Q3 2021 MetLife Inc Earnings Call

Ladies and gentlemen, we'd like to thank you for standing by and welcome to the MetLife third quarter 2021 earnings release Conference call. At this time all participants are in a listen-only mode. Later will conduct a question and answer session with instructions being given at that time.

As a reminder, this conference is being recorded. Before we get started I would refer you to the cautionary note about forward-looking statements in yesterday's earnings release, and two risk factors disgusted met lives SEC filings. With that I will turn the call over to John Hall, Global Head of Investor Relations. The floor is yours, Sir.

Global head of Investor Relations the floor is yours Sir.

Good morning, everyone welcome to MetLife's third quarter of 2021 earnings call.

Before we begin I refer you to the information on non-GAAP measures on the Investor Relations portion of metlife.com and our earnings release and in our quarterly financial supplements, which you should review.

On the call this morning, or Michelle Khalaf, President and Chief Executive Officer, and John McCallion, Chief Financial Officer.

Also participating in the discussions or other members of senior management. Last night, we released a set of supplemental slides, which addressed third quarter results. They are available on our web site.

Last night, we released a set of supplemental slides, which addressed third quarter results.

They are available on our web site.

John McCallion will speak to those supplemental slides and his prepared remarks if you wish to follow along. An appendix to these slides features additional disclosures, gap reconciliations and other information, which you should also review.

An appendix to these slides features additional disclosures gap reconciliations and other information, which you should also review.

After prepared remarks, we will have a Q&A session that will extend to the top of the hour. In fairness to all participants, please limit yourself to one question and one follow-up. With that over to Michel.

After prepared remarks, we will have a Q&A session that will extend to the top of the hour. In fairness to all participants, please limit yourself to one question and one follow-up. With that over to Michel.

In fairness to all participants please limit yourself to one question and one follow up.

With that over to Michelle.

Thank you and good morning, everyone. As I reflect on the journey MetLife has been on these past two years. I am more convinced than ever since we are focused on what matters most.

As I reflect on the journey of my life has been on these past two years.

I am more convinced than ever since we are focused on what matters most.

We are in purpose-driven company at a time when stakeholders will accept nothing less.

We have the right strategy to see us through even the most turbulent environments. And we have a strong culture of execution that gives all shareholders' confidence.

And we have a strong cultural of execution that gives all shareholders' confidence.

All of these attributes were on display in the third quarter of 2021. Starting with our financial results.

Parting with our financial results the.

Adjusted earnings were $2.1 billion up 31% year over year. Adjusted earnings per share were $2.39 up 38% year over year.

[noise] adjusted earnings per share were $2.39 up 38% year over year.

Excluding total notable items in both periods, adjusted earnings were up 24% and adjusted EPS was up 31%.

Looking at the quarterly performance of the enterprise as a whole, variable investment income was outstanding, underlying PFOs were strong. And expense disciplined how firm.

And expense disciplined how firm.

The main area where we have seen headwinds it's from elevated Covid claims. In key respects, the third quarter of 2021 looks very much like the first quarter with exceptionally strong VII more than offsetting excess mortality.

And can you respect the third quarter of 2021 looks very much like the first quarter with exceptionally strong VII more than offsetting excess mortality.

On the investment side, all private equity portfolio returned $1.5 billion in Q3, its highest quarterly contribution in 2021.

And the major contributor to VII, which ones well above the top end of our implied quarterly guidance range.

On underwriting and are you as a business. The group like mortality ratio was elevated at one O 6.2% in Q3 on higher claims severity and frequency due to a shift younger than the age distribution of Covid death.

The group like mortality ratio was elevated at one O 6.2% in Q3 on higher claims severity and frequency due to a shift younger than the age distribution of Covid death.

Our Latin America business incurred COVID-19 losses of $137 million in Q3. Two aspects of our underwriting results are noteworthy. From a social perspective, these COVID claims it's precisely how life insurance companies make a positive difference in the world.

Two aspects of our underwriting results are noteworthy.

From a social perspective Vancouver. It claims it's precisely how life insurance companies make a positive difference in the world.

The human toll of the pandemic on families is kinda strophic mature life insurance is present, the financial burden is eased. This is our purpose to help repair the financial damage after life's most destabilizing moments.

This is our purpose to help repair the financial damage after life's most destabilizing moment.

Pandemic to date and our US scoop business with encourage you asked slash claims of around $2.1 billion. Life insurance is not like other businesses, where losses or just losses. Every underwriting claim representative beneficiary, who is receiving the financial help they were promised.

Life insurance is not like other businesses, where losses or just losses.

Every underwriting claim representative beneficiary, who is receiving the financial help they were promised.

From a financial perspective, even though our life businesses have been hit with the most severe pandemic and more than 100 years. They remain profitable.

There remain profitable.

MetLife has actually paid out more in cold weather related claims in 2021 than we did in 2020 and yet our adjusted earnings per share are higher this year than last year as is our adjusted return on equity.

MetLife has actually paid out more in cold weather related claims in 2021 than we did in 2020 and yet our adjusted earnings per share are higher this year than last year as is our adjusted return on equity.

Dusted earnings per share are higher this year than last year as as our adjusted return on equity.

What has enhanced Metlife's capacity to pay outsized claims while still generating exceptional earnings as our strategic decision to allocate a prudent portion of our investment portfolio to private equity.

