MetLife, Inc. (NYSE:MET) today announced the following results
for the second quarter 2016:
Second Quarter Results
On a GAAP basis, MetLife reported second quarter 2016 net income
of $64 million, or $0.06 per share.
Net income includes a non-cash charge resulting from the
company's annual review of actuarial assumptions for the Retail
variable annuities business. As previously disclosed, MetLife
accelerated its 2016 annual variable annuity actuarial assumption
review from the third quarter to the second quarter in light of the
company's previously announced plan to separate a substantial
portion of its U.S. Retail business. As a result of this review,
MetLife has recorded a non-cash charge to net income of $2.0
billion, net of deferred acquisition costs and after tax.
Approximately $1.5 billion of this charge is attributable to
changes in policyholder behavior assumptions and the remainder is
related to changes in economic and other actuarial assumptions.
Consistent with past practice, MetLife will conduct the
remainder of its annual actuarial assumption review, which
addresses products other than variable annuities, in the third
quarter.
Net derivative losses were $1.4 billion, after tax. This
includes $2.4 billion, after tax, in derivative losses as a result
of the annual Retail variable annuity actuarial assumption review,
partially offset by $725 million, after tax, in derivative gains,
related to changes in interest rates and foreign currencies, and
$330 million, after tax, in derivative gains, resulting from other
variable annuity derivatives and hedging. MetLife uses derivatives
as part of its broader asset-liability management strategy to hedge
certain risks, such as movements in interest rates, and foreign
currencies. This hedging activity often generates derivative gains
or losses and creates fluctuations in net income because the risk
being hedged may not have the same GAAP accounting treatment.
MetLife reported operating earnings* of $924 million, down 48
percent from the second quarter of 2015, and 47 percent on a
constant currency basis*. On a per share basis, operating earnings
were $0.83, down 47 percent from the prior year quarter. Operating
earnings in the Americas decreased 42 percent, and 41 percent on a
constant currency basis. Operating earnings in Asia decreased 39
percent, and 41 percent on a constant currency basis. Operating
earnings in Europe, the Middle East and Africa (EMEA) increased 28
percent, and 36 percent on a constant currency basis.
Second quarter 2016 operating earnings included the following
items:
- reserve adjustments primarily resulting
from modeling improvements in the reserving process, mainly in
Retail, which decreased operating earnings by $257 million, or
$0.23 per share, after tax
- the annual Retail variable annuity
actuarial assumption review, which decreased operating earnings by
$161 million, or $0.15 per share, after tax
- an adjustment to reinsurance
receivables in Australia, which decreased operating earnings by $44
million, or $0.04 per share, after tax
- unfavorable catastrophe experience,
which decreased operating earnings by $15 million, or $0.01 per
share, after tax
- variable investment income below the
company’s 2016 quarterly plan range by $9 million, or $0.01 per
share, after tax, and the impact of deferred acquisition costs
(DAC)
The second quarter variance between operating earnings and net
income reflects a favorable impact of $1.8 billion, after-tax,
related to asymmetrical and non-economic accounting.
“Second quarter results were negatively impacted by market
factors, our annual variable annuity actuarial assumption review,
and reserve adjustments resulting from modeling improvements in our
reserving process,” said Steven A. Kandarian, chairman, president
and CEO, MetLife, Inc. “At the same time, we continued to make
significant progress on actions intended to create long-term
shareholder value, including our Accelerating Value initiative and
the planned separation of a substantial portion of the U.S. Retail
business.”
SECOND QUARTER 2016 SUMMARY
($ in millions, except per share data)
Three months ended June 30 2016
2015 Change Total revenues $ 15,244 $
16,166 (6 )% Premiums, fees & other revenues $ 12,190 $ 12,264
(1 )% Total operating revenues $ 16,955 $ 17,360 (2 )% Operating
premiums, fees & other revenues $ 12,074 $ 12,175 (1 )%
Net income $ 64 $ 1,042 (94 )% Net income per share $ 0.06 $ 0.92
(93 )% Operating earnings $ 924 $ 1,765 (48 )% Operating
earnings per share $ 0.83 $ 1.56 (47 )% Book value per share
$ 70.18 $ 60.27 16 %
Book value per share, excluding
accumulated other comprehensive income(AOCI) other than foreign
currency translation adjustments (FCTA)
$ 53.20 $ 50.73 5 % Book value per share – tangible common
stockholders’ equity $ 43.98 $ 41.73 5 % Return on equity
(ROE), excluding AOCI other than FCTA
0.4%
7.4%
Tangible ROE
0.6%
9.1%
Operating ROE, excluding AOCI other than FCTA
6.3%
12.5%
Operating tangible ROE
7.7%
15.3%
*Information regarding the non-GAAP and
other financial measures included in this news release and the
reconciliation of the non-GAAP financial measures to GAAP measures
is provided in the Non-GAAP and Other Financial Disclosures
discussion below, as well as in the tables that accompany this news
release and/or the Second Quarter 2016 Financial Supplement (which
is available on the MetLife Investor Relations Web page at
www.metlife.com).
MetLife’s operating ROE, excluding AOCI other than FCTA*, was
6.3 percent for the second quarter of 2016, and the company’s
operating tangible ROE* was 7.7 percent.
Operating premiums, fees & other revenues* were $12.1
billion, down 1 percent on both a reported and on a constant
currency basis over the second quarter of 2015.
Book value, excluding AOCI other than FCTA*, was $53.20 per
share, up 5 percent from $50.73 at June 30, 2015.
BUSINESS DISCUSSIONS
All comparisons of the results for the second quarter of 2016 in
the business discussions that follow are with the second quarter of
2015, unless otherwise noted.
THE AMERICAS
Total operating earnings for the Americas were $835 million,
down 42 percent, and 41 percent on a constant currency basis,
primarily due to the previously mentioned reserve adjustments
resulting from modeling improvements in the reserving process and
the annual variable annuity actuarial assumption review. Excluding
these and the remaining notable items identified in the second
quarter 2016 Financial Supplement, operating earnings were down 12
percent, and 11 percent on a constant currency basis, due to
unfavorable underwriting results and lower investment margins.
