01—Abstract
Summary
Summary of the 8-K filed January 31, 2024. Cited figures are marked; the original filing is the authoritative source.
MetLife's 4Q23 and full-year 2023 results, released January 31, 2024, show a mixed picture: reported GAAP net income fell sharply while underlying adjusted earnings held up.
Full-year GAAP net income available to common shareholders was $1.4 billiona ($1.81 per share), down 71% from $5.1 billion in 2022, largely because of market risk benefit remeasurement losses and investment impairments tied to the Global Atlantic reinsurance transaction. Adjusted earnings available to common shareholders were $5.5 billion ($7.25 per share), up 1%, and excluding total notable items they were $5.6 billion ($7.33 per share), up 4%. Fourth-quarter adjusted earnings excluding notable items rose 14% to $1.4 billion ($1.93 per share), with Group Benefits (+19%) and RIS (+10%) leading, while EMEA and MetLife Holdings declined.
Capital and liquidity were strong. Holding company cash and liquid assets were $5.2 billionb, above the $3.0 to $4.0 billion target, and the combined U.S. RBC ratio was about 400% against a 360% target. Share repurchases totaled $3.1 billion for the year, and the free cash flow ratio was 66% of adjusted earnings, just below the 65% to 75% target range after excluding notable items.
Book value per share rose 7% to $35.85c, though book value excluding AOCI other than FCTA fell 1% to $53.75. Looking ahead, management maintained its 13% to 15% adjusted ROE target and its 65% to 75% free cash flow ratio target, and lowered the full-year direct expense ratio target from 12.6% to 12.3%.
The supplemental slides guide to 2024 variable investment income of about $1.5 billiond, a Corporate & Other adjusted loss of $750 to $850 million, and an effective tax rate of 24% to 26%. They also project 2024 adjusted earnings of $700 to $900 million for MetLife Holdings and adjusted PFO declines of 13% to 15% in that segment, reflecting the November 2023 Global Atlantic reinsurance transaction.
02—Key points
Key Highlights
- Adjusted earnings excluding total notable items were $5.6 billion ($7.33 per share) for FY2023, up 4% per share, while GAAP net income available to common shareholders fell 71% to $1.4 billion ($1.81 per share).
- Q4 2023 adjusted earnings excluding notable items were $1.4 billion ($1.93 per share), up 21% per share, led by Group Benefits (+19%) and RIS (+10%).
- Holding company cash and liquid assets were $5.2 billion at year-end, above the $3.0 to $4.0 billion target; FY2023 share repurchases totaled $3.1 billion.
- Book value per share rose 7% to $35.85, but book value excluding AOCI other than FCTA declined 1% to $53.75.
- The full-year direct expense ratio target was cut from 12.6% to 12.3%, and FY2023 direct expense ratio excluding notable items and PRT came in at 12.2%.
- Near-term targets were maintained: adjusted ROE of 13% to 15% and a free cash flow ratio of 65% to 75% of adjusted earnings; FY2023 FCF ratio was 66%.
- 2024 guidance includes variable investment income of about $1.5 billion, a Corporate & Other adjusted loss of $750 to $850 million, and a 24% to 26% effective tax rate; MetLife Holdings adjusted earnings are expected at $700 to $900 million as the Global Atlantic reinsurance deal weighs on results.
03—Questions
Frequently Asked Questions
Why did GAAP net income fall so sharply in 2023 if adjusted earnings were relatively stable?
GAAP results were hit by items MetLife excludes from adjusted earnings, chiefly net investment losses of $2.8 billion (including impairments tied to the Global Atlantic reinsurance transaction) and net derivative losses of $2.1 billion. Full-year GAAP net income available to common shareholders was $1.4 billion versus $5.1 billion in 2022, while adjusted earnings were $5.5 billion versus $5.8 billion. Investors often focus on adjusted earnings because they strip out market volatility and accounting asymmetries, but the GAAP decline reflects real economic and balance-sheet effects from market movements and the reinsurance deal.
What drove the strong fourth-quarter adjusted earnings growth?
Q4 2023 adjusted earnings excluding notable items were $1.4 billion, up 14% on a reported basis. Group Benefits rose 19% on favorable life underwriting margins and volume growth, and RIS rose 10% on favorable investment and underwriting margins. Latin America grew 13% and Asia 12%, while EMEA fell 27% on an unfavorable tax charge and MetLife Holdings fell 15% due to foregone earnings from the November reinsurance transaction.
Is MetLife's capital position sufficient to support shareholder returns?
Management reports a solid capital position. Holding company cash and liquid assets of $5.2 billion exceed the $3.0 to $4.0 billion target, the combined U.S. RBC ratio was about 400% versus a 360% target, and the Japan solvency margin was about 720%. MetLife repurchased $3.1 billion of stock in 2023 and about $500 million in January 2024, and it expects no material liquidity deficiencies. The free cash flow ratio of 66% for 2023 was within the 65% to 75% target range, although the lower end leaves limited cushion.
What is the outlook for MetLife Holdings and the company's 2024 earnings trajectory?
MetLife Holdings is expected to be a drag in 2024. Its adjusted earnings are guided to $700 to $900 million, and adjusted premiums, fees and other revenues are expected to decline 13% to 15% in 2024 before growing 4% to 6% annually after that, reflecting the November 2023 Global Atlantic reinsurance transaction. Other segments are guided to grow: Asia adjusted earnings are expected to rise about 20% in 2024, and Latin America and EMEA are expected to grow in the high single digits and mid single digits respectively. The filing does not give a consolidated 2024 EPS figure, so investors must build that estimate from segment guidance and the other targets.
04—Continue