Q4 2023 MetLife Inc Earnings Call

Okay.

Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Metlife fourth quarter 2023 earnings release Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and 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 to risk factors discussed in Metlife SEC filings.

Speaker Change: With that I will turn the call over to John Hall Global head of Investor Relations.

John A. Hall: Thank you operator.

John A. Hall: Everyone. We appreciate you joining us for Metlife fourth quarter 2023 earnings near term outlook call.

John A. Hall: Before we begin I'd point, you to the information on non-GAAP measures on the Investor Relations portion of Metlife Dot com in our earnings release and in our quarterly financial supplements, which you should review.

John A. Hall: On the call. This morning are Michel <unk>, President and Chief Executive Officer, and John Mccallion, Chief Financial Officer.

John A. Hall: Also participating in the discussion are other members of senior management.

John A. Hall: Last night, we released a set of supplemental slides, which address the quarter as well as our near term outlook there.

John A. Hall: They are available on our website.

John Mccallion: Mccallion will speak to those supplemental slides in his prepared remarks.

John Mccallion: Appendix to the slides features outlook sensitivities disclosures GAAP reconciliations and other information, but you should also review.

John Mccallion: After prepared remarks, we will have a Q&A session, which will end promptly at the top of the hour.

John Mccallion: As a reminder, please limit yourself to one question and one follow up.

With that over to Michele.

Michele: Thank you John and good morning, everyone.

Michele: As we begin 2023 I shared our conviction that despite the uncertain times my life would exit the year stronger than we entered it.

Michele: We accomplished this by countering the challenging environment with the actions, we've taken to focus simplify and differentiate our business.

Michele: We maintained an accelerated momentum in my talks diversified set of market leading businesses.

Michele: Driving strong results for the year and the quarter.

Michele: And we illustrated our financial strength and flexibility with some transactions and one time capital management, ending the year with solid capital ratios and robust cash on hand.

Clearly our all weather strategy stood up again in 2023, we remain steadfastly focused on what matters, most and delivering for our customers and shareholders.

Michele: In 2023 we exited the pandemic and have yet to enter it widely expected U S recession.

Michele: We managed through a bank liquidity crisis, and the resulting credit concerns and.

Michele: And we adapt to an inverted yield curve that has persisted longer than any in history against this backdrop. The fundamentals of our businesses are as strong as I have ever seen.

Michele: Our successful 2023 is a testament to the resilience and durability of our business model.

Michele: Our relentless focus on execution concentrating on the factors we control.

Michele: Our risk management culture and processes.

Michele: The discipline, we apply to managing our assets and liabilities and the prudence of our investment portfolio.

Michele: On that last point, the strength and stability of our commercial real estate portfolio, which we detailed a year ago has borne out as we said a modest increase in ltvs and stable debt service coverage ratios and we expect that to remain true in 2020 for Ford.

Michele: For the year, we delivered an adjusted return on equity excluding notable items of 13.8% achieving our target for this all important metric.

Michele: We were unwavering in our expense discipline, employing efficiency and agility to post our full year direct expense ratio of 12, 2%.

Michele: We upheld our commitment to responsible growth directing capital to its highest and best juice with high teen IRR and mid single digit payback periods on new business.

Michele: We returned $4 $7 billion to shareholders via common stock dividends and share repurchases and we continued to generate strong recurring free cash flow and remain financially flexible with significant liquidity at our holding companies the resilience of our strategy and the clarity of our purpose to remain powerful drivers of Metlife success.

Michele: Yeah.

Michele: Our diversified portfolio of market, leading businesses is well positioned to perform for years to come.

Michele: Backed by a strong balance sheet and our demonstrated ability to generate cash flow I am confident in my ability to create value for shareholders and other stakeholders.

Michele: And to deliver financial security to our customers as we have for over a century and a half now turning to our fourth quarter 2023 results last night, we reported quarterly adjusted earnings of $1.4 billion or $1 83 per share.

Michele: Excluding notable items, we reported $1 93 per share up 21% compared to $1 59 per share a year ago again this quarter, our businesses showed strong underlying momentum with excellent underwriting results.

Michele: Also our recurring investment income grew on higher balances and higher new money rates shifting.

Michele: Shifting to the full year 2023 the differentiation and scale across our market leading businesses were among the factors that helped fuel our underlying business fundamentals.

Michele: We generated adjusted earnings excluding notable items of $5 $6 billion.

Michele: On the strength of new money yields are adjusted net investment income grew 9% year over year to almost $20 billion. Despite variable investment income falling below expectations.

Michele: Adjusted P F o's, excluding pension risk transfers declined 6%.

Michele: With healthy growth across most business segments grew.

Michele: Group benefits posted adjusted earnings excluding notable items of $1 $6 billion up 22% from the prior year.

Michele: The scale and breadth of this franchise business continues to drive organic growth and represents a clear point of competitive advantage sales.

Sales gained 9% while adjusted P. F o's, excluding the impact of participating policies rose roughly at 5%. We believe group here for growth is sustainable at more than $1 billion per year.

Michele: Higher interest rates serve as a tailwind to our leading retirement and income solutions business with new money yields exceeding roll off rates for the past seven consecutive quarters.

Michele: Volume growth in our I S away from PRT was very strong with more than $5 billion of longevity reinsurance sales and more than $3 billion of structured settlements pension risk transfers totaled $5 $3 billion for the year. The third largest annual total in my life's history.

Michele: This followed an all time record year in 2022, and we have a strong pipeline of new opportunities in 'twenty four and beyond.

Michele: Sales growth in Asia remains strong propelled by market demand in Japan for FX denominated life insurance product and a new cash value of life product in Korea. Finally, Latin America continues to be a growing and important region format life adjusted earnings on a reported basis in 2023 grew 15% over the pre.

Michele: Near year, and we've expanded our distribution capabilities as well as our product portfolio.

Michele: One of the ways, we hold ourselves accountable as against the next horizon commitments, we made in 2019.

Michele: On that basis. We are ahead of schedule to meet all criteria. In fact, we have even moved the goalposts on ourselves and raise the bar on certain of our next horizon commitments.

Michele: For instance, we initially committed to an adjusted return on equity of 12% to 14% and last year, we chose to push that target even higher to 13% to 15%.

Michele: And as you've seen them within our outlook disclosure, we further tightened our expense ratio target from 12, 6% to 12, 3%.

Michele: While we have the strongest conviction in our next horizon strategy, we do not view it as a ceiling on our aspirations, we constantly look to set higher standards and position Metlife for even greater success.

Michele: When I spoke of emerging from 'twenty to 'twenty three stronger our capital and cash is another Prime example.

Michele: During a year marked by periods of financial and geopolitical turmoil, our balance sheet strength enabled us to repurchase $3 $1 billion of our common stock and increase our common stock dividend per share paying out roughly $1.6 billion in common stock dividends, even still we enter 'twenty 'twenty four with robust level.

Michele: Use of cash and higher capital ratios and our key markets.

Michele: Our capital management has carried into 'twenty 'twenty, four and we have repurchased roughly half a billion dollars of net common shares in the month of January.

Michele: We continue to have capacity for further action with approximately $1 $6 billion remaining on our repurchase authorization. There is no doubt my life's financial strength and financial flexibility was on full view during 2023 particularly with the execution of our $19 billion risk transfer transaction.

