01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
MetLife's 2011 Form 10-K (filed February 28, 2012) reports a year of strong earnings recovery, driven mainly by a $4.8 billiona net derivative gain and the first full year of ALICO results.
Net income attributable to MetLife, Inc. was $6.98 billionb (vs. $2.79 billion in 2010), and net income available to common shareholders was $6.71 billion, or $6.29 diluted EPS. Operating earnings rose 38.6% to $5.48 billion, and operating earnings available to common shareholders rose 39.8% to $5.36 billion. Total revenues grew 34.4% to $70.3 billion, largely reflecting the ALICO acquisition completed November 1, 2010.
The balance sheet expanded to $799.6 billionc in total assets, and stockholders' equity rose to $59.8 billion. Management also disclosed a planned reorganization into three geographic regions, the sale of most of MetLife Bank's depository business, and an exit from forward residential mortgage origination, with additional charges of $90 million to $110 million after tax expected in 2012. A pending DAC accounting change (ASU 2010-26) is expected to reduce DAC by $3.1 billion to $3.6 billion and total equity by $2.1 billion to $2.4 billion when adopted in Q1 2012.
Investors should also note the Federal Reserve did not approve the proposed 2011 capital actions under CCAR 2011, and that the company's exposure to European sovereign debt was reduced substantially during 2011. Key risks include interest-rate sensitivity of spread-based products and variable annuity guarantees, Japan currency and earthquake-related exposure, litigation (including asbestos and unclaimed property audits covering more than 30 U.S. jurisdictions), and regulatory uncertainty from Dodd-Frank and potential non-bank SIFI designation.
02—Key points
Key Highlights
- Net income attributable to MetLife, Inc. of $6.98 billion in 2011, up from $2.79 billion in 2010, driven primarily by a $5.1 billion favorable swing in net derivative gains (to $4.82 billion).
- Operating earnings increased 38.6% to $5.48 billion; operating earnings available to common shareholders rose 39.8% to $5.36 billion, reflecting the ALICO acquisition.
- Total revenues increased 34.4% to $70.3 billion and total assets reached $799.6 billion; general account investments of about $522 billion.
- Diluted EPS of $6.29 for 2011 versus $3.00 in 2010; dividends of $0.74 per common share were maintained.
- Planned exit from MetLife Bank's depository business and forward mortgage origination, with $212 million of 2011 after-tax charges and $90–110 million more expected in 2012.
- DAC accounting change under ASU 2010-26 expected to cut DAC by $3.1–3.6 billion and equity by $2.1–2.4 billion upon Q1 2012 adoption.
- Federal Reserve did not approve the proposed dividend increase and other capital actions under CCAR 2011; a new comprehensive capital plan was submitted in January 2012.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $70.24B$52.25B | +34.4% |
| Operating Expenses | $18.54B$12.93B | +43.4% |
| Operating Income | $6.13B$2.50B | +145.1% |
| Interest Expense | $975.00M$1.55B | −37.1% |
| Net Income | $6.42B$2.67B | +140.8% |
| EPS (Basic) | $5.81$2.88 | +101.7% |
| EPS (Diluted) | $5.76$2.86 | +101.4% |
| Shares Outstanding (Basic) | 1.06B882.44M | +20.1% |
| Shares Outstanding (Diluted) | 1.07B889.57M | +20.1% |
05—Questions
Frequently Asked Questions
Why did net income rise so sharply in 2011?
The largest driver was a favorable change of about $5.1 billion in net derivative gains (losses) before tax, which moved from a $265 million loss in 2010 to a $4.82 billion gain in 2011, mainly because long- and mid-term interest rates fell and equity markets moved. Operating earnings also increased by $1.5 billion, largely from the ALICO acquisition, which was included for a full year in 2011 versus one month in 2010.
What is the status of MetLife Bank and how will it affect the company?
MetLife agreed in December 2011 to sell most of MetLife Bank's depository business, expected to close in Q2 2012, and in January 2012 announced its exit from forward residential mortgage origination. Once the depository business is fully exited, MetLife plans to terminate FDIC insurance and deregister as a bank holding company. The company expects $90–110 million of additional after-tax charges in 2012 and says there is no expected impact on operating earnings.
How exposed is MetLife to European sovereign debt and Japan?
As of December 31, 2011, sovereign exposure to Europe's perimeter region (Portugal, Ireland, Italy, Greece, Spain) was reduced to $264 million of fair value after the company sold a significant portion of these holdings during 2011, and it recorded $405 million of impairments on Greek sovereign debt. Japan is a significant exposure: the company's Japan fixed maturity and equity investments totaled $28.4 billion, with 74% in Japanese government and agency securities, and its Japan operation was affected by the March 2011 earthquake and tsunami.
What regulatory and legal risks should investors watch?
Key risks include potential designation as a non-bank systemically important financial institution under Dodd-Frank, which could subject MetLife to enhanced prudential standards; Basel III and Solvency II capital changes; consent decrees related to mortgage servicing; ongoing unclaimed property audits in more than 30 U.S. jurisdictions and a $117 million after-tax reserve charge taken in Q3 2011 related to the Death Master File; and asbestos-related claims against MLIC, with 66,747 claims pending at year-end 2011.
How much capital and dividend flexibility does MetLife have?
At year-end 2011, MetLife, Inc.'s total RBC ratio as a bank holding company was 10.25% and its Tier 1 leverage ratio was 5.32%, both above regulatory minimums. Stockholders' equity was $59.8 billion, and $1.3 billion remained under the common stock repurchase authorization. The common dividend was $0.74 per share ($787 million aggregate) in 2011. The Federal Reserve did not approve the proposed 2011 capital actions, so future dividend increases and buybacks remain subject to its review of the 2012 capital plan.
06—Continue