Metlife, Inc. · NYSE:MET
Metlife — Investor Day (December 2008)
170 slides from Metlife's investor day presentation, Dec 8, 2008
Slide 1: MetLife Annual Investor Day December 8, 2008
MetLife, Inc. Annual Investor Day December 8, 2008 Agenda Topic Presenters Registration / Continental Breakfast Outline of Day Conor Murphy Overview C. Robert Henrikson Investments Steven A. Kandarian Finance William J. Wheeler Finance & Investments Q&A William J. Wheeler Steven A. Kandarian Break I
Slide 2: Conor Murphy, Vice President Investor Relations
Conor Murphy Vice President Investor Relations
Slide 3: Safe Harbor Statement
Safe Harbor Statement These materials 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 4: Safe Harbor Statement (Continued)
Safe Harbor Statement (Continued) (x) market value impairments to illiquid assets; (xi) unanticipated changes in industry trends; (xii) heightened competition, including with respect to pricing, entry of new competitors, the development of new products by new and existing competitors and for personn
Slide 5: Explanatory Note on Non-GAAP Financial Information
Explanatory Note on Non-GAAP Financial Information The historical and forward-looking financial information presented at Investor Day and contained in these presentations include performance measures which are based on methodologies other than Generally Accepted Accounting Principles ("GAAP"). MetLi
Slide 6: Explanatory Note on Non-GAAP Financial Information (Continued)
Explanatory Note on Non-GAAP Financial Information (Continued) Operating return on common equity is calculated by dividing operating earnings available to common shareholders by average common equity for the period indicated, excluding accumulated other comprehensive income. For the historical perio
Slide 7: Agenda
Agenda Topic Presenters Registration / Continental Breakfast Outline of Day Conor Murphy Overview C. Robert Henrikson Investments Steven A. Kandarian Finance William J. Wheeler Finance & Investments Q&A Steven A. Kandarian William J. Wheeler Break Institutional William J. Mullaney Individual Lisa We
Slide 8: MetLife
MetLife
Slide 9: C. Robert Henrikson, Chairman, President & CEO
C. Robert Henrikson Chairman, President & Chief Executive Officer
Slide 10: We are Big, Strong, and Trusted
We are Big, Strong, and Trusted
Slide 11: Protecting Our Strength
Protecting Our Strength Reduced our securities lending program
Slide 12: Protecting Our Strength
Protecting Our Strength Reduced our securities lending program Raised capital of $2.3 billion
Slide 13: Protecting Our Strength
Protecting Our Strength Reduced our securities lending program Raised capital of $2.3 billion Continued to hedge our guarantees
Slide 14: Protecting Our Strength
Protecting Our Strength Reduced our securities lending program Raised capital of $2.3 billion Continued to hedge our guarantees Affirmed rating agency strength and outlook
Slide 15: Well Positioned Balance Sheet
Well Positioned Balance Sheet High quality investment portfolio Defensively structured Carefully underwritten Substantial capital To deliver on our promises A platform for growth
Slide 16: Growing Our Franchise through a Flight to Quality
Growing Our Franchise through a Flight to Quality 2002 2003 2004 2005 2006 2007 2008E Revenue 20.3 21.6 22.9 26 28.2 29.8 33 8.9% CAGR2 1Premiums, Fees & Other Revenues. 2Calculated using 2008E mid-point. See Appendix for non-GAAP financial information definitions and/or reconciliations. Total Compa
Slide 17: Institutional: Unique Franchise with Strong Relationships
MetLife A B C D E F G H I Life 5.5 1.1 1 1.1 2.7 1.3 0.7 0.4 0.3 - Dental 5.6 3.9 3.2 - - - - - - - Disability 2.6 1.1 1.1 2.9 0.8 2.1 1.2 0.3 0.2 - LTC 0.2 - - 0.2 0.039 - - - - 0.2 A&H 1.1 0.024 0.095 2007 In-force Premiums & Equivalents Institutional: Unique Franchise with Strong Relationships 60
Slide 18: U.S. Variable Annuities - A Market Leader
U.S. Variable Annuities - A Market Leader A MetLife B C D E F G H I J Sales 10799.6 10489.5 10321.4 9389.2 8886.9 7714.6 7210.3 6901.2 6739.2 6066.8 5872.9 Source: VARDS. See Appendix for non-GAAP financial information definitions and/or reconciliations. 3Q08 YTD Sales $0 $5 $10 $15 ($ Billions)
Slide 19: International - Growing into a Global Company
International - Growing into a Global Company 2000 2001 2002 2003 2004 2005 2006 2007 2008E Revenue 0.7 0.9 1.1 1.7 2.1 2.8 3.6 4.1 4.7 22.5% CAGR 2 1Premiums, Fees & Other Revenues. 2Calculated using 2008E mid-point. Revenue1 ($ Billions)
Slide 20: Operational Excellence
Operational Excellence Building a better and more profitable MetLife At least $400 million of run-rate expense savings expected by 2010 $150 million already captured as of 4Q08 Additional savings driven by: Business initiatives Technology initiatives
Slide 21: Operational Excellence
Operational Excellence Improving effectiveness and efficiency of technology portfolio Sharing expertise and systems across MetLife Using new technology to reduce infrastructure costs Working with strategic vendors to leverage competencies while reducing costs Substantially reducing costs, while inve