Michele: That closed in November.

Michele: This will free up more than $3 billion of capital over time and illustrates the disciplined approach we apply to evaluating our portfolio of businesses. We ended the year with $5 $2 billion of cash and liquid assets on our balance sheet, which is comfortably above our target cash buffer of $3 billion to $4 billion.

Michele: We have consistently said that one responsible growth is attractive and available we will deploy capital organically or inorganically, if not we will return capital to our shareholders.

Michele: I am pleased our next horizon strategy continues to prove its metal amid uncertainty looking ahead, whether driven by fed policy and changes to the yield curve geopolitical events or the unfolding U S election cycle. It is prudent to anticipate more uncertainty in 2020 for the supplemental slides we published last.

Michele: Night include some near term targets and elements of guidance.

Michele: It should be plain to see that we anticipate the underlying momentum building across our businesses to continue.

Michele: This is evident in our flagship group benefits business were off a large embedded base. We've established a strong growth outlook for premiums fees and other revenues and a further note.

Michele: We've also increased our expectations for both group life and non medical health margins.

Michele: Importantly, the outlook that we've provided reflects the world as we see it not as we wish it to be in that context, we assume a more modest private equity return of high single digits in the near term down from the 12% assumption we have used in prior years private equity remains an important contributor to our well tested asset.

Michele: Liability matching program. It is an asset class well suited to the fees long term liabilities and our historical track record has been very strong in closing when we launched our next horizon strategy in 2019, we could not have predicted the many challenges we would face in the markets where we operate.

Michele: Our unyielding execution against our strategy is serving us and our many stakeholders well, allowing us to positively impact our customers and live our purpose.

Our 2023 results reflect our capacity to move ahead with urgency and deliver on our strategy. We saw very good underlying business performance supported by a strong capital base.

Michele: We will continue to concentrate on controlling what we can control.

Michele: And she'd security responsible growth expense efficiency and capital deployment among others.

Michele: And the final year of the next horizon strategy timeframe.

Michele: We believe our past progress positions us to reach for new heights, not possible four years ago I.

Michele: I am energized for the future of Metlife driven by the continued momentum I see building in our businesses for 'twenty 'twenty four and beyond.

Michele: Now I'll turn it over to John to cover our performance and outlook in detail.

Thank you Michelle and good morning, I'll start with the four queued twenty-three supplemental slides will provide highlights of our financial performance and update of our liquidity and capital positions as well as our commercial mortgage loan portfolio.

John: In addition, I will discuss our near term outlook in more detail.

John: Starting on page three we provide a comparison of net income to adjusted earnings in the fourth quarter and full year 2023.

John: Market risk benefit or M. R. B remeasurement losses in the fourth quarter was due to the decline in long term interest rates.

John: Net derivative gains were only a partial offset as the favorable impact from lower long term interest rates were mitigated by changes in short term interest rates and higher equity markets in the quarter.

John: For the full year the variance between net income and adjusted earnings was mostly attributable to net derivative losses, primarily.

John: Primarily due to stronger equity markets changes in foreign currencies and higher interest rates in 2023 and.

John: In addition, net investment losses were largely the result of normal trading activity on the portfolio in a rising interest rate environment.

John: As well as the Mark to market impact on securities that were transferred as part of the reinsurance transaction with global Atlantic.

John: Overall, the portfolio remains well positioned with modest levels of credit losses.

John: And the hedging program continues to perform as expected.

John: On page four you can see the fourth quarter year over year comparison of adjusted earnings by segment, excluding $76 million after tax.

John: Of an unfavorable notable item relating to asbestos litigation reserves in <unk> of 23 that was accounted for in corporate and other.

John: There were no notable items in the prior year quarter rigor.

John: Regarding the asbestos reserve increase of $76 million based.

John: Based on our latest review, while we continue to observe a declining claim count the frequency of severe claims related to asbestos has not declined as expected.

John: The total reserve is $364 million at the end of 2023.

John: Adjusted earnings excluding total notable items were $1 $4 billion up 14% and 12% on a constant currency basis the.

John: The primary drivers were strong recurring interest margins higher variable investment income or VII.

John: Volume growth and favorable underwriting margins.

John: Adjusted earnings per share excluding total notable items were $1.93 up 21% and 19%.

John: On a constant currency basis.

John: Moving to the businesses group benefits adjusted earnings were $466 million up 19% versus the prior year period. The key drivers were favorable life underwriting margins and solid volume growth.

The group life mortality ratio was 83, 5%.

John: Favorable to the prior year quarter of 87, 3% and below the bottom end of our 2023 target range of 85% to 90%.

John: Consistent with CDC U S mortality data, we saw a much lower number of life claims than typical in the fourth quarter.

John: Regarding nonmedical health interest adjusted benefit ratio was 77% in the quarter and that the low end of its annual target range of 70% to 75%.

John: We expect both the life mortality ratio and the non medical health ratio to be higher in Q1, given the seasonality of the business.

John: Turning to the topline group benefits adjusted P. F OS on a full year basis were up 3% year over year.

John: Taking participating contracts into account, which dampened growth by roughly 200 basis points. The underlying PFS were up approximately 5% year over year within our 2023 target growth range of 4% to 6%.

John: In addition group benefits 2023 sales were up 9% year over year.

John: The continued strong growth is primarily due to solid growth across most products, including continued strong momentum in voluntary.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to... == Notes, time. Before we get started, I, boat.

Our as adjusted earnings were $421 million up 10% year over year.

John: The primary drivers were favorable investment margins due to higher recurring interest and variable investment income as well as favorable underwriting margins.

RIS investment spreads were 121 basis points.

John: Spreads excluding VII were 134 basis points up 10 points versus Q4 of 'twenty to.

John: Primarily due to higher interest rates as well as income from in the money interest rate caps are S. Adjusted P. F. O is excluding pension risk transfers were up 75% year over year, primarily driven by strong sales of structured settlement products.

Operator: Bye. With that, I will turn the call on to operate. Good morning everyone. We appreciate you joining us for MetLife's fourth quarter 2023 earnings and near-term outlook call. Before we begin, I point you to the information on non-GAAP measures on the Investor Relations portion of MetLife.com, in our earnings release, and in our quarterly financial supplements, which you should review. On the call this morning are Michel Khalaf, President and Chief Executive Officer, and John McCallion, Chief Financial Officer; also participating in the discussion are other members of senior management. Last night, we released a set of supplemental slides which address the quarter as well as our near-term outlook. They are available on our website.

John: And post retirement benefits.

John: As well as growth in U K longevity reinsurance.

John: With regards to PRT, we added transactions worth approximately $1 9 billion in the fourth quarter, bringing our full year total to roughly $5 $3 billion. This marks the third highest PRT sales year for Metlife and we continue to see an active market.

John: Moving to Asia, adjusted earnings were $296 million up 12% and 11% on a constant currency basis, primarily due to higher investment margins and lower taxes for Asia's key growth metrics General account assets under management on an amortized cost basis or up 6% year over year on a constant currency basis and.

John Mccallion: John McCallion will speak to those supplemental slides in his prepared remarks. An appendix to the slides features outlook sensitivities, disclosures, gap reconciliations, and other information which you should also review. After the prepared remarks, we will have a Q&A session, which will end promptly at the top of the hour. As a reminder, please limit yourself to one question and one follow-up. With that, over to Michel.

