This summary is based on the second quarter fiscal 2007 earnings call conducted by Metlife, Inc. (MET) on July 31, 2007.
Chairman, President and Chief Executive: Robert Henrikson
Chief Investment Officer: Steve Kandarian
Chief Financial Officer: Bill Wheeler
President, Individual: Lisa Weber
President, Institutional: Bill Mullaney
Investor Relations: Tracy Diedrich
Key Investors Issues
- Earnings per share were $1.48 compared to 80 cents in the prior year quarter.
- Long term debt was up 25%.
- International business continues to perform well with strong earnings, revenues and sales.
- There were no exposures to the sub-prime related hedge funds with the investment portfolio rated strongly.
Second Quarter Highlights
- Net Income rose 83% from $617 million or 80 cents per share in 2006 to $1.13 billion or $1.48 per share, due to strong revenue performance, with revenues rising to $13.2 billion.
Operating income increased 34.4% to $1.3 billion or 72 cents per share from the prior year.
- Preliminary statutory operating earnings were $720 million or $1.6 billion for the first half of 2007.
- The Institutional business recorded operating earnings of $521 million, up 15% from 2006 characterized by strong across the board underwriting results and consistent adherence to fundamental principles of sound risk selection and pricing discipline.
- Group Insurance and new business volumes has managed to shrug of the effects of the difficult 2006 period with activity returning to more normal levels as sales of the Term Life product were up over 40%.
- In the non-medical health segment, sales were up 50% driven primarily by solid sales of dental and disability products.
In the Retirement and Savings business, general account policy holder balances grew by more than 12% over the year ago period as a result of strong, positive net flows due to funding agreements and sales of global GICs.
- The Individual business’s operating earnings were $449 million, up 27% from the year ago period as a result of strong business growth, excellent investment performance, and improved underwriting margins.
- Significant investments were made in the Independent channel service capabilities, and steps taken to improve the underwriting risk selection leading to an up tick in sales of Universal and Term Life products.
Annuity operating earnings were up 31% from a year ago to $270 million, mainly driven by robust investment results and favorable market performance.
- Total annuity premiums and deposits reached a new high of $4.5 billion, up 6% from 2006 due to the staged introduction of various annuity products and writers including the 6% GMIB Plus writer in key states and channels.
- Sales of very low annuities were up 17% in the agency channel and 5% in the independent channel.
- Total annuity net flows were positive driven by strong variable annuity net flows of a billion dollars.
Auto and Home’s solid operating earnings of $108 million were driven by increased revenues and reduced operating expenses.
- Total sales were up 17%, led by group channel where sales were up 22% with top group accounts rising 26% over the prior year and auto sales increasing 24%, fuelled by strong sales in the 43 States where the Metrics Auto program has been introduced.
- In addition, the Grand Protect package product continues to attract customers in the higher end of the market.
International’s operating earnings were $117 million, up 83% compared to 2006 on the back of record premiums fees and other revenues following growth in Latin America and Asia-Pacific.
- Total sales, led by Korea and Japan, were up 14% from the prior year, with sales in Korea increasing 39% as a result of strong sales of the new GMAB product.
- A new target GMWB type product was introduced in Japan and sales growth is expected to continue with the launch of additional products during the later parts of the year.
- Assets under management in the Japan joint venture, MSI MetLife, reached $20 billion, up 56% from a year ago.
- In Mexico, Policy Number 1, the term life coverage for the Federal Government employees was successfully renewed for a three-year period.
Revenues, including premiums, fees and other income were $13.2 billion up 17% over $11.4 billion in 2006.
- The International segment grew revenues 17% over the prior year to $1 billion driven by stronger sales throughout Latin America and Asia Pacific.
- Sales of annuities in Japan, though excluded in GAAP revenue results, were $1.3 billion up 8% over the year ago period on a Yen basis.
- The Institutional segment realized top-line growth of 7.2% over the prior year driven by solid results in Group Life and non medical health led by the dental and disability businesses.
- Retirement and savings count liabilities grew by $4.1 billion, which is a 19.2% annualized growth rate.
In Individual business, revenue growth was 16%, as a result of outstanding annuities and good equity market performance.
- Institutional life underwriting results were excellent with a mortality ratio of 89.2%, which was well below the target range of 91% to 95%.
- Group Life underwriting results also benefited from $8 million after-tax reduction to policy holder benefits, relating to an administrative data review.
- In non-medical health and other, group disability’s strong morbidity ratio of 90.8% reflected continued improvement in reported incidents.
- Non-medical health and other underwriting results included two unusual items, a claim reserve to account for a change in disability claim processing protocol, resulting in an after-tax charge of $9 million and reserve adjustments leading to $10 million after-tax charge.
The mortality ratio in Individual business was 90.9%, which is higher than normal due to two large claims totaling $38 million though these were almost entirely offset by re-insurance and had a limited bottom line impact.
- Auto and Home, had a combined ratio of 87.4% inclusive of favorable prior accident year development of $23 million after tax, and a $10 million after tax lower than planned catastrophe claim experience.
Investments spread:
