Okay. It's a pleasure to have Eric Steigerwalt here. He is the interim CFO of MetLife, and he's in transition. Or actually, there's really no transition, right, Eric? You're actually currently heading the U.S. retail operations as well, and will continue to do that, and will also continue to be CFO until a replacement is found for that role. Eric's been with the company since 2000 when he left AXA Equitable, where he had a number of responsibilities, including relations with the investor community and rating agencies, and a number of other areas. With Met, he's also handled many roles, whether it be running IR, as the treasurer, as the CFO of the U.S. operations, and now he'll shortly solely be heading up the U.S. retail operations. It's a pleasure to have Eric here. I'm sure he can talk about most anything about Met.
Thanks, Andrew. Are you going to sit up here and hang with me?
I'm going to relax and you-
Cool
can just go up there and-
All right
take whatever heat that they put on you.
All right. Fair enough.
If they do that.
Well, good. I guess we're almost afternoon. Good morning, everyone. I'll walk through some stuff here, and maybe we'll take a couple of questions at the end. I see some of you from meetings earlier this morning, I will repeat some of it, but we'll see what we can get through here. Yep. Up to four now, Charlie. Super. Okay. Just a little overview here. Solid financial results despite the macro headwinds. You all have a pretty good sense of what's gone on, for us particularly, we had the added hits from the tsunami in Japan and the worst year we've ever had in our auto and home business in the U.S. We still had fantastic results. Now a global and growing franchise, and with the acquisition of Alico, that's not a throwaway line anymore.
40% of our earnings come from international, and that number will continue to grow. Prudent risk management. I think we showed that through the crisis, and we just continue to get better at it, frankly, because we're pretty damn focused on it at the company. I'll talk a little bit about that in light of what happened last week. We are perfectly comfortable saying that we have a very strong capital position. Again, I'll discuss that a little bit also in light of last week, not just as a throwaway line on this PowerPoint slide here. We are focused on creating long-term shareholder value. Our CEO, Steve Kandarian, that is what we talk about every damn day at the company. Everything is focused on a solid balance between top line and bottom line.
Our decision framework is centered around our customers and our shareholders. I'll walk you through some other topics here that I hope will demonstrate that. A solid year in a very challenging environment. Operating earnings per share grew 16%. Low interest rates, volatile equity markets, as I've said, record natural disasters. Alico providing the value that we expected, and our integration is on track. This is something that the rating agencies are obviously very interested in, and we have endless conversations around the technical pieces of integrating such a large company. I can say we had a very good plan from day one, and frankly, it's gone exactly according to schedule. There really haven't been any hiccups in the Alico integration, as big a purchase as it was for us. Full year 2011 financial overview.
I'll just point out a couple of things here versus the plan. You can see $5,358 billion in operating earnings, the middle to slight high side. Variable income for us, our variable income classes, corporate joint ventures, the biggest piece probably, bond prepayments. Securities lending happens to be in this number, though going forward, we've sort of adjusted our securities lending portfolio. The net balance these days is in the $25 billion-ish area. It's been there for quite a while now. We're going to pull it out of variable income in 2012 because it's simply not variable anymore. The structure of that portfolio is pretty stable, and there's really no reason to include that in this little category that we have as variable income, which we, on a quarterly basis, do this little normalizing exercise with some of you in the room, but certainly with Andrew.
Operating earnings per share, $5.02, right down the middle of the fairway there. Operating return on equity, 11%, which we think is a pretty good result, again, given all the caveats I made on the previous slide. Of course, book value per share above the high end of the range at $49. Solid operating earnings and obviously some pretty big derivative gains in 2011. Those derivatives move around year after year, quarter after quarter. A global and growing franchise. We have leadership positions in large established markets. Most of you in the room, I think, are well aware of that. Strong and growing presence in high growth markets with favorable demographics and high margins. I would say, obviously, when we bought Alico, we ended up in so many countries that we had never been in before.