John: Sales were essentially flat versus the prior year quarter for the full year Asia sales were up 13% driven by strong growth across the region exceeding its 2023 guidance range of mid to high single digits.

John: Latin America adjusted earnings were $207 million up, 13% and 4% on a constant currency basis.

John: Primarily due to solid volume growth, partially offset by less favorable underwriting margins versus a strong Q4 'twenty two.

Michel A. Khalaf: Thank you, John, and good morning, everyone. As we begin 2023, I shared our conviction that, despite the uncertain times, MetLife would exit the year stronger than we entered it. We accomplish this by countering the challenging environment with the actions we've taken to focus, simplify, and differentiate our business. We maintained an accelerated momentum and met life's diversified set of market-leading businesses, driving strong results for the year and the quarter. And we illustrated our financial strength and flexibility with sound transactions and well-timed capital management, ending the year with solid capital ratios and robust cash on hand. Clearly, our all-weather strategy stood up again in 2023. We remain steadfastly focused on what matters most in delivering for our customers and shareholders. In 2023, we exited a pandemic and have yet to enter a widely expected U.S. recession.

John: In addition.

John: Latam had favorable Chilean and Kai returns of seven 9% in <unk> of 'twenty three versus six 1% in the prior year quarter.

John: Latin America's top line continues to perform well as adjusted <unk> were up 29% and 19% on a constant currency basis.

John: Driven by strong sales and solid persistency across the region.

John: For the full year adjusted P. F. O's were also up 29% on a reported basis and 19% on a constant currency basis exceeding Latam 2023 guidance of low double digit growth.

John: EMEA adjusted earnings were $47 million down, 27% on both a reported and constant currency basis.

John: Primarily driven by an unfavorable tax charge following a favorable tax benefit in the prior year period.

John: As well as less favorable expense and underwriting margins.

Michel A. Khalaf: We are managing through a bank liquidity crisis and the resulting credit concerns, and we have adapted to an inverted yield curve that has persisted longer than any in history. Against this backdrop, the fundamentals of our businesses are as strong as I have ever seen. Our successful 2023 is a testament to the resilience and durability of our business model, a relentless focus on execution, concentrating on the factors we control. Our Risk Management Culture and Processes, the discipline we apply to managing our assets and liabilities, and the prudence of our investment portfolio. On that last point, the strength and stability of our commercial real estate portfolio, which we detailed a year ago, has borne out, as we said, a modest increase in LTVs and stable debt service coverage ratios, and we expect that to remain true in 2024. For the year, we delivered an adjusted return on equity, excluding notable items, of 13.8%, achieving our target for this all-important metric. We were unwavering in our expense discipline, employing efficiency and agility to post a full-year direct expense ratio of 12.2%.

This was partially offset by higher recurring interest margins year over year.

John: EMEA at full year 2023, adjusted earnings of $265 million exceeded our outlook expectations of roughly $55 million per quarter.

John: EMEA adjusted <unk> were up 5% on both a reported and constant currency basis, and sales were up 18% on a constant currency basis, reflecting strong growth across the region.

John: Metlife Holdings adjusted earnings were $156 million down, 15% largely driven by foregone earnings as a result of the reinsurance transaction that closed in November.

John: Corporate and other adjusted loss was $156 million, excluding the unfavorable notable item of $76 million after tax that I referenced earlier.

John: This compares to an adjusted loss of $210 million in the prior year higher net investment income and favorable taxes were the primary drivers the company's effective tax rate on adjusted earnings in the quarter was approximately 19%, which includes favorable tax benefits primarily related to the true up of the federal tax return to provision.

John: On page five this chart reflects our pretax variable investment income for the four quarters and full year of 2023.

Michel A. Khalaf: We upheld our commitment to responsible growth, directing capital to its highest and best use with high teen IRRs and mid-single-digit payback periods on new business. We returned $4.7 billion to shareholders via common stock dividends and share repurchases, and we continue to generate strong recurring free cash flow and remain financially flexible with significant liquidity at our holding companies. The resilience of our strategy and the clarity of our purpose remain powerful drivers of MetLife's success.

John: [noise] VII was $63 million in the fourth quarter, primarily driven by positive returns in our corporate and mortgage loan funds.

John: Private equity portfolio in real estate equity funds had a combined return of essentially zero in the quarter.

John: For the full year VII was $419 million well below our 2023 target of approximately $2 billion.

John: That said, while mark to market returns were below expectation in 2023.

John: The PE portfolio generated approximately $2 billion in cash distributions during the year.

Michel A. Khalaf: Our diversified portfolio of market-leading businesses is well positioned to perform for years to come. Backed by a strong balance sheet and our demonstrated ability to generate cash flow, I am confident in MetLife's ability to create value for shareholders and other stakeholders and to deliver financial security to our customers as we have for over a century and a half. Now turning to our fourth quarter 2023 results, last night we reported quarterly adjusted earnings of $1.4 billion, or $1.83 per share. Excluding notable items, we reported $1.93 per share, up 21% compared to $1.59 per share a year ago.

John: On page six we provide V I a post tax by segment for the prior four quarters and full year 2023.

John: As reflected in the chart our S Asia and Metlife Holdings continue to hold the largest proportion of V I a assets.

John: Given their long dated liability profile.

John: Now turning to page seven the chart on the left of the page shows the split of our net investment income between recurring and VII for the past three years as well as Q4 of 22 versus Q4 of 'twenty three.

John: Well VII has had lower than trend returns over the last couple of years recurring income, which accounted for most of the net investment income in 2023 was up approximately $2 $6 billion year over year, reflecting higher interest rates and growth in asset balances.

Michel A. Khalaf: Again this quarter, our businesses showed strong underlying momentum with excellent underwriting results. Also, our recurring investment income grew on higher balances and higher new money rates. Shifting to the full year 2023, the differentiation and scale across our market-leading businesses were among the factors that helped fuel our underlying business fundamentals. We generated adjusted earnings excluding notable items of $5.6 billion.

John: The expansion of recurring income in 2023 more than offset the lower VII year over year.

John: Shifting your attention to the right of the page, which shows our new money yield versus roll off yield since <unk> of 'twenty.

John: New money yields continue to outpace rollout yields over the past couple of years consistent with rising rates.

Michel A. Khalaf: On the strength of new money yields, our adjusted net investment income grew 9% year-over-year to almost $20 billion, despite variable investment income falling below expectations. Adjusted PFOs excluding pension risk transfers climbed 6% with healthy growth across most business segments. Group benefits posted adjusted earnings excluding notable items of $1.6 billion, up 22% from the prior year. The scale and breadth of this franchise business continue to drive organic growth and represents a clear point of competitive advantage. Sales gained 9%, while adjusted PFOs, excluding the impact of participating policies, rose roughly 5%.

John: In this quarter.

John: Our global new money yield continued its upward trajectory coming in at $6, six 7% 142 basis points higher than the roll off yield.

John: Turning to page eight I'll provide a few updates on our commercial mortgage loans overall, the CML portfolio continues to perform consistent with expectations, where we expect higher quality assets to outperform the asset sector broadly.

