Q3 2020 MetLife Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Metlife third quarter 2020 earnings release Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session instructions will be given at that time as a reminder, this conference is being recorded.
Before we get started I refer you to the cautionary note about forward looking statements in yesterday's earnings release, and two risk fast factors discussed in Metlifes FCC filings with that I will turn the call over to John Hall Global head of Investor Relations.
Thank you operator, good morning, everyone.
We appreciate you joining us for Metlifes third quarter 2020 earnings call.
Before we begin I refer you to the information on non-GAAP measures on the Investor Relations portion of Metlife Dotcom in our earnings release and in our quarterly financial supplements, which you should review.
On the call. This morning are mark.
Well hold off President and Chief Executive Officer, and John Mccallion, Chief Financial Officer.
Also participating in the discussions are other members of senior management.
Last night, we released a set of supplemental slides thereof.
They are available on our website.
John Mccallion will speak to those supplemental slides in his prepared remarks if.
If you wish to follow along.
An appendix to the slides features disclosures and GAAP reconciliations, which you should also review.
67% year over year at school, which claims rose sharply as expected.
In EMEA adjusted earnings ex notables increased 26% due to lower expenses favorable underwriting and volume growth.
And finally for Metlife Holdings adjusted earnings ex notables rose, 35% on higher VI and better long term care underwriting results.
Strong risk adjusted returns and high free cash flow generation.
Like are you as group benefits franchise more broadly it is precisely the kind of business we want to grow.
Knowing where not to play is just as important as knowing where to place to our strategic about.
During the quarter, we booked the sale of our annuity business in Argentina, which was no longer the right fit for my life.
While not material to Metlife. This divestment helps illustrate our ongoing process of planting and pruning in an effort to achieve the optimal business makes.
Why don't we talk about simplifying Metlife, we have two goals in mind continuously improving our operational efficiency and becoming an easier company for our customers to do business with an efficiency given the headwinds we have faced this year. We knew it was going to be a challenge to meet or target of at 12.3 per cent direct expense Ray.
Sure.
But this is a firm commitment and we will keep it despite.
Despite higher anticipated seasonal expenses in queue for we are increasingly confident that we will beat this target for the full year.
But our deep bench of leaders, who are ready to step up immediately and deliver value to our customers and shareholders.
Another area of differentiation I want to highlight its sustainability, which is core to our purpose up metlife.
The teen 83 to 89 passed away on October 11th at the age of 96.
John spouse at Metlife literally took him from the mailroom to the boardroom.
Among as many notable achievements was hiring snoopy and the peanuts gang and furthering the company's expansion into global markets.
But perhaps what best captures Johns career was his passion for the customer the overarching goal. He had in every job was to exceed customer expectations.
John Spicing reminds us that we are stewards of a great institution.
My life was around long before we got here and it will be around long after we are gone.
Our task is to create long term value for my life's many stake holders, including our shareholders to insure and the words of our purpose statement that we will be always would you, but I think I'm more confident future.
That I was during the cold over to John Mccallion.
Thank you Michelle and good morning, I'll start with the three Q 20 supplemental slides that we released it last evening, which highlight information in our earnings release and quarterly financial supplement.
In addition to slide provide more detail on our annual global actuarial assumption review as well as an update on our cash and capital positions.
Starting on page three the schedule provides a comparison of net income and adjusted earnings in the third quarter.
Net income in the third quarter was $633 million or $945 million lower than adjusted earnings. This.
This variance is primarily due to net derivative losses, resulting from higher long term interest rates as well as the stronger equity markets in the quarter.
The investment portfolio and hedging program continued to perform as expected.
In addition, the actuarial assumption review accounted for $98 million of the variance between net income and adjusted earnings, which I will now discussing more detail on page four.
During the quarter the actuarial assumption review reduced net income by $301 million of which $203 million impacted adjusted earnings.
The most significant driver was the reduction of or a longterm U S 10 year treasury interest rate assumption from 3.75% to 2.75%.
In addition to this 100 basis point reduction we have extended our mean reversion right to 12 years.
These changes reflect expectations of lower interest rates for a longer period of time.
Adjusted earnings growth.
Favorable expense margins and solid volume growth or other key year over year drivers.
