The paragraph is an introduction to MetLife's Third Quarter 2024 Earnings Conference Call. The call begins with the operator's announcement, emphasizing that participants are in listen-only mode and the conference is being recorded. The operator refers to cautionary notes on forward-looking statements and MetLife's SEC filings. John Hall, Global Head of Investor Relations, then thanks the participants for joining and points out resources regarding non-GAAP measures. He introduces key speakers, Michel Khalaf, CEO; and John McCallion, CFO, and notes the availability of supplemental slides and financial information on their website. The session will end with a Q&A, with guidelines on participation. Michel Khalaf then begins discussing MetLife's third-quarter results, indicating they remain financially attractive despite pressures on variable investment income.

MetLife reports a 12% increase in year-to-date adjusted earnings per share, driven by strong momentum and favorable conditions across various markets. In the U.S., low unemployment, controlled inflation, and a positively sloping yield curve benefit its Group Benefits and Retirement and Income Solutions businesses. Internationally, markets like Japan, Mexico, and Brazil offer opportunities through factors such as government incentives, near-shoring, and digital distribution channels. Despite geopolitical challenges and upcoming U.S. elections, MetLife remains confident in its ability to manage risks and capitalize on opportunities, reflected in its reported adjusted earnings of $1.4 billion or $1.95 per share this quarter.

In the third quarter, MetLife experienced mixed financial results, with challenges in recurring interest margins and private equity returns, though these were partially offset by volume growth and improved equity markets. The company reported a 14.6% adjusted return on equity and improved efficiency with a direct expense ratio of 11.7%. The Group Benefits business saw a decline in quarterly adjusted earnings but a 7% increase year-to-date, highlighting the competitive advantage of MetLife's scale and broad product offerings. Adjusted premiums, fees, and other revenue rose by about 5.5%. Additionally, MetLife introduced Upwise, a tool designed to simplify employee benefits enrollment by providing personalized recommendations.

The paragraph discusses the financial performance and strategic initiatives of the company across various regions. It highlights the importance of informed benefit selection in enhancing workforce engagement and productivity. In the Retirement and Income Solutions segment, adjusted earnings were $368 million, influenced by matured interest rate caps, with strong sales in stable value and U.K. longevity reinsurance. The company maintains a leadership position in the pension risk transfer space, with $5.6 billion in sales closed in 2024 and a robust pipeline, as indicated by a recent poll. In Asia, adjusted earnings were $347 million, down 6% due to market factors, but showing year-to-date growth of 16%. General account assets under management increased by 6%. In Latin America, adjusted earnings rose to $217 million, up 9%, with significant growth in sales driven by digital distribution partnerships in Brazil.

The paragraph discusses MetLife's deployment of the Accelerator technology, initially in Brazil, to enhance digital insurance offerings in Latin America, expanding to Mexico and Chile with over 4 million customers in a year. The company emphasizes the value of new business as a key management tool, achieving a 19% internal rate of return on $3.6 billion capital, generating $2.6 billion in value with a five-year payback. MetLife focuses on both organic and strategic inorganic growth, with a strong capital return strategy when opportunities aren't present. In the third quarter, they actively managed capital, returning $1.2 billion to shareholders via dividends and stock repurchases, including $400 million in dividends and $800 million in buybacks, totaling $2.8 billion in repurchases through the quarter.

The paragraph discusses MetLife's financial status and upcoming strategic plans. The company has over $2 billion remaining from a Board authorization and holds $4.5 billion in cash and liquid assets, exceeding its cash buffer target. They are preparing for the December 12 Investor Day to unveil their "New Frontier" five-year strategy, which aims for growth based on past successes. The strategy focuses on accelerating growth, boosting returns, and ensuring consistency. John McCallion then discusses third-quarter financial highlights, noting that net income was $1.3 billion, slightly lower than adjusted earnings. Net derivative gains were influenced by currency and interest rate changes, with some offset by losses related to market risk benefit remeasurement. Investment losses were minimal, indicating a stable credit environment.