Just because you're in one doesn't mean that's a place that you think you can grow profitably. We have exited some. We've gotten out of the U.K. We're getting out of the Caribbean and some other areas where we just don't think the future there for profitable growth, not growth, okay, profitable growth, is bright enough for us. In addition to some acquisitions that we've made, including our Turkey acquisition that we just recently made, we're also doing some divestitures and continue to think about some of the operations that we have that we just don't think are going to have the right returns or the potential for profitable growth going forward. Broad and diverse distribution channels worldwide, obviously, in the United States. I now also head up, as Andrew said, the U.S. retail business, so the career agency force reports into me.
All of our third-party retail sales report into me. Our auto and home independent distribution reports up there as well, as does all our broker-dealer operations. We have obviously a very broad and geographically broad distribution set of channels. The key going forward, as again I said to some of you in some earlier meetings, it's about profitable growth. It's about the balance between sales growth in areas where we have product expertise or franchises, and returns. These days at MetLife, you dare not walk into Steve's office and talk about sales. You better be prepared to talk about sales and the returns on those sales. Disciplined risk management to protect both our customers and our shareholders. I think for our customers, you can see that on our new variable annuity product.
This is a product that has really gained huge traction with our distributors and our customers. It's helping them do the right thing. Customers very often, as all of you know in this room, buy a product that has mutual funds in it. They tend to buy at the wrong time and sell at the wrong time. This product is designed to help them, and in addition is obviously designed to help with risk mitigation for MetLife. Finally, solid balance sheet and capital generation. Again, I don't mean this as a throwaway line. I've got a couple of slides in here where I think it'll be the most useful to discuss words like that in light of what happened last week. Leadership positions in markets today and tomorrow. You can see, obviously well established in the United States and Japan.
Significant growing operations in Mexico, Korea, Poland, and Chile. We're in all the BRICS here on the right. Brazil, we're number 1 in Russia. We've got a big Indian operation, and we just signed a joint venture with a huge bank in India. Our Chinese operation is making money, though I think for it to be material to MetLife's financials is going to take a number of years, but it is making money at this point. Our operation in Turkey and our recent acquisition, we expect that to be an area where, again, we can focus and we feel very comfortable on profitable growth. You can see all the way on the right there as well, both in the middle and on the right, high margins, fast-growing, solid margins worldwide. Frankly, in the U.S., when we're not getting our price, we're slowing down sales.
Whether it's the variable annuity business, which I'll talk about in a little while, whether it's our structured settlements or corporate benefit funding businesses, if we're not getting the returns that we feel we need to hit our goals, we'll slow down sales. We probably don't have any better concept to discuss than the variable annuity sales plan. $28 billion of variable annuities in 2011, and we intend to shoot for $17 billion-$18 billion. Our plan is $18 billion for 2012. Diversified product set. First of all, you can just see all the various colors. We are a pretty diversified company and have, I think, a well-diversified balance sheet. You can also see up there on the right side, you've got the U.S. and then everything that we sell internationally. We've said this before. We've said this certainly during the last three years.
We don't want to be held hostage, frankly, to any one product or service. We want to be able to have relationships with our customers any way they want to have it, but we want to make sure that the value proposition is there, that we're providing value to our customers, and at the same time, we're providing value to our shareholders. We intend that picture, in some way, shape, or form, should look similar three years from now. This is a slide that Steve Kandarian, our CEO, has been using, and I think it just sets up some of the messages that I want to discuss in the next couple of slides.
Guiding principles for building on our strengths. I would also say these are pretty good guiding principles when you think about our strategy that we'll be trotting out to you on May 23rd. I know some of you will definitely be there for that. We're taking a portfolio view of our businesses. Steve said many times nothing is sacrosanct. Everything is on the table. We are looking at everything through a lens of capital requirements, risk management, profitable growth, ROI lenses on every product that we're selling. Nothing is off the table. As I sit through the strategy sessions, I can verify that nothing is off the table. There's no sacred cows there. Steve is willing to look at anything, and it's through those lenses.
I'd say in addition, Steve has, when he was chief investment officer, he was also the head of strategy for the company. His idea is we've got to continuously assess our strategy. Just because we're in some business, and even if we've got some serious infrastructure, doesn't mean that you just have to continue to sell whatever product is associated with that infrastructure. Sort of on a high level basis and a very deep dive basis, I'm thinking every two years, but frankly, we are constantly talking about our tactics underneath the umbrella of strategy, and that's going to continue as we go forward. I've already talked about the third bullet, balancing growth, profitability, and risk, and then optimizing our use of capital.
Again, just because we were in businesses and maybe sold a lot in one particular year, doesn't mean that that business is automatically granted the right to as much capital as it wants going forward, whatever the business is. Okay, let me shift a minute here and I'll put my other hat on for the retail business of MetLife. We are committed to face-to-face distribution. Now, I'm saying that to all of you in this room. I'm also saying it to anyone listening who works for me, because there's about 18,000 of them. It's easy to say that line because it's a fact. We are committed to face-to-face distribution. As our entire organization understands, we are committed to profitable face-to-face distribution. Sales for the sake of sales don't help your ROE, okay?
That message is being blared in stereo around the entire company, whether it's from Steven Kandarian, or Bill Wheeler, or myself, or any member of the executive group. We are committed to face-to-face distribution. We have a fantastic asset there in our MetLife career agency system, our New England system, our MetLife Resources system, our broker-dealers, but it's got to provide value to the company, period. The message, I would say, is not as hard for them to swallow as maybe some people might think. Nonetheless, everything is being looked at through the lens of that profitability notion. That leads me to number 2, profitable growth. All business plans have to show returns on sales, return on infrastructure investments, returns on just about everything we're doing.
If you can't really put a number against it because it's too amorphous, then we need to understand the value proposition of the investment that you want to make. I think finally, and I think this is key, and all of you must wonder because companies do this all the time, unless some of you have been in some large companies, are you decentralizing? Are you centralizing? Which one is it, okay? Look, we just tried the U.S. business notion where we put a lot of things under one sort of roof, and they all had their own silos. I don't think it worked that well. That's why we've gone back to more vertically integrated, not completely, okay? We certainly have matrix operations in our company. IT, for instance, everybody in IT reports up to IT. Everybody in finance reports up to finance.
I'll show you in a second, a little picture of my organization and maybe give you a little insight into what we're thinking there. In the retail business, you can see under that top box, product development, product management, distribution, compensation, administration, marketing, all under one umbrella. That's key because if you look at the first bullet there, that promotes accountability and aligns the strategy between product and distribution. One of the concerns that any company has, and someone like Andrew will quiz us on this kind of stuff on a regular basis, where's the strategic thrust of the distribution channels versus your manufacturer, and are they aligned? This structure makes sure they're aligned.
When we have meetings about our life insurance business, when we're talking about the future strategy of our annuity business, all players are in the room and they're all under the same umbrella. I am heavily discouraging, I'm in distribution, I don't have to give a crap about the manufacturing profits. I'm in product development, and since I hear you talk about ROI all the time, I'm just going to jack all my pricing ROIs through the roof and distribution will never sell anything. There has to be a balance between those two, we felt, and Bill Wheeler, who runs the entire Americas operation, feels very strongly that you need alignment there.
We used to have a distribution organization where all of U.S. distribution all reported up through one channel, now we've broken that back apart, basically the way we used to run the company two years previously. Now it all reports up in the silos. If I think about our group products, it's no different. The chart would look the same. The distribution channels and the product manufacturer and the administration all report up to the head of group. Finally, we think this structure drives efficiency, and that's going to be something that we're going to be talking about as we go forward here. I've had conversations with some of you in the past, certainly with Andrew, who I've known how long? I've known you since 1992. It's been a pleasure every day. The whole time.
We've talked about the fact that there still are efficiency gains to be garnered throughout MetLife, and we'll be talking about that as we move forward through 2012. Let me talk about variable annuities a little bit. They always seem to be a nice hot topic. We have a well-diversified block. Over one-third of our VA block has no living benefits at all. It's dollar cost averaged over time, all during the crisis. We never stopped writing business, and obviously we've got some stuff on the books that have been put on at far lower levels of the S&P, which is obviously very helpful from a risk management point of view. Frankly, it's diversified by channel as well. We sell through every major wirehouse, regional brokers, banks, all the agency channels, and our broker-dealer channel. Okay? We're not tied into any one channel.
We distribute products across all the various channels in the U.S. Finally, proven risk management practices. Obviously, we came through the crisis pretty well. That was a real test. All the modeling we do, and we do extensive modeling, it's never a substitute for actually going through it. We can guess, and we can model, and we can estimate, and we can have a gut feel for what's going to happen to our reserves with respect to this business, but I don't think anything gives you a more comforting feel than when the S&P goes to 665 and our assets backing the living benefits are higher than our reserves. With respect to our hedging there, we have never changed our hedging strategy. We continue to do the same thing today with one caveat, and that is we actually have to hedge less.
With the new program, our vega, our volatility hedging, and a chunk of our interest rate hedging is now within the Protected Growth Funds. That's a big risk diversifier for us, and frankly, is also helpful with respect to hedging costs. That hedging, that piece of rho and vega is now done within the funds itself, or themselves. Finally, I talked about this a little bit, 2012 variable annuity sales of $17.5 billion-$18 billion. We did 28 in 2011. Look, the 28 was too much, period, thus the 2012 goal. Something very good did happen in 2011, and that is we moved from our old product to a new product which is more profitable, less risky, better product for the customer, and that's the most important thing with respect to MetLife.
I still would have preferred to sell a little bit less, but the move into that new product was critical, and frankly now we've shut the old product down. I probably should mention that next to last bullet. The plan was developed based on self-funding levels, okay? I said before, you're not automatically entitled to capital. You got to earn the right to get capital. One of the ways to do that is to self-fund it yourself. How much are you going to generate in earnings in the previous year? Maybe that should be the first place that you look at with respect to how much business you can put on the books the following year. Does that make sense, Andrew? Okay. Variable annuity account value by guarantee type.
You can see there in the darker blue, 35% of the block doesn't have any living benefits on it. You can see, this is a total VA account balance, which includes the stuff in the general account. At this point, the new GMIB Max product, which some of you have heard a little bit about, has no general account option. The only funds that you can put your money in are these Protected Growth Strategy funds or sort of volatility protected funds. We're already up to 9% of the block as a result of that. Of course, some of that is even the old 5.5% roll-up rate product, and now our product is a little less riskier as well, down at 5%. We continue to tweak features and raise prices.
I feel very good about this product from a risk management point of view and from a profitability point of view. I'm going to talk about that and give you a slide in a second that I hope will be a little bit helpful. These Protected Growth Strategy Funds provide a more stable fee base as well. The base product fees are off of the account value, and the account value is fluctuating a lot less. It's more capital efficient for us, as I've said. Finally, and this is really important, there's an improved distribution of returns here. When we talk about product returns, Andrew will ask me, "What's the return on your GMIB Max at 5% roll-up?" We'll say a number. That number's currently in the 17-ish%. The fact is, that number is an average of 1,000 stochastic scenarios.
That's a nice number, right? 17%, that's a good number for you, right? However, there's a couple of things I want to point out in that number. Number one, with respect to MetLife, whenever we quote a number, that is based off fully allocated economic capital and fully allocated expenses. I can make that number magically 19 just by pulling out a whole bunch of expenses. When you ask me what the return is, I'll say 19. That would be more like a marginal return. When we quote returns, we've been doing this for the last couple of years here. That is a fully allocated return. Then secondly, we talk about these 1,000 stochastic scenarios. Something that might be very interesting is how many of those have pretty poor results attached to them? Okay.
We put this chart together, which you've never seen, and this gives you a sense of the distribution of those 1,000 scenarios. You get a better sense of what we're thinking when we price these products. You'll notice down at the bottom, there is no sliver. Charlie put this little light blue box there for returns that are less than zero, but you can't find any light blue. That's because there are no returns less than zero. Okay. You can see from zero to eight, you've got sort of a single digit there, then you work your way up, and a huge 70-some% is over 15% in these 1,000 scenarios. That's another way to think about risk management. Okay. It's not just the average return on a product, it's the incidence of profitability throughout 1,000 different scenarios. Obviously, some of those scenarios, very stressed scenarios.
Risk management. Talk about risk management a little bit. Most of you have heard this story, for those of you who haven't, we've put on an enormous amount of protection for low interest rate environment, I just want to point out a couple of things here. We've got approximately $47 billion of notional hedges for low interest rates. 18 of that is interest rate floors. Some of those are deferred starts. These lines are all made up of interest rate floors, swaps, and swaptions that come online at various different times. Importantly, we got protection out to 2025 and beyond. Okay. You can see there, rates go up. Obviously, the income from these derivative portfolios go down. The bottom line is, I think we are very well protected, even if we have the 10-year at 2% for years or frankly, even lower.
We've kind of got a little band in here around the 10-year 2%, where if it goes lower, at least in 2012, we don't think we'd have any hit to earnings. Very modest. Why? Because our interest rate floor positions and swaps will just throw off more money. If it goes up a little bit, just in that first year or half a year, you're probably not going to see a lot either. Why? Because now you've got the floor income coming off, but now at least we're reinvesting in higher rates. Way better for the future. I got asked a question today, you've got this huge gain in the bond portfolio, what would you like to happen to that? I'd like that to turn into a loss. Okay. We want higher interest rates.
If you think back now over the last number of years, something I hope has become pretty clear to you, a company like MetLife, if you see a large unrealized loss in the bond portfolio, we're not going to sell the bond portfolio. If you see a large unrealized gain in the bond portfolio, we're not going to sell the bond portfolio. Our strategy is to match assets with liabilities. The liabilities come first, the assets are then matched pretty tightly with respect to ALM. Bond portfolio unrealized gain or loss, the key is we're not selling the bond portfolio. This chart is pretty important because we are protected, and we're protected for the long term. Talk a little bit more about the investment portfolio.
Peripheral European sovereigns were down to $254 million, you can see there on the right as of the end of the year. The bottom blue there, number $165 million, is our Greek government bonds. Frankly, following the exchange here that'll occur pretty soon, our actual Greek sovereign bonds will be in the $60 million-$70 million range. We feel very comfortable with this. With respect to bank exposure, proactively reduced exposure during 2011. As you can see, to the tune of $3 billion. Okay. We were trimming throughout the portfolio and the remaining holdings, as I say there on the left side of the slide, primarily in large, what we call national champion banks in core Europe and in the U.K. Again, we feel pretty comfortable with this.
The stuff that we just felt we prefer getting out of, we did it in 2011, some of it in early 2011. Commercial mortgage portfolio, this has been nothing short of a home run for the company. We have a very serious expertise in this area. We talked about it all through the crisis. I know there was a number of skeptics. This portfolio is absolutely pristine. Losses in 2011 on a $40 billion portfolio, $12 million. Our delinquency rate is 16 basis points at this time. Commercial mortgage valuation allowance is at $400 million. That's down from $625 million at the high, and that was sort of a FAS 5 general reserve there. I'd love to be able to keep that at $625 million, the accountants will not let us do that. Why?
There are no losses, and they've kind of pointed that out to me and others at the company that we're not allowed to keep that valuation allowance at $625. That's going to continue to come down because you have no losses in the portfolio. Loan to value down to 61%, over 2x DSCR . This is a fantastic portfolio for us. At this point we're originating commercial mortgages at great spreads over Treasury. This is a great portfolio for us. Let's talk about capital position a little bit. The infamous CCAR test, obviously we were one of the 19 bank holding companies. The Federal Reserve objected to our 2012 capital plan, which included $2 billion of share repurchases and raising our common stock dividend from $0.74 to $1.10. They did not object to our $0.74 dividend. They objected to raising it.
We submitted our own capital calculations and all of the four ratios. In each case, MetLife's numbers were well above the minimums. As I think you've heard, our plan is not to be a BHC by the end of the second quarter. Now, I have been reminded that all of my conversations with the Federal Reserve around this topic are what are called supervisory confidential, and I'm going to need to keep them there. That being said, I will tell you this. If you were to ask me for anything out of the CCAR testing that changes your view of your capital position or your excess capital position, the answer is no. We feel very comfortable with where we are with our own internal economic capital modeling. We're very comfortable. Our RBC ratio is 450%, remains at the high end of what it's ever been as a public company.
We manage in the 350%-400% area. That leaves us with a lot of excess capital. The fact is, we've said it many times, the CCAR tests and the modeling around the CCAR tests were designed for banks. We are not a bank. We have a small little bank. We're getting out of that bank, we should be measured along with all of our other peers, that's what we intend to do. I'll add one other piece here because I anticipate getting the question from one of you or from Andrew, when we are no longer a bank holding company, our intention would be to carry out the capital plan that we submitted to the Fed, and that would be share repurchases of $2 billion and increasing our common stock dividend to $1.10. I will give two caveats to that.
Caveat number one, we are a prudent management team, we will obviously look at the landscape. Landscape looks pretty good right now, we're in March. We'll have to do that when we're no longer a bank holding company. Finally, obviously, that's subject to board approval. If you asked me, I'm sure your board knows exactly what you put in the CCAR test and we're comfortable, the answer would be yes. Life insurance versus bank holding company profile. Discussed CCAR methodology a little bit, I'll give you a couple of examples. In the CCAR testing, there's something known as risk-weighted assets as the denominator in some of the ratios. Banks don't hold huge corporate bond portfolios. When you think about risk weighting, there's a number of percentages depending on the asset. You can have a zero risk rating, 20, 50, 100.
There's even a 200% category. What's an example of an asset that has a 0% charge? U.S. Treasuries. What's an example of an asset that is a 100% charge? Corporate bonds. Investment grade corporate bonds. What's another example of an asset that has a 0% charge? Maybe some other government sovereign bonds that you might be familiar with might actually have a 0% charge. When you think about our large corporate bond portfolio, this ratio just simply doesn't work for it. Okay? Secondly, our separate accounts are penalized by inclusion in what's called a Tier 1 leverage ratio as the denominator. You have roughly an $800 billion asset base, $200 billion of that is separate accounts. Those separate accounts, the risk is completely borne by the policyholder.
If a separate account has 100 bucks in it, and the underlying assets fall so that that separate account asset is now worth 50, bless you, the liability is now down to 50. One for one. Okay? The formula says you got $200 billion of assets here. Where's the capital associated with it? Well, there isn't. There's no risk in these. These are separate accounts. Okay? The Federal Reserve is in a position where they would have to make an exception here. They have decided that they're not going to make an exception in that case. I'm sure you can imagine our Tier 1 leverage ratio certainly doesn't look good. That's a pretty big number.
I'll reiterate, in our opinion, with respect to all of our internal ratios that we use that we think are appropriate for a life insurance company and our economic capital modeling, et cetera, we are very well capitalized and very well positioned going forward. Just to reiterate, U.S. combined risk-based capital ratio 450 as I said. Deployable capital at the holding companies Both the domestic and international holding companies, $3.5 billion at year-end, and as we've said before, that number is estimated at $6 billion-$7 billion at year-end 2012. I would add, we are committed to returning capital to shareholders. If our CEO was here today, that's exactly what he would say, and that's exactly what I'm saying to you. In summary, we delivered solid financial results in 2011. We think we're going to deliver another set of solid results in 2012.
We've got a strong presence globally. We are focused on profitable growth, and we're generating capital hand over fist to both fuel that growth and deliver shareholder value. With that, I'll turn it over to Andrew.
Yeah. You really did nail a lot of the key potential questions, Eric.
You don't have a zinger for me, though?
Well, let me just see if I can add one last twist on the bank holdco. Assuming that things track on plan, and in June it's gone, there's no reason why you feel like you have to answer to anyone other than the insurance regulators. Is that a fair assessment at that time? Even though there may be non-bank SIFI in December or other potential regulators, is it.
Yeah
comfortable to.
Obviously, we don't know where non-bank SIFI is going. I can't comment. I don't know anything, okay? That'll unfold over time here. Look, I think we have a couple of constituents, though, right? We certainly have our primary regulator, New York State Insurance Department. We've got rating agencies, okay? We've got our own internal ideas of what we think we should be doing with capital. I think the best way to answer that question is to reiterate what I said, which is, we intend, given the two caveats that I mentioned, board approval and making sure that the economy is in reasonable shape, we intend to carry out the plans that we put in the CCAR test.
Got it. Then just one more, then I'll open it up to everyone. We heard some very interesting presentations from consultants, one yesterday from Milliman, where they basically affirmed that this embedded hedging inside of the products is working and that the returns will be more solid. On the other hand, Guillaume from McKinsey spoke right before you, and so many of the things you're doing are spot on per the McKinsey presentation, your group business, your A&H business, the fact that you've got some captive distribution. One thing he seemed to be a bit negative on was the variable annuity business and the very high cost of equity.
Going forward, do you even really want to be in there at $17 billion, $18 billion of sales each year?
What I would say to that is, that's part of our strategic conversations, okay? We've given the goal here for 2012. Doesn't mean it couldn't be slightly less, by the way. I think that question is something that a responsible management team has to be thinking about, and we're thinking about it. We believe with our new product that we can absolutely be in this business. The level of sales that we should have on an annual basis, certainly over multiple years, we're still discussing, as you would expect a prudent management team to do. I'll wait, I don't want to steal Steve's thunder here as we get to May 23rd in our investor day. You can certainly rest assured that conversation is occurring.
I have one question on face-to-face sale. You mentioned your commitment to face-to-face sale. If you forward, let's say, five years or 10 years, do you think that, or do you bet that the market will still be a very dominant face-to-face market for individual life? If it is the case, then what does face-to-face look like? Is it still captive as we see today, commission-based, or does it look very different? I would love your overview on distribution.
I think that's a great question. Look, the bottom line, if you think about sort of rep count in America, it's been coming down year after year, okay? That's just a fact. However, we have a great field force. We've got some fantastic representatives in that field force, and we're interested, very interested, in making sure that we can engage customers in whatever model they want to be engaged in. Certainly, face-to-face sales is a big part of the life insurance industry. As I said, we can't afford to have reps who aren't making enough money for themselves or for MetLife. When I go forward, let's say five-ish years, I think there's absolutely going to be a place for general agency systems and career agency systems. I think the bar's going to be a little bit higher.
I'd like to see that as a career that people are more interested in. Maybe we're getting even a higher caliber of initial recruits into that business. Look, we're already selling a lot of life insurance in third-party channels, through banks and broker-dealers, et cetera. For us, at least, it's just another arrow in the quiver. When you say you're diversified, we mean a diversified balance sheet. We mean diversified geographically. Frankly, with respect to distribution, we mean diversified with respect to all the channels that we sell through. I'm bullish on our agency force, I really am. They've got to hold up their end of the bargain, which is they've got to be a profitable channel to sell through. That's what we're continuously working on.