While not a direct COVID-19 offset, the valuation of our PENVC funds with significant technology exposure has benefited from global capital flows to this growth sector.

The return on our PE portfolio in the quarter wasn't outstanding 12.6% and stands at approximately 36% year to date.

Stands at approximately 36% year to date.

The games on our world season portfolio are not mere accounting marks. Year to date, we have received $1.9 billion in cash distributions from our PE funds. Since 2016, the figure is $7.6 billion. While we often reinvest b E cash proceeds as funds mature and terminate the cash generated steady and significant.

Since 2016, the figure is $7.6 billion why.

Why do we often reinvest b E cash proceeds as funds mature and terminate the cash generated steady and significant.

Turning to the underlying performance of my life's businesses, we are seeing solid momentum. And US group benefits, adjusted PFOs grew 13% year over year, excluding [inaudible] PFO growth was 6.2% on strong jumble sales and persistency and we expect to end the year near the top end of our guidance range. Involuntary benefits, which for us consists of accident in house legal plans and pet insurance, we so strong double-digit PFO growth in the third quarter. The trend in sales is even stronger. Year to date sales are up 40% over the prior period and we remain on track for our record sales a year. While groups sales can fluctuate from year to year due to jumbo cases, we believe the robust to us job market and the competition for talent are creating a strong tailwind.

Turning to the underlying performance of my life's businesses, we are seeing solid momentum. And US group benefits, adjusted PFOs grew 13% year over year, excluding [inaudible] PFO growth was 6.2% on strong jumble sales and persistency and we expect to end the year near the top end of our guidance range. Involuntary benefits, which for us consists of accident in house legal plans and pet insurance, we so strong double-digit PFO growth in the third quarter. The trend in sales is even stronger. Year to date sales are up 40% over the prior period and we remain on track for our record sales a year. While groups sales can fluctuate from year to year due to jumbo cases, we believe the robust to us job market and the competition for talent are creating a strong tailwind.

And U S group benefits.

Just the P. F o's grew 13% year over year, excluding verse in 12th.

Full growth was 6.2% on strong jumble sales and persistency and we expect to end the year near the top end of our guidance range.

Involuntary benefits, which for US consists of accident in house legal plans and pet insurance, we so strong double digit P. F. All growth in the third quarter. The trend in sales is even stronger year to date sales are up 40% over the prior period and we remain on track for our records.

A year.

Why groups sales can fluctuate from year to year due to jumbo cases, we believe the robust to us job market and the competition for talent are creating a strong tailwind.

In connection with open enrollment season this fall we conducted consumer research on benefit preferences among millennials, who are now the largest age group cohort in the US with more than 70 million members. Millennials are expressing strong interest in both traditional benefits such as life insurance and dental.

And voluntary benefits such as legal plans and pet insurance. Another top desire is for help with financial planning. Metlife entered the space in late September with a digital financial wellness too cold applies which helps us connect with employees directly.

The app is designed to address the emotional barriers to financial progress and help people tackle death, save more or even create a digital well.

Within our IRS business, after a quiet for three quarters, we have already booked for cases totalling $3.5 billion of pension risk transfer deals and the first month of the fourth quarter. Next Tuesday marks the 100th anniversary of the first group annuity contract Metlife ever wrote with the William Roger printing company.

William Roger printing company.

We are pleased to be a leader in the business of helping companies honor their retirement promises they have made to their workers.

Last month Metlife released the results of our annual pension risk transfer pole. We only survey companies that want to the risk. Of the 253 respondents nearly seven in 10 have pension plan assets of $500 million or more and 93% and tend to divest all of the defined benefit pension liabilities at some point in the future. Up from 76% in 2019. Elsewhere in our IRS excluding PRTs from both periods, adjusted PFOs were up 70% year over year.

We only survey companies that want to the risk.

Of the 253 respondents nearly seven in 10 have pension plan assets of $500 million or more than 93% and tend to divest all of the defined benefit pension liabilities at some point in the future up from 76% in 2019 elsewhere in our I S X.

Judy Prt's from both periods adjusted P. F O's were up 70% year over year.

There were two main drivers. The first was longevity reinsurance and market we entered in the UK last year.

The second was post-retirement benefits, where we take on blocks of retiree life insurance from employers. This is unattractive adjacency to our group business the place to Metlife's competitive advantages.

This is unattractive adjacency to our group business the place to my life's competitive advantages.

In Latin America, we delivered exceptional sales growth in the quarter up 45% year over a year on a constant currency basis.

In fact sales were higher in Q3 2021 than they were in Q3 2019 before the Covid pandemic began.

Most markets across the region, we saw double-digit growth in both sales and PFOs.

Moving to caution capital Metlife ended the third quarter with $5.1 billion of cash at its holding companies.

During the quarter, we paid for 100 million in common stock dividends and repurchased $1 billion worth of outstanding common shares with another 233 million repurchased so far in Q4. We have $2.5 billion remaining on the 3 billion dollar share repurchase authorization we announced in August.

We have $2.5 billion remaining on the 3 billion dollar share repurchase authorization, we announced in August.

We are on track to return more than five and a half billion dollars of capital to shareholders in 2021, and we continue to strive for a balanced mixed between business investment and couple of return.

In 2020 for example, we returned $2.8 billion to shareholders and invested approximately $5 billion in organic growth and emanate.

Our task for capital deployment remains consistent does it clear a risk adjusted hurdle rate.

As John will describe in greater detail the new business we rode in 2020 at a period when interest rates were at all-time lows, what's the most attractive of the past five years. It had the shortest payback period, the highest internal rate of return and the highest value of new business relative to the amount of capital deployed.

This was the natural outgrowth of are accelerating value initiative. By optimizing our portfolio businesses.

By optimizing our portfolio businesses.

Shifting our product mix to be more capital efficient and fully embracing inefficiency mindset, we have consistently improved VNB over time and it is now an integral part of our capital allocation process.

This year in addition to organic growth, we increase the stake in our India joint venture PMB Metlife to 47% from 32%.

India is one of the five secondary growth markets we identified and our next horizon strategy. Consistent with that strategy, we are increasing our exposure to a market where PNB Metlife has access to more than 200 million customers across 15000 sales location.

In September we held an in-depth session with our board of directors to pressure test every aspect of our next horizon strategy. We've done this each year with my tenure as CEO.

We've done this each year with my tenure S. C O.

As representatives of our shareholders and shareholders themselves, our board challenged us to make sure we are positioned and on track to deliver on our goals.

I believe the alignment between the board and management is as strong as it's ever been and our shared commitments remain clear.

Focus on deploying capital to its best juice simplify the company to improve efficiency and the customer experience and truly differentiate ourselves in the marketplace. Now I'll turn it over to John for a detailed review of our quarterly performance.

Now I'll turn it over to John for a detailed review of our quarterly performance.

Thank you and good morning, I'll start with the three Q21, supplemental slides, which provide highlights of our financial performance, details of our annual global actuarial assumption review and updates on our value of new business metrics and our cash in capital positions.

Starting on page three we provide a comparison of net income to adjusted earnings. Net income in the third quarter was $1.5 billion or $541 million lower than adjusted earnings.

Net derivative losses of $172 million were primarily driven by the strengthening of the US dollar in the quarter.

In addition. Our actuarial assumption review accounted for $76 million of the variance between net income and adjusted earnings.

Our actuarial assumption review accounted for $76 million of the variance between net income and adjusted earnings.

In total the assumption review reduced net income by $216 million, including a notable item to adjusted earnings of $140 million.

The table on page four provides highlights the actuarial assumption review, with the breakdown of the adjusted earnings and net income impact by business segment.

We have kept our US mean reversion interest rate unchanged at 2.75% and maintained our long term mentality assumptions. Despite the near term impacts from COVID-19.

Most of the net income impact was at Metlife Holdings and Asia. For Metlife Holdings. The primary driver was a refinement to the variable annuity lapse rate function to better reflect the policyholder behavior based on withdrawal status.

For Metlife Holdings. The primary driver was a refinement to the variable annuity lapse rate function to better reflect the policyholder behavior based on withdrawal status.

In Asia, the largest impact was due to the lowering of the earned right assumption in Japan, where we assume current earned rates for a longterm rate assumption.

On page five you can see the year over year comparison of adjusted earnings by segment. Excluding notable items in both periods.

Excluding notable items in both periods.

Adjusted earnings excluding notable items were $2.2 billion up 24% and up 23% on a constant currency basis, primarily driven by strong returns in our private equity portfolio.

Adjusted earnings per share excluding notable items was $2.56 up 31% year over year on both the reported and constant currency basis. Aided by capital management.

Aided by capital management.

Move into the businesses, starting with the US. Group benefits adjusted earnings were down 72% year over year. Driven by unfavorable underwriting margins in group life. Which I'll discuss in more detail shortly.

Driven by unfavorable underwriting margins in group life.

Which I'll discuss in more detail shortly.

Regarding non medical health, the interest adjusted benefit ratio was 70.7% and three Q3 of 21 at the low end of its annual target range of 70% to 75%, but higher than the prior-year quarter of 67.4%.

Which benefited from extremely low dental utilization and favorable disability incidents.

Volume growth. The addition aversion health and favorable expense margins were partial loss as to the decline and year over year results.

Volume growth. The addition aversion health and favorable expense margins were partial loss as to the decline and year over year results.

Group Benefit continues to have strong top-line growth. Year to date sales were up 40%, primarily due to higher jumbo case activity.

Group Benefit continues to have strong top-line growth. Year to date sales were up 40%, primarily due to higher jumbo case activity.

Year to date sales were up 40%, primarily due to higher jumbo case activity.

Adjusted PFO as in the quarter up 13% year over year, driven by solid volume growth across most products, including voluntary and the addition aversion health.

Retirement income solutions or RIS adjusted earnings were up 60% year over year. The primary driver was higher variable investment income largely due to strong private equity returns.

Hi, Mary driver was higher variable investment income largely due to strong private equity returns.

Favorable underwriting margins and volume growth also contributed to year over year performance. RIS investment spreads were 256 basis points up 100 basis points year over year due to higher variable investment income.

R. S investment spreads were 256 basis points up 100 basis points year over year due to higher variable investment income.

Spreads, excluding VII were 93 basis points down 5 basis points year over year and sequentially, primarily due to lower pay downs in our portfolios a residential mortgage-backed securities and residential mortgage loans.

RIS liability exposures, including UK longevity reinsurance increased 4% year over year due to solid volume growth across the product portfolio.

With regards to pension risk transfers as Michelle noted, we've already completed $3.5 billion of transactions in the fourth quarter and continue to see an active market.