Operating return on allocated equity was 8.6 percent, and operating
return on allocated tangible equity was 9.6 percent. Operating
premiums, fees & other revenues were $9.3 billion, up 1
percent, and 3 percent on a constant currency basis. Excluding
pension risk transfers, operating premiums, fees & other
revenues were down 1 percent, but up 1 percent on a constant
currency basis.
Retail
Operating earnings for Retail were $184 million, down 73
percent, primarily due to the previously mentioned reserve
adjustments resulting from modeling improvements in the reserving
process and the annual variable annuity actuarial assumption
review. Excluding these and the remaining notable items identified
in the second quarter 2016 Financial Supplement, operating earnings
were down 17 percent, due to unfavorable underwriting results and
lower investment margins. Operating premiums, fees & other
revenues were $3.1 billion, down 6 percent. Retail life sales* were
down 8 percent, and Retail annuity sales were down 21 percent.
Group, Voluntary & Worksite
Benefits
Operating earnings for Group, Voluntary & Worksite Benefits
were $221 million, down 4 percent, due to higher auto claims and
lower investment margins. Operating premiums, fees & other
revenues were $4.6 billion, up 4 percent, due to increases in both
group and voluntary products. Group, Voluntary & Worksite
Benefits sales were up 25 percent.
Corporate Benefit Funding
Operating earnings for Corporate Benefit Funding were $302
million, down 26 percent, primarily due to lower investment margins
as well as a portion of the previously mentioned reserve
adjustments resulting from modeling improvements in the reserving
process. Operating premiums, fees & other revenues were $650
million, up 43 percent, due to higher pension risk transfers in the
quarter. Excluding pension risk transfers, operating premiums, fees
& other revenues were up 1 percent.
Latin America
Operating earnings for Latin America were $128 million, up 10
percent, and 36 percent on a constant currency basis. Operating
earnings were driven by volume growth, lower expenses and improved
underwriting margins. Operating premiums, fees & other revenues
were $994 million, down 9 percent, but up 4 percent on a constant
currency basis. Total sales for the region increased 29 percent on
a constant currency basis, primarily due to a large employee
benefit sale in Mexico.
ASIA
Operating earnings for Asia were $259 million, down 39 percent,
and 41 percent on a constant currency basis. Volume growth was
offset by unfavorable tax-related adjustments in Japan, the
previously mentioned adjustment to reinsurance receivables in
Australia and lower fixed annuity surrenders. In the second quarter
of 2015, operating earnings in Asia included a $61 million benefit
from a tax rate change in Japan. Operating return on allocated
equity was 9.4 percent, and operating return on allocated tangible
equity was 16.2 percent. Operating premiums, fees & other
revenues in Asia were $2.1 billion, down 8 percent, and 13 percent
on a constant currency basis. Excluding the impact of the
deconsolidation of our India operations and the withdrawal in Japan
of single premium accident & health Yen products in 2015,
operating premiums, fees & other revenues were down 5 percent
on a constant currency basis. Total sales for the region were down
3 percent on a constant currency basis, reflecting the impact of
management’s actions to improve value in targeted markets. This
includes actions in Japan, such as the planned reduction in Yen
life sales and a shift to sales of foreign currency life policies.
Excluding Japan, Asia sales were up 19 percent, driven by
Australia, Hong Kong and Korea.
EMEA
Operating earnings for EMEA were $64 million, up 28 percent, and
36 percent on a constant currency basis, driven by lower expenses
and volume growth. Operating return on allocated equity was 7.9
percent, and operating return on allocated tangible equity was 13.8
percent. Operating premiums, fees & other revenues were $633
million, down 4 percent, and 1 percent on a constant currency
basis. Excluding certain one-time items, operating premiums, fees
& other revenues were up 3 percent on a constant currency
basis. Total sales for the region increased 10 percent on a
constant currency basis, mainly driven by growth in employee
benefits and accident & health products.
INVESTMENTS
Net investment income was $4.9 billion, down 6 percent. Variable
investment income was $285 million ($186 million, after tax and
DAC), compared with $427 million ($278 million, after tax and DAC)
in the second quarter of 2015 due to alternative investment income
that was below plan.
The previously mentioned after tax, non-cash charge resulting
from the company’s annual variable annuity actuarial assumption
review drove derivative net losses of $1.5 billion, after tax.
Derivative net losses in the second quarter of 2015 were $721
million, after tax.
CORPORATE & OTHER
Corporate & Other had an operating loss of $234 million
compared with an operating loss of $153 million in the second
quarter of 2015, primarily due to lower investment margins.
Conference Call
MetLife will hold its second quarter 2016 earnings conference
call and audio webcast on Thursday, Aug. 4, 2016, from 8-9 a.m.
(EDT). The conference call will be available live via telephone and
the Internet. To listen via telephone, dial 800-401-8436 (U.S.) or
612-288-0340 (outside the U.S.). To listen to the conference call
via the Internet, visit www.metlife.com through a link on the
Investor Relations page. Those who want to listen to the call via
telephone or the Internet should dial in or go to the website at
least 15 minutes prior to the call to register, and/or download and
install any necessary audio software.
The conference call will be available for replay via telephone
and the Internet beginning at 10 a.m. (EDT) on Thursday, Aug. 4,
2016, until Thursday, Aug. 11, 2016, at 11:59 p.m. (EDT). To listen
to a replay of the conference call via telephone, dial 800-475-6701
(U.S.) or 320-365-3844 (outside the U.S.). The access code for the
replay is 370609. To access the replay of the conference call over
the Internet, visit the above-mentioned website.
A brief video of CFO John Hele discussing second quarter 2016
results can be viewed shortly after the conclusion of MetLife’s
second quarter 2016 earnings conference call and audio webcast on
Thursday, Aug. 4, at www.metlife.com/earningsvideo.
About MetLife
MetLife, Inc. (NYSE:MET), through its subsidiaries and
affiliates (“MetLife”), is one of the largest life insurance
companies in the world. Founded in 1868, MetLife is a global
provider of life insurance, annuities, employee benefits and asset
management. Serving approximately 100 million customers, MetLife
has operations in nearly 50 countries and holds leading market
positions in the United States, Japan, Latin America, Asia, Europe
and the Middle East. For more information, visit
www.metlife.com.
