The operator welcomes participants to the MetLife Third Quarter 2023 Earnings Release Conference Call and reminds them of the cautionary note about forward-looking statements. John Hall, Global Head of Investor Relations, introduces the speakers and directs participants to the non-GAAP measures and supplemental slides. Michel Khalaf, President and CEO, highlights the strong underlying results and business momentum of MetLife, which is a testament to their all-weather strategy and focus on execution. A Q&A session will follow after prepared remarks.

In the second paragraph, the speaker discusses the elements within their control that have positioned MetLife for long-term success. They then go on to report the company's adjusted earnings for the quarter and mention notable items that had a positive impact. The speaker also discusses the performance of their investment portfolio and the credit metrics associated with their real estate portfolio. Finally, they provide an overview of the company's business performance, specifically highlighting the strong underwriting results for their US Group Benefits division.

The company's year-to-date sales and adjusted PFOs have increased, and they are on track to achieve their outlook range for the full year. They have invested in integrating with employer benefits and improving enrollment capabilities for employee paid products. The company is also activating emerging technologies to improve underwriting claims and the customer experience. In the Retirement and Income Solutions division, adjusted earnings have increased by 60% due to higher recurring interest margins and sales in various products. The company has also released a pension risk transfer poll, showcasing their thought leadership in the industry.

The author discusses the results of a poll on the growth prospects for the pension risk transfer (PRT) market, stating that market activity is expected to remain strong following record sales in 2022. They also mention the growth in sales and adjusted earnings in Asia and Latin America, and highlight their digital initiatives in these regions. Additionally, they mention the release of their Value of New Business statistics for 2022, which show a strong deployment of capital with a high internal rate of return and expected payback period.

In 2022, MetLife generated $2.3 billion in new business, guided by the use of VNB, which helps prioritize capital-efficient and shorter payback business. The company has also maintained a balance between capital deployment for organic growth, acquisitions, and share repurchases. In the third quarter, MetLife paid $400 million in dividends and repurchased $800 million of common stock, with an additional $250 million repurchased in October. Year-to-date, the company has repurchased $2.5 billion of common shares and has $2.7 billion remaining on its repurchase authorization. At the end of the quarter, MetLife had $4.9 billion in cash at its holding companies, above its liquidity buffer. The company also provided an update on its pending reinsurance transaction with Global Atlantic.

The company has received all necessary approvals for the pending reinsurance transaction and expects to close it soon without any significant changes to the terms. The company recently held a strategy session with its Board of Directors and is on track to exceed its commitments made at its Investor Day in December 2019. The speaker, John McCallion, will provide updates on the company's financial performance, including its global actuarial assumption review, value of new business metrics, liquidity and capital positions, and commercial mortgage loan portfolio. Net income for the third quarter was affected by net investment losses from trading activity and derivatives due to rising interest rates and currency fluctuations.

The company's net derivative losses were partially offset by gains from higher interest rates. Credit losses were low and the hedging program performed well. The Annual Actuarial Assumption Review had a negligible impact on adjusted earnings and net income. Group Benefits had a favorable impact from assumption changes in individual disability, while RIS benefited from a lowered assumption for mortality improvement. Asia had a net unfavorable impact due to lapse rate changes. Adjusted earnings for the third quarter were $1.5 billion, up 35% year-over-year. The primary drivers were higher variable investment income, strong recurring interest margins, and favorable underwriting margins. Adjusted earnings per share were $1.95. In the US, Group Benefits saw a 16% increase in adjusted earnings, driven by favorable underwriting margins and volume growth.

The Group Life mortality ratio was below the target range for the quarter, but is expected to improve in the fourth quarter. Non-medical health interest adjusted benefit ratio was at the low end of its target range. Group Benefits adjusted PFOs were up 3% year-over-year, with underlying PFOs up 4%. RIS adjusted earnings were up 60% year-over-year, driven by favorable investment margins and volume growth. RIS investment spreads were up 26 points due to higher interest rates. RIS adjusted PFOs were up 75% excluding pension risk transfers. $1.5 billion in PRT transactions were added in the third quarter and $3.5 billion year-to-date.

Adjusted earnings for the company were $369 million, a 23% increase from the previous year. This was mainly due to higher investment margins. Asia saw solid growth in assets under management and sales, while Japan and other Asian countries had strong life sales. Sales in Latin America and EMEA also increased, driven by volume growth and favorable margins. Overall, the company expects sales to decline in the fourth quarter but still exceed their annual guidance range.

In the third quarter of 2023, MetLife Holdings saw an increase in adjusted earnings due to higher variable investment income. However, there was a loss in the Corporate and Other segment due to higher expenses and interest on debt. The effective tax rate on adjusted earnings was within the company's guidance. The private equity portfolio had a positive return, while real estate equity funds had a negative return. The company expects similar results in the fourth quarter. The chart on page 8 shows the breakdown of net investment income between recurring and variable investment income, with recurring income increasing due to higher interest rates and asset balances.

The company's new money yields have been consistently higher than roll-off yields over the past three years, with the global new money yield increasing to 6.26% in the current quarter. The commercial mortgage loan portfolio is performing as expected, with a slight increase in average LTV and stable debt service coverage ratio. The majority of loans scheduled to mature in 2023 have been successfully resolved, and the portfolio has manageable maturities over the next three years. The company will now shift its focus to discussing expenses on page 10.