Turning to the performance of our businesses.
Group benefits adjusted earnings were up 7% year over year.
The group life mortality ratio was 89.6%, which improved sequentially in included roughly three percentage points related to cope in 19 claims.
This is at the top end of our annual target range of 85% to 90%.
We expect the group life mortality ratio in the fourth quarter to be modestly above the annual target range as fourth quarter tends to have higher seasonal life claims and we expect COVID-19 related claims will remain elevated.
Had we expect our S investment spreads in four Q to decline sequentially.
Primarily due to lower VII, but still come in at the top end of the annual guidance range of 90 to 115 basis points.
R. S liability exposure grew 12.5% year over year, driven by strong volume across the product portfolio.
As well as separate account investment performance.
While liability exposures grew are are suggested <unk>, excluding pension risk transfers were down 8% year over year.
Due to lower structure settlement and institutional income annuity sales.
Regarding pension risk transfers, we had approximately $500 million of PRT sales in the quarter and.
EMEA adjusted earnings were up 26% and 30% on a constant currency basis, primarily driven by favorable underwriting margins as a result of lower claims in group policies in the region as well as better expense margins and volume growth.
Metlife Holdings adjusted earnings were up 35% year over year.
This increase was primarily driven by higher private equity returns as well as favorable underwriting margins as lower claim incidents in long term care more than offset marginally higher life claims due to cope in 19 delay.
The life interest adjusted benefit ratio was 60.2%, which included 7.3 percentage points related to the actuarial assumption review.
Adjusting for this impact of life interest adjusted benefit ratio was 52.9% within our annual target range of 50% to 55%.
Looking ahead to for Q, We expect Metlife holdings adjusted earnings to return to more normal levels due to lower VI and.
And more normal underwriting results in long term care.
Corporate and other adjusted loss was $131 million.
This result was modestly more favorable than the prior year quarter, which had an adjusted loss of $135 million excluding notable items.
This quarter's results reflect lower expenses, partially offset by less favorable investment margins as well as higher preferred stock dividends.
As we outlined in our Twoq earnings call, we expect an adjusted loss range of $325 million to $375 million in the second half of 2020.
Which implies corporate and other adjusted losses to be between $200 million to $250 million in Fourq you.
The company's effective tax rate on adjusted earnings in the quarter was 20% at the bottom of our 2020 guidance range of 20% to 22%.
Now, let's turn to VI in the quarter on page seven This chart reflects our pre tax variable investment income over the prior five quarters, including $652 million in the third quarter of 2020.
This strong result was mostly attributable to the private equity portfolio, which had a 6.7% return in the quarter.
As we have previously discussed private equities are generally accounted for on a one quarter lag.
And the positive marks included in our third quarter results are in line with the outlook offered in our last earnings call.
There was also a prop positive contribution to VI from hedge funds, which had a 13% return in the quarter as well as higher prepayment fees.
In the fourth quarter, we expect VI to remain strong, but closer to the pre two Q 20 trend levels.
Now, let's take a look at VI by segment on page eight.
This table breaks out the third quarter VI of $550 million after tax by segment.
The three largest recipients of VI in the quarter were Metlife Holdings Rs in Asia.
The allocation of VII by business segment is based on the quarterly returns of their individual portfolios.
That said as a general rule Metlife.
Metlife Holdings Rs and Asia will account for approximately 90% of the total VI.
And roughly split one third each.
Our new money rate was 2.76% versus a roll off rate of 3.81% in the quarter.
This compares to a new money rate of 3.41% and a roll up rate of 3.72% in Twoq of 20.
65 basis points sequential decline in the new money rate was primarily due to tighter credit spreads in the quarter.
Purchases of short term investments to match short term issuances in our capital markets business as well as higher liquidity at the holding company.
We also purchased close to $1 billion in low yielding foreign government bonds, primarily jgbs to invest cash flows associated with recurring premium income from our Japanese yen enforce block.
Looking ahead, we expect new money yields in Fourq, you to remain a comparable threeq levels as we maintain our disciplined approach to investing in high quality assets, despite persistently tight credit spreads.
Turning to page nine this chart shows our direct expense ratio from 2015 through 2019, and the first three quarters of 2020.