Moving to Asia, adjusted earning were up 31% on both are reported in constant currency basis. Primarily due to higher variable investment income.

Just at Orange were up 31% on both are reported in constant currency basis.

Primarily due to higher variable investment income.

Asia solid volume growth also contributed to the strong performance. Driven by higher general account assets under management on an amortized cost basis, which were up 7% on a constant currency basis.

Driven by higher general account assets under management on an amortized cost basis, which were up 7% on a constant currency basis.

Lower accident and health utilization in the prior period was a partial offset. Asia sales were down 12% year over year on a constant currency basis.

Asia sales were down 12% year over year on a constant currency basis.

Reflecting pressure from Covid related lockdowns in the regions. Asia year to date sales were up 10% on a constant currency basis and remain on target to achieve double-digit growth in 2021.

Asia year to date sales were up 10% on a constant currency basis and remain on target to achieve double digit growth in 2021.

Latin America adjusted earnings were down 35% and down 38% on a constant currency basis, primarily driven by unfavorable underwriting margins due to elevated COVID-19 related claims mainly in Mexico.

The impact of Latin America's third quarter adjusted earnings was approximately $137 million. While the situation remains fluid, we have seen COVID-19 related hospitalizations and deaths in Latin America significantly decline in October.

While the situation remains fluid, we have seen COVID-19 related hospitalizations and deaths in Latin America significantly decline in October.

Favourable investment and expense margins. As well as lower taxes versus the prior-year quarter were partial offsets. Latin America's adjusted earnings have been pressured by elevated COVID-19 related claims. Sales and persistency throughout the region remain strong.

As well as lower taxes versus the prior year quarter, where partial offsets.

Latin America is adjusted earnings have been pressured by elevated COVID-19 related claims.

Sales and persistency throughout the region remains strong.

Latin America, adjusted PFOs were up 22% year over year on a constant currency basis and sales were up 45% on a constant currency basis driven. Driven by solid growth across most markets. [EMEA] adjusted earnings were up 20% on both are reported in constant currency basis.

Driven by solid growth across most markets.

AH me adjusted earnings were up 20% on both are reported in constant currency basis.

Primarily driven by volume growth across the region and favorable underwriting margins primarily in the golf.

We expect EMEA adjusted earnings to decline in the fourth quarter due to the timing of certain technology investments across the region.

EMEA adjusted PFOs, we're down 2% on a constant currency basis, and sales were down 5% on a constant currency basis, reflecting divested businesses.

Partially offset by growth in Turkey and Europe. Metlife holdings adjusted earnings excluding notable items in both periods were up $271 million year over year.

Metlife Holdings adjusted earnings excluding notable items in both periods were up $271 million year over year.

The increase was primarily driven by strong private equity returns. Underwriting margins did reflect higher life claim severity than expected during the third quarter of 2021.

Underwriting margins did reflect higher life claim severity than expected during the third quarter of 2021.

However, the life interest adjusted benefit ratio of 53.3% was within our annual target range of 50 to 55%.

Was within our annual target range of 50 to 55 per cent.

In addition, LTC new claims return to more normal levels in the quarter versus very low new claim submissions in the prior-year quarter.

Corporate another adjusted lawsuit was $131 million in both periods. Lower tax benefits were mostly offset by higher net investment income year over year.

Lower tax benefits were mostly offset by higher net investment income year over year.

Companies effective tax rate and adjusted earnings in the quarter was 20.6%. And within our 2021 guidance range of 20% to 22%.

And within our 20th 21 guidance range of 20% to 22%.

Now I will provide more detail on group benefits mortality results on page six. This chart reflects our group like mortality ratio for the first three quarters of 2021.

This chart reflects our group like mortality ratio for the first three quarters of 2021 include.

Including the COVID-19 impact on the ratio and on Group Benefit's adjusted earnings. Group blood mortality ratio is 106.2% in the third quarter of 2021, which is well above our annual target range of 85% to 90%. COVID reported claims in Q3 of 21 were roughly 18 percentage points.

Including the COVID-19 impact on the ratio and on Group Benefit's adjusted earnings. Group blood mortality ratio is 106.2% in the third quarter of 2021, which is well above our annual target range of 85% to 90%. COVID reported claims in Q3 of 21 were roughly 18 percentage points.

Group blood mortality ratio is 106.2% in the third quarter of 2021, which is well above our annual target range of 85% to 90%.

Covid reported claims and three few of 21, where roughly 18 percentage points.

Which reduced group benefits adjusted earnings by approximately $290 million. The primary drivers were higher claim frequency and severity.

The primary drivers were higher claim frequency and severity.

Approximately 40% of US Covid deaths in the quarter were under age 65, about double the rate of the first quarter of this year.

And the highest percentage in any quarter since the pandemic began. And therefore, having a greater proportional impact on the working-age population.

And therefore, having a greater proportional impact on the working age population.

In addition, we estimate that the quarter included roughly 1 to 2 incremental percentage points impact on the mortality ratio from claims that appear to be COVID-related but we're not specifically identified as COVID-19 on the death certificate.

Despite the impact from Covid, Group Benefits remains a profitable and growing business for Metlife.

Group Benefits reported adjusted earnings of roughly $450 million a year to date. And adjusted PFO growth of 13%.

And adjusted P F O growth of 13%.

Now, let's turn to page seven. This chart reflects our pretax variable investment income over the last five quarters, including approximately $1.8 billion in the third quarter.