The investment portfolio is high-quality and resilient, with the hedging program performing as expected. An annual actuarial review indicated a modest impact on adjusted earnings and net income. In Group Benefits, an unfavorable impact was noted due to a liability refinement in a subset of the Group Life portfolio, though it has no ongoing effects. In RIS, consistent long-term mortality assumptions contributed positively to adjusted earnings. In Asia, the net unfavorable impact stemmed from changes in assumptions and fund returns but was partially offset by improved morbidity. Adjusted earnings were $1.4 billion, down due to lower interest margins but up slightly on a constant currency basis. Group Benefits adjusted earnings decreased by 11% year-over-year, mainly due to less favorable underwriting margins.

The paragraph discusses the financial performance of a company, focusing on various metrics and projections. The company's mortality ratio for Group Life remained at the low end of its annual target, with expectations for improvement by the fourth quarter. The interest-adjusted benefit ratio for nonmedical health was within the annual target but higher than the previous year. Group Benefits adjusted premiums were up 5% year-over-year, aligning with 2024 targets. Sales grew by 9%, thanks to national accounts. RIS (Retirement and Income Solutions) adjusted earnings fell by 10% due to lower interest margins, although offset by strong volume growth. Investment spreads decreased due to the expiration of interest rate caps, with stabilization expected in the fourth quarter. RIS adjusted premiums, excluding pension risk transfers, rose 3% driven by UK longevity reinsurance sales. The paragraph also notes a strong pension risk transfer market with substantial premiums in the third quarter and a robust start to the fourth quarter.

The paragraph discusses the financial performance of various regions and segments of the company. Adjusted earnings were down to $347 million, influenced by market-related factors but somewhat balanced by favorable underwriting. In Asia, general account assets grew by 6%, although sales dipped by 1%, with lower sales in Japan due to yen volatility being countered by growth in India and China. Latin America saw a 9% increase in adjusted earnings, boosted by Chilean returns and market growth. EMEA reported a 7% rise in adjusted earnings, driven by volume growth, particularly in Turkey and Egypt. MetLife Holdings experienced a 17% decrease in adjusted earnings due to a reinsurance transaction, while Corporate & Other narrowed its adjusted loss slightly to $249 million.

In the third quarter of 2024, the company's effective tax rate on adjusted earnings was approximately 24%, aligning with their 2024 guidance range. The pretax variable investment income for the past five quarters shows a decrease, with $162 million recorded in Q3 of 2024, down $17 million from Q3 of 2023. The private equity portfolio experienced a 0.6% return, lower than the 1.4% return in the same quarter the previous year. However, real estate-related and other funds, valued at $4.5 billion, showed a 1.1% return and continue to improve. These investments are reported on a one-quarter lag. Adjusted net investment income for Q3 of 2024 was similar to the previous year; higher recurring investment income from asset growth and higher interest rates was balanced by the roll-off of interest rate caps. Over the last 10 quarters, new money yields have surpassed roll-off yields due to higher interest rates, with Q3 2024's global new money rate achieving a 6% yield, 22 basis points above the roll-off rate.

In the third quarter, the spread between new money rates and roll-off yields narrowed primarily due to a decrease in U.S. interest rates and high pay downs of recently purchased high-yield securities. The proceeds from these pay downs were reinvested in high-value public and private assets with similar yields. The third quarter saw new money purchases of about $14 billion, which was more than double the amount of assets rolling off. Although the spread between new money rates and roll-off yields is used as a metric for future investment margin impact, it is not a precise indicator of spread impacts. Despite this, higher yields positively impact in-force and new business growth. The chart on Page 9 shows a decline in the direct expense ratio for 2023 and the first three quarters of 2024, with Q3 2024 at 11.7%. The full-year expense ratio is deemed the best performance measure. The lower Q3 ratio is attributed to growth and expense discipline, but an increase is expected in Q4 due to seasonal factors. The year-to-date performance suggests surpassing the 2024 target of 12.3%. The chart on Page 10 updates new business value metrics, noting a $3.6 billion capital investment in 2023 for new business support.

