Ladies and gentlemen thank you for standing by. Welcome to the MetLife First Quarter 2017 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 in 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, including in the risks factors section of those filings. 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 Hall, Head of Investor Relations.

Thank you, Greg and good morning, everyone. Welcome to MetLife's first quarter 2017 earnings call. On this 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 release and on our quarterly financial supplement. A reconciliation of forward-looking financial information to the most directly comparable GAAP measure is not accessible because of MetLife believes it is not possible to provide a reliable forecast of net investment and that derivative gains and losses, which can fluctuate from period to period and may have a significant impact on GAAP net income. Joining me this morning on the call are Steve Kandarian, Chairman, President and Chief Executive Officer and John Hele, Chief Financial Officer. Also here with us today to participate in the discussions are other members of Senior Management. After prepared remarks, we will have a Q&A session. In fairness to all participants, please limit yourself to one question and one follow-up. With that, I'd like to turn the call over to Steve.

Thank you, John and good morning everyone. Last night, we reported first quarter operating earnings per share of $1.41up from a $1.20 per share a year ago. Overall it was a strong quarter across most business segments with favorable results from a variable investment income, expense management and underwriting. Equity markets which rose by 5.5% in the quarter as measured by the S&P 500 create a tailwind for earnings. Well, low interest rates in a strong U.S. dollar remain as headwinds. Adjusting for notable items operating earnings were $1.46 per share, which compares to $1.31 per share on the same basis in the prior year period. Net notable items of $0.05 per share in the quarter including higher catastrophe losses, expenses to support our unit cost initiative, illegal settlement and a Penn Treaty guarantee fund assessment. These are offset in part by a retail life insurance reserve release. As noted in my annual letter to shareholders. MetLife has a leading position in group benefits with a market share of 25% among the large employers. We are also experiencing strong growth in the mid-market and have over 40,000 small employer relationships. What we pioneered this business as century ago, we consider group benefits an avenue for future growth and highlighted the segment as one of our growth engines and our November Investor Day. During the quarter sales of Group Benefits were up by 29% with strength across all market segments and product lines. Our national accounts sales were particularly strong especially among clients with more than 25,000 employees. We continue to invest in this business to create differentiated customer experiences, supported by strong enabling technology and leading data protection capabilities. Over the years our group customers have put their confidence in us, because of our financial strength and strong service capabilities.…

Thank you, Steve and good morning. Today, I'll cover our first quarter results including a discussion of our insurance underwriting margins, investment spreads, expenses and business highlights. I will then conclude with some comments on cash and capital. In addition to our earnings release and quarterly financial supplement, last evening we released disclosure labeled 1Q 2017 supplemental slides. That addresses the net derivative loss in the quarter. I will speak to these slides later my presentation. We will continue to release additional supplemental slides when we have complex elements in a quarter. Operating earnings for the first quarter were $1.5 billion or a $1.41 share. This quarter included five notable items totaling the negative $61 million that we highlighted in our news release and quarterly financial supplement. First, unfavorable catastrophe experience net of prior year development in Property & Casualty, decreased operating earnings by $45 million, or $0.04 per share, after tax. Second, Corporate & Other was negatively impacted by a guaranty fund assessment for the Penn Treaty insolvency and an increase in litigation reserves, which decreased operating earnings by $44 million, or $0.04 per share, after tax. Third, expenses related to a cost initiative also in Corporate & Other decreased operating earnings by $21 million, or $0.02 per share, after tax. Fourth, reserve adjustments primarily resulting from modeling improvements of individual life products, which increased operating earnings in MetLife Holdings by $34 million or $0.3 per share after tax. In addition, activity related to separation resulted in an increase to operating earnings of $42 million in MetLife Holdings and offsetting $42 million decrease to operating earnings in Brighthouse Financial. Finally, variable investment income was above the company's 2017 quarterly business plan range excluding Brighthouse Financial, increased in operating earnings by $15 million, or $0.01 per share, after tax, and…

Good morning. Steve, just a question on the separation, you've mentioned the complexity that may delay the timing, just a question on that, do you still feel confident in the structure of the transaction, in terms of the dividends, the capital for each business or do you see the delay being more administrative complexity.