This chart reflects our pretax variable investment income over the last five quarters, including approximately $1.8 billion in the third quarter.

There's very strong result was mostly attributable to the private equity portfolio, which had a 12.6% return in the quarter.

As we have previously discussed, the private equities are generally counted for on a one quarter lack.

While all private equity asset classes performed well in the quarter, our venture capital funds, which account for roughly 23% of our PE account balance of $12.8 billion were the strongest performer across subsectors that they roughly 18% quarterly return.

Page eight highlights VII by segment for the first three quarters of 2021, including $1.4 billion posttax in the third quarter.

The attribution of VII by business is based on the quarterly returns for each segments individual portfolio.

As we have previously noted RIS, Metlife holdings and Asia generally account for 90% or more of the total VII and are split roughly one third each. A lot can vary from quarter to quarter.

Hello can vary from quarter to quarter.

The VII result in the quarter or more heavily weighted towards RIS and Metlife Holdings as ages private equity portfolio is less mature and has a smaller proportion of venture capital funds I referenced earlier.

Turning to page nine this chart shows are direct expense ratio over the prior five quarters and full-year 2020, including 11.1% in the third quarter of '21.

As we have highlighted previously, we believe our full-year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.

Our third quarter direct expense ratio benefited from solid top-line growth and ongoing expense discipline. This did include approximately 20 basis points from premiums that relate to participating cases, and 20 basis points from a single premium group lifestyle and RIS.

This did include approximately 20 basis points from premiums that relate to participate in cases, and 20 basis points from a single premium group lifestyle and R. I S.

In addition, the impact from seasonal enrollment costs and timing of certain technology investments are expected to be more heavily weighted to the fourth quarter.

Therefore, we do expect the direct expense ratio would be elevated and four kids. Now, let's turn to page 10. This chart reflects new business value metrics from Metlife's major segments for the past five years, including an update for 2020.

Now, let's turn to page 10. This chart reflects new business value metrics from Metallize major segments for the past five years, including an update for 2020.

Consistent with our next horizon strategy, we continue to have a relentless focus on deploying capital and resources to the highest value opportunities.

As evidence of that commitment, Metlife invested $3.2 billion of capital in 2020 to support new business. Which was deployed at an average unlevered IRR of approximately 17% with a payback period of six years.

Which was deployed at an average unlevered IRR of approximately 17% with a payback period of six years.

New business written in 2020 reflects our disciplined approach to building profitable growth, while creating value, generating cash and mitigating risk.

Generating cash and mitigating risk.

Despite the sales challenges in 2020 associated with lockdowns related to the pandemic. We were able to increase our value of new business and IRR, while lowering our cash payback period versus 2019.

We were able to increase our value of new business and IRR, while lowering our cash payback period versus 2019.

Now I'll discuss our cash in capital position on page 11. Cash in liquid assets at the holding companies were $5.1 billion as of September 30th which is down from $6.5 billion at June 30th, but still well above or target cash buffer of $3 billion to $4 billion.

Cash in liquid assets at the holding companies were $5.1 billion as of September 30th which is down from $6.5 billion at June 30th, but still well above or target cash buffer of $3 billion to $4 billion.

The sequential decrease in cash at the holding companies include in the net effects of share repurchases of $1 billion.

Payment of our common stock dividend of roughly $400 million dollars subsidiary dividends as well as holding company expenses and other cash flows.

In addition, we had a long term debt repayment of $500 million in the third quarter. Our next long term debt maturity's not until September 2023.

Our next long term debt maturities not until September 2023.

Next, I would like to provide you with an update on our capital position. For our US companies, preliminary third quarter year to date 2021 statutory operating earnings were approximately $4 billion.

For our U S companies preliminary third quarter year to date 2021 statutory operating earnings where approximately $4 billion.

While net income was approximately $3 billion. Statutory operating earnings increased by approximately $1 billion year over year.

[noise] statutory operating earnings increase by approximately $1 billion year over year.

Primarily driven by higher variable investment income and lower variable annuity rider reserves. Year to date 2021, net income increased by roughly $400 million dollars as compared to the first nine months of 2020.

And lower variable annuity rider reserves.

Year to date 2021, net income increased by roughly four and a million dollars as compared to the first nine months of 2020.

The primary drivers were higher operating earnings and that investment gains, which was partially offset by derivative losses.

We estimate that our total US statutory adjusted capital was approximately $19.7 billion as of September 30th 2021. Up 16% compared to December 31st 2020.

Up 16% compared to December 31st 2020.

Favorable operating earnings and that investment gains were partially offset by derivative losses and dividends paid to the holding company. Finally, the Japan solvency margin ratio was 960% as of June 30th. Which is the latest public data.

Finally, the Japan solvency margin ratio was 960% as of June 30th which.

Which is the latest public data.

In summary, Metlife delivered another very strong quarter, driven by exceptional private equity returns, solid top-line growth, ongoing expense discipline and the benefits of our diverse set of market leading businesses and capabilities.

Ongoing expense discipline and the benefits of our diverse at a market leading businesses and capabilities.

While earnings power of our group benefits in Latin America businesses has been dampened by COVID-19 excess mortality. We are pleased with the momentum behind these market leading franchises.

We are pleased with the momentum behind these market leading franchises.

In addition, our capital, liquidity and investment portfolio remains strong and position us for further success.