The paragraph provides a financial overview of a company, noting an impressive average unlevered IRR of 19% and a $2.6 billion value generation with a five-year payback period. The company had $4.5 billion in cash and liquid assets at the holding companies as of September 30, exceeding their target buffer. Subsidiary dividends, stock dividends, and $930 million in share repurchases impacted the cash position. U.S. statutory operating earnings were roughly $2.8 billion, with net income at $2 billion. Their total U.S. statutory adjusted capital fell by 2% since June 30 due to dividends and derivative losses. The Japan solvency margin ratio is estimated at approximately 745%. The commercial mortgage loan portfolio remains strong despite a slight downturn in adjusted earnings due to lower variable investment income.

The paragraph discusses MetLife's strategic approach to capital deployment, emphasizing strong business metrics and a commitment to sustainable growth for customers and shareholders. The company is in a strong position due to its balance sheet, cash flow, and business diversification. An announcement is made regarding an Investor Day on December 12 to introduce the "New Frontier" strategy, with a near-term outlook to be shared in February 2024. During the Q&A session, Suneet Kamath from Jefferies inquires about Group Benefits, specifically the adjusted loss ratios and pricing strategy in dental. Ramy Tadros responds, indicating no change in the competitive environment, describing it as competitive but not irrational, with the nature of products allowing for quick corrective action against aggressive pricing.

The paragraph discusses the competitive environment in the insurance industry, highlighting factors beyond price such as capabilities and digital experiences. The company is pleased with its life insurance ratio, which is favorable due to positive population incidents and sits at 83.9% year-to-date, expected to remain near the lower end of the target range even with a potentially higher Q4. The nonmedical health ratio faced minor unfavorable items but remains within the desired range, while the dental insurance market trends back to pre-pandemic levels, prompting pricing adjustments. The company can reprice 80% of this business annually and aims to return to target margins for the dental block by 2025.

The paragraph features a discussion between Michel Khalaf and John McCallion about the factors driving improvements in the internal rate of return (IRR) and reduction in the payback period for their business. Key points include the strategic capital allocation towards high-return areas like Group Benefits and Latin America, which have shown strong growth. This selective growth strategy has positively impacted the Value of New Business (VNB). McCallion adds that they have back-tested their IRRs against best estimate assumptions and found that the favorable economic environment, including a benign credit scenario and consistent underwriting, has supported these outcomes.

The paragraph discusses the positive momentum a company is experiencing due to several factors, such as a favorable mix of business, the use of management tools for pricing and capital optimization, regulatory changes in places like Korea, and improvements in unit costs. These factors contribute to increased excess capital and business growth, particularly in areas with high internal rates of return (IRRs) and low capital requirements, like group and Latin American markets. The speaker affirms that these positive changes suggest an upward trend in return on equity (ROE), especially as low-ROE businesses, such as MetLife Holdings, are phased out.

In the paragraph, Jimmy Bhullar asks about the impact of the yen-dollar exchange rate on Japan sales, particularly for dollar-denominated products, and the market dynamics of the commercial real estate portfolio. Lyndon Oliver responds by noting that Japan remains an attractive market despite challenges due to increased interest rates and FX market volatility. He mentions that sales of single premium FX products were lower year-over-year due to a strong comparison with the previous year, where there was a 14% increase in sales. The volatility has led to more cautious customer behavior. He states that sales for the third quarter were consistent with the second quarter and highlights the company's diversified product portfolio, which includes both U.S. dollar and yen products, and the introduction of new products to remain competitive.

The company has launched several new insurance products, including a refreshed yen-denominated variable life product, a cancer product, and an A&H medical product, with plans to introduce a new U.S. dollar life product next year. Sales in Asia have increased by 9% year-over-year, driven by strong performance in China and India, although overall year-to-date sales are expected to remain flat compared to the previous year. On the commercial mortgage front, despite recent pressures, there is optimism due to healthy economic growth, a positive real estate outlook, expectation of declining interest rates, and increased transaction activity. The company saw significant gains from real estate sales this quarter, indicating improved market liquidity.

The paragraph discusses a financial update, highlighting a positive outlook for 2025 despite not expecting a V-shaped recovery. It mentions a $10 billion portfolio in CMBS, with most rated AAA or AA, and a small single-borrower exposure. In the Group Benefits segment, certain nonmedical health products, outside of dental, saw elevated levels in the quarter due to several one-time factors, including reinsurance true-ups and timing of rate approvals. Disability insurance performed well with incidents and recoveries meeting expectations. Overall, the one-time negative impacts amounted to about $20 million post-tax.

