MetLife, Inc. (MET)

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MetLife (MET)

Q3 2012 Earnings Call

November 01, 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, 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

Christopher Townsend - Head of Asia Region

Analysts

Nigel P. Dally - Morgan Stanley, Research Division

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

Suneet L. Kamath - UBS Investment Bank, Research Division

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

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

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

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

Eric N. Berg - RBC Capital Markets, LLC, Research Division

John A. Hall - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Third Quarter 2012 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 the products of the company and its subsidiaries. MetLife's actual results may differ materially from the results anticipated in the forward-looking statements as a 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

Thank you, Greg, and good morning, everyone. Welcome to MetLife's third quarter 2012 earnings 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 and related definitions 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's not possible to provide a reliable forecast of net investment and net derivative gains and losses, which can fluctuate from period-to-period and may have a significant impact on GAAP net income.

Now, joining me this morning on the call are Steve Kandarian, Chairman, President and Chief Executive Officer; and John Hele, Chief Financial Officer. After their prepared remarks, we will take your questions. Also, here with us today to participate in the discussions are other members of management, including Bill Wheeler, President of Americas; Steve Goulart, Chief Investment Officer; Michel Khalaf, President of EMEA; and Chris Townsend, President of Asia.

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

Steven A. Kandarian

Thank you, John, and good morning, everyone. Before we discuss our financial results for the third quarter, I want to express my condolences to those who have suffered great loss as a result of Hurricane Sandy. At MetLife, we are doing everything we can to help our customers cope with the impact of the storm. Our claims associates are on the ground helping customers find shelter, facilitating temporary repairs and issuing advance payments for immediate expenses. We know there is still a tremendous amount of work to do before life returns to normal, and our thoughts are especially with those who are hardest hit by the storm. I also want to thank all of you for being on this call under these difficult circumstances.

Now let me turn to MetLife's financial performance. I would like to begin this morning by discussing the goodwill impairment we recorded in the third quarter of 2012. As we've indicated on previous earnings calls, as well as during our interest rate call last November, a prolonged low-rate environment might cause us to impair some or all of the goodwill in our U.S. retail annuity business. In the third quarter of 2012, we took a $1.6 billion after-tax goodwill impairment in this business to reflect the expected market impact of continued low interest rates, changes in the regulatory environment and other market and economic factors.

MetLife delivered another solid quarter with operating earnings of $1.4 billion or $1.32 per share, up 47% from the third quarter of 2011. Adjusting for certain onetime items that depressed the results in the prior year quarter, operating earnings still rose by 23%. John Hele will discuss our third quarter results in greater detail in a few moments.

I would like to highlight a few aspects of MetLife's performance that tie to our enterprise strategy, which we developed to address the external economic environment facing life insurers.

As you know, one of our strategic goals is to refocus the U.S. business by shifting our business mix from more capital-intensive and interest rate-sensitive products to simpler protection and fee-based products. Our results and activities in the third quarter were consistent with this strategy. Premiums, fees and other revenues rose by 9% in our Group, Voluntary & Worksite Benefit business on strong sales and on revenues from the TRICARE Dental contract. Variable annuity sales in the United States declined by 46% from the prior year quarter to $4.6 billion, in line with our plan. We continued to manage the risk associated with this business.

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