The operator welcomes participants to the MetLife First Quarter 2024 Earnings Conference Call and reminds them that the call is being recorded. John Hall, Global Head of Investor Relations, introduces the participants and mentions the non-GAAP measures and supplemental slides that are available. The CEO, Michel Khalaf, and CFO, John McCallion, will speak, and there will be a Q&A session. Participants are asked to limit themselves to one question and one follow-up.

MetLife has had a strong start to the year with solid financial results and consistent execution. The company's resilience and success are attributed to their unwavering commitment, confidence in their strategy, and focus on controlling controllable factors. Risk management is a key aspect of their operations, with a 156-year track record of stability. This includes protecting their balance sheet and diversifying their products and geographies to mitigate risks. Even within their business segments, there is diversification, such as in their Group Benefits and retirement and income solutions.

MetLife's diversification sets them apart from other companies and promotes sustainable and responsible growth. In the first quarter, they reported strong earnings and top line growth in their various businesses. They also achieved positive results in key metrics such as return on equity and direct expense ratio. Group Benefits saw a 5% increase in adjusted PFOs, driven by growth in various products and their national accounts franchise.

In the fourth quarter, Group Benefits adjusted earnings were impacted by high mortality and elevated health utilization, but sales increased by 25%. MetLife also launched their 2024 employee benefit study, which focuses on the importance of employee care. The Retirement and Income Solutions business reported flat earnings but saw a 49% increase in sales. The Asia business had a 51% increase in earnings and strong sales, despite a slight decrease from the previous year.

The company's assets under management in Asia have increased by 6% and Latin America continues to see growth, particularly in Mexico and Chile. The company follows a balanced approach to capital deployment, investing in growth and returning capital to shareholders through dividends and share repurchases. They have repurchased $1.2 billion worth of common stock and announced an additional $3 billion in repurchase authorization. The company also welcomed a new board member with a strong background in insurance. As the company nears the end of their five-year strategic plan, they are working on the next steps for their future growth.

The company's CEO does not expect any major changes in their successful strategy, but rather a continued evolution. They have already begun advancing towards the next phase and are focused on growth and delivering value to customers. They plan to discuss their refreshed strategy at an Investor Day in December. The CFO then provides an update on their financial performance, mentioning net derivative losses but also offsetting gains due to higher interest rates and equity markets.

In the first quarter, net investment losses were primarily due to normal trading activity in a rising rate environment. Overall, the investment portfolio is in good shape and credit losses were minimal. Adjusted earnings for the quarter were $1.3 billion, up 13% from the previous year. Group Benefits adjusted earnings were down 7%, mainly due to underwriting margins. Non-Medical Health had a high interest adjusted benefit ratio, in line with expectations. Group Benefits sales were up 25% and RIS adjusted earnings were essentially flat.

The RIS investment spreads were within the annual target range and adjusted PFOs were up 25% due to strong sales in structured settlement products and UK longevity reinsurance. In Asia, adjusted earnings were up 51% and 57% on a constant currency basis, driven by higher variable investment income, favorable underwriting margins, and tax benefits. Latin America also saw growth in adjusted earnings and PFOs, while EMEA had a significant increase in adjusted earnings due to favorable underwriting and volume growth. However, the run rate for EMEA is expected to be lower for the remainder of the year.

In the first quarter of 2024, EMEA adjusted PFOs and sales saw strong growth, driven by Turkey and the UK. MetLife Holdings adjusted earnings were slightly higher than the previous year, but were impacted by a reinsurance transaction and a true-up. The company's effective tax rate was lower than expected due to favorable tax items. The private equity portfolio had a positive return, while real estate equity funds had a negative return. MetLife Investment Management divested $750 million of private equity assets, but will continue to manage them. This approach is similar to a previous divestment in 2022 and supports the company's fee-generating business.

The company expects VII returns to increase in the second half of the year and is confident in their full year VII guidance. The chart on Page 6 shows the proportion of VII assets in different segments, with RIS Asia and MetLife Holdings having the largest share. Page 7 shows a comparison of recurring and VII net investment income, with a 10% increase in adjusted net investment income in Q1 of 2024. New money yields continue to outpace roll-off yields, with a 6.6% global new money rate in Q1 of 2024. Page 8 compares the direct expense ratio for the full year 2023 and Q1 of 2024, with a slight decrease in Q1. The company believes the full year direct expense ratio is the best measure of performance due to quarterly fluctuations.