The chart on page 12 shows the cash and capital position of MetLife and its subsidiaries as of September 30th, with a total of $4.9 billion in cash and liquid assets. This is above the target cash buffer of $3 billion to $4 billion and higher than the previous quarter. The company has also invested $3.7 billion in capital to support new business in 2022, generating $2.3 billion in value. In addition, MetLife has repurchased $800 million in shares in the third quarter and an additional $250 million in October. Preliminary third quarter 2023 statutory operating earnings for the company's US companies were $3.1 billion, with net income of $2.1 billion.

The paragraph discusses the increase in statutory operating earnings and adjusted capital for MetLife in the third quarter of 2023. It also mentions the negative impact of investments being transferred to Global Atlantic, but expects to recover upon closing. The company's strong business fundamentals and value of new business metrics are highlighted, along with their commitment to responsible growth and building value for customers and shareholders. The call then opens for questions from Ryan Krueger with KBW.

Ramy Tadro, speaking on behalf of Group Benefits, reports that January 1 renewals are going well with high persistency and increased jumbo activity. The company is also seeing success in rate actions for both new business and persistency. Michel Khalaf adds that recent acquisitions have been complementary and the company will continue to invest in the business to meet customer expectations. There are no gaps in product or capability at this time.

The company is open to strategic opportunities that can help accelerate revenue growth and align with their focus on deploying capital to its highest and best use. They have a minimum risk-adjusted hurdle rate and compare potential transactions to other uses of capital. The SMR in Japan is currently at 600% but they have other tools to manage it if needed. The $1 billion increase in debt is part of their permanent capital structure and was issued in July.

In the paragraph, Tom Gallagher asks about the improved real estate returns expected for alternatives in the fourth quarter. John McCallion explains that the improvement is more due to market stability rather than property sales, and that they expect to see a U-shaped recovery in the future. Jimmy Bhullar asks about retirement spreads and whether they will compress in the future due to the expiration of caps. John McCallion responds that they expect spreads to remain strong in the fourth quarter and will provide more guidance on 2024 in the outlook call. He also mentions that the CRE portfolio metrics may seem too good and stable, but they are accurately reflecting the market.

John McCallion, speaking on behalf of the company, responds to a question about how the company has resolved 88% of their 2023 maturities. He explains that the majority of these maturities have been resolved through contractual extension options, with strong financial metrics and a small percentage being refinanced or paid off. The remaining 12% is expected to follow a similar pattern and there is nothing unique or out of the ordinary about these properties.

During a conference call, the speaker discusses the company's performance in the first quarter and reiterates their expectations for the year. They also mention the deployment of capital and the strong results seen in Japan. The speaker does not expect a significant increase in IRRs due to the current interest rate environment.

The speaker, Michel Khalaf, is pleased with the regulatory approvals for the Global Atlantic transaction and expects it to add about 60 points to their RBC. They have increased their authorization by $1 billion to signal the sustainability of their buyback activity. They have a track record of returning capital post major divestitures and will conduct themselves in a similar manner here. The next question is about the outlook for the industry in retaining better margins in the Group business. Ramy Tadros responds that they are extremely pleased with their record quarter, even if the notable is excluded. They tend to see seasonality in their results, with the third quarter being the most favorable. The mortality ratio is expected to come back in line with their guidance range in the fourth quarter, and they also mention disability as a factor to consider.

Disability insurance has been performing well due to a favorable macro environment and strategic investments in underwriting, return to health capabilities, data technology, and predictive analytics. These investments have also allowed the company to excel in the live and absent space and maintain strong margins. In the US, the company has had $3.5 billion in sales and added $600 million in premium in the fourth quarter, with a healthy pipeline and visibility into 2024. The company's focus is on the jumbo end of the market, where they have competitive advantages.

Eric Clurfain, speaking on behalf of the company, is pleased with the results for the quarter in the LatAm region. The growth in adjusted earnings can be attributed to volume growth, favorable underwriting, and foreign currency tailwinds. The company is also seeing solid double-digit growth in both retail and group business, and has been expanding into third-party distribution channels and investing in technology.

The paragraph discusses the positive impact of the company's new integrated platform on its earnings performance and sustained momentum. The interviewer asks about the benefits of higher interest rates on net investment income and if there are any tactical changes being made in allocation. The company's CFO responds by mentioning sensitivities to interest rate movements and the benefits of roll-off and reinvest. He also notes that the company has reduced its interest rate sensitivity and makes tactical asset allocations based on relative values.

The speaker discusses the opportunities in their field and the benefits of having a wide range of products and expertise. They also mention maintaining a focus on quality in investments and how higher rates could potentially increase demand and pricing. The speaker also addresses the impact of GLP or obesity treatment in renewal conversations.

The speaker is not concerned about the effects of current events on their business, as they primarily focus on group life insurance and do not provide major medical or prescription coverage. Sales in Asia have been strong, particularly in Japan due to interest rates. The company is open to inorganic growth in the US for voluntary benefits, as long as it aligns with their strategic goals and is accretive over time.

The speaker discusses the company's strategic capability in mergers and acquisitions (M&A) and its use of capital. They state that there are no gaps in their M&A approach and they will only pursue it if it is a better use of capital compared to other options. They also mention that the size of the target market does not play a significant role in their consideration of M&A opportunities. The call concludes with the speaker thanking the participants and ending the conference.

This summary was generated with AI and may contain some inaccuracies.