John: The average LTV on our CML portfolio now stands at 64% as of December 31 up slightly from 63% in the third quarter of twenty-three.

John: And the average debt service coverage ratio remained steady at two three times.

John: The modest increase in Ltvs and stable debt service coverage ratio are further indicators of the disciplined approach we take to investing in this asset class.

Michel A. Khalaf: We believe group PFO growth is sustainable at more than $1 billion per year. Higher interest rates serve as a tailwind to our leading retirement and income solutions business, with new money yields exceeding roll-off rates for the past seven consecutive quarters. Volume growth in RIS, away from PRT, was very strong with more than $5 billion of longevity reinsurance sales and more than $3 billion of structured settlements. Pension risk transfers totaled $5.3 billion for the year, the third largest annual total in MetLife's history.

John: The quality of our CML portfolio remained strong with only two 6% of loans, having ltvs more than 80% in D. C are less than one times.

John: With regard to CML loan maturities, we resolved 100% of the loans that were scheduled to mature in 2023, our expectation going forward remains for modest credit losses on the portfolio.

John: Turning to page nine this chart shows a comparison of our direct expense ratio over the prior eight quarters.

Michel A. Khalaf: This followed an all-time record year in 2022, and we have a strong pipeline of new opportunities for 2024 and beyond. Sales growth in Asia remains strong, propelled by market demand in Japan for FX-denominated life insurance products and a new cash value life product in Korea. Finally, Latin America continues to be a growing and important region for MetLife.

John: And full year 2022 and 2023.

John: Our direct expense ratio in <unk> of 23 was up modestly at 12, 4%, reflecting the impact from seasonal enrollment costs in group benefits as well as higher employee related costs.

John: That said as we've highlighted previously we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.

Michel A. Khalaf: Adjusted earnings on a reported basis in 2023 grew 15% over the prior year, and we've expanded our distribution capabilities as well as our product portfolio. One of the ways we hold ourselves accountable is against the Next Horizon commitments we made in 2019. On that basis, we are ahead of schedule to meet all criteria.

John: For the full year of 2023, our direct expense ratio was 12, 2% below our 2023 target of 12, 6%. We believe this result, once again demonstrates our consistent execution and focus on an efficiency mindset and a challenging inflationary environment.

Michel A. Khalaf: In fact, we have even moved the goalposts on ourselves and raised the bar on certain of our Next Horizon commitments. For instance, we initially committed to an adjusted return on equity of 12-14%, and last year, we chose to push that target even higher to 13-15%. And as you've seen within our Outlook disclosure, we further tightened our expense ratio target from 12.6% to 12.3%. While we have the strongest conviction in our Next Horizon strategy, we do not view it as a ceiling on our aspirations. We constantly look to set higher standards and position MetLife for even greater success.

John: While continuing to make investments in our businesses.

John: I will now discuss our cash and capital positions on page 10 cash.

John: Cash and liquid assets at the holding companies were approximately $5 2 billion at December 31st which is above our target cash buffer of $3 billion to $4 billion. The.

John: Cash at the holding companies reflects the net effects of subsidiary dividends payment of our common stock dividend share repurchases of roughly $900 million in the fourth quarter as well as holding company expenses and other cash flows.

John: In addition, we repurchased shares totaling approximately $500 million in January.

John: For the two year period, 2022, and 2000 and twenty-three our average free cash flow ratio. Excluding notable items totaled 74% and was within our 65% to 75% target range.

Michel A. Khalaf: When I spoke of emerging from 2023 stronger, our capital and cash are another prime example. During a year marked by periods of financial and geopolitical turmoil, our balance sheet strength enabled us to repurchase $3.1 billion of our common stock and increase our common stock dividend per share, paying out roughly $1.6 billion in common stock dividends. Even so, we enter 2024 with robust levels of cash and higher capital ratios in our key markets. Our capital management has carried into 2024, and we have repurchased roughly half a billion dollars of Metcom and shares in the month of January. We continue to have capacity for further action, with approximately $1.6 billion remaining on our repurchase authorization.

In terms of statutory capital for our U S companies, our combined 2000 twenty-three NTIC RBC ratio is still preliminary but expected to be approximately 400% and above our 360% target.

For our U S companies preliminary 2023 statutory operating earnings were approximately $4 5 billion. While net income was approximately $3 9 billion.

Statutory operating earnings increased by approximately $1 $9 billion year over year.

John: Primarily driven by favorable underwriting and impacts from the reinsurance transaction. This was partially offset by higher expenses.

Michel A. Khalaf: There is no doubt MetLife's financial strength and financial flexibility were on full view during 2023, particularly with the execution of our $19 billion risk transfer transaction that closed in November. This will free up more than $3 billion of capital over time and illustrate the disciplined approach we apply to evaluating our portfolio of businesses. We ended the year with $5.2 billion of cash and liquid assets on our balance sheet, which is comfortably above our target cash buffer of $3 to $4 billion. We have consistently said that when responsible growth is attractive and available, we will deploy capital organically or inorganically.

John: We estimate that our total U S. Statutory adjusted capital was approximately $19 5 billion as of December 31, 2023 up 10% from September 32023, primarily due to operating earnings and the impacts of the reinsurance transaction.

John: This was partially offset by dividends paid.

John: Finally, we expect the Japan solvency margin ratio to be approximately 720% as of December 31, which will be based on statutory statements that we filed in the next few weeks.

John: Before I shift to our near term outlook starting on page 12, a few points on what we included in the Appendix. The chart on page 17 reflects new business value metrics for Metlife major segments from 2018 through 2022.

Michel A. Khalaf: If not, we will return capital to our shareholders. I am pleased our Next Horizon strategy continues to prove its mettle amid uncertainty. Looking ahead, whether driven by Fed policy and changes to the yield curve, geopolitical events, or the unfolding U.S. election cycle, it is prudent to anticipate more uncertainty in 2024. The supplemental slides we published last night include some near-term targets and elements of guidance.

John: This is the same chart that we showed as part of our three Q twenty-three supplemental slides, but we feel it's worth including again for the sake of completeness also pages 18 through 21 provide interest rate assumptions and key outlook sensitivities by line of business.

John: Now, let's turn to page 12 for further details on our near term outlook starting with the overview.

Michel A. Khalaf: It should be plain to see that we anticipate the underlying momentum building across our businesses to continue. This is evident in our flagship group benefits business, where, off a large embedded base, we've established a strong growth outlook for premiums, fees, and other revenues. In addition, we've also increased our expectations for both group life and non-medical health margins. Importantly, the outlook that we've provided reflects the world as we see it, not as we wish it to be. In that context, we assume a more modest private equity return of high single digits in the near term, down from the 12% assumption we have used in prior years. However, private equity remains an important contributor to our well-tested asset liability matching program.

John: We expect continued uncertainty to persist around inflation and unemployment in 2024, we expect the U S dollar to stabilize around current levels.

John: Based on the 12 31 23 forward curve, we assume long term interest rates to be largely unchanged in 2024, and the yield curve will move from inverted to modestly upward sloping as short term interest rates decline.

John: And we assume a 5% annual return for the S&P 500.

John: For our near term targets, we are maintaining our adjusted <unk> range of 13% to 15%.

John: We expect to maintain our two year average free cash flow ratio of 65% to 75% of adjusted earnings.

