METLIFE INC quarterly report, Q1 FY2022

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MetLife, Inc. — Q1 2022 Form 10-Q

Business context and period. MetLife is a global insurer and financial services company with U.S., Asia, Latin America, EMEA and MetLife Holdings segments, plus Corporate & Other. This unaudited report covers the three months ended March 31, 2022; interim results are not necessarily indicative of full-year performance.

Financial results and position

  • Revenue and earnings: GAAP total revenue was $15.8 billion, up 1.2% from $15.6 billion. Net income was $674 million versus $363 million; net income available to common shareholders was $606 million versus $290 million. Diluted EPS was $0.73 versus $0.33. The calculated common-shareholder net margin was approximately 3.8% versus 1.9%.
  • Adjusted results: Adjusted earnings available to common shareholders, a non-GAAP measure, fell to $1.727 billion from $1.965 billion (about 12%). Adjusted premiums, fees and other revenues increased to $12.732 billion from $11.413 billion.
  • Key revenue and expense drivers: Net investment income declined to $4.284 billion from $5.314 billion. Policyholder benefits and claims and dividends increased to $11.391 billion from $10.770 billion. Interest credited fell to $630 million from $1.351 billion. GAAP income before tax was $715 million versus $291 million.
  • Cash flow: Operating activities provided $1.954 billion, compared with $1.496 billion. Investing activities used $426 million versus $1.054 billion; financing activities provided $1.951 billion versus using $564 million. Cash and cash equivalents ended the quarter at $23.488 billion, up from $20.047 billion at year-end.
  • Balance sheet, debt and liquidity: Total assets were $724.3 billion, down from $759.7 billion at December 31, 2021. Total equity declined to $54.2 billion from $67.7 billion; MetLife stockholders’ equity was $54.0 billion versus $67.5 billion. Short-term debt was $323 million, long-term debt $13.848 billion and junior subordinated debt $3.156 billion. Management reported short-term liquidity of $12.8 billion and liquid assets of $205.6 billion, excluding pledged or otherwise committed assets.
  • Investment marks: Fixed maturity AFS securities were $320.1 billion at fair value versus $340.3 billion at year-end. Net unrealized investment gains attributable to MetLife fell to $5.2 billion from $17.7 billion; the filing attributes substantial unrealized losses to higher interest rates and wider credit spreads. These changes contributed to the sharp decline in equity and comprehensive income.

Changes versus the prior comparable period

  • GAAP common earnings rose by $316 million, principally because net derivative losses improved by $1.376 billion, partly offset by a $652 million deterioration in net investment gains and losses. Derivative results remained negative: a loss of $859 million versus $2.235 billion.
  • Adjusted earnings available to common shareholders fell $238 million. Management cited weaker returns on private equity and hedge funds, lower investment yields and higher expenses; larger average invested assets and favorable underwriting, including fewer COVID-19-related claims, partially offset these pressures.
  • Adjusted earnings varied by segment: U.S. $693 million (down from $784 million); Asia $580 million (down from $623 million); Latin America $142 million (up from $40 million); EMEA $52 million (down from $71 million); MetLife Holdings $377 million (down from $618 million). Corporate & Other adjusted loss was $54 million versus $103 million.

Outlook, risks and unusual items

  • Outlook and commentary: No consolidated earnings guidance was provided in the supplied filing text. Management expects MetLife Holdings adjusted premiums, fees and other revenues to decline approximately 6%–8% annually due to runoff. Management said it believes liquidity is ample for business needs under current conditions and reasonably possible stress scenarios.
  • Market and operating risks: The company highlighted inflation, rising interest rates, potential economic slowdown, COVID-19 uncertainty, Russia’s invasion of Ukraine and related sanctions, currency movements, investment volatility, credit losses, and the sensitivity of insurance guarantees and derivatives to market changes. Russian and Ukrainian sovereign and corporate securities generated credit-loss allowances during the quarter.
  • Disposition: MetLife recorded an additional expected loss of $32 million after tax on the Poland and Greece sales in Q1; the total expected sale loss was $246 million after tax. Greece’s sale closed in January 2022 and Poland’s in April 2022.
  • Accounting transition: MetLife expects to adopt the long-duration insurance accounting standard on January 1, 2023. It anticipates a reduction in total equity, with impacts still under evaluation.
  • Legal matters: The estimated aggregate range of reasonably possible losses above accrued amounts for matters where a range could be estimated was $0–$125 million. Losses for other matters could not be estimated; the company cautioned that adverse outcomes could materially affect results or cash flows in particular periods.
  • Capital returns: MetLife repurchased $915 million of common stock and paid $397 million of common dividends in Q1. On May 4, 2022, the board authorized an additional $3.0 billion in repurchases. Repurchases and dividends remain subject to board discretion, regulatory restrictions and capital and liquidity needs.

Most important facts for investors to verify

  • Whether the improvement in GAAP earnings reflects durable operating performance or largely period-to-period derivative and market movements; compare it with the decline in adjusted earnings.
  • How rising rates and credit spreads affect realized losses, AOCI, equity, statutory capital and liquidity, and whether any securities must be sold before recovery.
  • Investment portfolio credit quality and exposure to Russia, Ukraine, real estate and private equity; review the adequacy of credit-loss allowances and the $9.5 billion of gross unrealized losses on securities without an allowance.
  • The evolving cost and effectiveness of hedges and the exposure to variable-annuity guarantees, including policyholder behavior and counterparty risks.
  • Progress and estimated equity impact of the 2023 long-duration insurance accounting adoption, and the final financial effects of the Poland disposition.
  • Developments in litigation and regulatory inquiries, including asbestos claims and matters involving reserve-estimation controls; some potential losses remain unquantifiable.