01—Abstract
Summary
Summary of the 10-K filed February 16, 2024. Cited figures are marked; the original filing is the authoritative source.
MetLife's FY2023 10-K shows a year of heavy portfolio and reserving adjustment.
GAAP net income available to common shareholders fell to $1.4 billiona from $5.1 billion in 2022, driven mainly by $2.8 billion of net investment losses (including impairments tied to a reinsurance transaction and the pending MetLife Malaysia sale) and a higher effective tax rate of 26%. Adjusted earnings available to common shareholders, the company's preferred management measure, declined more modestly to $5.5 billion from $5.8 billion, with adjusted earnings down $268 million on a reported basis, pressured by higher interest crediting rates and lower variable investment income, partly offset by volume growth and favorable mortality in Group Benefits. The balance sheet remains substantial: total assets of $687.6 billion, total equity of $30.3 billion, and a Statement-Based Combined RBC Ratio above 380% for principal U.S. insurance subsidiaries.
Management reported $5.2 billionb of holding company cash and liquid assets against a $3.0-3.0 billion to $4.0 billion target, and free cash flow of all holding companies of $3.6 billion, a 66% ratio to adjusted earnings. Shareholder returns continued, with $3.1 billion of share repurchases and $1.6 billion of common dividends paid in 2023, leaving $2.1 billion of authorization remaining at year-end.
Key items for investors include the adoption of LDTI accounting (ASU 2018-12) effective January 1, 2023, which restated prior-period comparatives, the November 2023 risk transfer reinsurance of an in-force MetLife Holdings block to Global Atlantic, the Q4 2023 reorganization into six segments, and an ongoing asbestos reserve increase to $364 millionc. Management's 2024 outlook calls for a 13%-15% adjusted return on equity target and a 65%-75% free cash flow conversion ratio over the near term.
02—Key points
Key Highlights
- GAAP net income available to common shareholders declined to $1.38 billion ($1.81 diluted EPS) from $5.10 billion ($6.30) in 2022, mainly due to $2.82 billion of net investment losses and a 26% effective tax rate.
- Adjusted earnings available to common shareholders were $5.53 billion versus $5.79 billion in 2022, a $268 million decline on a reported basis; adjusted premiums, fees and other revenues fell 7% to $51.97 billion.
- Total assets reached $687.6 billion and total equity $30.3 billion at December 31, 2023; the Statement-Based Combined RBC Ratio exceeded 380% for principal U.S. insurance subsidiaries.
- Holding company liquidity was $5.2 billion versus a $3.0-$4.0 billion target; free cash flow of all holding companies was $3.6 billion (66% of adjusted earnings available to common shareholders).
- Capital returns totaled $4.7 billion in 2023 ($3.1 billion in share repurchases and $1.6 billion in common dividends), with $2.1 billion of repurchase authorization remaining.
- Segment adjusted earnings: Group Benefits $1.66 billion (up 24%), RIS $1.71 billion, Asia $1.28 billion (down 21%), Latin America $840 million (up 15%), EMEA $265 million, MetLife Holdings $733 million (down 29%).
- The company adopted LDTI accounting effective January 1, 2023 with a January 1, 2021 transition date, which restated prior-period results and changed the calculation of adjusted earnings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 16, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $66.91B$68.77B | −2.7% |
| Operating Expenses | $12.71B$11.86B | +7.2% |
| Operating Income | $5.72B$5.98B | −4.3% |
| Interest Expense | $740.00M$655.00M | +13.0% |
| Net Income | $1.60B$5.30B | −69.8% |
| EPS (Basic) | $1.82$6.35 | −71.3% |
| EPS (Diluted) | $1.81$6.30 | −71.3% |
| Shares Outstanding (Basic) | 757.70M803.20M | −5.7% |
| Shares Outstanding (Diluted) | 762.30M808.90M | −5.8% |
05—Questions
Frequently Asked Questions
Why did GAAP net income fall so sharply in 2023 while adjusted earnings held up?
GAAP results include items that MetLife excludes from adjusted earnings, notably net investment losses of $2.82 billion (driven by impairments on investments disposed of in a reinsurance transaction, a pending MetLife Malaysia impairment and interest-rate-related securities losses) and net derivative losses of $2.14 billion. Market risk benefit remeasurement was a gain of $994 million, partially offsetting these. The effective tax rate also rose to 26% from 17%. Adjusted earnings strip out most of this market-driven volatility, so the underlying business declined far less.
How strong is MetLife's capital and liquidity position?
Liquidity appears solid. Holding company liquid assets were $5.2 billion at year-end 2023, above the company's $3.0-$4.0 billion target, and the company reported short-term liquidity of $19.2 billion and total liquid assets of $182.6 billion. Principal U.S. insurance subsidiaries reported Statement-Based Combined RBC Ratios above 380%. The company also states it expects to maintain its holding company cash target in 2024 and does not anticipate material liquidity deficiencies.
What are the main risks flagged for investors?
The 10-K highlights interest rate sensitivity (a 50 basis point move in rates is estimated to affect 2024-2026 adjusted earnings by $50 million to $148 million, depending on direction and year), exposure to Level 3 fair value assets (about $32.9 billion of fixed maturity securities), mortgage loan and commercial real estate credit quality, ongoing asbestos litigation (with the recorded liability raised to $364 million), a material weakness related to group annuity reserves disclosed in 2018 with continuing regulatory inquiries, and a pending Brighthouse separation tax risk. Regulatory changes in Chile's pension system and cybersecurity rules in New York are also noted.
What does the company expect for 2024?
Management maintains its near-term adjusted return on equity target of 13% to 15%, expects to maintain a two-year average free cash flow to adjusted earnings ratio of 65% to 75%, and lowered its full-year direct expense ratio target from 12.6% to 12.3%. It also expects to exceed its goals of approximately $20.0 billion of cumulative free cash flow over 2020-2024. Its outlook assumes a 10-year U.S. Treasury rate of 3.84% at year-end 2024 and S&P 500 returns of 5% over the near term.
06—Continue