MetLife 2013 Annual Report Download - page 3

Chairman’s Letter
To my fellow shareholders:
When I became CEO in May of 2011, my mandate was clear: Improve the profitability and risk profile of the business.
MetLife was the largest life insurer in the United States with a great brand and a nearly 145-year history of keeping its
promises to policyholders, but we had taken on too much risk in certain parts of our business and our profitability was in
the middle of the pack relative to industry peers.
The first order of business for the executive group in 2011 was to develop a strategy to achieve our goal. It is not
easy to turn a ship as large as MetLife, especially in an industry where profits emerge slowly over time. The strategy we
launched in 2012 was not a one- or two-year strategy. It was a five-year strategy to raise our return on equity, reduce our
cost of equity, and return capital to shareholders.
Even though we have faced both economic and regulatory headwinds along the way, I am pleased to report that we
are ahead of schedule on our plan to increase the profitability of MetLife’s business while also decreasing its level of risk.
A Very Good Year
Our progress was clearly evident in 2013. Operating earnings increased 11% over the prior year, exceeding our
plan.1Premiums, fees and other revenues increased 2% on a reported basis and 5% on a constant currency basis –
solid top-line growth in light of our efforts to improve MetLife’s risk profile. And most important, operating return on equity
in 2013 came in at 12%, hitting the low end of our 2016 target range three years ahead of schedule.
The four cornerstones of MetLife’s strategy have held constant: Refocus the U.S. Business; Grow Emerging Markets;
Build a Global Employee Benefits Business; and Drive Toward Customer Centricity and a Global Brand. We have made
significant progress on implementing the strategy over the past year:
‰We have refocused and de-risked the U.S. business while increasing operating earnings by more than 40% from
2011.
‰We are well on our way toward our 2016 goal of having emerging markets contribute 20% of MetLife’s operating
earnings and believe the high-growth, high-return potential of these businesses is a key differentiator relative to
peers.
‰We are on track to achieve our target of $1 billion in gross expense saves while reinvesting $400 million in the
business, much of it in technology to improve the customer experience – an imperative to realize our goal of
becoming a world-class organization.
One element of our 2013 performance requires a word of explanation. While operating earnings grew by 11%,
operating earnings per share increased by 7%. Our growth on a per-share basis was dampened by the conversion of
equity units issued in 2010 to fund the acquisition of Alico. Of the $3 billion in equity units issued to help fund the deal,
$2 billion have now converted into common shares, with the final $1 billion scheduled to convert in 2014.
We originally anticipated repurchasing these shares as they converted, but we have grown more cautious due to
uncertainty over the level of capital MetLife will be required to hold if we are named a non-bank systemically important
financial institution (SIFI). Even though we are holding more capital, the strength of our franchise and strong execution of
our strategy have lifted operating return on equity from 9.8% in 2010 to 12% in 2013.
1See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP and Other Financial Disclosures” for
non-GAAP definitions and financial information.