In Threeq you are direct expense ratio was 11.4%.
This low ratio was driven by a reduction in direct expenses increased availability of our dental services driving higher premium and a reserve release in corporate and other.
Year to date, our direct expense ratio was 11.9%.
We expect the direct expense ratio to be higher than trend in fourq <unk>, primarily due to seasonality.
In our group benefits business, we incur higher enrollment and other costs prior to receiving premiums also.
Also certain corporate initiative costs are expected to be higher in Fourq you.
Overall as Michelle noted we are increasingly confident that we will beat our full year target of approximately 12.3%.
As we continue to deploy and efficiency mindset to increase capacity for reinvestment and to protect the margins of the firm.
I will now discuss our cash and capital position on page 10.
Cash and liquid assets at the holding companies were approximately $7.8 billion at September Thirtyth, which is up from $6.6 billion at June Thirtyth, and well above our target cash buffer of $3 billion to $4 billion.
The $1.2 billion increase in cash at the holding companies was primarily the result of a $1 billion preferred stock issuance in the quarter.
The proceeds from this issuance were used in October to redeem $1 billion of preferred stock outstanding.
In addition, cash at the holding companies reflect the net effects of subsidiary dividends payments of our common stock dividends share repurchases of $80 million in the quarter as well as holding company expenses and other cash flows.
Next I would like to provide you with an update on our capital position.
For our us companies preliminary third quarter year to date 2020 statutory operating earnings were approximately $3.2 billion, while net income was approximately $2.8 billion.
Statutory operating earnings decreased by $200 million from the prior year period, primarily due to higher VA rider reserves and.
And the impact of a prior year dividends from an investment subsidiary.
This was partially offset by the favorable underwriting higher separate account returns and lower operating expenses.
Year to date net income was lower due to the decrease in operating earnings and other realized losses.
These were partially offset by derivative gains in the current year.
We estimate that our total U.S statutory adjusted capital was approximately $21 billion at September Thirtyth.
Up 12% compared to December 30, Onest 2019.
Operating income in derivative gains more than offset dividends paid.
Finally, the Japan solvency margin ratio was 892% as of June Thirtyth, which is the latest public data.
Overall, Metlife delivered a strong quarter bolstered by an increase in variable investment income and supported by the solid fundamentals from our diverse set of market leading businesses.
In addition, we believe our capital liquidity and investment portfolio, our strong resilient and well positioned to manage through and come out stronger in this challenging environment.
Finally, we are confident the actions we are taking to be a simpler and more focused company will continue to create long term sustainable value for our customers and our shareholders and with that I will turn the call back to the operator for your questions.
Thank you, ladies and gentlemen, if youd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if you're using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one than zero at this time and one moment. Please for your first question.
Your first question comes from the line of a lease Greenspan from Wells Fargo. Please go ahead.
Hi, Thanks, Good morning, Barry.
Question on the non.
Capital.
Hello.
You mentioned you have a good amount of excess capital above the buffer you'd like to hold at the holding company.
Even if we adjust for that preferred stock that you paid back subsequent to the end of the quarter. So okay fine yes, Ben.
How you're thinking about.
Kind of working your way back down to kind of that target buffer and as we think about the environment normalizing combine that potentially holding on cash and excess capital for potential M&A from here on about some kind of any new packaging that could potentially be out there and the like.
Hi, good morning antisense Michelle.
So let me, let me begin by saying that.
At a high level, we have a well diversified mix of market leading businesses.
And I think that diversity was on display and a largely offsetting and pockets from Cove at 19.
In addition, we believe that our capital liquidity and investment portfolio, our strong resilient and well positioned to manage through and come out stronger.
In this challenging environment.
And ultimately I think this up this this we believe underscores the durability of all of our all weather next horizon strategy and our consistent execution across a range of economic scenarios.
What I would say around sort of our capital management philosophy is that it has not changed so we believe excess capital above and beyond what is required to fund organic growth.
Belongs to our shareholders and should be used for share repurchases.
Common dividends or strategic acquisitions that clear a minimum.
Risk adjusted hurdle rate.
You know as you as you mentioned as you referenced of after we complete our buyback authorization by year end.