Non-GAAP and Other Financial
Disclosures
Any references in this news release
(except in this section and the tables that accompany this release)
to:
should be read as, respectively: (i)
net income (loss); (i) net income (loss) available to
MetLife, Inc.’s common shareholders; (ii) net income (loss) per
share; (ii) net income (loss) available to MetLife, Inc.’s common
shareholders per diluted common share; (iii) operating earnings;
(iii) operating earnings available to common shareholders; (iv)
operating earnings per share; (iv) operating earnings available to
common shareholders per diluted common share; (v) book value per
share; (v) book value per common share; (vi) book value per share,
excluding AOCI other than FCTA; (vi) book value per common share,
excluding AOCI other than FCTA; (vii) book value per share-tangible
common stockholders’ equity; (vii) book value per common
share-tangible common stockholders’ equity; (viii)
premiums, fees and other revenues;
(viii)
premiums, fees and other revenues
(operating);
(ix) operating return on equity, excluding AOCI other than FCTA;
and (ix) operating return on MetLife, Inc.’s common stockholders’
equity, excluding AOCI other than FCTA; and (x) operating tangible
return on equity. (x) operating return on MetLife, Inc.’s tangible
common stockholders’ equity.
In this news release, MetLife presents certain measures of its
performance that are not calculated in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”). MetLife believes that these non-GAAP financial measures
enhance the understanding of MetLife’s performance by highlighting
the results of operations and the underlying profitability drivers
of the business. The following non-GAAP financial measures should
not be viewed as substitutes for the most directly comparable
financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:
Comparable GAAP financial
measures:
(i) operating revenues; (i) revenues; (ii) operating
expenses; (ii) expenses; (iii)
operating premiums, fees and other
revenues;
(iii)
premiums, fees and other revenues;
(iv) operating earnings; (iv) income (loss) from continuing
operations, net of income tax; (v) operating earnings available to
common shareholders; (v) net income (loss) available to MetLife,
Inc.’s common shareholders; (vi) operating earnings available to
common shareholders, adjusted for total notable items; (vi) net
income (loss) available to MetLife, Inc.’s common shareholders;
(vii) operating earnings available to common shareholders per
diluted common share; (vii) net income (loss) available to MetLife,
Inc.’s common shareholders per diluted common share; (viii)
operating return on equity;
(viii)
return on equity;
(ix) investment portfolio gains (losses); (ix) net investment gains
(losses); (x) derivative gains (losses); (x) net derivative gains
(losses); (xi) MetLife, Inc.’s tangible common stockholders’
equity; (xi) MetLife, Inc.’s stockholders’ equity; (xii) MetLife,
Inc.’s tangible common stockholders’ equity, adjusted for total
notable items; (xii) MetLife, Inc.’s stockholders’ equity; (xiii)
MetLife, Inc.’s common stockholders’ equity, excluding AOCI other
than FCTA; (xiii) MetLife, Inc.’s stockholders’ equity; (xiv)
MetLife, Inc.’s common stockholders’ equity, excluding AOCI other
than FCTA, adjusted for total notable items; and (xiv) MetLife,
Inc.’s stockholders’ equity; and (xv) free cash flow of all holding
companies. (xv) MetLife, Inc.’s net cash provided by (used in)
operating activities.
Reconciliations of these measures to the most directly
comparable GAAP measures are included in this earnings news release
and in this period’s quarterly financial supplement.
MetLife’s definitions of the various non-GAAP and other
financial measures discussed in this news release may differ from
those used by other companies:
Operating earnings is the measure of segment profit or loss that
MetLife uses to evaluate segment performance and allocate
resources. Consistent with GAAP guidance for segment reporting,
operating earnings is MetLife’s measure of segment performance.
Operating earnings is also a measure by which MetLife senior
management’s and many other employees’ performance is evaluated for
the purposes of determining their compensation under applicable
compensation plans.
Operating earnings is defined as operating revenues less
operating expenses, both net of income tax. Operating earnings
available to common shareholders is defined as operating earnings
less preferred stock dividends.
Operating revenues and operating expenses exclude results of
discontinued operations and other businesses that have been or will
be sold or exited by MetLife and are referred to as divested
businesses. In addition, for the three months ended March 31, 2016
and for the year to date period ended June 30, 2016, operating
revenues and operating expenses exclude the financial impact of
converting MetLife’s Japan operations to calendar-year end
reporting without retrospective application of this change to prior
periods and is referred to as lag elimination. Operating revenues
also excludes net investment gains (losses) (NIGL) and net
derivative gains (losses) (NDGL). Operating expenses also excludes
goodwill impairments.
The following additional adjustments are made to revenues, in
the line items indicated, in calculating operating revenues:
- Universal life and investment-type
product policy fees excludes the amortization of unearned revenue
related to NIGL and NDGL and certain variable annuity guaranteed
minimum income benefits (GMIB) fees (GMIB fees);
- Net investment income: (i) includes
earned income on derivatives and amortization of premium on
derivatives that are hedges of investments or that are used to
replicate certain investments but do not qualify for hedge
accounting treatment, (ii) includes income from discontinued real
estate operations, (iii) excludes post-tax operating earnings
adjustments relating to insurance joint ventures accounted for
under the equity method, (iv) excludes certain amounts related to
contractholder-directed unit-linked investments, and (v) excludes
certain amounts related to securitization entities that are
variable interest entities (VIEs) consolidated under GAAP; and
- Other revenues are adjusted for
settlements of foreign currency earnings hedges.
