Business Overview and History: MetLife's origins trace back to 1868 when a group of New York-based businessmen established the National Union Life and Limb Insurance Company. In 1871, the company was reorganized and renamed the Metropolitan Life Insurance Company (MLIC), reflecting its aspirations to become a national player. MLIC experienced rapid growth in the late 19th and early 20th centuries, expanding its product offerings and geographic footprint. By 1915, it had become the largest life insurance company in the world.
Over the ensuing decades, MetLife steadily expanded its footprint, both domestically and globally, through organic growth and strategic acquisitions. In the 1980s and 1990s, the company made several strategic acquisitions to expand its business lines and global reach, including the acquisition of The Travelers insurance company in 1996.
In 2000, MLIC converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of the newly formed MetLife, Inc. This demutualization allowed the company to access the public capital markets and pursue growth opportunities. Throughout the 2000s and 2010s, MetLife continued to expand its global footprint, entering new markets and further diversifying its product portfolio.
In the early 20th century, MetLife established a prominent presence in the group insurance market, catering to the needs of employers and their employees. This segment, now known as the Group Benefits business, has remained a crucial pillar of the company's operations. The mid-20th century saw MetLife's foray into the individual life insurance and annuities markets, laying the foundations for its current Retirement and Income Solutions (RIS) and MetLife Holdings divisions.
Navigating the Digital Transformation: As the insurance industry has undergone a profound digital transformation, MetLife has proactively adapted its business model to leverage emerging technologies and changing customer preferences. The company has invested heavily in digital platforms, data analytics, and automation to enhance the customer experience, improve operational efficiency, and maintain its competitive edge.
One such example is the launch of MetLife's Upwise tool, which simplifies benefits selection for employees by making personalized recommendations based on individual needs and preferences. This innovation underscores MetLife's focus on delivering innovative solutions that cater to the evolving demands of its diverse customer base.
Geographic Diversification and Global Expansion: Beyond its strong domestic presence, MetLife has strategically expanded its global footprint, with a significant presence in Asia, Latin America, and Europe, the Middle East, and Africa (EMEA). This diversification has helped the company mitigate risks and capitalize on growth opportunities in various international markets.
In Asia, MetLife has established a strong position in Japan, China, and India, among other countries, leveraging its expertise in life insurance, retirement solutions, and accident and health products. The Latin American segment, with a focus on markets like Mexico, Brazil, and Chile, has also been a consistent contributor to the company's overall performance.
Financials and Liquidity: MetLife's financial stability and prudent capital management have been key to its longevity and success. The company's diversified investment portfolio, disciplined risk underwriting, and robust risk management practices have enabled it to navigate through various economic and market cycles.
As of September 30, 2024, MetLife reported a total asset base of $704.98 billion and a strong solvency position, with a risk-based capital ratio well above regulatory requirements. The company's commitment to maintaining a solid financial foundation is further evidenced by its consistent dividend payments and strategic share repurchase program, which have enhanced shareholder value over the years.
For the third quarter of 2024, MetLife reported revenue of $18.44 billion and net income of $1.342 billion. The company's operating cash flow (OCF) and free cash flow (FCF) for the quarter were both $4.169 billion. These figures demonstrate MetLife's ability to generate substantial cash flows from its operations, providing the company with financial flexibility to invest in growth initiatives, return capital to shareholders, and maintain a strong balance sheet.
MetLife's liquidity position remains robust, with $4.5 billion of cash and liquid assets at the holding company level as of September 30, 2024. This amount exceeds the company's target cash buffer of $3 billion to $4 billion, providing additional financial flexibility. Furthermore, MetLife has over $2 billion remaining on its Board's common stock repurchase authorization, indicating its ongoing commitment to returning value to shareholders.
Focused on Value Creation: MetLife's strategic initiatives have been centered on driving responsible growth, improving operational efficiency, and maximizing returns on capital. The company's focus on value-oriented metrics, such as return on equity (ROE) and value of new business (VNB), has been a hallmark of its approach.
In 2023, MetLife deployed $3.6 billion of capital to support new business, achieving an impressive unlevered internal rate of return (IRR) of 19% and a payback period of approximately five years. This represents a significant improvement from previous years, with a 400 basis point increase in IRR and a 2-year decrease in payback period. The disciplined capital allocation strategy resulted in $2.6 billion in value of new business (VNB), contributing to the company's ability to generate consistent shareholder value.
Recent Performance and Outlook: MetLife's recent financial performance has been characterized by a mix of tailwinds and headwinds. While the company has navigated some market-related challenges, such as lower variable investment income, it has also demonstrated resilience through strong top-line growth, disciplined expense management, and favorable underwriting results in key business segments.
For the nine months ended September 30, 2024, MetLife reported adjusted earnings of $4.50 billion, up 4% year-over-year, highlighting the underlying strength of its diversified business model. The company's adjusted return on equity (ROE) of 14.6% for the third quarter of 2024 was within its targeted range of 13% to 15%, underscoring its commitment to responsible growth and shareholder value creation.
MetLife's full-year 2023 direct expense ratio was 12.2%, which the company considers the best measure of its expense performance due to quarterly fluctuations. For 2024, MetLife expects its full-year direct expense ratio to be below its target of 12.3%, demonstrating consistent execution and an efficiency mindset.
Looking ahead, MetLife remains cautiously optimistic about its future prospects, as it continues to leverage its global footprint, digital capabilities, and disciplined risk management to capture opportunities in the evolving insurance and financial services landscape. The company's preliminary third quarter 2024 year-to-date statutory operating earnings were approximately $2.8 billion, essentially flat year-over-year, indicating stability in its core operations.
MetLife expects the Japan solvency margin ratio to be approximately 745% as of September 30, 2024, reflecting the company's strong capital position in one of its key international markets.
Business Segments and Product Offerings: MetLife operates through several key business segments, each catering to specific market needs:
1. Group Benefits Segment: This segment offers a broad range of products to corporations, their employees, and individuals. Products include term, variable, and universal life insurance, dental, group and individual disability, vision, and accident & health insurance.
2. Retirement and Income Solutions (RIS) Segment: The RIS segment provides life and annuity-based insurance and investment products to corporations, their employees, institutions, and individuals. Offerings include stable value and pension risk transfer products, institutional income annuities, structured settlements, longevity reinsurance solutions, benefit funding solutions, and capital markets investment products.
3. Asia Segment: In Asia, MetLife offers life insurance, accident & health insurance, and retirement and savings products to both individuals and corporations.
4. Latin America Segment: This segment provides life insurance, retirement and savings, accident & health insurance, and credit insurance to individuals and corporations in Latin American markets.
5. EMEA Segment: In Europe, the Middle East, and Africa, MetLife offers life insurance, retirement and savings, accident & health insurance, and credit insurance to individuals and corporations.
6. MetLife Holdings Segment: This segment consists of operations relating to products and businesses that the company no longer actively markets in the U.S. These include variable, universal, term and whole life insurance, variable, fixed and index-linked annuities, and long-term care insurance. It also includes an in-force block of assumed variable annuity guarantees from a third party.
Conclusion: MetLife's rich history, financial resilience, and strategic focus on value creation position the company well to navigate the dynamic insurance industry. By leveraging its diversified business model, technological advancements, and global reach, MetLife is poised to deliver consistent long-term value to its shareholders, customers, and other stakeholders. As the company embarks on its "New Frontier" strategy, investors will be keen to see how MetLife's execution and adaptability enable it to thrive in an increasingly complex and competitive environment.