And diverse since acquisition, we expect to have a cash buffer well in excess of our three to 4 billion target.
But no change in terms of our philosophy, and how we would deploy excess capital.
Okay. That's helpful. And then my second question I wanted to get a little bit more color on the group side on the non medical results and then on pretty strong.
You're on and you kind of alluded to favorable dental results and it sounds like that to continue in the fourth quarter at that kind of low end of your range on how should we think about that.
That that business kind of performing in 2021 to have some.
Some initial thoughts obviously given that the business has been a little kind of volatile this year given the impact of coated.
Good morning, Lisa its rami here.
So with respect to the nonmedical health ratio.
First you've got the disability part of that business.
Historically, you've seen a linkage although be it was delayed linkage between recessions and increases in our frequency and lower recoveries on the Ltd book.
We have not seen that yet.
The results continue to track pretty favorably on the Ltd side.
But there is a lag and we're continuing to monitor this pretty carefully.
On the STD side.
The cobot impact has been a push for us as we look forward so higher higher corporate related claims have been offset by lower our claims due to delays of elective surgeries et cetera.
So we continue to monitor the LTV book into the into next year, but I would remind you.
We can reprice, just shy of 50% of that business every year.
So our block is about 13% of our peer photos and and about half of that can be repriced every year. So this is a short term business and we have a track record of being able to appropriately react to changes in the environment and getting to throw the rate changes that we need.
On the dental side this year has been.
An exceptional year in the sense that we've had all the shutdowns.
But our corporate related in the second quarter and hence the rationale and the reason why you've set up the the unearned premium reserves as.
As we look forward in terms of the dental business as John mentioned as the quarter progressed.
Dental offices of footwear urban or more fully opened.
And we started seeing utilization levels, primarily in September that came in above our typical levels as the patients are made up for those services.
And this was offset by the partial release of the dental premium that.
That we've set up in the second quarter.
Sitting here today, we expect to continue to see above typical utilization levels in the fourth quarter, our for dental and you will also see us release, the balance of the unearned premium reserve in the fourth quarter for the dental business.
Okay. That's helpful. Appreciate all the color. Thank you.
Your next question comes from the line of Tom Gallagher from Evercore. Please go ahead.
Thanks.
First question is on Metlife holdings.
Just following the equitable.
Risk transfer deal.
A new York company with.
A pretty attractive pricing on that deal would you say it makes you more likely to consider risk transfer for that business.
Good morning, Tom It's John So let me just start with the.
I don't think our commentary would change here. So one as I said before our focus is on optimizing Metlife holdings to large and stable well.
Well seasoned enforce its diversified it's got a number of natural offsets.
It's a good source of sustainable free cash flow that said, we've continued to take an external perspective in in the third party view of the business in one I think it makes us better at managing the business to we need to do this work.
Because there is it has got some complex complexity to it so.
You need to do the work upfront.
And you.
I think it can give us an opportunity to accelerate our albeit appropriately the release of capital reserve. So I think.
It was interesting data point I think bid ask spreads are still still wide, but certainly as I said before I think some increases in supply here can can narrow that and you know I don't think its changed the sense of urgency we have on an on how we optimize the business.
Okay. Thank you.
And just my follow up is topline.
In group benefits, which holding up pretty well.
And better than most peers.
You see that trend continuing as you think about 2021.
Hey, it's Romney here.
We're clearly seized with the performance of this quarter and were exceptionally pleased with the performance, especially in the context of a of a difficult environment. I mean think about the rise in unemployment rates. So think about that we're in the middle of a pandemic as the largest group life insurer in the country and were there.
Paying claims unfulfilling promises to our customers and beneficiaries. So just to give you a sense on topline.
For the full year, we would expect to be over from a year over year perspective, or close to the bottom end of RP AFFO guidance range of 4% to 6%.
And Thats, even if you factor in the premium discounts.
That we've given in dental.
And I would remind you that you should expect to also see topline p. AFFO growth be in double digits next year with the additions additional versant.
So if you're thinking about the topline growth, we still have a pretty robust view of next year.
Okay. Thanks.
Your next question comes from the line of Ryan Krueger from KBW. Please go ahead.
Thanks, Good morning, first I had one follow up to Tom's question.
