Metlife, Inc. · NYSE:MET
Metlife — Investor Day (December 2014)
76 slides from Metlife's investor day presentation, Dec 12, 2014
Slide 1: Outlook Call 2014
Exhibit 99.1 Edward A. Spehar Senior Vice President & Head of Investor Relations December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 2: Cautionary Statement on Forward-Looking Statements and Non-GAAP Financial Information
Cautionary Statement on Forward-Looking Statements and Non-GAAP Financial Information This presentation may contain or incorporate by reference forward-looking statements. Forward-looking statements give expectations or forecasts of future events and use words such as “anticipate,” “estimate,” “expe
Slide 3: Agenda
Agenda Overview Steven A. Kandarian Chairman, President & Chief Executive Officer Americas William J. Wheeler President, Americas Asia Christopher Townsend President, Asia EMEA Michel Khalaf President, Europe, Middle East and Africa Financial Update John C.R. Hele Chief Financial Officer Closing Rem
Slide 4: Detailed Discussion of Business Segments
Detailed Discussion of Business Segments Operating earnings analysis Key sensitivities Near-term opportunities and challenges Near-term guidance on certain key items Long-term outlook See Appendix for non-GAAP financial information, definitions and/or reconciliations. 4
Slide 5: Anticipated Changes in Segment Results for 2015
Anticipated Changes in Segment Results for 2015 Revised capital allocation methodology will impact segment net investment income Certain tax benefits from Corporate & Other to business segments Consumer direct from Corporate & Other to Latin America New expense allocation All anticipated changes to
Slide 6: Steven A. Kandarian, Chairman, President & CEO
Steven A. Kandarian Chairman, President & Chief Executive Officer December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 7: Operating Earnings and ROE Ahead of Strategic Plan
Operating Earnings and ROE Ahead of Strategic Plan Operating Earnings ($ in millions) Highlights 2012-2014 operating earnings $6,261 almost 10% better than strategy $5,649 assumption $4,977 $4,654 Operating ROE at low end of 2016 1 target range in 2013 and 3Q14 YTD Expect to achieve net expense save
Slide 8: External Factors Mixed During 2012-2014
External Factors Mixed During 2012-2014 1 1 Strong Equity Market, but Low Interest Rates Substantial Yen Depreciation vs. U.S. Dollar 2,500 3.5 % ¥140 3.0 2,000 ¥120 2.5 1,500 ¥100 2.0 1,000 ¥80 1.5 500 1.0 ¥60 S&P 500 (left axis) 10-year Treasury yield (right axis) Regulatory Uncertainty Limits Sha
Slide 9: New Share Buyback of up to $1 Billion
New Share Buyback of up to $1 Billion 1 Completed $967 million of $1 billion common stock repurchase program announced in June 2014 Additional share buyback supported by estimated $6 billion of cash and liquid assets at holding companies at year-end 2014 New program consistent with our prudent capit
Slide 10: Goal of Outlook Call
Goal of Outlook Call Improve understanding of MetLife’s business model Provide high quality information and more transparency Focus on multi-year outlook, the driver of shareholder value – Near-term is 2015-2017 – Long-term is beyond 2017 10
Slide 11: Key Near-Term Macro Assumptions
Key Near-Term Macro Assumptions 5% annual appreciation in S&P 500 U.S. interest rates based on consensus and internal forecast – 10-year U.S. Treasury 2.50% at 12/31/14, 3.24% at 12/31/15, 3.80% at 12/31/16 and 4.50% at 12/31/17 Exchange rates at consensus – Yen/$ average of 115 for 2015 and 116 for
Slide 12: William J. Wheeler, President Americas
William J. Wheeler President Americas December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 13: Americas Overview
Americas Overview Near-Term Opportunities Key Strategies Long-Term Outlook and Challenges Return to growth in U.S. Retail Opportunities: Mid- to high single digit Expand Latin America agency Improved Group underwriting growth in Group results and direct marketing Upside in Corporate Benefit Strong g
Slide 14: Americas – Group, Voluntary & Worksite Benefits Operating Earnings Analysis
Americas – Group, Voluntary & Worksite Benefits Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $861 1 Reported notable items : Variable investment income, as compared to plan ($15) Catastrophe experience and prior year development, net ($23) Baseline Operating Ea
Slide 15: Americas – Group, Voluntary & Worksite Benefits Key Sensitivities
Americas – Group, Voluntary & Worksite Benefits Key Sensitivities 1% change in Group Life mortality ratio translates to approximately $40 million of operating earnings 1% change in Non-Medical Health interest adjusted loss ratio translates to approximately $40 million of operating earnings 1% change