Finally, we're confident that the actions we are taken 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'll turn the call back to the operator for your questions.

Ladies and gentlemen, we'll now begin the question and answer session of today's conference. If you wish to ask a question please press one followed by the zero on your touchtone phone, you'll hear a tone, indicating that you've placed yourself in queue. And all questions will be pulled me order they are received. You may remove yourself at any time by once again by pressing one followed  by the zero on your touchtone phone. And if you're using a speakerphone. Please pick up your handset before pressing the keys.

by the zero on your touchtone phone. And if you're using a speakerphone. Please pick up your handset before pressing the keys.

Our first question will come from the line of Ryan Kruger of K B W. Please go ahead.

Hi, Good morning was hoping you could provide a little bit more detail on your group no medical help cleaning trends in the quarter I guess in particular.

And I know disabilities is a bit smaller for you, but you know some companies have had weaker disability yourself that that was like yours held up pretty well. So I. Appreciate a veto you can provide.

Good morning, Ryan, It's it's rummy here so on the disability front as as you noted it it's Ah it's well it's of our premium it's about 12% of our overall P F O's in group.

And I can give you some color based on both the L. T D and the S. T D portions of the book So for the L. T decide what we so is an incidence rate this quarter that's much more in line with our historical norms. It was higher than last few about last year was a favorable incidents here from a disability.

Two perspective, so we're seeing it take it back to where it was historically from a frequency perspective.

And then the recoveries continue to be up Ah pretty pretty strong.

The only thing I would add there on the L. T. D side is Ah. So far we have not seen any significant impact on the business from kind of COVID-19 or long corporate effect. Neither have we seen any material impacts from the overall economy. So it's pretty.

And demick levels as far as the L. T D book.

For the S. T decide ah, it's a bit different Ah, so think about that 12% of disability premium too.

Two thirds of it is sitting in the L. T D. Only a third of it sits in the S. T D.

And then for that one third that's an S. T D about half of those employees.

Are comprised of as only a business so where we are administering the disability claims, but not on the hook for the for the actual claims for themselves.

So while before the S. T. D portion we have seen him continued to see elevated S. T. D. Covid claims the actual impact on demand medical health ratio is pretty de Minimis given the composition of our book under are so exposure.

Great that was that was helpful. Thank you Uhm and then.

<unk> had some benefit from R. M B S pay down and and R. A S.

How should we think about the ongoing impact of that or what's left of it from there.

Good morning, writing it's John.

Yeah, obviously R. S spreads I think overall been just a beneficiary of just the excellent performance here in private equity portfolio. So we saw that continuing this quarter.

You're referencing after excluding VII that spreads have remained resilient at 93 basis points, although five basis point declined from second quarter, but pretty much in line with what we what we set back [noise] 90 days ago. So you referencing that continued elevated.

Evil's of Paydown activity on the residential mortgage book in that accelerates. The income from those securities are loans that we purchase a discount.

But as we said you know we we we believe we'd seen the peak of that and so that you know five basis point runoff was generally expected [noise], we would expect that to continue.

Into a into four Q and.

And you know kind of start to make its way down in but I I think kind of a similar trajectory seems seems reasonable at this point.

Got it thank you very much.

Our next question will come from the light of Eric bass of Autonomous Research. Please go ahead.

[noise] hi, Thank you so it seemed more enforced block transactions over the past quarter with sellers getting pretty attractive multiples and it seems like there's plenty of buyer interest in the types of liabilities. You have now there are some potential counterparties that have new York entities. So I'm curious if you're getting more optimistic about finding a transaction.

Sensually unlock value in portions of your Metlife holdings blocks.

Good morning Air gets it's John I'd say the short answer is yes. If if the question is are we getting more optimistic yes.

We are seeing what you're referencing as well.

The supplier and buyer bases are continuing to remain I'd say robust.

Mm.

And and I think our team continues to work and and take a third party view and do the analytics around our portfolio and as we've I've talked about before you know quite a bit of it is thinking about what are of interest of different buyers. It differs not everyone is thinking the same way or had they you know.

Buyers of different tools for creating value.

And so we have to think through that and think about our situation as well and how we would optimize from our end and I think there is a you know a puzzled to put together there to to think through how to how to best optimize a situation like that as we've talked about before where we're not gonna do something it.

Any cost, but we are continuing to look at things too.

To optimize and accelerate the release of reserves in capital appropriately and I think that's you know we're still on track with that.

Great. Thank you and then the second I was hoping you could give some perspective on what's going on in Chile, and the potential implications for your business and a specific way what are the different proposals that are out there for the F. P system from the leading presidential candidates and did you see risk of significant change to that business following the election.

But then also hoping you could talk about the early annuity payouts issues. That's been covered in the press and whether that's material for you at all.

Yeah, Hi, Eric It's it's Michelle here. So let me give you some some comments and then we'll just see if Eric would want to add anything.

And do you know the the pension system and Chili has been subject to you know public debate for a number of years now I would say in that debate tends to hit up you know around.

Elections, you know one thing I would say is that despite the you know a general perception to the contrary if you think about the pension system I mean, that's function quite well and the returns have been quite quite good there's one for the industry as a whole.

You know the problem with the system is that you know due to inconsistent contributions. The fact that you have widespread informal labor labor and should I and the contribution rates are low.

You know that slot to sort of low project a replacement rates at retirement.

