MetLife Earnings Call Nuggets: Washington Feedback and Cost Savings

MetLife  (NYSE:MET) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Washington Feedback

Suneet Kamath – UBS: I wanted to start with Steve, if I could. I thought your comments around the presentation you made in Washington were helpful. Could you provide any color on how the response has been and what the feedback was?

Steven A. Kandarian – Chairman, President and CEO: I would say that the policymakers, people on the hill, others in Washington are listening carefully to the arguments. There is lot of debate going on. I think it’s healthy. I think having these views on the table is important to make sure we get it right. This is an important industry. It affects millions of Americans across our country and just really important that these financial protection products are still going to be available and affordable to people going forward, especially at time when social safety net is under a lot of pressure in our country. So, I think people are being pretty thoughtful about the discussion, are listening carefully and I’m hopeful that when things falling transpire here that we’ll get a solution that makes sense.

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Suneet Kamath – UBS: Anything on the timing of when things may transpire?

Steven A. Kandarian – Chairman, President and CEO: We don’t have any clarity on that Suneet. There have been statements coming out of FSOC that they think that the first designations of non-bank SIFIs will be coming and the word they used was ‘soon’, but obviously that word doesn’t have a great deal of specificity to it, so we have to wait and see how that sorts out.

Suneet Kamath – UBS: Just a follow-up for John, if I could on the holding company cash. I think you said $4.8 billion, down a little bit from year-end, if we think back to that cash flow roll forward that you provided in December. I know you had some items in there that were like placeholders, for example the Dodd-Frank collateral. I’m not sure if we had real clarity on what the run rate holding company expenses were, but just sort of big picture, is that cash flow roll forward pretty much the same based on where you sit today or have there been any changes to it? Other than the dividend I understand that…

Steven A. Kandarian – Chairman, President and CEO: Sure. In the foray it is where we plan to be, given the timing of our expenses and some dividends how we get them and the flows in and out. We did have a placeholder as we mentioned for Dodd Frank derivative collaterals rules. Those are still a bit influx. The original rules that were specified last year in the U.S. were somewhat onerous. However, the international rules had longer phase-in period and were not as onerous. There’s still discussion going on between, which ones are going to be adopted. I believe they are leaning very much on the international, less onerous rules with the longer phase-in period, but for now we are going to keep the placeholder in and we’ll have to see how things develop throughout the year.

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Cost Savings

Tom Gallagher – Credit Suisse: First question is, of the $600 million of costs saves that you’re targeting, can you tell us where you’re at on that. How much is in this quarter’s run rate to-date and how much is still on the come through. I think Steve, you guys had said, the $600 million should be realized by the end of ’14, how much is still to come on that?

Steven A. Kandarian – Chairman, President and CEO: We’ve got net – and this is mainly hitting to the U.S. There is about $115 million, but we have some one-time costs about $40 million so the net to the bottom line is about $75 million.

Tom Gallagher – Credit Suisse: John, is that $75 million per quarter is hitting the bottom line right now?

John C.R. Hele – EVP and CFO: Yes.

Tom Gallagher – Credit Suisse: So you’re not… sorry, go ahead.

John C.R. Hele – EVP and CFO: So it’s really $115 million, but there is a one-time cost of $40 million.

Tom Gallagher – Credit Suisse: You’re not stripping out that one – or are you stripping out that one-time cost from operating?

John C.R. Hele – EVP and CFO: No, it’s included.

Tom Gallagher – Credit Suisse: Got it, okay. That would be restructuring cost I presume?

John C.R. Hele – EVP and CFO: Yes, but some of our reinvestment, the $600 million is a net number, so we plan to get to $1 billion with a $400 million reinvest over time when we get out there. So we’ll start to have some more reinvest hitting in, in future periods as well.

Tom Gallagher – Credit Suisse: So should I view that that you guys are more than half of the way there? Should I be netting that against the full year $600 million pre-tax number? Or should I be netting that against $1 billion? I just want to understand how you’re thinking about that $115 million in the context to your goal…

John C.R. Hele – EVP and CFO: Yeah, I’d say we’re about halfway there, may be a third to a half. The reinvestment timing is still going to be phased in. But we’ve made good progress here.

Tom Gallagher – Credit Suisse: Got it. Then my follow-up is, just want to understand the yen sensitivity a little bit better at a higher level. Can you tell us what percent of your Asia earnings are actually Japan? Because you know obviously Korea is a pretty big contributor, so I want to understand of the $330 million, how much is Japan and of the Japan how much are yen denominated earnings versus U.S. dollar denominated earnings?

Christopher G. Townsend – President, Asia: It’s Chris Townsend here. Let me just wade in and give you the number in terms of the Japan proportion of the $333 million. The Japan earnings overall for the quarter are ($383 million) (indiscernible) $333 million. I think we’re about 65% yen-based earnings on that.

Tom Gallagher – Credit Suisse: Chris, that’s 65% yen based of the $303 million?

Christopher G. Townsend – President, Asia: That’s correct.

A Closer Look: MetLife Earnings Cheat Sheet>>