Slide 16: Americas – Group, Voluntary & Worksite Benefits Factors Driving Near-Term Outlook
Americas – Group, Voluntary & Worksite Benefits Factors Driving Near-Term Outlook Opportunities Challenges Demand for voluntary Uncertainty due to health care products as responsibility reform shifts to employees Aggressive competitor pricing Emergence of private Modest job gains offset by exchanges
Slide 17: Americas – Group, Voluntary & Worksite Benefits Near-Term Guidance on Certain Key Items
Americas – Group, Voluntary & Worksite Benefits Near-Term Guidance on Certain Key Items Expect growth in operating premiums, fees and other revenues (PFOs) of 2-4% in 2015, with acceleration in 2016-2017 Group Life mortality ratio of 89.7% 1; expect within targeted range of 85-90% Non-Medical Health
Slide 18: Americas – Group, Voluntary & Worksite Benefits Long-Term Outlook
Americas – Group, Voluntary & Worksite Benefits Long-Term Outlook Target market growth for group insurance industry is 2-4% 1 Expect growth in operating PFOs to be 4-7%, while maintaining pricing discipline Operating earnings growth expected to be 6-8% 1 MetLife Group Insurance Markets Analysis (201
Slide 19: Americas – Corporate Benefit Funding Operating Earnings Analysis
Americas – Corporate Benefit Funding Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $1,494 1 Reported notable items : Variable investment income, as compared to plan ($96) Litigation reserves & settlement costs $10 Baseline Operating Earnings $1,408 Estimated imp
Slide 20: Americas – Corporate Benefit Funding Key Sensitivities
Americas – Corporate Benefit Funding Key Sensitivities $1 billion of pension closeout sales translates to approximately $10 million of operating earnings 10 bps increase in LIBOR without any change in longer-term interest rates could reduce operating earnings by $3-$5 million 20 See Appendix for non
Slide 21: Americas – Corporate Benefit Funding Factors Driving Near-Term Outlook
Americas – Corporate Benefit Funding Factors Driving Near-Term Outlook Opportunities Challenges Robust pension risk transfer Uncertain capital rules and market regulatory environment Employer-sponsored Flattening yield curve expected retirement income solutions to pressure investment spreads 21
Slide 22: Americas – Corporate Benefit Funding Near-Term Guidance on Certain Key Items
Americas – Corporate Benefit Funding Near-Term Guidance on Certain Key Items Expect pension risk transfer market to be robust even without any jumbo deals Expect spread compression in 2015-2017 from favorable 2014 results 1 – Investment income spread of 179 bps , with variable investment income cont
Slide 23: Americas – Corporate Benefit Funding Long-Term Outlook
Americas – Corporate Benefit Funding Long-Term Outlook Continued significant and sustained growth in pension risk transfer market About 40% of plan sponsors with frozen plans under $1 billion expect to terminate in next 4 years 1 Expect to maintain top 3 market share position in most major markets (
Slide 24: Americas – Retail Annuities Operating Earnings Analysis
Americas – Retail Annuities Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $1,489 Reported notable items 1: Variable investment income, as compared to plan ($35) Actuarial assumption review and other insurance adjustments $18 Other noteworthy items: Initial marke
Slide 25: Americas – Retail Annuities Key Sensitivities
Americas – Retail Annuities Key Sensitivities 65-70% of the separate account (SA) assets are in equities Operating earnings sensitivity to SA returns: SA Return Initial Market Impact1 Ongoing Market Impact2 +10% +$35 million +$100 million (10%) ($25 million) ($100 million) 10 bps change in the inves
Slide 26: Americas – Retail Annuities Factors Affecting Near-Term Outlook
Americas – Retail Annuities Factors Affecting Near-Term Outlook Opportunities Challenges Full suite of competitive Investment spread Retail annuity products compression Sales growth in all product Continued negative variable lines annuity fund flows Upside from rising interest rates and modest equit
Slide 27: Americas – Retail Annuities Near-Term Guidance on Certain Key Items
Americas – Retail Annuities Near-Term Guidance on Certain Key Items Expect annuity sales to increase more than 50% in 2015, then continue to increase through 2017; balanced product portfolio Expect net flows to improve, but still negative Deferred annuity spread of 283 bps 1; expect 250-270 bps in 2
Slide 28: Americas – Retail Annuities Long-Term Outlook
Americas – Retail Annuities Long-Term Outlook Retail annuity industry sales expected to grow, driven by favorable demographics Expect MetLife’s market share to increase in the near term and then remain stable Growth in operating PFOs and operating earnings of approximately 3-5% per year; dependent o