The following additional adjustments are made to expenses, in
the line items indicated, in calculating operating expenses:
- Policyholder benefits and claims and
policyholder dividends excludes: (i) changes in the policyholder
dividend obligation related to NIGL and NDGL, (ii)
inflation-indexed benefit adjustments associated with contracts
backed by inflation-indexed investments and amounts associated with
periodic crediting rate adjustments based on the total return of a
contractually referenced pool of assets and other pass through
adjustments, (iii) benefits and hedging costs related to GMIBs
(GMIB costs), and (iv) market value adjustments associated with
surrenders or terminations of contracts (Market value
adjustments);
- Interest credited to policyholder
account balances includes adjustments for earned income on
derivatives and amortization of premium on derivatives that are
hedges of policyholder account balances but do not qualify for
hedge accounting treatment and excludes amounts related to net
investment income earned on contractholder-directed unit-linked
investments;
- Amortization of DAC and value of
business acquired (VOBA) excludes amounts related to: (i) NIGL and
NDGL, (ii) GMIB fees and GMIB costs and (iii) Market value
adjustments;
- Amortization of negative VOBA excludes
amounts related to Market value adjustments;
- Interest expense on debt excludes
certain amounts related to securitization entities that are VIEs
consolidated under GAAP; and
- Other operating expenses excludes costs
related to: (i) noncontrolling interests, (ii) implementation of
new insurance regulatory requirements, and (iii) acquisition,
integration and other costs.
Operating earnings also excludes the recognition of certain
contingent assets and liabilities that could not be recognized at
acquisition or adjusted for during the measurement period under
GAAP business combination accounting guidance. In addition to the
tax impact of the adjustments mentioned above, provision for income
tax (expense) benefit also includes the impact related to the
timing of certain tax credits, as well as certain tax reforms.
The following additional information is relevant to an
understanding of MetLife’s performance results:
- MetLife, Inc.’s tangible common
stockholders’ equity or tangible equity - MetLife, Inc.’s common
stockholders’ equity, excluding the net unrealized investment gains
(losses) and defined benefit plans adjustment components of AOCI
reduced by the impact of goodwill, value of distribution agreements
(VODA) and value of customer relationships acquired (VOCRA), all
net of income tax.
- MetLife, Inc.’s common stockholders’
equity, excluding AOCI other than FCTA - MetLife, Inc.’s common
stockholders’ equity, excluding the net unrealized investment gains
(losses) and defined benefit plans adjustment components of AOCI,
net of income tax.
- Allocated equity - portion of MetLife,
Inc.’s common stockholders’ equity that management allocates to
each of its segments and sub-segments based on local capital
requirements and economic capital. Economic capital is an
internally developed risk capital model, the purpose of which is to
measure the risk in the business and to provide a basis upon which
capital is deployed. MetLife management periodically reviews this
model to ensure that it remains consistent with emerging industry
practice standards and the local capital requirements; allocated
equity may be adjusted if warranted by such review. Allocated
equity excludes the impact of AOCI other than FCTA.
- Operating return on MetLife, Inc.'s
common stockholders' equity, excluding AOCI other than FCTA -
operating earnings available to common shareholders divided by
MetLife, Inc.'s average common stockholders' equity, excluding AOCI
other than FCTA.
- Operating return on MetLife, Inc.'s
tangible common stockholders' equity - operating earnings available
to common shareholders, excluding amortization of VODA and VOCRA,
net of income tax, divided by MetLife, Inc.'s average tangible
common stockholders' equity.
- Operating return on MetLife, Inc.'s
common stockholders' equity - operating earnings available to
common shareholders divided by MetLife, Inc.'s average common
stockholders' equity.
- Return on MetLife, Inc.'s common
stockholders' equity, excluding AOCI other than FCTA - net income
(loss) available to MetLife, Inc.’s common shareholders divided by
MetLife, Inc.'s average common stockholders' equity, excluding AOCI
other than FCTA.
- Return on MetLife, Inc.’s tangible
common stockholders' equity - net income (loss) available to
MetLife, Inc.’s common shareholders, excluding goodwill impairment
and amortization of VODA and VOCRA, net of income tax, divided by
MetLife, Inc.'s average tangible common stockholders' equity.
- Return on MetLife, Inc.’s common
stockholders’ equity - net income (loss) available to MetLife,
Inc.’s common shareholders divided by MetLife, Inc.’s average
common stockholders’ equity.
- Operating return on allocated equity -
operating earnings available to common shareholders divided by
allocated equity.
- Operating return on allocated tangible
equity - operating earnings available to common shareholders,
excluding amortization of VODA and VOCRA, net of income tax,
divided by allocated tangible equity.
- Return on allocated equity - net income
(loss) available to MetLife, Inc.’s common shareholders divided by
allocated equity.
- Return on allocated tangible equity -
net income (loss) available to MetLife, Inc.’s common shareholders,
excluding amortization of VODA and VOCRA, net of income tax,
divided by allocated tangible equity.
- Operating expense ratio - calculated by
dividing operating expenses (other expenses, net of capitalization
of DAC) by operating premiums, fees and other revenues.
- Statistical sales information for
Retail- Life sales are calculated 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 placement variable universal life insurance.
Annuity sales consist of statutory premiums direct and assumed,
excluding company sponsored internal exchanges. Sales statistics do
not correspond to revenues under GAAP, but are used as relevant
measures of business activity.
- Statistical sales information for Latin
America, Asia and EMEA - calculated using 10% of single-premium
deposits (mainly from retirement products such as variable annuity,
fixed annuity and pensions), 20% of single-premium deposits from
credit insurance and 100% of annualized full-year premiums and fees
from recurring-premium policy sales of all products (mainly from
risk and protection products such as individual life, accident
& health and group). Sales statistics do not correspond to
revenues under GAAP, but are used as relevant measures of business
activity.
- All comparisons on a constant currency
basis reflect the impact of changes in foreign currency exchange
rates and are calculated using the average foreign currency
exchange rates for the current period and are applied to each of
the comparable periods.
- Volume growth, as discussed in the
context of business growth, is the period over period percentage
change in operating earnings available to common shareholders
attributable to operating premiums, fees and other revenues and
assets under management levels, applying a model in which certain
margins and factors are held constant. The most significant of
such items are underwriting margins, investment margins, changes in
equity market performance, expense margins and the impact of
changes in foreign currency exchange rates.
- Asymmetrical and non-economic
accounting refer to: (i) the portion of net derivative gains
(losses) on embedded derivatives attributable to the inclusion of
MetLife’s credit spreads in the liability valuations, (ii) hedging
activity that generates net derivative gains (losses) and creates
fluctuations in net income because hedge accounting cannot be
achieved and the item being hedged does not a have an offsetting
gain or loss recognized in earnings, (iii) inflation-indexed
benefit adjustments associated with contracts backed by
inflation-indexed investments and amounts associated with periodic
crediting rate adjustments based on the total return of a
contractually referenced pool of assets and other pass through
adjustments, and (iv) impact of changes in foreign currency
exchange rates on the re-measurement of foreign denominated
unhedged funding agreements and financing transactions to the U.S.
dollar and the re-measurement of certain liabilities from
non-functional currencies to functional currencies.