Slide 22: Summary
Summary Our capital position is strong Our investment portfolio is defensively positioned We have tremendous growth opportunities We continue to benefit from the flight to quality
Slide 23: MetLife
MetLife
Slide 24: Steven A. Kandarian, EVP & Chief Investment Officer
Steven A. Kandarian Executive Vice President & Chief Investment Officer Investments
Slide 25: Defensively Positioned for Current Environment
Defensively Positioned for Current Environment Identified weaknesses in certain asset sectors early and took action Repositioned portfolio for recession beginning in 2007 Reduced balance sheet leverage and increased liquidity
Slide 26: Market Overview
MetLife Market Overview
Slide 27: 2009 Market View and Themes
2009 Market View and Themes Fundamentals deteriorate Credit Fundamentals deteriorate Real Estate Rates remain low Fed Contained, talk of deflation Inflation Global recession Economy Well ahead of fundamentals Spreads
Slide 28: Spreads are Historically Wide
Spreads are Historically Wide Source: Moody's Investor Service through 11/30/08 AAA CMBS 590 bps 11/28/08 688bps 6/30/32 1,554 bps 11/20/08 Corporate Bond Spreads: 1920 to Present Structured Finance Spreads: 2000 to Present Long-term BBB Rated Corporate Bonds 0 Source: Barclays AAA CMBS Index spread
Slide 29: High Yield Spreads and Default Rates Delinked
High Yield Spreads and Default Rates Delinked Moody's U.S. Speculative Grade Default Rates Barclays U.S. Corporate High Yield 1/31/1987 0.0551 504 2/28/1987 0.0559 480 3/31/1987 0.0591 451 4/30/1987 0.0654 452 5/31/1987 0.0547 422 6/30/1987 0.0531 429 7/31/1987 0.0396 403 8/31/1987 0.037 376 9/30/19
Slide 30: Portfolio Income
MetLife Portfolio Income
Slide 31: Annual Variable Net Investment Income
2003 2004 2005 2006 2007 2008E* 2009P Actual Volatile Income 749 1103 1542 1551 1938 755 596 Alternative Investments Corporate Joint Ventures Hedge Funds Real Estate Development Joint Ventures and Funds Prepayments Corporate Bond Prepayments Commercial Mortgage Prepayments Securities Lending 2009 Pl
Slide 32: Securities Lending Has Declined
Securities Lending Has Declined Lower demand for securities lending Current balance is $26.8 billion as of 11/30/08 $15.8 billion on open (including $15.0 billion of Treasury and Agency securities) Sufficient liquidity to facilitate further reduction 12/31/2007 6/30/2008 9/12/2008 9/30/2008 10/28/20
Slide 33: Alternative Investments Impacted by Current Markets
Alternative Investments Impacted by Current Markets Buy-out and Hedge Funds Buy-out funds unable to generate exits Hedge fund returns impacted by equity market declines, credit spread widening and delevering Other CJV includes Mezzanine, Distress, Infrastructure, Energy & Timber Funds Buy-Out Funds
Slide 34: Portfolio Overview
MetLife Portfolio Overview
Slide 35: MetLife Investments: $305.2 Billion of Managed Assets
Investment Grade Corporate Bonds Structured Finance Commercial and Agricultural Mortgages Cash and Short-Term U.S. Treasury Below Investment Grade Corporate Bonds Real Estate Equity Corporate Equity East 34.9 24.8 16 7.5 5.4 4.6 3.6 3.2 Total Portfolio: Diversified portfolio across many sectors Liab
Slide 36: Proactively Repositioned Portfolio
Proactively Repositioned Portfolio MetLife Portfolio Allocation Trend September 30, 2007 September 30, 2008
Slide 37: High Quality Structured Finance Portfolio
High Quality Structured Finance Portfolio $75.7 billion* Collateral characteristics and tranche selection is critical Less than $200 million of below investment grade structured finance *Market value as of 9/30/08 9/30/2007 9/30/2008 RMBS 0.182 0.154 CMBS 0.061 0.052 ABS 0.036 0.042 Structured Finan
Slide 38: MetLife RMBS Holdings Positioned Conservatively
MetLife RMBS Holdings Positioned Conservatively $10.1 billion* 99.3% AAA rated 41% Super Senior 96% Fixed Rate is key *Market value as of 9/30/2008 **Source: Hybrid ARMs (2003-2007): UBS AG; Loan-to-Value (2003-2007): J.P.Morgan; Credit Enhancement (2005-2007): Fitch Ratings Statistics MetLife* Mark
Slide 39: Non-Agency Prime RMBS MetLife versus Market
Non-Agency Prime RMBS MetLife versus Market Better collateral results in better performance Market C/E* Market 60+ DQ 60+DQ or C/E Level Loan Age in Months *Credit Enhancement as of 9/30/08 Source: Intex; Data as of 9/30/08; Delinquencies weighted by Loan Age, 05-07 Credit Enhancement & Delinquencie
Slide 40: Non-Agency Prime RMBS MetLife versus Market
MET 60+ DQ Non-Agency Prime RMBS MetLife versus Market Better collateral results in better performance MET C/E* Market C/E* Market 60+ DQ 60+DQ or C/E Level Loan Age in Months *Credit Enhancement as of 9/30/08 Source: Intex; Data as of 9/30/08; Delinquencies weighted by Loan Age, 05-07 Credit Enhanc
Slide 41: MetLife RMBS Holdings Positioned Conservatively (Alt-A)