You know the the debate is continuing now what presidential elections around one is in they'd November and then you'll have the second round in December [noise] different candidates are taking very different views. You know some are supportive of the system. You know others are are in favor of.

Radical reforms, so we'd have to see how that plays out you know the other thing that's happening in Chile is that.

You know, there's a redrafting of the constitution, that's taking place that that's gonna play out you know next year as well. So you know, we'll just see what what comes out of that.

You know, we we were very much engaged what are the local authorities, we have great relationships in in Chile, We're leaving player. There as you know we're also you know in in collaboration with the industry, making sure that you know our point of view as.

Is being heard and and hopefully addressed as well and look where you know we're not you know we're in favor of reform that makes sense for the participants in the system that protects them their retirement, but we are also cautioning against any measures.

Ultimately would do with with damage you know Chilliest coupla markets as well as you know investor perceptions of the you know what should I am chili as an investment destination.

So you know we we continue to be engaged you know as you know there's been a three rounds of withdrawals already there's another proposal for a fourth round of of pension with roles.

You know, we'd see whether that got surpassed or not you know clearly if it does whereas you know these withdrawals don't have a material impact on earnings.

You know they.

You know the damage sort of the viability of the system. If you like which is something that we are you know we advocate against and then on the annuities from that you referenced.

You know this there's been one withdrawal there again, we don't know if there'll be another one I think probably our view is that the likelihood of that is not you know very high but we'd have to wait and see all in all our pension business has two per cent of my life's over or earning.

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But you know our view is that you know we continue to engage we continue to keep a close eye on the situation and you know we'll have to see how this plays out over the coming you know weeks and months.

Anything to Ah direct nope I think that covers it. So I hope that gives you a sort of that answers the question Eric.

Yes, I appreciate the perspective, thank you.

Our next question comes from the line of Jimmy Bueller of J P. Morgan. Please go ahead.

Hi, Good morning, just another question on the group business. If you could talk about what you're saying in terms of Ah claims utilization, both frequency and severity in your dental book.

Sure Jimmy it's it's for me here.

I would say the the dental story is is very much a return to prepandemic utilization. So if you look at the courts are over court. The results 22 2020 was.

Exceptionally low with in terms of dental utilization, we've seen dot come back to to normal levels.

Ah Q3 tends to be seasonally lower so Q4 tends to kind of slightly pick up typically in terms of the dental business.

So very much kind of a return to normal and and I would say if you look at the overall the ratio or non medical health ratio.

[noise] expectation right now is that for the full year, we're gonna get a ratio that's been a very close to the mid point of a range.

Okay.

And then on the accounting changes can you talk about there you are internally on sort of the process of figuring out what the impact will be on Metlife. In then related the when do you think you'll start quantifying the impact and sharing it with the investment community.

Hey, good morning, Jimmy it's John.

We are well underway on our implementation work progress continues.

And I'd say continue to be on target for implementation come one 123.

You know, where we're gonna we're in the process of evaluating transition amounts in an ongoing impaction of the new guidance and I'd say, our plan is still intact, which would be kind of a mid 2022.

Timeframe give or take Ah for the for disclosing in.

You know kind of sharing you know how to think about the transition and the insides you should drop on this again I would remind everyone that ultimately economics cashflow pricing.

Products does not change and I think you know.

We're working well with the industry to think through how we collectively.

Transition ourselves in kind of explain the results and I think that's.

You know going well so at this point, let's say nothing's nothing has caused us to feel the need to change the timeline.

And have you had conversations with the rating agencies on holiday would view, obviously, they focus on cashflows instead as well, but they do look at cap also but do you think there will be changes cause a lotta your gap ratios would obviously ended up changing once the rules are implemented.

Yeah, we've had we've had periodic discussions with them over time I I think they I think the rating agencies get it.

And you know not everything's changing so when you say ratio ratios no ratios are changing I mean, a group business ratios won't change you know so I I think it's not all businesses Ah, it's not all products and I think.

You know, it's there will be certain unique circumstances that will arise in in certain books, but in general I think.

My assessment is that they have a very balanced methodical way of thinking about it and they recognize.

The fact that you know economics cash flow and pricing of products is not changing.

Okay. Thank you.

Our next question will come from a line of Tom Gallagher of Evercore ISI. Please go ahead.

Yeah. Good morning, John just a follow up on Eric's question on risk transfer would you say is a variable annuities the priority or you're looking broader that might include life insurance and fixed annuities and just a related question cause your New York domicile.

I'll limit the types of Counterparties state you might transact with or would you say, it's still a pretty robust list as as you're thinking about things that that would be in a potential auction bidding situation.

Hey, good morning, Tom I would say the answer to the first question would be.

Would be we're open to.

You know all blocks of business that create value for us. So I think a lot of different aspects go into value creation. When it comes to that question. So I don't think it's.

One focus there or another I'd say, probably the only one I could probably scope out OSA is less likely is L. T. C. Just give them aware bedash spreads are these days, but I'd say.

Markets are evolving on and all the other ones and then you have to look at your own person you know kind of a situation, but to think about the benefits we get from having them in our New York domiciled entity and so that's how we would kind of frame, but I wouldn't.

Exclude anything outside of let's say L. T C. Just given where I think you know pricing is there's a pretty big divergence in and when people think at this point.

On the other on the other aspect of of counterparty I would say we come at it probably the same way that are New York domiciled.