Hi Tom, nothing changes in terms of our expectations other than the timing. In the timing I use the word months, I didn't use the word quarters. It is the complex transaction. We're working closely with our regulator. There's a lot of information to impart. We are working very diligently and providing information as fast as humanly possible. But it is a large volume of information and analysis that is going on. So that's what's resulted in the expected delay from what our initial thought was, which was made many months ago, over many quarters ago in terms of expectations around timing once you get into these transactions and you see the complexity associated with them. You see what occurs in terms of the amount of work that has to get done to make sure that everything is detailed appropriately and headlines appropriately.

Okay. Okay, thanks. That's helpful. And then just a question on expenses to make sure I have had my head wrapped around these. So John, if I'm understanding the flow of the strategic expenses for RemainCo that would imply you still have another $260 million to $270 million left for the balance of the year. That would come through operating and corporate? That was my first question on expenses. And then also on Brighthouse, I just wanted to get a sense for how much of the kind of annualized $200 million increase in expenses this year is embedded in the 1Q result?

The answer to your first question is yes, that's why you expect for the year and could you say the second question again, I quite get that?

Yeah in the Form 10 it indicates Brighthouse expenses you're expected to go up $200 million in 2017 versus 2016 levels, and I just want to understand how much of that planned increase is embedded in the 1Q number. Is any of that or is a small amount just you know some indication of how much is in the 1Q number?

Probably about $30 million of that is in Q1.

$30 million on an annualized basis?

No $30 million in the quarter, it's…

In the quarter building to like $50 million quarterly run rate?

Yeah, yeah.

Okay, so little more than half. Thank you.

Your next question comes from the line of Ryan Krueger from KBW. Please go ahead.

Hi thanks. Good morning. My first question was in regard to the changes you made to the derivatives program. Should we expect any impact to the to your ongoing benefit from some of the low interest rate hedges that would come through that would have been coming through operating earnings?

There's not a material change to the benefit that we get from those hedges, of course rates are higher now so we get less benefit, but those are still essentially there.

Okay. So no material change, other than the interest rates are moving. And then just secondly, coming into the year you had guided to $450 million to $650 million of corporate losses excluding the expense initiative costs. Does that change now that you lowered your consolidated tax rate outlook?

Yeah, so we expect still to be within that range, but we do expect the lower tax rate for the year now.

Okay. All right. Thank you.

Your next question comes from the line of Jimmy Bhullar from JP Morgan. Please go ahead.

Hi good morning. First, I just had a question on the derivatives losses. Obviously the derivatives loss declined significantly from 4Q, but was still relatively large. So I was a little surprised with the loss in interest rates and that rates were generally flat or lowered depending on which part of the curve you look at. So just wondering what caused that was that related to sales some of that depreciations or something else. And then how the GAAP loss in on the hedging program affected yours whether it had any effect on stat capital?

So there's a few things going on Jimmy. First is although the 1-year Treasury dropped a little or almost flat quarter-to-quarter swap rates were up a little bit. So some noise from that that's asymmetrical on non-economic, but you get the GAAP noise from that, and you also had some strong equity market in the quarter and you've got some GAAP noise in that as well. We also as we pointed out had some hedge ineffectiveness in the quarter and that impacted the total GAAP net income.

And then just in terms of the change is implemented I'm assuming you change from swaps to swaps and as you had discussed before, but is that correct and how if you can discuss some of the other changes that you have made and whether you changed the size of the hedge program whether made it bigger or smaller?

We actually did a variety of things. We were able to get some more statutory hedge accounting for some types of derivatives by changing their technique and structure. We did move from two different instruments like that. And we have accomplished our primary goal of making stat couple of RemainCo less sensitive to changes in interest rates. And as you can see from the numbers and the breakouts RemainCo has less sensitivity across the board in terms of equities it is relatively insensitive. I mean there's always movements and every time you look at these results every quarter there's a lot going on in a quarter when you have derivatives as well as variable annuities. There is the time decay of the derivatives is aging the portfolio your basis risk or otherwise is going to VA hedge ineffectiveness and all these get grouped together. So there are sensitivities going up and down we minimize that, but there always be some move movement here due to all these factors.

Okay. And then lastly just you mentioned the strong sales in Asia and Japan. I think up to 8% to what extent do you view this as sort of a turn in their sales since the results had been pretty weak the last few quarters versus maybe some front selling related to the discount rate changes are going into effect in the second quarter?