MetLife RMBS Holdings Positioned Conservatively $4.4 billion* 95% AAA or AA rated 83% Super Senior 92.4% of 2006-2007 vintages are Super Senior No Option ARMs and 87% Fixed Rate is key MetLife* Market** Option ARMs 0% 21% Hybrid ARMs 13% 43% Fixed Rate 87% 36% Loan-to-Value 70% 75% Credit Enhancemen
Slide 42: Alt-A RMBS MetLife versus Market
Alt-A RMBS MetLife versus Market Better collateral results in better performance Market C/E* Market 60+ DQ 0% 2% 4% 6% 8% 10% 12% 14% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 60+DQ or C/E Level Loan Age in Months *Credit Enhancement as of 9/30/08 Source: Intex; Data as of 9/30/08; Delinquencies weigh
Slide 43: Alt-A RMBS MetLife versus Market
Alt-A RMBS MetLife versus Market Better collateral results in better performance MET C/E* Market C/E* Market 60+ DQ MET 60+ DQ 60+DQ or C/E Level 0% 2% 4% 6% 8% 10% 12% 14% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Loan Age in Months *Credit Enhancement as of 9/30/08 Source: Intex; Data as of 9/30/08;
Slide 44: MetLife Sub-Prime Holdings Reduced Early
MetLife Sub-Prime Holdings Reduced Early $1.4 billion* Approximately 80% are vintage years 2005 or earlier MetLife credit enhancement is 35.1% vs. 24.0% for ABX 71.8% Fixed Rate vs. 24.2% for ABX is key *Market value and ratings as of 9/30/2008 Sub-Prime MBS Below BBB 3 0 6 0 BBB 38 3 1 0 A 20 0 0 0
Slide 45: Sub-Prime MBS MetLife versus Market
Sub-Prime MBS MetLife versus Market *Credit Enhancement as of 9/30/08 Source: Intex Better collateral results in better performance MetLife ABX Market C/E MetLife C/E 1 0 0 0.2366 0.3273 2 0 0 0.2366 0.3273 3 0.01 0 0.2366 0.3273 4 0.01 0.01 0.2366 0.3273 5 0.02 0.01 0.2366 0.3273 6 0.02 0.02 0.2366
Slide 46: Sub-Prime MBS MetLife versus Market
Sub-Prime MBS MetLife versus Market Better collateral results in better performance MetLife ABX Market C/E MetLife C/E 1 0 0 0.2366 0.351 2 0 0 0.2366 0.351 3 0.01 0 0.2366 0.351 4 0.01 0.01 0.2366 0.351 5 0.02 0.01 0.2366 0.351 6 0.02 0.02 0.2366 0.351 7 0.03 0.04 0.2366 0.351 8 0.03 0.05 0.2366 0.
Slide 47: MetLife's CMBS Positioned for Downturn
MetLife's CMBS Positioned for Downturn $15.9 billion* 24% average credit enhancement for conduits Can withstand 3 times historical maximum loss No exposure to CMBX Only $139 million in CRE CDOs Conduit Single Asset/Large Loan CRE CDO Other East 14653 926 139 145 CMBS Holdings by Type *Market value a
Slide 48: Seasoned, High Quality CMBS Holdings
Seasoned, High Quality CMBS Holdings 78% from 2005 and prior vintages vs. 50% of the market 90% of 2006-2007 vintages are Super Senior and Senior AAA CMBS Holdings by Vintage* Below BBB 99 24 7 0 BBB 61 3 84 9 A 326 29 29 32 AA 619 137 85 45 AAA 7,856 3,260 2,101 1,098 *Market value as of 9/30/08 13
Slide 49: CMBS Price Does Not Convey Full Story
CMBS Price Does Not Convey Full Story Fundamental analysis of bond characteristics is key Focus on the details MetLife Bond* Market Bond* Price $66 $67 Rating Senior AAA Senior AAA Vintage 2007 2007 Interest Only Loans 39.2% 80.4% Loans on Servicer Watch List 6.4% 49.9% MetLife's Projections: MetLif
Slide 50: Reduced Risk in Credit Portfolio
Reduced Risk in Credit Portfolio $120.3 billion* Decreased 'BBB' and Below Investment Grade exposure Approximately 29% private placements 9/30/2007 9/30/2008 AAA/AA/A 0.209 0.212 BBB 0.15 0.1362 Below Inv Grade 0.057 0.0457 Corporate Credit as a % of Managed Assets 41.6% 39.4% $132.6B $120.3B *Marke
Slide 51: Positioned for Recession
Positioned for Recession Began to reposition portfolio for potential recession in 2007 Actively identified, then sold vulnerable securities, loans and mortgages Since October 2007, sold $7.2 billion of assets we believed were vulnerable in a recession Sector Book Value ($ Millions) Investment Grade
Slide 52: Defensively Positioned Below Investment Grade Credit
Defensively Positioned Below Investment Grade Credit $13.9 billion* Reduced below investment grade credit from 5.7%** to 4.6%* Emphasize loss avoidance over yield maximization Higher allocation to BB rated credits BB B CCC and Below Other East 0.62 0.33 0.05 145 Below Investment Grade Credit by Rati
Slide 53: High Quality Real Estate and Agricultural Investments
High Quality Real Estate and Agricultural Investments 9/30/2007 9/30/2008 Commercial Mortgages 0.106 0.1195 Agricultural Mortgages 0.032 0.0406 Real Estate Equity 0.032 0.0357 Real Estate & Agricultural Investments as a % of Managed Assets* $54.1B $59.8B 3.2% 3.2% 10.6% 12.0% 4.1% 3.6% 19.7% 17.0% F
Slide 54: Commercial Mortgage Portfolio Defensively Positioned
2003 2004 2005 2006 2007 2008 YTD MetLife LTV 0.65 0.66 0.63 0.62 0.61 0.55 CMBS LTV 0.723 0.725 0.727 0.73 0.71 0.7 70% CMBS LTV** Average Loan to Value Commercial Mortgage Portfolio Defensively Positioned $35.9 billion* Decreased portfolio LTV as market became more aggressive Underwritten to susta
Slide 55: Positioned to Withstand Value Declines
Positioned to Withstand Value Declines Below 65% LTV 65% to 75% LTV 75-80% LTV Above 80% LTV MetLife LTV 0.66 0.26 0.06 0.02 Significantly different fundamentals vs. early 1990s On-going pruning of higher risk loans Positioned to withstand 40% property value declines Less than 2% of portfolio has LT