John: Also.

John: Given continued focus on expense discipline building capacity to reinvest in growth initiatives and our overall efficiency mindset.

Michel A. Khalaf: It is an asset class well-suited to defease long-term liabilities, and our historical track record has been very strong. In closing, when we launched our Next Horizon strategy in 2019, we could not have predicted the many challenges we would face in the markets where we operate. But our unyielding execution against our strategy is serving us and our many stakeholders well, allowing us to positively impact our customers and live our purpose.

John: We are lowering our direct expense ratio guidance for 2024 from 12, 6% to 12, 3%.

John: Specifically for 2020 for VII expected to be approximately $1 5 billion.

John: Our corporate and other adjusted loss target is expected to be 752 $850 million after tax in 2020 for.

Michel A. Khalaf: Our 2023 results reflect our capacity to move ahead with urgency and deliver on our strategy. We saw very good underlying business performance, supported by a strong capital base. We will continue to concentrate on controlling what we can control, balance sheet security, responsible growth, expense efficiency, and capital deployment, among others. In the final year of the Next Horizon Strategy timeframe, we believe our past progress positions us to reach new heights not possible four years ago. I am energized for the future of MetLife, driven by the continued momentum I see building in our businesses for 2024 and beyond. Now, I'll turn it over to John to cover our performance and outlook in detail. Thank you, Michel, and good morning.

John: This represents an approximate $100 million increase from our prior adjusted last guidance was $6 $50 million to $750 million in 2023.

John: The higher range reflects <unk> current run rate given the impact of a higher rate environment on interest expense and pension costs as well as the impact of lower expected benefits from VII.

John: We are increasing our expected effective tax rate range by two points to 24% to 26% to reflect our expectation for higher earnings in foreign markets with higher tax rates and lower tax credits in the U S.

John: At the bottom of the page you will see certain interest rate sensitivities relative to our base case, reflecting a relatively modest impact on adjusted earnings over the near term.

John Mccallion: I will start with the four Q23 supplemental slides, which provide highlights of our financial performance, an update on our liquidity and capital positions, as well as our commercial mortgage loan portfolio. In addition, I will discuss our near-term outlook in more detail. Starting on page 3, we provide a comparison of net income to adjusted earnings in the fourth quarter and full year 2023. Market Risk Benefit, or MRB, remeasurement losses in the fourth quarter were due to the decline in long-term interest rates. Net derivative gains were only a partial offset as the favorable impact from lower long-term interest rates was mitigated by changes in short-term interest rates and higher equity markets in the quarter.

John: On page 13, the chart reflects our VII average asset balances from 18 billion in 2022 to $19 7 billion expected in 2024.

John: Private equity investments will continue to represent the vast majority of our VII asset balances.

We are reducing our near term expected annual return for private equity to be between 7% to 10% and we are also lowering our expected returns for real estate and other funds to be in the range of 5% to 7% over the near term.

John: We expect P E and real estate returns will remain pressured in the first quarter of 'twenty four before trending higher.

John: Finally, as a reminder, we include prepayment fees on fixed maturities and mortgage loans N V I a.

John Mccallion: For the full year, the variance between net income and adjusted earnings was mostly attributable to net derivative losses, primarily due to stronger equity markets, changes in foreign currencies, and higher interest rates in 2023. In addition, net investment losses were largely the result of normal trading activity on the portfolio in a rising interest rate environment, as well as the mark-to-market impact on securities that were transferred as part of the reinsurance transaction with Global Atlantic. Overall, the portfolio remains well positioned, with modest levels of credit losses, and the hedging program continues to perform as expected. On page four, you can see the fourth quarter year-over-year comparison of adjusted earnings by segment excluding $76.6 million after tax of an unfavorable notable item relating to asbestos litigation reserves in 4Q of 23 that was accounted for in corporate and other. There were no notable items in the prior year quarter.

Speaker Change: So now I will discuss our near term outlook for our business segments, let's start with the U S on page 14.

Speaker Change: For group benefits, excluding the excess premium from participating group life contracts of approximately $300 million in 2023 adjusted P. F. O's are expected to grow at 4% to 6% annually over the near term and for 2024, we expect growth to be in the top half of that range.

Speaker Change: This reflects the strong momentum in the business, particularly in voluntary products as well as exceptionally strong persistency in our national accounts rigor.

Speaker Change: Regarding underwriting we expect 2020 for underwriting margins to be generally consistent with 2023.

Speaker Change: As such we are reducing our near term group life mortality ratio and non medical health interest adjusted benefit ratio ranges by one percentage point to 84% to 89% and 69% to 74% respectively.

Speaker Change: Finally keep in mind. These are annual ratios in both typically skew to the higher end of the ranges in the first quarter given the seasonality of the business.

John Mccallion: Regarding the asbestos reserve increase of 76 million, based on our latest review, while we continue to observe a declining claim count, the frequency of severe claims related to asbestos has not declined as expected. The total reserve is $364 million at the end of 2023. Just in earnings excluding total notable items were $1.4 billion, 14% and 12% on a constant currency basis. The primary drivers were Strong Recurring Interest Margins, Higher Variable Investment Income, or VII, volume growth, and favorable underwriting margins. Just earnings per share excluding total notable items were $1.93, up 21% and 19% on a constant currency basis. Moving to the businesses, group benefits, adjusted earnings were $466 million, up 19% versus the prior year period. The key drivers were favorable life underwriting margins and solid volume growth. The group life mortality ratio was 83.5%, favorable to the prior year quarter of 87.3% and below the bottom end of our 2023 target range of 85 to 90%. Consistent with CDC U.S. mortality data, we saw a much lower number of life claims than usual in the fourth quarter.

Speaker Change: For our S. We're maintaining our 2% to 4% expected annual growth for total liability exposures across our general account spread and fee based businesses.

Speaker Change: Regarding investment spread full year 2023 was 125 basis points and is expected to be relatively flat for the full year of 2024.

Speaker Change: This incorporates both the impact of the roll off of our interest rate caps with maturities throughout 2024.

Speaker Change: And the offsetting benefit of VII re emerging over the year as a more meaningful contributor as such we expect the investment spread range for 2024 is 115 to 140 basis points.

Speaker Change: We have also provided updated ARIA sensitivities for interest rate movements in the appendix sensitivities reflect the anticipated impact from interest rate cap maturities throughout 2024, as such our sensitivity to chauffeur declines throughout the year.

Speaker Change: For Metlife Holdings, we are expecting adjusted P. F O S. A decline by approximately 13% to 15% in 2024, and then declining 4% to 6% annually thereafter.

Speaker Change: And we are lowering the adjusted earnings guidance range to $700 million to $900 million in 2024 to reflect the foregone earnings from the reinsurance transaction as well as lower expected returns and natural runoff of the business.

John Mccallion: Regarding non-medical health, the interest-adjusted benefit ratio was 70.7% in the quarter and at the low end of its annual target range of 70 to 75%. We expect both the life mortality ratio and the non-medical health ratio to be higher in Q1 given the seasonality of the business. Turning to the top line, group benefits adjusted PFOs on a full year basis were up 3% year over year. However, taking participating contracts into account, which dampened growth by roughly 200 basis points, the underlying PFOs were up approximately 5% year-over-year within our 2023 target growth range of 4% to 6%. In addition, Group Benefit's 2023 sales were up 9% year-over-year. The continued strong growth is primarily due to solid growth across most products, including continued strong momentum in voluntary. RAS adjusted earnings were $421 million, up 10% year-over-year.