The paragraph discusses dental insurance rate increases that have been gradually implemented and are expected to achieve target margins by the beginning of 2025. It mentions the end of the rate increase cycle and expresses confidence in hitting margins. Tom Gallagher then inquires about the company's stance on risk transfer in the long-term care market following a peer's decision that the pricing was too challenging. Ramy Tadros responds that the market has seen increased activity and narrowing bid-ask spreads. He emphasizes that any risk transfer deal would need to add long-term shareholder value, considering both price and structure.

In the paragraph, John McCallion discusses the stability of spreads, noting a decline in the current quarter compared to the previous quarter's expectations. Despite this, there is optimism for stable to slightly increased spreads by the fourth quarter, although much depends on the future rate curve. He is hesitant to make definitive predictions until they see how the curve evolves, indicating more insight will be given in February's outlook call. Regarding fourth quarter variable investment income, McCallion admits there is no clear insight, attributing volatility to adjustments in private equity portfolios responding to higher rates and market volatility.

The paragraph discusses a positive financial performance for the quarter, including a rebound in real estate and related funds, and $600 million in distributions contributing to strong cash flow. The performance is described as being in the top half or second quartile. There were some one-off issues affecting certain funds, but these are not expected to impact future performance significantly. The suggestion is made to use these quarterly results as a proxy for estimating fourth-quarter performance, possibly surpassing current levels but not reaching second-quarter levels. During a Q&A, Alex Scott from Barclays inquires about the firm's sensitivity to interest rates, asking for details on floating rate allocations and the impact of changes in the yield curve, to which John McCallion responds by saying a steeper curve and higher rates are generally better for their portfolio.

The paragraph is a discussion about the financial strategy and performance of a company. The conversation between Alex Scott and Michel Khalaf focuses on the direction of travel for floating rate assets and liabilities, with a preference for a lower short-end curve. Khalaf highlights their successful portfolio management and strategies aimed at enhancing returns, including growing high-return businesses and reducing unit costs to drive organizational efficiency. Additionally, the operator introduces a new question from Wilma Burdis regarding the expected normalized run rate level of earnings for specific business segments, indicating an ongoing financial analysis and assessment.

In the paragraph, John McCallion discusses the impact of interest rate caps on RIS earnings, noting that the impact is in line with their guidance of 8 to 10 basis points per quarter. He mentions some stabilization is expected in the fourth quarter and beyond. McCallion emphasizes that for RIS, VII is a significant factor affecting their earnings relative to the expected run rate. For the group's earnings, seasonality plays a critical role and recent challenges were due to several non-recurring, small negative events impacting various regions, including Japan. He provides a holistic view rather than limiting the discussion to RIS and the group. In response to Wilma Burdis' question, McCallion remarks on the economic environment, stating that higher interest rates have forced sector adjustments, which could influence VII returning to normal levels.

In the paragraph, the discussion revolves around the impact of changing interest rates on a sector that previously thrived in a low-interest environment. As interest rates rise, firms are shifting from a leverage-based model to a growth-oriented strategy. Challenges in the macro environment, including slowed M&A and IPO activity, are affecting the sector, but stabilization of interest rates and curves could provide support. During a Q&A session, John Barnidge asks about the potential for an extended recovery in the real estate sector, given its cyclical nature, and whether this could lead to a greater contribution to overall VII (variable investment income) after the recovery. John McCallion clarifies that the outlook given was based on specific assumptions, some of which have not materialized.

In the paragraph, John Barnidge inquires about the potential growth opportunities in Asia, particularly due to regulatory reforms, with a specific mention of Korea. John McCallion responds, expressing that their firm operates better within an economic framework while acknowledging statutory constraints. He believes the regulatory environment in Korea is more favorable for their business but emphasizes that it might not necessarily lead to a business outlook change. The session concludes with John Hall giving closing remarks and mentioning the next meeting on December 12.

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