One piece of Metlife holdings is participating life, which I assume would be a pretty attractive liability to reinsurers.
My question is is because it's participating from premium utilization is there any.
Any impediment to you looking for risk transfer for that specific walk.
Hey, Ryan as John I would just say to start that.
Nothing's necessarily off the table, but there is a there is a close block and then there is an open block that have participating policies associated with it and I think.
Certainly the close block has different complexity associated with it.
Yes, both are very.
Well performing blocks of business.
And as I said before we have a number of businesses that are actually complimentary have a number of natural offsets with.
Some of what you actually saw come through this quarter.
But.
I think just to answer your question directly.
Certain blocks would have different complexities and others.
Got it thanks, and then on retirement spread they did pick up quite a bit on an underlying basis ex VI in the quarter.
I heard your comment on the full year, but if as we as we look a little bit longer into 2021.
Can you give us any sense of kind of though the rough range to think about here.
So you may have heard John's opening remarks, we'll give we're going to have an outlook call in February.
And we'll we'll give more color color there, but look I would just give maybe some qualitative commentary to start one is we've seen of this we seen some resiliency here in our spreads and it goes back to just the diverse set of business would be to have not just in terms of source of earnings but even.
In across spread businesses, we have diverse set of spread business, some of which do well in a lower rate steeper curve environment.
And then we have longer tail legacy blocks that obviously would have some spread pressure over a long period of time and so net so all things considered I think we've said we've seen a pretty resilient.
Spread levels this year Nonetheless.
Nonetheless, you know I think over time, there would there would be longer term pressure on some of those other long term blocks.
But you know that ignores new business.
Got it thanks John.
Your next question comes from the line of Nigel Dally from Morgan Stanley. Please go ahead.
Great. Thanks, Good morning, so with optimizing your businesses can you discuss the importance of the property casualty business is a article back in September highlighting potentially division completed put up for sale that you probably don't want to speak to the specific article, but hoping you can discuss just where it fits strategically into you able mix.
Yeah, Hi, Nigel shore. So first of all I would say this is a well run good business or PNC business.
It's been consistently profitable.
It generates mid teen are always.
And that does have an important strategic connection to our group business.
It also produces a steady source of non correlated free cash flow.
So as you know I think those are the comments that I would make about you know about the business and as you.
As you said you know, we're not gonna speculate or we're not going to respond to any root potential rumors here.
Okay. That's helpful. Thank you.
Your next question comes from the line of Erik Bass from Autonomous Research. Please go ahead.
Hi, Thank you going back to our asset volumes have also been pretty strong year to date. Despite a lower level of PRT activities can you talk about what's been driving this and how you see the outlook for liability grow.
Hi, Eric its rami here so.
So as we've talked about a number of different.
Parts of businesses within our gas.
We have seen a significant pickup in sales and stable value.
Deposits this year a lot of that was driven by individuals.
Individuals seeking to safety that stable value offers them inside their DC plans.
Offsetting that if you think about all the other parts of already asked Weve seen more pressure in the structured settlements business, the institutional annuity business and a lot of those businesses are.
Our rate sensitive so the value proposition to the customer if you will is diminished and lower rate environment and so.
Think about the volumes there as being continuing to be driven by the rate environment.
PRT, we're seeing it starting to pick up a as John mentioned, we're looking at a pretty at a pretty healthy pipeline in Q4.
But as we've talked about before were not chasing top line here, we continue to be highly disciplined in terms of our pricing of every single deal that we look out in.
In the PRT space.
And then finally as you probably have seen but we are now well into our entry into the UK longevity market. So far this year, we're close to a billion dollars in sales in terms of longevity swaps and we continue to see a robust pipeline there into Q4 and into next year.
I would just come back and reiterate for RMBS. It's we've seen a very healthy top line, we've seen very healthy growth in liability balances, but discipline is the name of the game here in terms of looking for the returns as opposed to chasing growth.
Thank you and then maybe if I could ask one for Steve Goulart, just hoping you could discuss your outlook for the commercial real estate sector and how you see the current stresses affecting both your commercial mortgage loan portfolio as well as some CMBS more broadly.
Sure. Thanks Ryan.