Frankly, I think we've got a lot of people in that system who are game to take on that challenge and make that distribution channel more and more profitable, both for themselves and for MetLife.
Eric, I think the ROE last year was about 11 plus.
The previous CEO, Rob Henrikson, was shooting for a 12%-14% ROE by this year and 13%-15% by 2013 or beyond. I think that's off the table now. Where do you think, given your product mix, your capital, where do you think the ROE can go over time? What are the possibilities, if not your definitive target?
Look, obviously, there's pressure on returns in all these financial services industries. I'll tell you right now, we are obviously grappling with that, and we know many of you in this room and in other rooms are waiting to hear our answer. That's one I'm certainly going to leave to my boss.
Do you like the business mix that you have right now? Is there anything that you think you could do more of or less of that you can?
I really do like the business mix that we have. I know I've got some of these charts up there with the pie charts and so forth, obviously, they're meant to demonstrate more sophisticated concepts than the one-dimensional charts. Yeah, we feel really good about our businesses. Of course, the Alico acquisition brought on not only global diversification but product diversification. We are an insurance company, okay? We're happy to take on some interest rate and equity market risk, but we love morbidity and mortality risk, and that's what we got in the Alico deal. We like our business mix a lot, and I think at this point, it's tweaking more than it is wholesale change, although in some cases, the tweaking can be pretty serious. For instance, a 35% decrease in, excuse me, variable annuity sounds like a little bit more than tweaking, right?
Nonetheless, we still like that business. With what we've got with the new product and the landscape for us, we're going to be in that business. I think our mix is terrific, but that doesn't mean that we're not going to have tweaking along the way.
Hartford, that decision, was that surprising to you, to get out of the variable annuity business?
Well, obviously we don't have insight into what happens in their boardroom, but just from an onlooker and a participant in this industry, it wasn't that surprising.
Corporate benefit funding, that's a big opportunity in asset gathering. I think you did a little shy of $3 billion last year in deposits. The goal again is another $3-ish billion this year. When does that take off? When do we start to see you using your capital and generating the high returns that you could get from it?
Andrew's talking specifically about the closeout business, the pension closeout business, although in addition, we have structured settlements in that particular portfolio. In the closeout business, look, we've been saying for a long time, eventually, a lot of these U.S. corporations, and frankly, European corporations too, are going to offload their pension liabilities. With interest rates where they've been and the funding levels in those pension plans, the year when this all comes to fruition keeps getting pushed out.
At this point, I think you've noticed that we gave up last year, sort of putting the big target out there and then explaining to you why, once again, we didn't hit it. We stopped putting the big target out. Seemed reasonably responsible. I would say, look, we don't know at this point. Tell me where you think interest rates are going to be. By the way, it also matters where pricing is. We need to get our returns when we're doing larger pension closeout deals. That's what we intend to do. Obviously, everybody in the room can sort of say, well, 2012 is probably not the year. We'll have to see what happens going forward.
One last one. M&A. It's been a quiet market. Is there any activity going on out there? Is there an appetite for that in lieu of capital management?
I guess I'd like to be careful just making the perfect nexus between in lieu of capital management. We don't want to go out and do a deal just because right now we can't buy stock. That's probably not prudent. The only way we'd do a deal is if it hit our accretion targets and our strategic requirements. When you're in a position like we are, obviously we're looking at everything that's out there. It's got to hit those two measures. We don't want to do deals for the sake of doing deals. We want to make sure that both of those hurdles are met. Shareholder value and strategic value for us. I wouldn't want to say, and I know why you're asking, and it's obviously fine, but I wouldn't want to say in lieu.
I would just say if the right opportunity came along, we'd be very interested, but only if it was the right opportunity under those criteria.
Eric, as always, a great presentation. Appreciate your candor, and thanks for coming.
Thank you.