- MetLife uses a measure of free cash
flow to facilitate an understanding of its ability to generate cash
for reinvestment into its businesses or use in discretionary
capital actions. MetLife defines free cash flow as the sum of cash
available at MetLife’s holding companies from dividends from
operating subsidiaries, expenses and other net flows of the holding
companies, and net contributions from debt to be at or below target
leverage ratios. This measure of free cash flow is prior to
discretionary capital deployment, including common stock dividends
and repurchases, debt reduction and mergers and acquisitions. Free
cash flow should not be viewed as a substitute for net cash
provided by (used in) operating activities calculated in accordance
with GAAP. The free cash flow ratio is typically expressed as a
percentage of annual operating earnings available to common
shareholders.
Forward-Looking Statements
This news release 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. These statements can be identified by
the fact that they do not relate strictly to historical or current
facts. They use words such as “anticipate,” “estimate,” “expect,”
“project,” “intend,” “plan,” “believe” and other words and terms of
similar meaning, or are tied to future periods, in connection with
a discussion of future operating or financial performance. In
particular, these include statements relating to future actions,
prospective services or products, future performance or results of
current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings,
trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties. Many such factors will be
important in determining the actual future results of MetLife,
Inc., its subsidiaries and affiliates. These statements are based
on current expectations and the current economic environment. They
involve a number of risks and uncertainties that are difficult to
predict. These statements are not guarantees of future performance.
Actual results could differ materially from those expressed or
implied in the forward-looking statements. Risks, uncertainties,
and other factors that might cause such differences include the
risks, uncertainties and other factors identified in MetLife,
Inc.’s filings with the U.S. Securities and Exchange Commission.
These factors include: (1) difficult conditions in the global
capital markets; (2) increased volatility and disruption of the
global capital and credit markets, which may affect our ability to
meet liquidity needs and access capital, including through our
credit facilities, generate fee income and market-related revenue
and finance statutory reserve requirements and may require us to
pledge collateral or make payments related to declines in value of
specified assets, including assets supporting risks ceded to
certain of our captive reinsurers or hedging arrangements
associated with those risks; (3) exposure to global financial and
capital market risks, including as a result of the disruption in
Europe and possible withdrawal of one or more countries from the
Euro zone; (4) impact on us of comprehensive financial services
regulation reform, including potential regulation of MetLife, Inc.
as a non-bank systemically important financial institution, or
otherwise; (5) numerous rulemaking initiatives required or
permitted by the Dodd-Frank Wall Street Reform and Consumer
Protection Act which may impact how we conduct our business,
including those compelling the liquidation of certain financial
institutions; (6) regulatory, legislative or tax changes relating
to our insurance, international, or other operations that may
affect the cost of, or demand for, our products or services, or
increase the cost or administrative burdens of providing benefits
to employees; (7) adverse results or other consequences from
litigation, arbitration or regulatory investigations; (8) our
ability to address difficulties, unforeseen liabilities, asset
impairments, or rating agency actions arising from (a) business
acquisitions and integrating and managing the growth of such
acquired businesses, (b) dispositions of businesses via sale,
initial public offering, spin-off or otherwise, (c) entry into
joint ventures, or (d) legal entity reorganizations; (9) potential
liquidity and other risks resulting from our participation in a
securities lending program and other transactions; (10) investment
losses and defaults, and changes to investment valuations; (11)
changes in assumptions related to investment valuations, deferred
policy acquisition costs, deferred sales inducements, value of
business acquired or goodwill; (12) impairments of goodwill and
realized losses or market value impairments to illiquid assets;
(13) defaults on our mortgage loans; (14) the defaults or
deteriorating credit of other financial institutions that could
adversely affect us; (15) economic, political, legal, currency and
other risks relating to our international operations, including
with respect to fluctuations of exchange rates; (16) downgrades in
our claims paying ability, financial strength or credit ratings;
(17) a deterioration in the experience of the closed block
established in connection with the reorganization of Metropolitan
Life Insurance Company; (18) availability and effectiveness of
reinsurance or indemnification arrangements, as well as any default
or failure of counterparties to perform; (19) differences between
actual claims experience and underwriting and reserving
assumptions; (20) ineffectiveness of risk management policies and
procedures; (21) catastrophe losses; (22) increasing cost and
limited market capacity for statutory life insurance reserve
financings; (23) heightened competition, including with respect to
pricing, entry of new competitors, consolidation of distributors,
the development of new products by new and existing competitors,
and for personnel; (24) exposure to losses related to variable
annuity guarantee benefits, including from significant and
sustained downturns or extreme volatility in equity markets,
reduced interest rates, unanticipated policyholder behavior,
mortality or longevity; (25) regulatory and other restrictions
affecting MetLife, Inc.’s ability to pay dividends and repurchase
common stock; (26) MetLife, Inc.’s primary reliance, as a holding
company, on dividends from its subsidiaries to meet its free cash
flow targets and debt payment obligations and the applicable
regulatory restrictions on the ability of the subsidiaries to pay
such dividends; (27) the possibility that MetLife, Inc.’s Board of
Directors may influence the outcome of stockholder votes through
the voting provisions of the MetLife Policyholder Trust; (28)
changes in accounting standards, practices and/or policies; (29)
increased expenses relating to pension and postretirement benefit
plans, as well as health care and other employee benefits; (30)
inability to protect our intellectual property rights or claims of
infringement of the intellectual property rights of others; (31)
difficulties in marketing and distributing products through our
distribution channels; (32) provisions of laws and our
incorporation documents may delay, deter or prevent takeovers and
corporate combinations involving MetLife; (33) the effects of
business disruption or economic contraction due to disasters such
as terrorist attacks, cyberattacks, other hostilities, or natural
catastrophes, including any related impact on the value of our
investment portfolio, our disaster recovery systems, cyber- or
other information security systems and management continuity
planning; (34) the effectiveness of our programs and practices in
avoiding giving our associates incentives to take excessive risks;
and (35) other risks and uncertainties described from time to time
in MetLife, Inc.’s filings with the U.S. Securities and Exchange
Commission.