I think we've talked about this on a a couple of our goals. Obviously, it's a it's an important topic, it's an important investment.
For us and commercial mortgage loans.
We continue to be optimistic about the sector, we like it we continue to invest in the sector.
I think back actually to.
Some of the comments I made I think it was actually room for perhaps response to one of your questions but.
We did see deferral requests as we entered into a covert.
Pandemic.
I think I mentioned on our last earnings call that.
Good those got too.
About 9% of our principal balance outstanding.
But that appears to be sort of where we topped out and what's most important now is as those are rolling off the deferral requests we've seen 60% of them roll off and they've all gone back to resuming payment. So I think that supports.
Our underlying view of strength in the sector, Eric and it continues to be important for us.
Thank you.
Your next question comes from the line of Suneet Kamath from Citi. Please go ahead.
Thanks, I wanted to ask about Asia sales, they're down year over year, but up pretty sharply on a sequential quarter basis.
Just curious what's going on there we heard from another company.
There was a pull forward of sales because of some some rate changes that helped their sales growth. Just wondering if there was any kind of similar dynamic.
Matt four or more specifically, what you're seeing in terms of driving that growth.
Oh City this is kishore.
They say that though the premise of your question is correct and the first part.
So let me.
Based on your question, let me start by putting a little bit of context. So our sales performance in Q2 in.
In the second quarter locked out and social this is the restrictions had a significant impact on our sales.
And Q2 sales for Asia, overall dropped 44%, 55% in Japan compared to prior year.
To overcome this challenge, we took several distribution and product action.
You know as you are well aware of all the past investments, we've been making in sales platforms and on top of that we implemented several digital solutions to augment our face to face interactions.
And we also stepped up our sales management activities as well.
And because of these actions we've seen a very strong recovery and it feels as you rightly.
Rightly pointed out.
Q3 sales increased sequentially, 63% for overall Asia, 85% of Japan.
And our year over year drop.
It is now reduced to 16%.
So you asked about the pricing.
That was you know.
We did repriced our level premium FX product.
It was a contributing but not a major factor in driving our sequential growth.
So Phil another way to look at this is to you know how we're seeing how this is going to play out for the rest of the year.
We expect the impact of our actions are you know we've taken so far to sustain our Q3 momentum.
While the environment is still challenging for face to face sales environment.
Yeah, we're seeing a pickup in our sales pipeline and you should expect a positive year on year growth for.
For Asia as a whole.
Got it thanks for that and then I guess does that help.
No. It does thank you.
Had a quick one for John on the VA block.
Just curious as you mentioned something about reserves I'm on a statutory basis, but is this block sort of past that peak reserve funding period or are you still sort of building reserves as the block matures and at what point do you think you'd be at sort of peak reserves. Thanks.
Morning Suneet.
Just as a reminder, we have roughly 50 billion of VA account balances half of it is the living benefit guarantee as we boot. We showed you back at Investor day and that has been.
Rolling off consistently over time, having said that there are certain certain components.
Components of that block that are building reserves and others that are I'd say a kind of.
Kind of have kind of settled down in terms of the reserve build so so it depends on which which vintage you're talking about.
Is there any way to give us a percentage of the block that that peak reserves versus the block that's still building.
Probably have to get back to you on that and I have it handy.
Okay. Thanks.
Yes.
Your next question comes from the line of Jimmy Mueller from JP Morgan. Please go ahead.
Hi, Good morning, I had a couple of question first on your Latin America business sales were down a decent amount year over year.
Im assuming thats, mostly because the goal of it and to the extent that is can you give us any color on whether things got better as the quarter went on and how do you see things working out.
Through the next quarter or two.
And then I have another one.
Hey, guys. This is Oscar so let me talk about the quality of our topline overall, so a few fit.
So far down because social distancing because of coli benefits beyond our region, but the but it but do you think about it.
Bill Gupp, we're performing on all done remotely really good performance considering the potential after social distancing goes away, but if you think about our premiums and fees.
You exclude speech I, let me say that's been seen to date, so far are really down because the.
Most of TVN start deferring their decision to retire so CPFL for really down if you exclude the impacts in our previous some fees year over year and were growing above mid single digits, which is pretty healthy considering the current environment and that speaks that speaks about the quality.