Slide 29: Americas – Retail Life & Other Operating Earnings Analysis
Americas – Retail Life & Other Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $1,132 Reported notable items 1: Variable investment income, as compared to plan ($51) Catastrophe experience and prior year development, net ($9) Actuarial assumption review and other
Slide 30: Americas – Retail Life & Other Key Sensitivities
Americas – Retail Life & Other Key Sensitivities 1% change in interest adjusted benefit ratio translates to approximately $35 million of operating earnings 1% change in the P&C combined ratio 1 translates to approximately $12 million of operating earnings 1 Includes catastrophes. 30 See Appendix for
Slide 31: Americas – Retail Life & Other Factors Affecting Near-Term Outlook
Americas – Retail Life & Other Factors Affecting Near-Term Outlook Opportunities Challenges Improving sales growth with Expect Closed Block operating new product portfolio earnings to decline in 2015 Speed to market with Pace of market adoption of migration to a new new product solutions administrat
Slide 32: Americas – Retail Life & Other Near-Term Guidance on Certain Key Items
Americas – Retail Life & Other Near-Term Guidance on Certain Key Items Double digit growth in total life sales in 2015, which compares to lower sales in 2014; operating PFOs flat in 2015 Variable & universal life spread of 202 bps 1,2; expect range of 190-200 bps in 2015 and then a modest decline in
Slide 33: Americas – Retail Life & Other Long-Term Outlook
Americas – Retail Life & Other Long-Term Outlook Long-term life industry distribution shift from traditional producers to financial advisors and banks 1 MetLife’s current market share is 3% ; expect share increase with focus on higher growth distribution channels Growth in operating PFOs and operati
Slide 34: Americas – Latin America Operating Earnings Analysis
Americas – Latin America Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $668 1 Reported notable items : 2 Tax adjustments $41 Other noteworthy items: 3 ProVida encaje earnings, as compared to plan ($24) Other tax items ($9) Baseline Operating Earnings $676 Estima
Slide 35: Americas – Latin America Key Sensitivities
Americas – Latin America Key Sensitivities 1% change in Mexican Peso to U.S. dollar exchange rate translates to approximately $5 million of operating earnings 1% change in Chilean Peso to U.S. dollar exchange rate translates to approximately $3 million of operating earnings 1% change in the annual r
Slide 36: Americas – Latin America Factors Driving Near-Term Outlook
Americas – Latin America Factors Driving Near-Term Outlook Opportunities Challenges Growth in employee benefits Regulatory uncertainty across and worksite marketing region Growth in Chile and Chilean pension reform Colombia agency Currency weakness and Direct marketing regional economic growth 36
Slide 37: Americas – Latin America Near-Term Guidance on Certain Key Items
Americas – Latin America Near-Term Guidance on Certain Key Items Mexico and Chile expected to remain at 85% of Latin America operating earnings Expect low double-digit annual growth in operating PFOs Operating earnings growth consistent with growth in operating PFOs as a result of investment in the
Slide 38: Americas – Latin America Long-Term Outlook
Americas – Latin America Long-Term Outlook Anticipate low double digit growth in operating PFOs in the region, in line with market Operating earnings growth expected to be in excess of growth in operating PFOs as a result of: – Momentum in direct marketing – Expansion of employee benefits across the
Slide 39: Christopher Townsend, President Asia
Christopher Townsend President Asia December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 40: Asia Overview
Asia Overview A leading multinational in Asia with operations across 10 markets Clear, consistent strategy to maximize earnings from scale businesses and capitalize on high-growth markets Diversified across currencies, products and channels Expect high single to low double digit operating earnings g
Slide 41: Asia Operating Earnings Analysis
Asia Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $1,277 Reported notable items 1: Variable investment income, as compared to plan ($17) Actuarial assumption review and other insurance adjustments $13 Other noteworthy items: Japan – Excess fixed annuity surrend
Slide 42: Asia Operating Earnings Breakdown
Asia Operating Earnings Breakdown 2014 2017 Japan 85-90% 75-80% Japanese Yen 45-55% U.S. Dollar 30-40% Australian Dollar 10-15% Korea 10-15% 10-15% Rest of Asia* < 3% 10-15% * Emerging markets expected to be less than 2% in 2014 and 6-9% in 2017. 42 See Appendix for non-GAAP financial information, d
