: Capital deployment strategy amid recession risks - Management confirmed no change in capital deployment philosophy, emphasizing support for organic growth and shareholder returns [60][62] Question: LatAm growth influenced by macro environment - Management highlighted strong franchise strength and low insurance penetration as key growth drivers in Latin America [66][68]