So far were persistency not just to the refueling themselves. So we're very confident about our health.
Help but be great. If you strip out the Sps, we took folks that are really related to.
Few number of exciting to retire.
We'll retire so we're very confident as well that's where our agents are for core channels, we learn to remotely update.
They can start you know.
Dealing face to face with customers.
Oh, sorry, I want to go back to normal and it's happening. So we're we're very happy about the potential.
And then maybe a bigger picture question Youve done a few sort of nish acquisitions and group benefits, but and obviously, you're deploying capital towards buybacks as well given yours there your stock prices.
Can you comment on your interest in sort of larger acquisitions and how you think about those because they know there is a decent amount of activity in the business lines that you ran are you interested in large acquisitions as well or not.
Not as much given sort of the potential accretion from buybacks at this price.
Hi, Jeremy.
I mean, I go back to our strategy and what we shared with you or at the Investor Day last December.
If I look at our portfolio, especially factoring and some other recent acquisitions versus health potential, but first and and digital willing.
You know I don't we don't see gaps in terms of the portfolio dot to all businesses that we have we see plenty of organic growth opportunities and we're focused on and get you know getting the synergies and you know whether or cost or revenue synergies.
From those acquisitions that I that I referenced so you know hopefully that gives you a bit of sort of insight into our thinking here.
Thanks.
Your next question comes from the line of Humphrey Lee from Dowling and partners. Please go ahead.
Good morning, and thank you for taking my questions. My first question is.
Looking at the annual assumption review should we think about.
There's going be some ongoing run rate earnings impact.
Yes.
Good morning, Humphrey, It's John No. We don't we don't expect any material changes in ongoing run.
Run rate earnings as a result of the assumption review.
My second question is I think shows.
You talked about entering into access management.
Oh, how should we think about the corresponding expense.
From the investment.
Yes.
Actually seen some of your peers have encouraged.
So for this business.
Hey, Humphrey, it's it's Rami here.
So in terms of our actual expenses relating to our disability business. This quarter. They are running right in line with expectations. So were not wouldn't.
We're not really seeing any impact here whatsoever.
What Michelle was talking about is some of our broader investments in technology and platform around disability and absence management.
All of those numbers on all of those investments have been baked into our run rate that you've seen over the past.
Many quarters.
And our investments here are in areas like pricing sophistication contract competitiveness clinical model in terms of the return to health initiatives, which are critical for the Ltd business and we're already seeing positive business.
Outcomes.
And the end to end disability and absence management solution, which Michelle is talking about is already resonating in the market with the larger employers.
It includes things like the digital interface for claimants AI driven automated claim processing suffer.
Sophisticated data analytics for employers so they can understand their workforce and and we're expecting to see growth year, although growth with discipline in this area going forward.
And and encourage John I would just add just to Rami is at around his point, there and a little bit to the way you asked the question. You know this is all part of the as we refer to as the efficiency mindset concept, where we continued to drive efficiencies.
Every quarter in the firm and look for opportunities then to redeploy that into strategic.
Strategic Reinvestments.
Just to support our market leading businesses in all doing all of that within our our run rate costs. So I would just go back to that point, we made that point at Investor Day, and I think it's a it's a key key component for us as we move forward.
Got it I appreciate the color.
Your next question comes from the line of John Barnidge from Piper Sandler. Please go ahead.
Thank you another wife ensure that reported last night talked about elevated non tobin mortality from delaying care heart attacks and death death of despair.
As it relates to the group life business and benefits are you seeing any signs of us.
No we're not.
Okay, and then are you seeing any signs of permanent change behavior.
Coming out of covert that may impact claims utilization trends on a more secular basis. Thank you for the answers.
No not yet.
And at this time there are no further questions I'd now like to turn the call back to Michelle whole off.
Thank you in closing I believe our performance in Q3, and so far in 2020 underscores the sense of urgency and laser focus and how this leadership team is executing on our next horizon strategy to create long term shareholder value.
I am thankful and proud of the effort and commitment of our employees around the world.
Going above and beyond to deliver for our customers.
Please be safe and talk soon.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using 18 to teleconference. You may now disconnect.
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