Slide 43: Asia Key Sensitivities
Asia Key Sensitivities Annual Impact Solvency on Operating Change Margin Ratio Earnings (%) ($ in millions) Japanese Yen: U.S. Dollar – unhedged basis +/- 1 $4-$5 1 Korean Won: U.S. Dollar +/- 10 $1-$2 10-Year U.S. Government Bond Yield +/- 10 bps $1-$2 5%-10% 10-Year Japanese Government Bond Yield
Slide 44: Asia Factors Driving Near-Term Outlook
Asia Factors Driving Near-Term Outlook Opportunities Challenges Continue to enhance Strengthening of U.S. dollar distribution to drive productivity against Asian currencies Continue to actively manage Regulatory tightening product portfolio Low interest rate environment Expand Health expertise outsi
Slide 45: Asia Near-Term Guidance on Certain Key Items
Asia Near-Term Guidance on Certain Key Items Proportion of protection sales expected to grow from 48% of total Asia sales in 2014 to 50-55% by 2017 Growth in operating PFOs of 5-10% annually on a constant currency basis, with 2015 expected to be at the lower end of the range Distribution expenses ma
Slide 46: Asia Long-Term Outlook
Asia Long-Term Outlook Market growth 1 – Japan 2-3% – Korea 5-6% – Rest of Asia 10-15% Growth in MetLife Asia operating PFOs (constant currency basis) – Japan 4-6% – Korea 6-8% – Rest of Asia 15-20% Operating expenses grow at a slower rate than operating PFOs 1 Source: Swiss Re Country Insurance Mar
Slide 47: Michel Khalaf, President EMEA
Michel Khalaf President Europe, Middle East and Africa December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 48: EMEA Overview
EMEA Overview Leading position in several markets in the Middle East and Central & Eastern Europe Emerging markets expected to comprise close to 80% of EMEA operating earnings over the near term Diversified across geography, product and channel Near-term challenges but long-term growth prospects int
Slide 49: EMEA Operating Earnings Analysis
EMEA Operating Earnings Analysis ($ in millions) 4Q13 – 3Q14 Reported Operating Earnings $366 Reported notable items 1: Actuarial assumption review and other insurance adjustments ($10) Tax adjustments ($11) Other noteworthy items: Conversion of certain operations to calendar year reporting ($11) Ot
Slide 50: EMEA Key Sensitivities
EMEA Key Sensitivities Largest operations Poland, the Gulf and Russia, accounting for roughly half of emerging markets operating earnings in region Operating earnings currency exposure 1 – 45% Euro – 22% Polish Zloty – 15% Russian Ruble – 10% Turkish Lira 1 Based on baseline operating earnings, as a
Slide 51: EMEA Factors Driving Near-Term Outlook
EMEA Factors Driving Near-Term Outlook Opportunities Challenges Growth in emerging markets Strengthening of U.S. dollar Build the MetLife brand in key Regulatory changes markets Political and economic headwinds Capital diversification and cash generation 51
Slide 52: EMEA Near-Term Guidance on Certain Key Items
EMEA Near-Term Guidance on Certain Key Items Sales growth rate in the high single digits, moving to mid-teens Operating PFOs flat to down in 2015 due to FX, conversion of certain operations to calendar reporting and divestitures in 2014 Expect mid- to high single digit growth in operating PFOs in 20
Slide 53: EMEA Long-Term Outlook
EMEA Long-Term Outlook 1 Market growth – Developed 2-4% – Emerging markets 6-8% Growth in MetLife EMEA operating PFOs of 10-12% (constant currency basis) – Developed 4-6% – Emerging markets 12-15% Operating expense growth of mid- to high single digits as more countries reach scale 1 Source: Munich R
Slide 54: John C.R. Hele, Chief Financial Officer
John C.R. Hele Chief Financial Officer December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 55: Financial Update
Financial Update Equity and operating ROE by segment Impact of low interest rates Corporate & Other and taxes Free cash flow (FCF) See Appendix for non-GAAP financial information, definitions and/or reconciliations. 55
Slide 56: Equity and ROE by Segment
Equity and ROE by Segment 1 2,3 2,3 ($ in billions) Equity Operating ROE Tangible ROE Retail Life & Other $8.5 – $8.9 12 – 13% Retail Annuities 11.4 – 12.0 12 – 13% GVWB 5.5 – 5.8 14 – 15% Corporate Benefit Funding 7.1 – 7.4 18 – 19% Latin America 3.5 – 3.7 15 – 16% Americas 36.0 – 37.8 14 – 15% 16
Slide 57: Manageable Impact from Low Interest Rates
Manageable Impact from Low Interest Rates Balance sheet impact if 10-year Treasury at 2% forever – Statutory reserve increase of less than $1 billion – GAAP charge with present value of approximately $3 billion after tax Operating earnings impact if 10-year Treasury at 2% for 2015-2016 – Approximate