Slide 56: Unrealized Loss
MetLife Unrealized Loss
Slide 57: Unrealized Losses Increased Due to Spread Widening
Unrealized Losses Increased Due to Spread Widening $12.2 billion fixed maturity net unrealized loss as of 9/30/08 $16.7 billion gross unrealized loss $4.5 billion gross unrealized gain Approximately 88% fixed maturity gross unrealized losses rated Investment Grade AAA/AA/A BBB BB B CCC and Lower Eas
Slide 58: Spreads Have Increased Dramatically
Spreads over Treasuries Spreads Have Increased Dramatically *Source: Custom index based on actual 9/30/08 fixed maturity allocations using option adjusted spreads from Barclays US Agency, Barclays US Treasury, Barclays US MBS, Barclays US CMBS, Barclays US ABS, Barclays US Credit, Barclays US High Y
Slide 59: Net Unrealized Loss Has Also Increased
Net Unrealized Loss Has Also Increased *Source: Custom index based on actual 9/30/08 fixed maturity allocations using option adjusted spreads from Barclays US Agency, Barclays US Treasury, Barclays US MBS, Barclays US CMBS, Barclays US ABS, Barclays US Credit, Barclays US High Yield indices Market S
Slide 60: Loss Recognition
Loss Recognition Asset Liability Matching We buy assets to match our liabilities Hold the vast majority to maturity Robust process to identify credit impairments Creditworthiness of these securities has not fundamentally changed since 9/30/08 $200 - $300 million estimated Q408 after-tax impairments
Slide 61: Summary
Summary Diversified portfolio across fixed income, real estate, agricultural and equity sectors Focus on risk management, underwriting and proactive portfolio management Defensively positioned for current environment
Slide 62: MetLife
MetLife
Slide 63: William J. Wheeler, EVP & Chief Financial Officer
William J. Wheeler Executive Vice President & Chief Financial Officer
Slide 64: Agenda
Agenda Review of 4th Quarter 2008 Estimated Results Review of Full Year 2008 Estimated Results Review of 2009 Plan Variable Annuities GMIB rider liability Hedging activity MetLife Liquidity and Capital Position
Slide 65: Fourth Quarter 2008 Estimate
Fourth Quarter 2008 Estimate ($ Millions, except per share data) 4th Quarter Operating Earnings ($50) - $150 Operating EPS ($0.05) - $0.20 Realized Gains $1,200 - $1,800 Net Income $1,150 - $1,950 Net Income EPS $1.50 - $2.55 Book Value per Share (including AOCI) $27.25 - $28.25 Book Value per Share
Slide 66: Fourth Quarter 2008 Estimate - Operating Earnings
Fourth Quarter 2008 Estimate - Operating Earnings Solid revenue growth Underwriting results (+/-) Auto & Home prior year development (+) Non-medical Health modestly below plan (-) Investment margins (-) Negative variable investment income (-) Higher cash balances (-) Expenses (+/-) Operating expense
Slide 67: Fourth Quarter 2008 Estimate - Realized Gains
Fourth Quarter 2008 Estimate - Realized Gains Relatively modest credit losses Very substantial derivative gains Interest rate floors Currency
Slide 68: 2008 Operating EPS Estimate
2008 Operating EPS Estimate See Appendix for non-GAAP financial information definitions and/or reconciliations. 2008 Operating EPS Estimated 4th Quarter ($0.05) - $0.20 First 9 Months 2008 $3.56 Estimated Full Year 2008 $3.50 - $3.75
Slide 69: 2008 Financial Review
2008 Financial Review Strong revenue growth: 10.9% increase vs. 2007 Mixed underwriting results: Individual mortality below plan, but not systemic Higher non-medical health claims in 2nd half Auto & Home very strong even with higher catastrophes Investment margins: Below plan variable investment inc
Slide 70: 2008 Operating Earnings Analysis
2008 Operating Earnings Analysis ($ Millions) *Annuity earnings excludes variable income 2008 Plan 2008 Estimate Reported Operating Earnings $4,350 $2,555 - $2,755 Variable Investment Income (996) (450) - (525) Annuity Earnings* (811) (5) - (85) Operational Excellence Charge 0 70 Retirement & Saving
Slide 71: Operating Expenses
Operating Expenses ($ Millions) 2007 2008 Estimate % Change Operating Expenses $9,485 $10,165 - $10,365 7.2% - 9.3% Operating Expense Ratios 31.9% 30.8% - 31.4% DAC Amortization (2,385) (3,115) Operational Excellence 0 (100) MetLife Bank Expenses (48) (175) Adjusted Operating Expenses $7,052 $6,775
Slide 72: 2009 Plan
2009 Plan ($ Millions, except per share data) 2009 Plan Operating Earnings $2,920 - $3,250 Operational Excellence Charges $70 Adjusted Operating Earnings $2,990 - $3,320 Average Shares Outstanding 824.8 Adjusted Operating Earnings per Share $3.60 - $4.00 Book Value per Share (excluding AOCI) $47.20
Slide 73: 2009 Plan Assumptions
2009 Plan Assumptions Revenue growth of 4% to 5% Solid underwriting results Investment spreads: Low variable investment income 5% annual growth in S&P 500 (900 at 12/31/08) Expenses: New expense ratio1 of 21% to 23% Higher pension pre-tax costs of approximately $180 million Operational Excellence pr
Slide 74: Longer Term Financial Outlook
