MetLife, Inc. (MET)

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MetLife, Inc. (MET)

December 13, 2012 8:00 am ET

Executives

Edward Spehar

Steven A. Kandarian - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

John C. R. Hele - Chief Financial Officer and Executive Vice President

William J. Wheeler - President of The Americas

Steven Jeffrey Goulart - Chief Investment Officer and Executive Vice President

Analysts

A. Mark Finkelstein - Evercore Partners Inc., Research Division

Suneet L. Kamath - UBS Investment Bank, Research Division

Thomas G. Gallagher - Crédit Suisse AG, Research Division

John M. Nadel - Sterne Agee & Leach Inc., Research Division

Jamminder S. Bhullar - JP Morgan Chase & Co, Research Division

Jeffrey R. Schuman - Keefe, Bruyette, & Woods, Inc., Research Division

Christopher Giovanni - Goldman Sachs Group Inc., Research Division

Seth Weiss

Randy Binner - FBR Capital Markets & Co., Research Division

Sean Dargan - Macquarie Research

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Year-End 2012 Investor Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ed Spehar. Please go ahead.

Edward Spehar

Thank you, Greg, and good morning, everyone. Welcome to MetLife's year-end investor call. Presentation materials for this discussion are currently available at metlife.com through a link on the Investor Relations page.

Now please turn to the agenda of the presentation. On Slide 2 is the cautionary statement on forward-looking statements and non-GAAP financial information. These items are discussed in further detail in the appendix slides. The Safe Harbor statement contained in the appendix governs the forward-looking statements made on today's call. Forward-looking statements include our estimated results for the fourth quarter and full year 2012, our projections for 2013 and any other statements providing information about future periods.

As the statement notes, actual results might differ materially from the projected results we will be discussing today. For a discussion of the factors that could cause actual results to differ, please see the Risk Factors in our 10-K, 10-Q or other reports filed with the SEC.

Let me remind you that we will be using non-GAAP financial measures on today's call. The explanatory note on non-GAAP financial information contained in the appendix includes information on how we calculate these measures and the reasons we believe they are useful. Reconciliations to the most directly comparable GAAP measures are also included in the appendix.

Please turn to Slide 3 for today's agenda. We'll begin the presentation with opening remarks from Steve Kandarian, then John Hele will discuss our financial projections for the fourth quarter, full year 2012 and full year 2013. Then, we'll have some time for Q&A. [Operator Instructions]

Now I'd like to turn the call over to Steve.

Steven A. Kandarian

Thank you, Ed, and good morning, everyone. On this morning's investor call, we will focus on MetLife's financial outlook for the fourth quarter of 2012 and full year 2013. As you will see in our presentation this morning, the impact on our financial performance from low interest rates is tracking closely with the expectations we laid out in the fall of 2011, and we continue to believe this is a manageable risk for MetLife.

You will also see that we intend to accelerate our shift away from capital-intensive products to improve the risk profile and free cash flow generation of the company. For example, our U.S. variable annuity sales target for the next year is approximately 40% below the level of sales we anticipate in 2012. Over time, the resilience of our earnings stream and our continuing actions to reduce tail risk should improve the valuation of MetLife shares.

Before I turn to today's presentation, I also want to share the latest news with regard to our efforts to debank. Yesterday, the Office of the Comptroller of the Currency conditionally approved the application of GE Capital Retail Bank to assume the deposits of MetLife Bank. We do not have an estimate of when the deal will close nor do we have an answer at this time on what this will mean for MetLife's participation in the Federal Reserve's 2013 Comprehensive Capital Analysis and Review. But we are pleased that the debanking process is moving forward.

Turning to Slide 5. Let me emphasize that while macroeconomic factors and regulatory uncertainty deserve attention, we are confident that MetLife has the right strategy in place to create long-term shareholder value. As a reminder, our strategy contains 4 cornerstone initiatives. We are refocusing the U.S. business to improve the balance between growth, risk and profitability. Our actions relating to variable annuities are clear example of this effort.

We are growing our presence in emerging markets, with a goal of increasing the earnings contribution from 14% today to more than 20% in 2016. We are building a global employee benefits business to leverage our expertise in a product line with a highly attractive risk return profile, with a target of $250 million of operating earnings in 2016. We are driving toward customer centricity and a global brand. I believe these can be enduring competitive advantages for MetLife that will drive both revenue growth and better margins over time.

Slide 6 provides a high-level view of our anticipated fourth quarter and full year 2012 financial performance. John Hele will provide more detail later in the presentation. As you can see, 2012 is likely to be a good year, with reported operating earnings per share expected at the top end of our guidance range and normalized operating EPS above the top end of guidance. The most notable unplanned operating item in the fourth quarter is an estimated loss of $85 million to $95 million after tax from superstorm Sandy.

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