MetLife, Inc. does not undertake any obligation to publicly
correct or update any forward-looking statement if MetLife, Inc.
later becomes aware that such statement is not likely to be
achieved. Please consult any further disclosures MetLife, Inc.
makes on related subjects in reports to the U.S. Securities and
Exchange Commission.
MetLife, Inc. GAAP Interim Condensed Consolidated
Statements of Operations (Unaudited)
For the Three Months Ended For the Six
Months Ended June 30, June 30, 2016 2015
2016 2015 (In millions) (In
millions)
Revenues Premiums $ 9,417 $ 9,312 $ 19,110 $
18,565 Universal life and investment-type product policy fees 2,286
2,434 4,630 4,828 Net investment income 4,887 4,947 9,446 10,408
Other revenues 487 518 974 1,013 Net investment gains (losses) 266
(133 ) 281 153 Net derivative gains (losses) (2,099 )
(912 ) (764 ) (91 ) Total revenues 15,244
16,166 33,677 34,876
Expenses Policyholder benefits and claims
10,274 9,352 19,952 18,609 Interest credited to policyholder
account balances 1,500 1,298 2,826 3,293 Policyholder dividends 324
331 639 670 Other expenses 3,246 4,072
7,438 8,132 Total expenses
15,344 15,053 30,855
30,704 Income (loss) from continuing operations
before provision for income tax (100 ) 1,113 2,822 4,172 Provision
for income tax expense (benefit) (214 ) (6 )
505 890 Net income (loss) 114 1,119 2,317
3,282 Less: Net income (loss) attributable to noncontrolling
interests 4 4 6 9
Net income (loss) attributable to MetLife, Inc. 110 1,115
2,311 3,273 Less: Preferred stock dividends 46 31 52 61 Preferred
stock repurchase premium - 42 -
42 Net income (loss) available to MetLife,
Inc.'s common shareholders $ 64 $ 1,042 $ 2,259
$ 3,170 See footnotes on last page.
MetLife, Inc. Consolidated Statements of Operating
Earnings Available to Common Shareholders (Unaudited)
For the Three Months
Ended For the Six Months Ended June 30, June 30, 2016
2015 2016 2015 (In
millions) (In millions)
Operating revenues Premiums $ 9,417
$ 9,313 $ 18,684 $ 18,566 Universal life and investment-type
product policy fees 2,173 2,335 4,324 4,629 Net investment income
4,881 5,185 9,587 10,167 Other revenues 484
527 971 1,030 Total operating
revenues 16,955 17,360 33,566
34,392
Operating expenses
Policyholder benefits and claims and policyholder dividends 10,385
9,503 19,978 18,950 Interest credited to policyholder account
balances 1,314 1,342 2,615 2,673 Capitalization of DAC (915 ) (927
) (1,791 ) (1,895 ) Amortization of DAC and VOBA 1,015 1,001 1,896
1,954 Amortization of negative VOBA (61 ) (83 ) (128 ) (173 )
Interest expense on debt 303 307 615 604 Other operating expenses
3,659 3,882 7,369
7,682 Total operating expenses 15,700
15,025 30,554 29,795
Operating earnings before provision for income tax 1,255 2,335
3,012 4,597 Provision for income tax expense (benefit) 285
539 707 1,133
Operating earnings 970 1,796 2,305 3,464 Preferred stock dividends
46 31 52 61
Operating earnings available to common shareholders $ 924
$ 1,765 $ 2,253 $ 3,403
Reconciliation to
Income (Loss) from Continuing Operations, Net of Income
Tax
Operating earnings $ 970 $ 1,796 $ 2,305 $ 3,464 Adjustments from
operating earnings to income (loss) from continuing operations, net
of income tax: Net investment gains (losses) (1) 266 (133 ) 281 153
Net derivative gains (losses) (1) (2,099 ) (912 ) (764 ) (91 )
Premiums - (1 ) 426 (1 ) Universal life and investment-type product
policy fees 113 99 306 199 Net investment income 6 (238 ) (141 )
241 Other revenues 3 (9 ) 3 (17 ) Policyholder benefits and claims
and policyholder dividends (1) (213 ) (180 ) (613 ) (329 ) Interest
credited to policyholder account balances (186 ) 44 (211 ) (620 )
Capitalization of DAC - - 105 - Amortization of DAC and VOBA (1)
894 104 780 32 Amortization of negative VOBA 6 9 38 19 Interest
expense on debt (3 ) (1 ) (3 ) (2 ) Other operating expenses (142 )
(4 ) (397 ) (9 ) Goodwill impairment - - - - Provision for income
tax (expense) benefit (1) 499 545
202 243
Income (loss) from
continuing operations, net of income tax 114 1,119 2,317 3,282
Income (loss) from discontinued operations, net of income tax
- - - - Net
income (loss) 114 1,119 2,317 3,282 Less: Net income (loss)
attributable to noncontrolling interests 4 4
6 9 Net income (loss)
attributable to MetLife, Inc. 110 1,115 2,311 3,273 Less: Preferred
stock dividends 46 31 52 61 Preferred stock repurchase premium
- 42 - 42
Net income (loss) available to MetLife, Inc.'s common
shareholders $ 64 $ 1,042 $ 2,259 $ 3,170
See footnotes on last page.