Longer Term Financial Outlook Variable investment income expected to be weak in 2009, but recover modestly in 2010 We are not assuming a rebound in the equity market for 2010 As the environment gradually improves, we expect earnings growth of about 25% in 2010 We project ROE to return to double digi
Slide 75: Operational Excellence
Operational Excellence Enterprise-wide strategic review to build a better and more profitable MetLife 2008 action: $100 million pre-tax charge creating annualized pre-tax expense savings of $150 million 2009 plan: Additional pre-tax charges of $100 million Severance Real Estate and IT-related charge
Slide 76: Operating Earnings by Line of Business
Operating Earnings by Line of Business ($ Millions) 2008 Estimate 2009 Plan Institutional $1,655 - $1,675 $1,600 - $1,660 Individual 545 - 675 850 - 1,050 International 480 - 500 525 - 565 Auto & Home 355 - 375 310 - 330 Corporate & Other (480) - (470) (365) - (355) Total $2,555 - $2,755 $2,920 - $3
Slide 77: Variable Annuities: GMIB
Variable Annuities: GMIB Our U.S. variable annuity business had $92.5 billion of assets at 9/30/08, $75.9 billion in separate accounts and $16.6 billion in the general account Approximately 40% of our variable annuity business has a living benefit rider Approximately 70% of our living benefit riders
Slide 78: "Welcome to the Tail" GMIB Analysis
"Welcome to the Tail1" GMIB Analysis 1Source: Goldman Sachs Global Investments Research report dated 11/11/2008 "Focus on the GMIBs: Under reserved and under hedged? .... we calculate a possible $50 billion liability for the industry on GMIBs ..." "Estimated GMIB Loss - MetLife: 6.288 billion" This
Slide 79: Calculating GMIB Economic Loss
Calculating GMIB Economic Loss Model Assumptions: MetLife: No hedging Hedging offset is significant 100% annuitization as soon as possible We assume quick annuitization, but not 100% day one Seems to assume no lapses since date of issue There are lapses which can be meaningful 100% investment in equ
Slide 80: GMIB Annuity Factor
GMIB Annuity Factor Guaranteed Ratio: determines the payout based on longevity assumptions and interest rates "Welcome to the Tail" Analysis assumes Guaranteed Ratio of 90% using assumptions that differ from MetLife's: Applying a 68% guaranteed ratio, and keeping all other assumptions the same, calc
Slide 81: Variable Annuity Rider Hedging Activity
Variable Annuity Rider Hedging Activity Captive Reinsurer External Reinsurance Hedging MLIC MLI - USA Japan JV Others
Slide 82: Statutory Variable Annuity Rider Reserves
Statutory Variable Annuity Rider Reserves = Hedge Asset and Reinsurance Value 12/31/07 3/31/08 6/30/08 9/30/08 11/30/08 $0.93 $1.14 $0.95 $3.63 $1.94 $2.57 $1.78 $1.70 $6.18 $2.56 ($ Billions)
Slide 83: Statutory Variable Annuity Rider Reserves Sensitivity
S&P 500 @ 896 S&P Down 10% S&P Down 20% Japan JV 0.896 1.061 1.294 GMDB 0.705 1.014 1.845 Living Riders 2.026 2.864 4.37 Statutory Variable Annuity Rider Reserves $3.63 $4.94 $7.51 ($ Billions) $6.18 $6.60 $7.11 11/30/08 = Hedge Asset and Reinsurance Value
Slide 84: Variable Annuity Hedging
Variable Annuity Hedging MetLife has a strong and effective hedge program Why have we been successful? We did what we said we would do (3 Greeks) We hedged our Japanese products Regulation 128 has been adjusted Variable annuity riders and hedging are manageable capital issues
Slide 85: Liquidity
Liquidity Cash At 9/30/08 = $20.2 billion Current balance at 11/30/08 ^ $27 billion Securities lending At 9/30/08 = $41.2 billion Current balance at 11/30/08 = $26.8 billion Lapses in insurance products are declining or stable No debt maturities in the near term
Slide 86: MetLife Capital Position
MetLife Capital Position Low High Combined RBC ratio Year End 2008 Estimate 365 points 400 points Excess capital above 350 $900 $3,000 Excess cash at holding company $1,650 $1,650 Cash from February 2009 convert $1,040 $1,040 Total Excess Capital $3,590 $5,690 ($ Millions)
Slide 87: MetLife Capital Position
MetLife Capital Position The RBC range is primarily affected by the results of C3 Phase 1, which is the stochastic ALM test Due to higher liquidity needs, our general account portfolio duration is relatively short We are currently making some adjustments in our general account to limit the negative
Slide 88: Summary
Summary Earnings power of MetLife is intact Annuity earnings and variable investment income are affecting overall results in the near term Variable annuity hedging has been effective and potential capital impact going forward is manageable Overall capital cushion is strong We are well positioned to
Slide 89: MetLife
MetLife
Slide 90: William J. Mullaney, President Institutional Business
William J. Mullaney President Institutional Business
Slide 91: 2008 Institutional Highlights
2008 Institutional Highlights Excellent top-line growth Solid core earnings Aggressively managed expenses Completed DHMO acquisition
Slide 92: Institutional: 2008 Results and 2009 Plan
Institutional: 2008 Results and 2009 Plan See Appendix for non-GAAP financial information definitions and/or reconciliations.