Slide 58: Guidance on Corporate & Other and Tax Rate
Guidance on Corporate & Other and Tax Rate Litigation reserve increase related to asbestos cases of $110-$130 million, after tax, in 4Q14 Corporate & Other expected operating loss of $550-$750 million in 2015 Effective tax rate expected to be 26.3% in 2015 58 See Appendix for non-GAAP financial info
Slide 59: FCF Outlook Remains 45-55% of Operating Earnings
FCF Outlook Remains 45-55% of Operating Earnings Free Cash Flow as a % of Operating Earnings 45 - 55% ~40% ~35% 2014 Projection per Current 2014 Current 2015-2017 1 2013 Outlook Call Estimate Projection 1 The bars represent mid-points of ranges. 59 See Appendix for non-GAAP financial information, de
Slide 60: Steven A. Kandarian, Chairman, President & CEO
Steven A. Kandarian Chairman, President & Chief Executive Officer December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 61: Key Takeaways
Key Takeaways Ahead of strategic plan for operating earnings and operating ROE Challenges in 2015 include foreign currency weakness and margin pressure from low interest rates Ongoing effort to improve quality of information for investors Focused on improving free cash flow See Appendix for non-GAAP
Slide 62: MetLife
MetLife
Slide 63: Appendix
Appendix December 12, 2014 OUTLOOK CALL2 0 1 4
Slide 64: Safe Harbor Statement
Safe Harbor Statement This presentation may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events
Slide 65: Safe Harbor Statement (Continued)
Safe Harbor Statement (Continued) policies and procedures; (20) catastrophe losses; (21) increasing cost and limited market capacity for statutory life insurance reserve financings; (22) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributor
Slide 66: Explanatory Note on Non-GAAP Financial Information
Explanatory Note on Non-GAAP Financial Information Any references in this presentation (except in this Explanatory Note on Non-GAAP Financial Information slide and this Appendix) to net income (loss), net income (loss) per share, operating earnings, operating earnings per share, book value per share
Slide 67: Explanatory Note on Non-GAAP Financial Information (Continued)
Explanatory Note on Non-GAAP Financial Information (Continued) The following additional adjustments are made to GAAP expenses, in the line items indicated, in calculating operating expenses: Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividen
Slide 68: Explanatory Note on Non-GAAP Financial Information (Continued)
Explanatory Note on Non-GAAP Financial Information (Continued) MetLife believes the presentation of operating earnings and operating earnings available to common shareholders as MetLife measures it for management purposes enhances the understanding of the company's performance by highlighting the re
Slide 69: Explanatory Note on Non-GAAP Financial Information (Continued)
Explanatory Note on Non-GAAP Financial Information (Continued) Return on MetLife, Inc.'s common stockholders' equity, excluding AOCI other than FCTA is defined as net income (loss) available to MetLife, Inc.’s common shareholders divided by average MetLife, Inc.'s common stockholders' equity, exclud
Slide 70: Definitions
MetLife Definitions
Slide 71: Definitions - Sales
Definitions - Sales Retail: Life Sales: • Statistical sales information for life insurance is calculated by MetLife using the LIMRA definition of sales for core direct sales, excluding company sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placem
Slide 72: Reconciliations
MetLife Reconciliations
Slide 73: Reconciliation of Operating Earnings Available to Common Shareholders to Net Income – Total Company
Reconciliation of Operating Earnings Available to Common Shareholders to Net Income (Loss) Available to MetLife, Inc.’s Common Shareholders –Total Company Nine Months Ended 2011 2012 2013 September 30, 2014 ($ in millions) Operating earnings available to common shareholders $ 4,654 $ 5,649 $ 6,261 $
Slide 74: Reconciliation of Operating Earnings Available to Common Shareholders to Net Income by Segment
Reconciliation of Operating Earnings Available to Common Shareholders to Net Income (Loss) Available to MetLife, Inc.’s Common Shareholders Cumulative Results 4Q13 - 3Q14 Americas Group, Retail Voluntary Corporate Life & Retail & Worksite Benefit Latin Other Annuities Benefits Funding America Asia E
Slide 75: Reconciliation of Return on Common Equity
Reconciliation of Return on Common Equity Nine Months Ended 1 2011 2012 2013 September 30, 2014 Return on Common Equity Operating return on MetLife, Inc.'s: Common stockholders' equity, excluding AOCI other than FCTA 10.1% 11.3% 12.2% 12.2% Common stockholders' equity, excluding AOCI 10.0% 11.2% 11.
Slide 76: MetLife
MetLife