Speaker Change: Now, let's look at the near term guidance of our businesses outside the U S. On page 15 four.

Speaker Change: For Asia, we expect the recent sales momentum to continue and generate mid single digit growth over the near term. In addition, we expect general account AUM to maintain mid single digit growth, we're expecting adjusted earnings to grow roughly 20% in 2024, as we assume VII to have a greater impact throughout.

Speaker Change: The year.

Speaker Change: We are maintaining mid single digit adjusted earnings growth expectation over the remainder of the near term.

Speaker Change: For Latin America, we expect both adjusted <unk> and adjusted earnings to grow by high single digits over the near term.

Speaker Change: Finally for EMEA, we are expecting sales to grow mid to high single digits and adjusted P. F O should grow mid single digits over the near term.

Speaker Change: The forward curve assumes a strengthening of the U S dollar relative to most currencies in EMEA as such we projected me as adjusted earnings run rate to be roughly $60 million to $65 million per quarter in 2024.

John Mccallion: The primary drivers were favorable investment margins due to higher recurring interest and variable investment income, as well as favorable underwriting margins. RAS Investment Spreads for 121 basis points; Spreads excluding VII were 134 basis points, up 10 points versus Q4 of 22, primarily due to higher interest rates as well as income from in-the-money interest rate caps. RIS-adjusted PFOs excluding pension risk transfers were up 75% year-over-year, primarily driven by strong sales of structured settlement products and post-retirement benefits, as well as growth and UK longevity reinsurance. With regard to PRT, we added transactions worth approximately $1.9 billion in the fourth quarter, bringing our full year total to roughly $5.3 billion. This marks the third highest PRT sales year for MetLife, and we continue to see an active market. Moving to Asia.

And then grow by mid single digits in 2025 in 2026 based on the forward curve for these currencies.

Let me conclude by saying that Metlife delivered a solid quarter to close out another strong year, the underlying strength of our business fundamentals remains on display with strong topline growth coupled with disciplined underwriting and expense management, while VII remains below historical returns core spreads remain robust and.

Speaker Change: <unk> to benefit from the higher yield environment.

Speaker Change: While the current environment remains uncertain, we are excited about the outlook and growth prospects for our businesses over the near term and beyond.

Speaker Change: Metlife continues to move forward from a position of strength with a strong balance sheet recurring free cash flow generation and a diversified set of our market leading businesses and we are committed to deploying capital to achieve responsible growth and build sustainable value for our customers and our shareholders and with that I will turn the call back to the.

John Mccallion: Adjusted earnings were $296 million, up 12% and 11% on a constant currency basis, primarily due to higher investment margins and lower taxes. For Asia's key growth metrics, general account assets under management on an amortized cost basis were up 6% year-over-year on a constant currency basis. And sales were essentially flat versus the prior year quarter. For the full year, Asia's sales were up 13 percent, driven by strong growth across the region, exceeding its 2023 guidance range of mid to high single digits.

Speaker Change: Operator for your questions.

Speaker Change: Ladies and gentlemen, if you would like to ask a question you May press one on your telephone keypad, you will hear acknowledgment that your line has been placed in Q you may remove yourself from the queue by repeating the same one zero command.

Speaker Change: Our first question is from Ryan Krueger with <unk>. Please go ahead.

John Mccallion: Latin America adjusted earnings for $207 million, up 13% and 4% on a constant currency basis, primarily due to solid volume growth, partially offset by less favorable underwriting margins versus a strong Q4-22. In addition, LATAM had favorable Chilean and Caje returns of 7.9% in 4Q of 23 versus 6.1% in the prior year quarter. Latin America's top line continues to perform well as adjusted PFOs were up 29% and 19% on a constant currency basis, driven by strong sails and solid persistency across the region. For the full year, adjusted PFOs were also up 29% on a reported basis and 19% on a constant currency basis, exceeding LATAM's 2023 guidance of low double-digit growth. AMIA adjusted earnings were $47 million, down 27% on both a reported and constant currency basis, primarily driven by an unfavorable tax charge following a favorable tax benefit in the prior year period, as well as less favorable expense and underwriting margins.

Ryan Krueger: Hey, Thanks. Good morning. My first question is on the ROE target and I recognize that you just raised the target by 100 basis point, a year ago to 13% in.

Ryan Krueger: It seems like your segment outlook.

Ryan Krueger: Yes.

Ryan Krueger: A bit about 15, maybe something closer to 15, so I guess I just wanted to hear.

Ryan Krueger: Your perspective.

Ryan Krueger: Thinking about that incorrectly or.

Ryan Krueger: So outside the RV based on the current trends Youre seeing.

Good morning, Ryan It's John.

John: I think you know we wouldn't debate your model calculations, there I think it's fair to say that.

Ryan Krueger: Yeah, we certainly are trending to the high end of that range, if not with a plus sign but we just we just moved it a year ago and I think we will take a year here and take stock at that time.

Speaker Change: But I'd say I think just maybe just to help you with that one other thing is.

Speaker Change: It's.

Speaker Change: Like I said, we'll take stock.

We think over time and we've been talking about this that there has been kind of as a result of higher rates. You know there has been a shift in volume and returns on our business. So.

John Mccallion: This was partially offset by higher recurring interest margins year over year. AMEA full-year 2023 adjusted earnings of $265 million exceeded our outlook expectations of roughly $55 million per quarter. EMEA adjusted PFOs were up 5% on both a reported and constant currency basis, and sales were up 18% on a constant currency basis, reflecting strong growth across the region. MetLife Holdings adjusted earnings were $156 million, down 15%, largely driven by foregone earnings as a result of the reinsurance transaction that closed in November.

Speaker Change: It wouldn't preclude us from doing it again, we just think we want to take some time to take stock.

Speaker Change: Okay makes sense and then I think you said you expected the RBC ratio to be around 400% would've thought it would've been maybe a little higher than that following the reinsurance transaction give anymore color on if there were any offsets.

Speaker Change: Yeah, I think when we announced the deal we thought this would give US 50 to 60 points.

Speaker Change: We still think it well, there's a little bit of like what happens immediately and then how things trended over time.

John Mccallion: Corporate and other adjusted loss was $156 million, excluding the unfavorable notable item of $76 million after tax that I referenced earlier. This compares to an adjusted loss of $210 million in the prior year. Higher net investment income and favorable taxes were the primary drivers. The company's effective tax rate on adjusted earnings in the quarter was approximately 19%, which includes favorable tax benefits primarily related to the true-up of the federal tax return to provision.

Speaker Change: Also there's a lot of other things going on Fungibility growth, we had some very sizable growth in our S. We've deployed some extra capital this year so.

Speaker Change: You know I think a lot of those things but.

Speaker Change: In terms of the deal.

Speaker Change: The economics that we outlined at the time of signing everything came in as expected.

Yeah.

Speaker Change: Okay, great. Thank you.

Speaker Change: Next we go to the line of <unk> Kamath with Jefferies. Please go ahead.

