01—Abstract
Summary
Summary of the 10-K filed February 18, 2022. Cited figures are marked; the original filing is the authoritative source.
MetLife's 2021 Form 10-K, filed February 18, 2022, reports a year of strong earnings recovery and capital return against a backdrop of COVID-19 underwriting pressure.
Net income available to common shareholders rose to $6.35 billiona ($7.31 diluted EPS) from $5.19 billion in 2020, and adjusted earnings available to common shareholders increased $2.3 billion to $7.95 billion. Drivers included higher private equity and real estate returns, growth in net investment income on a larger asset base, and lower interest credited expenses, partly offset by roughly $1.2 billion of unfavorable underwriting tied to COVID-19 mortality and dental claims. Reported net income was also helped by the $1.0 billion after-tax gain on the April 2021 sale of MetLife P&C, though divestitures reduced adjusted earnings by $322 million.
Capital and liquidity remained strong. Holding company cash and liquid assets stood at $5.4 billionb, above the company's $3.0-$4.0 billion target. MetLife repurchased $4.3 billion of common stock during 2021 and paid $1.6 billion in common dividends, and it reported a Statement-Based Combined RBC ratio above 360%.
Free cash flow of all holding companies was $3.8 billionc, equal to 48% of adjusted earnings available to common shareholders, below the prior year's 71%. Management targets a 65%-75% two-year average free cash flow conversion, a 12%-14% adjusted ROE, and roughly $20 billion of cumulative free cash flow over 2020-2024. Investors should weigh several risks.
Mortality and underwriting pressure from the pandemic persisted, the Next Horizon strategy relies on continued portfolio returns, and the company faces interest-rate sensitivity in MetLife Holdings and Japan, along with legacy risks such as asbestos litigation (about 58,800 pending claims), variable annuity guarantees, and an ongoing ex-MetLife Holdings run-off. The company also disclosed previously identified material weaknesses tied to group annuity reserves and assumed variable annuity reserves, and it is subject to several regulatory and derivative-demand investigations.
02—Key points
Key Highlights
- Net income available to common shareholders rose to $6.35 billion, or $7.31 per diluted share, versus $5.19 billion ($5.68) in 2020; adjusted earnings available to common shareholders grew 42% to $7.95 billion.
- Net investment income increased to $21.4 billion from $17.1 billion, reflecting strong private equity and real estate returns and a larger invested asset base.
- Capital return was substantial: $4.3 billion of share repurchases and $1.6 billion of common dividends, with $1.5 billion remaining under the August 2021 $3.0 billion repurchase authorization.
- Holding company liquidity was $5.4 billion at year-end, above the $3.0-$4.0 billion target; the company expects to remain at or above the high end of that range in 2022.
- Free cash flow of all holding companies was $3.8 billion (48% of adjusted earnings available to common shareholders), down from $4.0 billion (71%) in 2020.
- Underwriting was unfavorable, with about $1.2 billion of adjusted earnings headwind from COVID-19-related mortality and dental claims, while the sale of MetLife P&C closed in April 2021 for a $1.0 billion after-tax gain.
- The company reported a Statement-Based Combined RBC ratio above 360%, and it has a 2022 outlook calling for an 12%-14% adjusted ROE target and approximately $20 billion of free cash flow over 2020-2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 18, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $68.70B$67.84B | +1.3% |
| Operating Expenses | $12.02B$13.15B | −8.6% |
| Interest Expense | $647.00M$632.00M | +2.4% |
| Net Income | $6.88B$5.42B | +26.9% |
| EPS (Basic) | $7.71$5.72 | +34.8% |
| EPS (Diluted) | $7.65$5.68 | +34.7% |
| Shares Outstanding (Basic) | 862.70M907.80M | −5.0% |
| Shares Outstanding (Diluted) | 869.40M913.20M | −4.8% |
05—Questions
Frequently Asked Questions
How did MetLife's profitability change in 2021?
GAAP net income available to common shareholders increased to $6.35 billion from $5.19 billion, and adjusted earnings available to common shareholders rose $2.3 billion to $7.95 billion. Higher investment yields from private equity and real estate, growth in net investment income, and lower interest credited expenses drove the improvement, partially offset by COVID-19 underwriting losses and the MetLife P&C disposition.
How much capital did MetLife return to shareholders, and what remains available?
In 2021 MetLife repurchased $4.3 billion of common stock and paid $1.6 billion in common dividends, plus $195 million in preferred dividends and $494 million to redeem Series C preferred stock. At year-end, $1.5 billion remained under the August 2021 $3.0 billion repurchase authorization, subject to Board discretion and capital, liquidity, and regulatory constraints.
What are the main risks to MetLife's earnings and capital?
Key risks include interest rate movements affecting investment spread and derivative results, equity market declines affecting variable annuity guarantees, elevated mortality and dental claims from COVID-19, litigation and regulatory investigations (including asbestos claims and the Total Asset Recovery qui tam action), and Chilean pension reform. The filing also discloses previously identified material weaknesses related to group annuity reserves and assumed variable annuity reserves, along with ongoing securities and derivative-related litigation that was largely dismissed or remains under review.
What is MetLife's outlook and near-term financial targets?
Management targets a two-year average free cash flow to adjusted earnings ratio of 65%-75%, an adjusted ROE of 12%-14% excluding AOCI other than FCTA, a direct expense ratio below 12.3%, and about $20 billion of free cash flow over 2020-2024. These targets exclude COVID-19 assumptions for 2022, and the company will continue to monitor interest rates, which it expects to rise in 2022.
What are the pending or recent portfolio transactions that affect future results?
MetLife completed the sale of MetLife P&C in April 2021, MetLife Seguros in September 2021, and MetLife Russia in January 2021, and sold MetLife Greece in January 2022. The sale of MetLife Poland is pending and expected to close in the first half of 2022. The company also agreed to increase its stake in PNB MetLife India to approximately 47%, subject to regulatory approvals.
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