MetLife,
Inc. (Unaudited)
For the Three Months
Ended For the Six Months Ended June 30, June 30, 2016
2015
2016
2015
Earnings Per Weighted
Average Common SharesDiluted (2)
Earnings PerWeighted AverageCommon
SharesDiluted (2)
Earnings PerWeighted AverageCommon
SharesDiluted (2)
Earnings PerWeighted AverageCommon
SharesDiluted (2)
(In millions, except per share data)
(In millions, except per share data)
Reconciliation to Net Income (Loss) Available to MetLife, Inc.'s
Common Shareholders Operating earnings available to common
shareholders, adjusted for total notable items $ 1,410 $ 1.27 $
1,704 $ 1.51 $ 2,860 $ 2.58 $ 3,358 $ 2.97 Add: Total notable items
(486 ) (0.44 ) 61 0.05
(607 ) (0.55 ) 45 0.04
Operating earnings available to common shareholders $ 924 $ 0.83 $
1,765 $ 1.56 $ 2,253 $ 2.03 $ 3,403 $ 3.01 Adjustments from
operating earnings available to common shareholders to net income
(loss) available to MetLife, Inc.'s common shareholders: Add: Net
investment gains (losses) 266 0.24 (133 ) (0.12 ) 281 0.25 153 0.14
Add: Net derivative gains (losses) (2,099 ) (1.89 ) (912 ) (0.81 )
(764 ) (0.69 ) (91 ) (0.08 ) Add: Goodwill impairment - - - - - - -
- Add: Other adjustments to continuing operations 478 0.43 (177 )
(0.15 ) 293 0.27 (487 ) (0.43 ) Add: Provision for income tax
(expense) benefit 499 0.45 545 0.48 202 0.18 243 0.21 Add: Income
(loss) from discontinued operations, net of income tax - - - - - -
- - Less: Net income (loss) attributable to noncontrolling
interests 4 - 4 - 6 - 9 0.01 Less: Preferred stock repurchase
premium - - 42
0.04 - - 42
0.04
Net income (loss) available to MetLife, Inc.'s
common shareholders $ 64 $ 0.06 $ 1,042 $
0.92 $ 2,259 $ 2.04 $ 3,170 $ 2.80
Weighted average common shares outstanding - diluted
1,109.1 1,128.4 1,108.9 1,131.1 For the Three
Months Ended For the Six Months Ended June 30, June 30, 2016
2015 2016 2015 (In
millions) (In millions)
Reconciliation to Premiums, Fees and
Other Revenues Total operating premiums, fees and other
revenues $ 12,074 $ 12,175 $ 23,979 $ 24,225 Add: Adjustments to
premiums, fees and other revenues 116 89
735 181
Total premiums, fees
and other revenues $ 12,190 $ 12,264 $ 24,714
$ 24,406
Reconciliation to Revenues
and Expenses Total operating revenues $ 16,955 $ 17,360
$ 33,566 $ 34,392 Add: Net investment gains (losses) 266 (133 ) 281
153 Add: Net derivative gains (losses) (2,099 ) (912 ) (764 ) (91 )
Add: Adjustments related to net investment gains (losses) and net
derivative gains (losses) 9 3 34 7 Add: Other adjustments to
revenues 113 (152 ) 560
415
Total revenues $ 15,244 $ 16,166 $
33,677 $ 34,876 Total operating expenses $
15,700 $ 15,025 $ 30,554 $ 29,795 Add: Adjustments related to net
investment gains (losses) and net derivative gains (losses) (1,087
) (94 ) (1,081 ) 1 Add: Goodwill impairment - - - - Add: Other
adjustments to expenses 731 122
1,382 908
Total expenses $ 15,344
$ 15,053 $ 30,855 $ 30,704 See
footnotes on last page.
MetLife, Inc.
(Unaudited)
June 30,
Book Value (3) 2016
2015 Book value per common share $ 70.18 $ 60.27
Less: Net unrealized investment gains (losses), net of income tax
18.78 11.52 Less: Defined benefit plans adjustment, net of income
tax (1.80 ) (1.98 ) Book value per common share,
excluding AOCI other than FCTA $ 53.20 $ 50.73 Less: Goodwill, net
of income tax 8.79 8.51 Less: VODA and VOCRA, net of income tax
0.43 0.49 Book value per common share -
tangible common stockholders' equity $ 43.98 $ 41.73
Common shares outstanding, end of period (In millions)
1,098.8 1,116.8 For the Three Months Ended June 30,
Return on Equity (4) 2016 2015
Return on MetLife, Inc.'s: Common stockholders' equity 0.3 % 6.0 %
Common stockholders' equity, excluding AOCI other than FCTA 0.4 %
7.4 % Tangible common stockholders' equity 0.6 % 9.1 %
Operating return on MetLife, Inc.'s: Common stockholders' equity
4.9 % 10.2 % Common stockholders' equity, excluding AOCI other than
FCTA 6.3 % 12.5 % Common stockholders' equity, excluding AOCI other
than FCTA, adjusted for total notable items 9.5 % 12.1 % Tangible
common stockholders' equity 7.7 % 15.3 % Tangible common
stockholders' equity, adjusted for total notable items 11.5 % 14.9
% Return on Allocated Equity: Americas (7.6 )% 10.4 % Asia
27.9 % 19.6 % EMEA 11.8 % 7.7 % Return on Allocated Tangible
Equity: Americas (8.3 )% 11.7 % Asia 48.0 % 33.7 % EMEA 20.2 % 14.2
% Operating Return on Allocated Equity: Americas 8.6 % 14.8
% Asia 9.4 % 14.8 % EMEA 7.9 % 6.0 % Operating Return
on Allocated Tangible Equity: Americas 9.6 % 16.6 % Asia 16.2 %
25.4 % EMEA 13.8 % 11.2 % See footnotes on last page.
MetLife, Inc.