John Mccallion: On page five, this chart reflects our pre-tax variable investment income for the four quarters and full year of 2023. VII was $63 million in the fourth quarter, primarily driven by positive returns in our corporate and mortgage loan funds. The private equity portfolio and real estate equity funds had a combined return of essentially zero in the quarter.

Kamath: Yeah, Thanks, and I appreciate all the color on the guidance, but maybe if we could just circle back to consolidated recurring NII I think he talked about a pretty big lift in in 'twenty three relative to 'twenty, two that $19 3 billion.

Kamath: Any help in terms of what you think that could look like given all the moving pieces as we think about 2024.

Speaker Change: Hey, she needed John it's a good question I mean, sometimes NII as it's you know it's a helpful metric certainly from I'd say mix and then just to show that higher.

John Mccallion: For the full year, VII was $419 million, well below our 2023 target of approximately $2 billion. That said, while mark-to-market returns were below expectation in 2023, the PE portfolio generated approximately $2 billion in cash distributions during the year.

Speaker Change: Higher rates have more than offset or actually offset.

Speaker Change: Some of the depression in VII and I think the point of that slide is to show that there's more power there.

Speaker Change: One things once things kind of reemerge on the VII front.

Speaker Change: The times, it's a little hard with just translating NII to earnings.

Speaker Change: So we're a little cautious on always unnecessary given a target around that because we have different products.

Speaker Change: That perform well in different environments and ultimately to spread.

John Mccallion: On page six, we provide VII post-tax by segment for the prior four quarters in full year 2023. As reflected in the chart, RAS, Asia, and MetLife holdings continue to hold the largest proportion of VII assets, given their long-dated liability profile. Now turning to page 7, the chart on the left side of the page shows the split of our net investment income between recurring and BII for the past 3 years as well as Q4 of 22 vs. Q4 of 23. While VII has had lower-than-trend returns over the last couple of years, recurring income, which accounted for most of the net investment income in 2023, was up approximately $2.6 billion year-over-year, reflecting higher interest The expansion of recurring income in 2023 more than offsets the lower VII year over year.

Speaker Change:

Speaker Change: So I think we're a little hesitant to kind of forecast for you I think the point of that slide was to indicate that.

Speaker Change: It shows the growth in our business. It shows that we're well diversified we can perform well in a variety of economic environments.

Speaker Change: And I think that's really the probably the theme to takeaway so sorry, I didn't get to the maybe your exact question or answer, but that's probably the best I can do.

Speaker Change: Okay got it and then as we think about the benefit of the caps in 'twenty, three and what that looks like in 'twenty four as they roll off should we think about the improvement in VII is essentially like those two kind of net as a wash or is one kind of greater than the other I just wanted to get some additional color on that if we could if we could.

Speaker Change: Yeah. It's a great question I think what you just said at the end around.

Speaker Change: In terms of them being a wash as a pretty good way of thinking about it. So we had a 125 basis points last year. All in for 2023, we gave a range of $1 15 to $1 40 for next year I think the mid points a little above it's at 127 I guess.

John Mccallion: Shifting your attention to the right of the page, which shows our new money yield versus roll-off yield since 4Q of 20. New money yields continue to outpace roll-off yields over the past couple of years, consistent with rising rates. In this quarter, our global new money yield continued its upward trajectory, coming in at 6.67%, 142 basis points higher than the roll-off yield. Turn to page 8.

Speaker Change: You did the math.

Speaker Change: And in our view is yeah, there's a the interest rate casual roll off throughout the year, and then VII will emerge throughout the year and essentially.

Speaker Change: This offset the decline there and so we think the best way to think about the spreads for the year is relatively flat to what you saw for the full year of 'twenty three it will give and take here and there.

John Mccallion: I'll provide a few updates on our commercial mortgage loans. Overall, the CML portfolio continues to perform consistent with expectations, where we expect higher quality assets to outperform the asset sector broadly. The average LTV on our CML portfolio now stands at 64% as of December 31, up slightly from 63% in the third quarter of 2023. And the average debt service coverage ratio remains steady at 2.3 times.

Speaker Change: As as we pointed out on the slide we think VII in the first quarter will continue to be pressured.

Speaker Change: Obviously, the caps haven't fully roll off yet so we'll have a we'll still have income from them and then as V. I emerges youll see the casual often fill essentially offset.

Speaker Change: Okay. That's helpful. Thanks.

Speaker Change: Next we have a question from Tom Gallagher with Evercore ISI. Please go ahead.

John Mccallion: The modest increase in LTVs and stable debt service coverage ratio are further indicators of the disciplined approach we take to investing in this asset class. The quality of our CML portfolio remains strong, with only 2.6% of loans having LTVs more than 80% and DSCRs less than one times. With regard to CML loan maturities, we resolved 100% of the loans that were scheduled to mature in 2023. Our expectation going forward remains for modest credit losses on the portfolio. Turn to page nine.

Speaker Change: Hi.

Tom Gallagher: Were assumed alternative returns are now around seven and a half a percent for 24.

Tom Gallagher: And I think the RBC risk charge, if I was to do a weighted average would be 15% to 20%.

Speaker Change: Most of that portfolio.

Tom Gallagher: Have you considered pivoting some of the portfolio into assets with.

Tom Gallagher: With comparable let's say, 7% yields like private credit or just other fixed income.

Tom Gallagher: But much lower risk charges I'm, just thinking about it from the perspective of.

John Mccallion: This chart shows a comparison of our direct expense ratio over the prior eight quarters and full year 2022 and 2023. Our direct expense ratio in 4Q of 23 was up modestly at 12.4%, reflecting the impact of seasonal enrollment costs for group benefits, as well as higher employer-related costs. That said, 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. For the full year of 2023, our direct expense ratio was 12.2%, below our 2023 target of 12.6%.

Tom Gallagher: We've had two years of underperformance your outlook for a third year is below those levels and rates are higher.

Tom Gallagher: Think about.

Tom Gallagher: Both of your cost of capital and ROE I think it would be a fairly meaningful positive not recognizing you can't do this overnight, but is that something you consider pivoting or shifting too.

Yeah.

Tom Gallagher: Hey, Good morning, Tom It's John I think the last point you made around you can't do this overnight as a as an important piece, but I think the direction of travel.

John: Yeah, It's probably fair point, and I think we've talked about them.

John: The fact that we are in a different rate environment. So the relative value of investments are probably different than where they were when it was lower for longer.

John Mccallion: We believe this result once again demonstrates our consistent execution and focus on an efficiency mindset in a challenging inflationary environment while continuing to make investments in our businesses. I will now discuss our cash and capital positions on page 10. Cash and liquid assets at the holding companies were approximately 5.2 billion dollars at December 31st, which is above our target cash buffer of three to four billion dollars. The cash at the holding companies reflects the net effects of subsidiary dividends, payment of our common stock dividend, share repurchases of roughly $900 million in the fourth quarter, as well as holding company expenses and other cash flows. In addition, we repurchased shares totaling approximately $500 million in January.

John:

John: We liked we pride ourself in diversification. So it's it's not that we would make an abrupt shift, but we do believe that I'm, making some tweaks to allocations as appropriate in different environments and that would I think what you're referencing is one that we would.

John: Lean towards.