Slide 93: Institutional Business - Top-Line Growth
Institutional Business - Top-Line Growth 2005 2006 2007 2008E 2009P Group Life 6444 6754 7100 7570 7880 Non-Medical Health 4430 4842 5324 6070 6440 Retirement & Savings 1938 1731 1496 3045 3265 ($ Millions) $12,812 $13,327 $13,920 $17,285 - $17,685 $16,485 - $16,730 05-08 CAGR: +9.0%1 08-09 Growth:
Slide 94: External Forces Impacting Benefits
External Forces Impacting Benefits Financial strength and expertise is more important than ever to our customers Recession leading to reduction in payrolls Cost pressure impacting benefit spending Equity market volatility affecting pension plan funding
Slide 95: Minimizing the Recession Impact: Disability
Minimizing the Recession Impact: Disability Slowed growth through disciplined new business underwriting Factored in an increase in incidence in renewal pricing Expected loss ratio consistent with prior years Focused resources on business fundamentals 2006 2007 2008E Actual 135 112 105 - -22.2% Long
Slide 96: Managing Institutional for Long-term Growth
Managing Institutional for Long-term Growth Unmatched customer relationships Careful risk selection Disciplined pricing Sophisticated asset-liability management
Slide 97: Group Life - Differentiation and Discipline
Group Life - Differentiation and Discipline Comprehensive set of products and services Consultative approach Continuous innovation and investment Sound pricing and underwriting
Slide 98: Group Life - Differentiation and Discipline
2005 2006 2007 2008E Earnings 400 426 463 535 2005 2006 2007 2008E Premiums & Fees 6444 6754 7100 7570 Group Life - Differentiation and Discipline Growing faster than the market; strong ROE 5.5% CAGR1 ($ Millions) ($ Millions) 10.2% CAGR1 See Appendix for non-GAAP financial information definitions a
Slide 99: Growth in the Dental Business
Growth in the Dental Business Double digit top-line growth High ROE Broader product portfolio Preferred Provider Organization (PPO) Dental Health Maintenance Organization (DHMO) Voluntary Retiree Significant opportunities for continued growth
Slide 100: Leveraging Opportunities for Growth
Leveraging Opportunities for Growth Purchase of DHMO capabilities in CA, FL and TX Integrated product offering Expanded distribution 2007 2008E 2009P PPO 116 137 178 DHMO 6 12 24 $122 $149 $202 See Appendix for non-GAAP financial information definitions and/or reconciliations. CA/FL/TX Dental Sales
Slide 101: Pension Closeouts
Pension Closeouts Heightened plan sponsor awareness of risks in managing pensions Greater appreciation for guarantees Expertise even more important 2006 2007 2008E 207.5 147 1583 $208 $147 $1,425 - $1,585 ($ Millions) See Appendix for non-GAAP financial information definitions and/or reconciliations
Slide 102: Institutional Operational Excellence Initiatives
Institutional Operational Excellence Initiatives Market segmentation Broker penetration strategy Distribution enhancements Small market strategy Operational re-engineering Process automation Sourcing of work Process re-engineering Deployment of workflow capabilities
Slide 103: Institutional Business: Focus for 2009
Institutional Business: Focus for 2009 Maintain strong business fundamentals Invest in long-term growth opportunities Aggressively manage expenses Continue to tell our story in the market
Slide 104: MetLife
MetLife
Slide 105: Lisa Weber, President Individual Business
Lisa Weber President Individual Business
Slide 106: 2008 Individual Business Highlights
2008 Individual Business Highlights Strengthened leading VA market position Improved life market share and increased margins Grew affiliated distribution capacity Drove more sales through key third-party firms Improved operational efficiencies
Slide 107: Individual: 2008 Results and 2009 Plan
Individual: 2008 Results and 2009 Plan See Appendix for non-GAAP financial information definitions and/or reconciliations.
Slide 108: External Forces Impacting the Business
External Forces Impacting the Business Regulatory change Shifting distribution Market uncertainty and low consumer confidence Higher hedging and capital costs Underperformance of 401(k) plans Need for trusted advice and guarantees
Slide 109: Annuities - Capturing the Retirement Market
Annuity Sales Annuities - Capturing the Retirement Market #1 in Q3 08 VARDS 11% market share Conservative features See Appendix for non-GAAP financial information definitions and/or reconciliations. 2005 2006 2007 2008E Annuity Sales 12223 15496 16406 17500 ($ Millions) 12.7% CAGR
Slide 110: Annuities - Designed to Deliver Protection
Annuities - Designed to Deliver Protection Annual step-ups Appropriate hedging Reasonable withdrawal benefit Diligent asset management Continuous review of fees and benefit factors "Spreadsheeting the guarantor, not the guarantees"
Slide 111: Life - Growing Share, Driving Margins
Life - Growing Share, Driving Margins #5 in Q3 08 LIMRA 5% market share Rebuilt product portfolio Higher prices at older ages See Appendix for non-GAAP financial information definitions and/or reconciliations. 2005 2006 2007 2008E Life Sales 549 521 540 540 ($ Millions) Life Sales
Slide 112: Third-Party Distribution - "Narrow and Deep"
Third-Party Distribution - "Narrow and Deep"
Slide 113: Affiliated Distribution - Blue-Chip Team
Affiliated Distribution - Blue-Chip Team Strong selection Industry-leading retention Strong local infrastructure Large existing client base High agent productivity Data include MetLife and New England Financial channels. 2005 2006 2007 2008E Salespower 7810 8003 8398 8675 8,650 - 8,700 Agent Headcou
Slide 114: Understanding Client Needs - Keeping it Simple
Understanding Client Needs - Keeping it Simple 59.5 62 70.5 Retirement Ages
Slide 115: Track Record of Success
Track Record of Success Strong Marketing Programs Generate Results Robust data mining State-of-art lead routing system Local infrastructure to support strategies Training, support, and education Clients Served Age Age 2007 2004 1 182 96 2 60 44 3 43 39 4 51 60 5 46 50 6 40 43 7 61 39 8 68 50 9 43 30
Slide 116: Track Record of Success
Track Record of Success Strong Marketing Programs Generate Results Robust data mining State-of-art lead routing system Local infrastructure to support strategies Training, support, and education Clients Served 70 65 Age Age 2007 2004 1 182 96 2 60 44 3 43 39 4 51 60 5 46 50 6 40 43 7 61 39 8 68 50 9
Slide 117: Individual Business Operational Excellence Initiatives
Individual Business Operational Excellence Initiatives Realign field offices and infrastructure around key markets Increase agent productivity Improve distribution profitability Focus on disciplined risk management Ensure appropriate pricing Consolidate administrative functions Extend automated unde
Slide 118: 2009 Key Priorities
2009 Key Priorities Leverage franchise position Maintain sharp focus on expense controls Adjust prices for market volatility Align life sales strategy with market environment Increase distribution productivity and efficiency
Slide 119: Summary
Summary Disciplined product portfolio Diversity of distribution Efficient operations Strong market position Consistent leadership
Slide 120: MetLife
MetLife
Slide 121: Bill Toppeta, President International
Bill Toppeta President International
Slide 122: 2008 International Highlights
2008 International Highlights Strong 2008 results despite challenging environment Growing top and bottom lines Sound strategy and focus on the fundamentals Growth based upon diversification: geographic, business model, product and distribution
Slide 123: Solid Financial Results in a Challenging Environment
Solid Financial Results in a Challenging Environment See Appendix for non-GAAP financial information definitions and/or reconciliations.