Supplemental Reconciliations to Net
Income (Loss) Available to Common Shareholders
(Unaudited)
For the Three Months Ended For the Six
Months Ended June 30, June 30, 2016 2015
2016 2015 (In millions) (In
millions)
Total Americas Operations:
Operating earnings available to common shareholders, adjusted for
total notable items $ 1,266 $ 1,443 $ 2,520 $ 2,840 Add: Total
notable items (431 ) - (547 )
(16 ) Operating earnings available to common shareholders 835 1,443
1,973 2,824 Add: Net investment gains (losses) 180 (14 ) (91 ) 260
Add: Net derivative gains (losses) (3,174 ) (508 ) (2,725 ) 69 Add:
Other adjustments to continuing operations 576 (124 ) 374 (392 )
Add: Provision for income tax (expense) benefit 844 221 836 16
Less: Net income (loss) attributable to noncontrolling interests
2 3 3 6 Net
income (loss) available to MetLife, Inc.'s common shareholders $
(741 ) $ 1,015 $ 364 $ 2,771
Retail:
Operating earnings available to common shareholders, adjusted for
total notable items $ 575 $ 692 $ 1,161 $ 1,348 Add: Total notable
items (391 ) (2 ) (445 ) (5 ) Operating
earnings available to common shareholders 184 690 716 1,343 Add:
Net investment gains (losses) 84 9 (33 ) 77 Add: Net derivative
gains (losses) (3,643 ) (95 ) (3,654 ) 218 Add: Other adjustments
to continuing operations 749 (72 ) 717 (264 ) Add: Provision for
income tax (expense) benefit 984 55
1,040 (11 ) Net income (loss) available to
MetLife, Inc.'s common shareholders $ (1,642 ) $ 587 $
(1,214 ) $ 1,363
Group, Voluntary & Worksite
Benefits:
Operating earnings available to common shareholders, adjusted for
total notable items $ 228 $ 229 $ 419 $ 469 Add: Total notable
items (7 ) 2 (24 ) (10 )
Operating earnings available to common shareholders 221 231 395 459
Add: Net investment gains (losses) 11 8 (28 ) 11 Add: Net
derivative gains (losses) 314 (264 ) 605 (59 ) Add: Other
adjustments to continuing operations (44 ) (41 ) (89 ) (83 ) Add:
Provision for income tax (expense) benefit (94 ) 104
(166 ) 46 Net income (loss) available
to MetLife, Inc.'s common shareholders $ 408 $ 38 $
717 $ 374
Corporate Benefit Funding:
Operating earnings available to common shareholders, adjusted for
total notable items $ 331 $ 406 $ 656 $ 775 Add: Total notable
items (29 ) - (59 ) -
Operating earnings available to common shareholders 302 406 597 775
Add: Net investment gains (losses) 67 (31 ) (26 ) 174 Add: Net
derivative gains (losses) 181 (134 ) 266 (54 ) Add: Other
adjustments to continuing operations (73 ) 13 (148 ) (26 ) Add:
Provision for income tax (expense) benefit (61 ) 53
(32 ) (33 ) Net income (loss) available to
MetLife, Inc.'s common shareholders $ 416 $ 307 $ 657
$ 836
Latin America:
Operating earnings available to common shareholders, adjusted for
total notable items $ 132 $ 116 $ 284 $ 248 Add: Total notable
items (4 ) - (19 ) (1 )
Operating earnings available to common shareholders 128 116 265 247
Add: Net investment gains (losses) 18 - (4 ) (2 ) Add: Net
derivative gains (losses) (26 ) (15 ) 58 (36 ) Add: Other
adjustments to continuing operations (56 ) (24 ) (106 ) (19 ) Add:
Provision for income tax (expense) benefit 15 9 (6 ) 14 Less: Net
income (loss) attributable to noncontrolling interests 2
3 3 6 Net income
(loss) available to MetLife, Inc.'s common shareholders $ 77
$ 83 $ 204 $ 198
Asia:
Operating earnings available to common shareholders, adjusted for
total notable items $ 313 $ 364 $ 618 $ 691 Add: Total notable
items (54 ) 61 (54 ) 61
Operating earnings available to common shareholders 259 425 564 752
Add: Net investment gains (losses) 140 57 363 125 Add: Net
derivative gains (losses) 606 9 1,017 27 Add: Other adjustments to
continuing operations (30 ) (37 ) 37 (92 ) Add: Provision for
income tax (expense) benefit (204 ) 111 (347 ) 101 Less: Net income
(loss) attributable to noncontrolling interests 1
1 1 1 Net income (loss)
available to MetLife, Inc.'s common shareholders $ 770 $ 564
$ 1,633 $ 912
EMEA:
Operating earnings available to common shareholders, adjusted for
total notable items $ 64 $ 50 $ 127 $ 120 Add: Total notable items
- - - -
Operating earnings available to common shareholders 64 50 127 120
Add: Net investment gains (losses) 16 5 24 8 Add: Net derivative
gains (losses) 3 13 2 14 Add: Other adjustments to continuing
operations 48 (12 ) 66 7 Add: Provision for income tax (expense)
benefit (35 ) 7 (49 ) (19 ) Less: Net income (loss) attributable to
noncontrolling interests 1 (1 ) 2
1 Net income (loss) available to MetLife,
Inc.'s common shareholders $ 95 $ 64 $ 168 $
129
Corporate & Other:
Operating earnings available to common shareholders, adjusted for
total notable items $ (233 ) $ (153 ) $ (405 ) $ (293 ) Add: Total
notable items (1 ) - (6 ) -
Operating earnings available to common shareholders (234 )
(153 ) (411 ) (293 ) Add: Net investment gains (losses) (70 ) (181
) (15 ) (240 ) Add: Net derivative gains (losses) 466 (426 ) 942
(201 ) Add: Other adjustments to continuing operations (116 ) (4 )
(184 ) (10 ) Add: Provision for income tax (expense) benefit (106 )
206 (238 ) 145 Less: Net income (loss) attributable to
noncontrolling interests - 1 - 1 Less: Preferred stock repurchase
premium - 42 - 42
Net income (loss) available to MetLife, Inc.'s common
shareholders $ (60 ) $ (601 ) $ 94 $ (642 ) (1)
The impacts of asymmetrical and
non-economic accounting for the three months ended June 30, 2016
are as follows: i) Net investment gains (losses) - $217 million;
ii) Net derivative gains (losses) - $2.3 billion; iii) Policyholder
benefits and claims and policyholder dividends - ($66) million; iv)
Amortization of DAC and VOBA - $402 million; and v) Provision for
income tax (expense) benefit - ($989) million.
(2) Operating earnings available to common shareholders is
calculated on a stand alone basis and may not equal the sum of
operating earnings available to common shareholders, adjusted for
total notable items and total notable items. (3) Book values
exclude $2,066 million of equity related to preferred stock at both
June 30, 2016 and 2015. (4) Annualized using quarter-to-date
results.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160803006557/en/
MetLife, Inc.For Media:John Calagna, 212-578-6252orFor
Investors:John Hall, 212-578-7888
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