So let me touch, I'm Christopher Townsend here, so Japan sales were up 8% year-on-year and this driven primarily by cant see life sale growth were obliviously 1% as you know we made that shift from the end market volume for July the end of 2015, beginning of 2016, it's very strong growth in Asia is up 6%. So the foreign currency business now makes up about 70% of alternative life sales we think that fairly consistent at the mix going forward and as the number of our competitors have pulled the end life products and change pricing for the discount rate range. We think Asia is being pushed towards a foreign currency life products and we're very well positioned to provide that given the distribution we've got, so we see that as a fairly interesting team we probably did benefit from around [indiscernible] product we repriced in April, and as you know for the reserve discount price in the financial year and we expect sales with the full often in the second quarter. Overall we're very comfortable in terms of Japan sales, but it's too early to sort of break that guidance at the moment.

Thank you.

Your next question comes from the line of Erik Bass from Autonomous. Please go ahead.

Hi. Thank you. In Group benefits can you just talk about the competitive environment and where you're seeing the best opportunities and given relatively strong industry results in recent quarters you've seen any uptick in price competition?

Hi this is Maria Morris. First of all I just want to say we were very pleased with our group sales results in 2017. It's a competitive market as you know it's always competitive. But having said that, I'd say that life and disability has been rational. We've seen a little bit more of intense competition in dental, especially down market, but overall we feel very comfortable with the market that we are in. You probably saw that we had strong growth and strong persistency. We've been able to get our renewal actions. And overall it's been a rational market.

Got it. And then one thing to clarify just on the pace of buybacks, should we expect it to slow it all until you receive the dividend payment from Brighthouse and I'm assuming that $3.3 billion to $3.8 billion is contingent on the transaction being approved. And I guess also are there any restrictions to your being in the market around the time of the transaction?

No we don't anticipate any change in the program that we put in place between our existing cash reserves and earnings. We believe we're on track for the program being completed by 2017.

Got it. OK. Thank you.

Your next question comes from the line of Sean Dargan from Wells Fargo. Please go ahead.

Thank you. And just to follow up on Erik's question around the share repurchase. As I understand it there was kind of a bright line test that RBC couldn't fall below 400% and it sounds like whatever happened with hedge losses in the first quarter didn't bring you close to that. But is that 400% applied to the statutory entities related to RemainCo or are all of the current MetLife?

Well RBC as measured once a year and so were half of long term projections that we always knew that there's a lot of pluses and minuses as you do this restructuring unwinding reinsurance transaction to see the pieces moving back and forth and the Brighthouse 10 of RBC we haven't done the debt infusion yet from that. So there's a lot of moving pieces here, and you have to look and if take that into account we're strongly capitalized across the board for all our businesses.

Okay. That would be great, thanks. And then just on MetLife Holdings the results were stronger on a normalized basis than I would have thought. I mean broadly speaking should we think that in quarters and where just you have - you see favorable equity market performance that MetLife Holdings will not run off as quickly, as you guided to?

Whether it's a block of VAs in MetLife Holdings. And so for equity markets we had better fees on an ongoing basis, and that will continue to be one of the factors.

Okay. Thank you.

Your next question comes from the line of John Nadel from Credit Suisse. Please go ahead.

Thank you, good morning. My question about the group insurance business, Steve, it's been a long time since and since I can remember you sort of starting off the conference call talking about or highlighting that business. Given your size and scale there particularly at the large case market is there anything beyond further economies of scale that you think you could gain from a large acquisition within that business line. And relatedly why do you think you're seeing more success particularly in the jumbo case market has competition declined there or have you just gotten a bit more aggressive.

John the first part of your question, we always look at any opportunities out there in the marketplace. And the Group business is one of which we have a very favorable view going forward and it's been a strong part of our company for many decades. So if there's opportunities in the marketplace to make an accretive acquisition, we certainly be quite interested in looking at that. Maria you want to take the second part of the question?

Sure in terms of where we've been investing in group insurance, I think we're seeing the benefits of our investment in our growth. So as an example, we've been investing in our voluntary benefit platform, and so we're seeing large groups as well as medium sized groups really gravitate toward carriers both for their core benefit programs and to offer voluntary benefits to their employees toward a carrier like MetLife where we're in a position to do that. We've talked historically about benefiting as an example from the exchanges where we're in some cases the only non-medical carrier on the health exchanges and I think going forward the other place we really put investments in our ability to ensure that employee records are secure. So a lot of work in our security platforms that's been very helpful at market as we've look to bring on new Group life and disability business as well.

So Maria is it fair to say that when you talk about really strong growth in sales at the jumbo case market that a good chunk of that is actually voluntary not employer paid?