Slide 124: Working Toward Greater Regional Diversification
Working Toward Greater Regional Diversification Produces Solid Top-line Growth 1 CAGR based on mid-point 2008E. 2005 2006 2007 2008E LATAM 1583.8 1925.3 2203.7 2461.7 APAC 1070.2 1345.3 1607.2 1700.4 EMEI 130.8 284.7 303.5 410.3 18% CAGR1 $2,785 $3,554 $4,115 $4,525 - $4,625 ($ Millions) Premiums, F
Slide 125: ....and even Faster Bottom-line Growth
....and even Faster Bottom-line Growth 2005 2006 2007 2008E LATAM 172 180 423 377 APAC 51 84 160 143 EMEI -6 -45 -26 -37 29% CAGR1 ($ Millions) Operating Earnings $227 $228 $568 $480 - $500 1 CAGR based on mid-point 2008E. See Appendix for non-GAAP financial information definitions and/or reconcilia
Slide 126: Growing by Focusing on the Fundamentals
Growing by Focusing on the Fundamentals Focusing on middle and mass market consumers Customers Delivering quality risk & protection and retirement & savings products Products Distributing through proprietary channels while utilizing third party distributors Distribution Leveraging MetLife's brand, f
Slide 127: Diversified Business Models - A Source of Strength and Stability
Diversified Business Models - A Source of Strength and Stability Mexico: Government workers Group Life and Major Medical Savings products distributed at the worksite Paid through automatic payroll deduction Chile: Middle and mass market customers Fixed pay-out annuities Group Life and Accident & Hea
Slide 128: 2008 Actions - A Foundation for Growth
2008 Actions - A Foundation for Growth Expanding variable annuities distribution through Nomura Securities and Japan Post Launching distribution of fixed annuities through 7 banks Launching fixed annuities in Korea's 7 largest banks Grew our professional sales force from 4,100 to over 5,000 Expandin
Slide 129: Broad Product Mix Improves Risk Profile
Broad Product Mix Improves Risk Profile Premiums, Fees & Other (2008E) 2009 Group Life 774.2 Group Medical 372.5 UL 491.5 Traditional Life 1154.4 Credit Life 528.5 VA/VUL 621.7 Fixed Annuity 395 Other 367.9
Slide 130: Latin America: Product Innovation Drives Growth
Latin America: Product Innovation Drives Growth Mexico Brazil 19% CAGR1 MetLife Mexico - Sales ($ Millions) 15% CAGR1 MetLife Brazil - Sales ($ Millions) Expanding our product offering with dental Complementing our 5,800 brokers and increasing cross-selling opportunities Growing Individual Major Med
Slide 131: Diversified Distribution Channels Produce Strong and Steady Results
Diversified Distribution Channels Produce Strong and Steady Results Premiums, Fees & Other (2008E) 2009 Banks 833 DM 553 Financial Advisors 404 Institutional 620 Proprietary Agents 962 Mex Gov't 691 WSM 1212 Other 112
Slide 132: Asia Pacific: Distribution Expansion Fuels Growth
Asia Pacific: Distribution Expansion Fuels Growth 1 Growth rate is calculated 2008E mid-point to 2011P mid-point. 2 Source: Korea Ministry of Strategy and Finance as of year end 2005 3 Source: Bank of Japan Flow of Funds - Household Financial Assets as of September 30, 2008 See Appendix for non-GAAP
Slide 133: International Operational Excellence Initiatives
International Operational Excellence Initiatives Drive Top and Bottom-line Growth Removed layers of management eliminating 130 positions Additional reorganization underway in several countries Streamlined International organization structure Exited Direct Marketing in Korea and Mexico Redesigned age
Slide 134: MetLife International is All about Growth
MetLife International is All about Growth Strong 2008 results despite challenging environment Growth based upon diversification: geographic, business model, product and distribution Sound strategy and focus on the fundamentals Growth will continue through 2009-2011: Premiums, Fees & Other CAGR of 18
Slide 135: MetLife
MetLife
Slide 136: Appendix
Appendix
Slide 137: Explanatory Note on Non-GAAP Financial Information
Explanatory Note on Non-GAAP Financial Information The historical and forward-looking financial information presented at Investor Day and contained in these presentations include performance measures which are based on methodologies other than Generally Accepted Accounting Principles ("GAAP"). MetLi
Slide 138: Explanatory Note on Non-GAAP Financial Information (Continued)
Explanatory Note on Non-GAAP Financial Information (Continued) For the historical periods presented, reconciliations of the non-GAAP measures used in the presentations made at Investor Day to the most directly comparable GAAP measures are included in this Appendix and are on the Investor Relations p
Slide 139: Table of Contents
Table of Contents Definitions...............................................................................................5 Reconciliation Reconciliation of Net Income Available to Common Shareholders.....................8 Reconciliation of Book Value per Common Share..............................