In the first quarter, our direct expense ratio improved due to strong top line growth and cost control. Our cash and capital positions are strong, with $5.2 billion in cash and a target cash buffer of $3-4 billion. We have no further debt maturities this year and have repurchased shares totaling $330 million in April. Our statutory capital for U.S. companies is above our target ratio, and our preliminary first quarter statutory operating earnings were flat year-over-year. Our total U.S. statutory adjusted capital decreased 6% from year-end 2023, primarily due to dividends paid and surplus notes repaid. We expect the Japan solvency margin ratio to be approximately 725% as of March 31.

The CML portfolio is performing well with strong ratios and minimal losses. MetLife had a solid quarter with growth, underwriting, and expense management. The company has a strong balance sheet and is committed to responsible growth and value for customers and shareholders. In regards to VII, there was a 5.8% loss primarily due to appraisals and valuations, but it is expected to moderate in the future.

In the second quarter, there will likely still be some pressure, but it will decrease throughout the year. The company expects a positive outlook towards the end of the year and into 2025. There will be a measured pace for future share buybacks, with a greater pace in the first quarter. The company expects to be towards the higher end of the range for variable investment income for the rest of the year.

The speaker believes that the next quarter will be less negative, but there will still be some pressure in appraisals. However, they expect things to improve afterwards. They were asked about the competitive environment in the Group Benefits business and they mentioned that it is a competitive market, but there are other factors besides price that can differentiate a company. They are pleased with their growth in sales and the rate adequacy for new business and renewals. The next question was about persistency and pricing in the Group Benefits business.

Wes Carmichael asks about pension risk transfer deals and if there are any changes in the marketplace. Ramy Tadros responds by saying that while there were no deals in the quarter, there is a robust pipeline for jumbo deals and the company is well positioned to win their fair share. He also mentions that the company evaluates each deal carefully and will only deploy capital if the risk-adjusted returns and ROEs are aligned with their targets.

Michel Khalaf, the CEO of a company, talks about the company's plans for allocating capital towards growth and buying back stock. He mentions their philosophy of supporting organic growth, considering M&A opportunities, and returning excess capital to shareholders through dividends and share repurchases. The company aims to maintain a balance between these strategies and is focused on deploying capital in support of organic growth. The next question is directed to John, who discusses the company's spreads in RIS and mentions a recent decline due to the expiration of an interest rate cap.

The speaker is responding to a question about the impact of expiring caps on the company's trajectory. He explains that the roll-off of caps is in line with expectations and will result in a 10 bps decline in the first quarter and another one in the second quarter. However, he expects VII to have a reemergence and contribute to growth in the second half of the year. Overall, the roll-off of caps will have a minimal impact on the company's total spread.

In this paragraph, analysts ask questions about margins and Group Benefits for the company. They ask about the weak group life margin in the first quarter and the increase in dental claims. The company attributes these changes to seasonality and expects to stay within their annual range for non-medical health ratio. They also discuss the expected base spreads for RIS and the earnings for Group Benefits in comparison to the previous year.

The speaker confirms that the company expects to continue growing above $450 million in earnings for the next three quarters, despite lower earnings in the current quarter due to seasonal factors. Dental utilization was high in the first quarter, but is expected to decrease in the second quarter and be even lower in the third quarter. This is a return to a more regular pattern after being masked by COVID-related behaviors in the past.

The speaker explains that there will be a decrease in the company's performance, but it is difficult to predict if it will happen abruptly in the second and third quarter or gradually throughout the year. They emphasize looking at the full year range and the midpoint for a better understanding. The all-in spread is also important to consider. The next question is about the structured settlement results and the speaker explains that the demand is primarily driven by interest rates, but there was a temporary increase due to the courts being closed during the pandemic. The company is a major player in this market.

The speaker discusses the growth of the market in recent years and their company's success in maintaining a good share in the specialized market. They are pleased with the volume and returns achieved. In regards to Latin America, overall results for the quarter were positive, with all key markets contributing to high single-digit PFO growth. Sales were flat compared to last year, which had two large sales included. Excluding these, sales were up 10% year-over-year. The company is pleased with the growth trajectory and believes their outlook guidance is reasonable for the rest of the year. The conference call is now ending.

The operator concludes the conference and thanks the participants for their participation, instructing them to disconnect.

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