It's actually both. I would say that we've had a very strong sales quarter up and down the market. So double digit growth in the jumbo market, but we've had high single digit growth in the regional market. And as you know smart market is actually not seasonally first quarter focused, but even there we've had strong growth. We've had growth in both our core business and our voluntary business, our voluntary business is up double digits from a sales perspective. So overall very strong sales quarter Group.

Thank you. And then a question for John, on the change in the hedging strategy implemented if both Brighthouse and RemainCo. Can you give us some senses to the duration of the program that you've put in place now and how often some of these hedges need to roll. I'm just trying to understand how the new instruments compare with some of the older hedges I'm not sure if you even still have them that had extended into the 2020s?

So on RemainCo the duration is about the same and it's basically some longer term hedges mainly in that. Brighthouse is like a one to three year type restructuring of hedges that they're doing and they've made significant progress to get their hedging done now. So if you think about future sensitivities, we point out look at the Form 10 that was recently published. The sensitivity to VA as well as you ULSG in there and you can see both on a stat and a GAAP basis with expect to senses should be going forward.

No I understand that that disclosure is there, I was just trying to understand duration and you know maybe the risk of having to roll?

So for balances is about one to three years.

Thank you.

Your next question comes from the line of Suneet Kamath up from Citi. Please go ahead.

Thanks. Just want to start with the stat capital, I guess it was down about a $1 billion from year end despite not taking any dividends out. So John can you just walk the mechanics in terms of why the capital was down?

Is going down $500 million from $24.6 million to $24.1 million, and as I said most of those Brighthouse Financial and they had some of the restructuring costs, less sensitivity to the reserves. The total of CTE (95) which is what they're really hedging to in their strategy, is still as a buffer when we take into account all the transactions that will happen so on a pro forma basis, but as of March 31st you are seeing partway through the restructuring and all the steps that have to happen. So you've seen that sort of the low point and is - as I said in my script it's up significantly from March 31st and there will be a whole series of further that have to happen to get there. So we gave you sort of the pro forma view of it and expect to be in like a 650 RBC pro forma for all that as of - if all that had happened as of March 31.

Okay. And just another question on the update Form 10 to the changes or that the debt to capital of Brighthouse is now going to be 25% and then CTE (95) buffer has gone from I guess around $3 billion, to $2 billion to $3 billion so can you just discuss why - what drove those two changes?

So the first Form 10 all the calculations the values as well as all the core assumptions and projections were all done as of June 30th last year. And the updated Form 10 as of December 31st and things change a lot between June 30th and December 31st. So there's a series of changes and I think Brighthouse will be a dynamic company and how they manage their business. And that's the reason for that still strongly capitalized and will provide good value over time to shareholders.

Okay and just one last clarification question if could on the 9% ROE target for Brighthouse. Is that the guidance for sort of out of the gate or is that more of a longer term expectation?

I think what happens with Brighthouse is for the next little while it is about that type of range, because of just how kind of GAAP works and there - their key focus is to build up overtime to reduce the hedging cost to start getting cash out of the company. And that's the key focus is to run it mainly on statutory basis.

Okay, thanks.

And your final question today comes from the line of Humphrey Lee from Dowling & Partners. Please go ahead.

Good morning and thank you for taking my question. Just to follow up on John does question regarding kind of the appetite for group market acquisition given your capital position like what like what size of the transaction would you be more comfortable doing it with kind of seeking external capital?

Hi Humphrey. Well, first of all we certainly will have some capital in reserve for acquisitions, but please remember that we do acquisitions of larger size like the Travelers deal back in 2005 the Alico deal in 2010. We would access the capital markets for any funds necessary above and beyond we hold at the holding company. And it is just important to reiterate our philosophy on acquisitions they have to make sense strategically in terms of what we are planning for the company going forward direction in businesses we want to be in. And second of all they have to be creative for shareholders and create shareholder value have to earn more than their cost of capital. And any point in time when there is an acquisition opportunity we look at the capital markets, which of course is to raise capital in all kinds of returns would expect from acquisition including synergies and we make a determination in terms of what we're willing to pay for that business.

Got it. And then just a housekeeping question, do you have any updates regarding the dividends to offer in some of your debt cost right now?

Well, we do not believe that this will be a factor going forward. We have steps that we can take if we need to adjust for this. So that's something that we can plan for if we need to execute it.

Got it. Thank you.

And at this time there are no further questions. So I'll now turn the call back over to Mr. Hall.

Thank you everybody and we'll talk to you throughout the quarter. Good bye.