Slide 140: Definitions
Definitions
Slide 141: Definitions
Definitions Sales (Total Company): Variable annuity sales are on a VARDS basis. Sales (Institutional): Sales include annualized revenue at issue and initial deposit. Sales (Individual): Variable annuity sales are on a VARDS basis. Fixed annuity and life sales are on a LIMRA basis. Sales (Internation
Slide 142: Reconciliation
Reconciliation
Slide 143: Reconciliation of Net Income to Operating Earnings - Total Company
Reconciliation of Net Income Available to Common Shareholders to Operating Earnings Available to Common Shareholders -Total Company Operating Earnings Available to Common Shareholders -Total Company Operating Earnings Available to Common Shareholders -Total Company
Slide 144: Reconciliation of Net Income per Share to Operating Earnings per Share
Reconciliation of Net Income Available to Common Shareholders per Share to Operating Earnings Available to Common Shareholders per Share - Total Company Operating Earnings Available to Common Shareholders per Share - Total Company Operating Earnings Available to Common Shareholders per Share - Total
Slide 145: Reconciliation of Net Income to Operating Earnings
Reconciliation of Net Income Available to Common Shareholders to Operating Earnings Available to Common Shareholders Operating Earnings Available to Common Shareholders Operating Earnings Available to Common Shareholders
Slide 146: Reconciliation of Net Income to Operating Earnings
Reconciliation of Net Income Available to Common Shareholders to Operating Earnings Available to Common Shareholders Operating Earnings Available to Common Shareholders Operating Earnings Available to Common Shareholders Operating Earnings Available to Common Shareholders Operating Earnings Availabl
Slide 147: Reconciliation of Book Value per Common Share
Reconciliation of Book Value per Common Share Reconciliation of Book Value per Common Share
Slide 148: Reconciliation of Premiums, Fees & Other Revenues
Reconciliation of Premiums, Fees & Other Revenues Reconciliation of Premiums, Fees & Other Revenues
Slide 149: Reconciliation of Operating Expenses and Expense Ratio
Reconciliation of Operating Expenses and Expense Ratio 1 The operating expense ratio is calculated by dividing operating expenses by premiums, fees & other revenues. The operating expense ratio, as presented, is calculated by dividing operating expenses, as presented, by premiums, fees & other reven
Slide 150: Reconciliation of Return on Common Equity
Reconciliation of Return on Common Equity Reconciliation of Return on Common Equity
Slide 151: 2007 Reconciliation of Return on Common Equity
2007 Reconciliation of Return on Common Equity 2007 Reconciliation of Return on Common Equity
Slide 152: Institutional Metrics
Institutional Metrics
Slide 153: Institutional: 2008 Results
Institutional: 2008 Results
Slide 154: Institutional: 2009 Targets
Institutional: 2009 Targets
Slide 155: Institutional: 2007 - 2009 Operating Earnings
Institutional: 2007 - 2009 Operating Earnings
Slide 156: Group Life: Key Metrics
MetLife Group Life: Key Metrics ($ Millions) 20086 Premiums, Fees & Other 7,100 7,555 - 7,585 Operating Earnings 463 525 - 545 Investment Spread 196 bps 230 - 240 bps Mortality Ratio 91.7% 91.0% - 93.0% 2008E 2009P Premiums, Fees & Other 7,555-7,585 7,855 - 7,905 41% Operating Earnings 525 - 545 545
Slide 157: Retirement & Savings: Key Metrics
Retirement & Savings: Key Metrics
Slide 158: Non-Medical Health: Key Metrics
Non-Medical Health: Key Metrics
Slide 159: Individual Metrics
Individual Metrics
Slide 160: Individual: 2008 Results
MetLife Individual: 2008 Results (§ Millions, except headcount) 2007 2008E Premiums, Fees & Other 8,621 8,500 - 8,700 Operating Earnings 1,514 545 - 675 Operating ROE 15.2% 5.2% - 6.4% Sales Variable Annuity Sales 15,135 13,900 - 14,100 Fixed Annuity Sales 1,271 3,300 - 3,700 Life Sales 540 535 - 54
Slide 161: Individual: 2009 Targets
MetLife Individual: 2009 Targets ($ Millions, except headcount) 2008E 2009P Growth Rate’ Premiums, Fees & Other 8,500- 8,700 8,150 - 8,450 3.5% Operating Earnings 545 - 675 850 - 1,050 55.7% Operating ROE 5.2% - 6.4% 7.8% - 9.6% Sales Variable Annuity Sales 13,900 - 14,100 15,300 - 15,600 Fixed Annu
Slide 162: Individual: 2007 - 2009 Operating Earnings
Individual: 2007 - 2009 Operating Earnings
Slide 163: Individual: 2007 - 2009 Premiums, Fees & Other
Individual: 2007 - 2009 Premiums, Fees & Other
Slide 164: International Metrics
International Metrics 29
Slide 165: International: 2008 Results
International: 2008 Results
Slide 166: International: 2009 Targets
International: 2009 Targets
Slide 167: Auto & Home Metrics
Auto & Home Metrics
Slide 168: Auto & Home: 2008 Results
MetLife Auto & Home: 2008 Results ($ Millions) 2007 2008E Premiums, Fees & Other 3,009 3,010 - 3,020 Operating Earnings 426 355 - 375 Operating ROE 30.1% 19.5% - 20.6% Drivers Expense Ratio (0.5pp) - (1.0pp) 3
Slide 169: Auto & Home: 2009 Targets
MetLife Auto & Home: 2009 Targets ($ Millions) 2008E 2009P Growth Rate’ Premiums, Fees & Other 3,010 - 3,020 3,010 - 3,110 1.5% Operating Earnings 355 - 375 310 - 330 12.3% Operating ROE 19.5%- 20.6% 16.9%- 18.0% Combined Ratio 90.5% -92.5% 92.5%- 94.5% Drivers Exposures In-force 0.5% - 1.5% Expense
Slide 170: MetLife
MetLife