Partners would come at it as well so I don't I don't know if it.

Changes.

Who are how we would do a transaction I think we probably take us somewhat of a similar construct because at the end of the day you know our situation would be a reinsurance transaction from the New York domiciled entity and so you know credit risk would matter and so.

You know structure can help with that as well but.

I don't think it excludes anything per se, but that that would be a strong consideration.

Okay. Okay. Thanks, and then just one quick one longterm care claims you said return to more normal levels. This quarter was out on both claim frequency and severity.

Okay and the reason I ask is you know there's clearly from what we've heard from other has been a shift away from facility care to home health care, which has lowered severity and just curious if you have that level of detail for how that's trending right now.

Yeah sure. Good good question time, because you're right. It it had shifted I mean, it's quite honestly every metric has shifted back to prepandemic levels, I mean, where we may be worse off slightly on the relationship of Ah in home versus.

You know kind of external care, but it's it's very close it's much it's very close to being prepandemic.

Okay. Thanks.

Part of the next question will come from the line of help freely over Darling partners. Please go ahead.

Well, thank you for taking my questions.

Related to India, you talked about there are some favorable items and being a part or your next batch fourth quarter to trend along that's don't be high expensive, there's any way to help us think about what would be the kind of the robbery earnings for India.

Yeah. Good morning, good morning, I'm free so yeah, we had a very strong Q3, I'd say a number of items went in one direction.

That caused us to have a very strong result in Q3 [noise].

You know as we think about quantification of that you know you could put it in the.

Area of call at 20.

20 million 25 million give or take.

And then as I said I'm on in my prepared remarks, we'd expect some elevated technology investments in the [noise].

And the fourth in the fourth quarter so.

Give you some data points minutes for sure I'd give you anything outside of that but that that should probably should help you kind of frame your for your modeling.

Got it in the in terms of the overall kind of expensive for a company is the 12.3% for the full you're still a.

Great way to think about the expensive for the 2021.

Yeah. So I I would say we continue to focus on the full year, that's our target to be under 12, 3% full year, obviously, we've been running well below that.

I mentioned that we would expect to to have elevated expenses in the fourth quarter, you know quite honestly, it's not much different than the trend you saw a year ago in terms of Ah how things transpired for most of the year and then we saw an uptick and so that you know if we're above 12, three in the fourth quarter by by a bit that.

Would that would not be as you know surprised per se, but that's not our focus should just using that as an example, when you talk about the 12 three what's important to us as the 12th root for the full year.

And and so you know that's that's kind of our mindset. When we think about our expense ratio and we continue to anticipate to be under that on a full year basis.

Oh, that's it thank you.

And our next question will come from the light of John Barnidge of Piper Sadler. Please go ahead.

And increase Toby and pack on the group like business is there a need to increase administrative expenses to deal with enduring nature of the pandemic at all.

Hey, Hey, John It's it's for me here the the expense ratio in a in a life business is pretty small so the real the real issue is not operations are expensive the real issue and the challenge of seeing is just the claims France. So it's not a it's.

It's not really an expense issue at all this point.

Okay and then.

Would it be fair to say.

If the seasonal increase and the direct expense ratio overall, obviously about 12.3% soon.

Care to come in well below 12% for the year would there be a reevaluation of it longer term, possibly.

Thank you.

Hey, John It's it's rummy again here I just Wanna, maybe also further clarify I wasn't sure with the intent of your question.

With respect to what's going to change it what is changing on the life site is pricing. So we did talk about this.

Lost courts are we have and we continue to make right adjustments in the group life business in line with our prospective you of the pandemic is thought operations related is related to the underwriting into mortality.

And as you look at the upcoming renewal season, we have been able to Ah achieve rate adjustments in rate increases are in line with our perspective, you of of mortality, while maintaining pretty strong persistency in our book So that's gonna be an ongoing process.

That we're undertaking so that's kind of what's changing if you will with respect to the group life piece.

Yeah, and then I can take the the second question you had John this is John as well.

Yeah I took our our target is under 12 went through you said is it possible sure anything's possible I guess, but ultimately you know we are.

Steadfast on you know being at or below 12.3 again, what we also are trying to do shift the mix of expenses that are within our expense space and continue to drive savings and capacity for reinvestment. So we want to maintain.

Being at or below 12.3% on a persistent basis every year, but at the same time, we want to continue to drive efficiencies that free.

You know the allocation of resources to invest in the customer invested in our processes and.

And to continue to drive growth for the firm and and so and at the same time, if we see headwinds in an economy.

We can use that capacity as a protection for profit margins. So that's kind of our philosophy when it comes to our efficiency mindset and I'd say you know nothing would kind of take us off that that track at this point.

Thank you for the answer.

Okay.

There are no further questions in queue at this time I would now like to turn the conference back over to our C. E O Michelle hold off for any closing remarks. Please go ahead Sir.

Alright, Thank you operator.

While the third quarter had outsized returns in Covid claims we believe the underlying performance of our business demonstrates to endure inc trends and growth potential of the Metlife Global insurance franchise.

Although the pandemic continues to create uncertainty I am confident in our ability to continue to execute and create longterm shareholder value for shareholders have a great day.

Ladies and gentlemen that does conclude our conference call for today on behalf of today's panel, we'd like to thank you for your participation in today's earnings call and thank you for using our service have a wonderful day you may now disconnect.

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