MetLife, Inc. (MET)

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MetLife (MET)

Q4 2011 Earnings Call

February 15, 2012 8:00 am ET

Executives

John McCallion - Head of Investor Relations and Vice President

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

Eric T. Steigerwalt - Chief Financial officer of Individual Business Segment

William J. Wheeler - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Metropolitan Life and Executive Vice President of Metropolitan Life

William J. Toppeta - Former President of International and President of International - Metropolitan Life Insurance Company

Analysts

Suneet Kamath - Sanford C. Bernstein & Co., LLC., Research Division

Andrew Kligerman - UBS Investment Bank, Research Division

Joanne A. Smith - Scotiabank Global Banking and Market, Research Division

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

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

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Fourth Quarter 2011 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Before we get started, I would like to read the following statement on behalf of MetLife. Except with respect to historical information, statements made in this conference call constitute forward-looking statements within the meaning of the federal securities laws, including statements relating to trends in the company's operations and financial results and the business and products of the company and its subsidiaries.

MetLife's actual results may differ materially from the results anticipated in the forward-looking statements as result of risks and uncertainties, including those described from time to time in MetLife's filings with the U.S. Securities and Exchange Commission. MetLife specifically disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

With that, I would like to turn the call over to John McCallion, Head of Investor Relations.

John McCallion

Great. Thank you, Greg, and good morning, everyone. Welcome to MetLife Fourth Quarter 2011 Earning Call. We will be discussing certain financial measures not based on Generally Accepted Accounting Principles, so-called non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures may be found on the Investor Relations portion of metlife.com in our earnings press release, our Quarterly Financial Supplements and in the Other Financial Information section. A reconciliation of forward-looking financial information to the most directly comparable GAAP measure is not accessible because MetLife believes it is not possible to provide a reliable forecast of net investments and net derivative gains and losses, which can fluctuate from period to period and may have a significant impact on GAAP net income.

I would also like to bring your attention to one item. As noted in our press release, during the fourth quarter of 2011, MetLife began reporting certain operations of MetLife Bank and Insurance operations in the Caribbean Region, Panama and Costa Rica as divested businesses. As a result, we have modified our definition of operating earnings to exclude the impact of these divested businesses, and prior periods have been reclassified to confirm -- conform to the current period segment presentation.

Now joining me this morning on the call are Steve Kandarian, Chairman, President and Chief Executive Officer; and Eric Steigerwalt, Interim Chief Financial Officer. After their prepared remarks, we'll take your questions. Also here with us today to participate in the discussion are other members of management, including Bill Wheeler, President of Americas; Steve Goulart, Chief Investment Officer; and Bill Toppeta, Vice Chairman of EMEA and Asia.

With that, I'd like to turn the call over to Steve.

Steven A. Kandarian

Thank you, John, and good morning, everyone. Let me begin this morning with by an overview of MetLife's performance for the full year 2011. Overall, MetLife had a solid year. We generated operating earnings per share of $5.02, up 16% from 2010, and our operating return on shareholders' equity was 11%, up 100 basis points from 10% in 2010. These results are even more noteworthy in light of a challenging external environment the insurance industry faced in 2011. The global macroeconomic environment remain volatile. Interest rates declined, equity markets were flat and several natural disasters in both the United States and Japan drove up claims. Adjusting for certain onetime items, which we discussed at our December investor call, MetLife's 2011 operatings -- operating earnings would have been $5.25 per share.

Capping a solid 2011 was a strong fourth quarter. MetLife delivered operating earnings per share of $1.31, up 11% year-over-year. In our U.S. Businesses, underwriting discipline continue to produce favorable results in Group Life, with a loss ratio of 85.2%, as well as in Dental. In addition, core spreads held relatively stable despite the low interest rate environment, largely as a result of our disciplined asset liability management, our hedging strategies and our private asset origination capabilities.

Outside the United States, we continue to be pleased with our financial results and our progress in integrating Alico. Compared to the fourth quarter of 2010, sales increased by 12% on a combined basis while premiums, fees and other revenue rose by 1%. We generated $570 million in operating earnings on $3.8 billion of premiums, fees and other revenues. Top line growth was negatively impacted by the disposition of noncore businesses, nonrenewals of certain large group accounts and the accounting impact of a shift towards savings products.

In Japan, sales increased in the Bank and Independent channels. In other international regions, we benefited from our acquisition in Turkey and in leveraging of our accident health capabilities in Latin America and Asia Pacific. Total sales of A&H, a low capital, high-ROE product, increased roughly 25% year-over-year. Looking ahead, we remain confident in the growth of our non-U.S. businesses. As we said on our December investor call, we expect to grow operating earnings by roughly 14% outside of the United States in 2012, after adjusting for the new accounting treatment of deferred acquisition costs.

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