John: We've had a you know it's an asset class, where you have prior commitments and those then get deployed judiciously and actually they probably have some really good opportunities right now that we're leveraging having said that we think distributions will likely outpace.

John: New contributions just given our revised level of new commitments and I think over time, you would see.

John: A moderate shift in.

John: And allocation in that asset class versus others.

Speaker Change: Okay. Thanks, and then just a question on group benefits, the 100 basis point improvement.

John Mccallion: For the two-year period, 2022 and 2023, our average free cash flow ratio, excluding notable items, totaled 74% and was within our 65 to 75% target range. In terms of statutory capital, for our U.S. companies, our combined 2023 NAIC-RBC ratio is still preliminary, but expected to be approximately 400% and above our 360% target. For our U.S. companies, preliminary 2023 statutory operating earnings were approximately $4.5 billion, while net income was approximately $3.9 billion. Statutory operating earnings increased by approximately $1.9 billion year-over-year, primarily driven by favorable underwriting and impacts from the reinsurance transaction.

Speaker Change: In the the margin target or.

Speaker Change: Or at least a loss ratio targets can you comment on what's driving that is at stake.

Speaker Change: Stable pricing sustained.

Sustainably higher disability.

Speaker Change: Disability loss ratios and maybe a little bit on the group life side, what you're thinking thanks.

Good morning, Tom.

Rami: It's rami here.

Rami: And I would say at the highest level in terms of our near term outlook. Here is this is driven by the changing the changing business mix both in terms of.

Rami: The customer segments that we serve as well as the products that we offer so from a customer perspective we've.

John Mccallion: This was partially offset by higher expenses. We estimate that our total U.S. statutory adjusted capital will be approximately $19.5 billion as of December 31, 2023, up 10% from September 30, 2023, primarily due to operating earnings and the impacts of the reinsurance transaction. This was partially offset by dividends paid.

Rami: We've executed well on our strategy to target higher growth in regional markets.

Rami: We're seeing the benefits of that in terms of growth our regional markets has grown 2% to three percentage points higher than the overall average and we see a clear path for that growth to continue and regional market is a segment that does carry a lower loss ratio across both.

Rami: The life underwriting ratio in non medical health.

John Mccallion: Finally, we expect the Japan solvency margin ratio to be approximately 720% as of December 31st, which will be based on statutory statements that we file in the next few weeks. Before I shift to our near-term outlook, starting on page 12, a few points on what we included in the appendix. The chart on page 17 reflects new business value metrics for MetLife's major segments from 2018 through 2022. This is the same chart that we showed as part of our 3Q23 supplemental slides, but we feel it's worth including again for the sake of completeness.

Rami: And we're also seeing a shift from a product perspective.

Rami: Executed well on our employee paid strategy in general and voluntary strategy in particular.

Rami: On an involuntary we've seen double digit growth over many years and we expect that to persist in the future given customer needs and the opportunity to drive penetration in the workplace and the loss ratio here tends to be also more favorable to the overall portfolio. So between that customer segment and the product view, if you think about this.

Rami: Overtime.

Rami: We feel kind of a shift to the outlook is warranted.

John Mccallion: Also, pages 18 through 21 provide interest rate assumptions and key outlook sensitivities by line of business. Now, let's turn to page 12 for further details on our near-term outlook, starting with an overview. We expect continued uncertainty to persist around inflation and unemployment in 2024. We expect the U.S. dollar to stabilize around current levels. Based on the 12-31-23 forward curve, we assume long-term interest rates to be largely unchanged in 2024, and the yield curve will move from inverted to modestly upward sloping as short-term interest rates decline, and we assume a 5% annual return for the S&P 500.

Rami: Let me tell you what it's not been driven by on the life ratio. This quarter was a very favorable and it's really driven as John pointed out to the population mortality experience.

Rami: So this is not one quarter makes a trend. This is one quarter here that was a favorable and we do expect the Q1 numbers to pick up given the seasonality of life claims.

Rami: And then on the disability side our outlook in terms of the ratios does include an expectation the profitability board disability line of business will moderate over time.

Rami: But that is outweighed by the other factors.

Rami: Factors that I've just mentioned.

John Mccallion: For our near-term targets, we are maintaining our adjusted ROE range of 13 to 15 percent. We expect to maintain our two-year average free cash flow ratio of 65 to 75% of adjusted earnings. Also, given our continued focus on expense discipline, building capacity to reinvest in growth initiatives, and our overall efficiency mindset, we are lowering our direct expense ratio guidance for 2024 from 12.6% to 12.3%.

Rami: Back to Q1 as well, they're just remember there's also seasonality in that ratio in Q1, given the seasonality of the dental business. So net net think about it as business mix customer and product mix, that's really driving this.

Rami: Drift downwards in the in the ranges.

Speaker Change: That's helpful. Thanks.

Speaker Change: Next we go to the line of Jimmy Buhler with J P. Morgan. Please go ahead.

Jimmy S. Bhullar: So first a question on retirement spreads can you discuss the driver of the sequential decline in spreads each the last two quarters and how much of this is being driven by mix.

John Mccallion: Specifically, for 2024, VII is expected to be approximately $1.5 billion. Our corporate and other adjusted loss target is expected to be $750 to $850 million after tax in 2024. This represents an approximate $100 million increase from our prior adjusted loss guidance of $650 to $750 million in 2023. The higher range reflects C&O's current run rate given the impact of a higher rate environment on interest expense and pension costs, as well as the impact of lower expected benefits from VII. We are increasing our expected effective tax rate range by two points to reflect our expectation for higher earnings in foreign markets with higher tax rates and lower tax credits in the U.S. At the bottom of the page, you will see certain interest rate sensitivities relative to our base case, reflecting a relatively modest impact on adjusted earnings over the near term. On page 13, the chart reflects our VII average asset balances from $18 billion in 2022 to $19.7 billion expected in Private equity investments will continue to represent the vast majority of our VII asset balance.

Jimmy S. Bhullar: Mix of business versus maybe competition because what we're seeing is your yields have gone up but the crediting rates seem to be rising even faster than that.

Yeah.

Jimmy S. Bhullar: Good morning, Jimmy it's John.

The simple answer just sequentially for US is we just let the lower rates late in the in the quarter caused a bit of compression on the.

Jimmy S. Bhullar: On the spread number just how the we had the caps were in the money and lower rates were.

Jimmy S. Bhullar: You know it came in so it was different than the forward curve at the time of the third quarter. When we gave the $1 35 to $1 40 range came in at $1 34 ex VII. So that's the that's the that's the main driver it's not pricing pricing has actually been pretty.

Jimmy S. Bhullar: Healthy relatively speaking we haven't seen any.

Jimmy S. Bhullar: Change in pricing and so.

Jimmy S. Bhullar: So anything if anything it's really just a simple change in the curve.

Jimmy S. Bhullar: Okay.

Jimmy S. Bhullar: And then on the CRE portfolio, you mentioned resolving all of the maturities for 23 can you give us a sense of how much of your book is coming due over the next one to two year, especially in office properties and as Youre. Resolving these loans are you having to extend more of them than you've done in the past or are you are resolving them similar.

John Mccallion: We are reducing our near-term expected annual return for private equity to be between 7% to 10%, and we are also lowering our expected return for real estate and other funds to be in the range of 5% to 7% over the near term. We expect P.E. and real estate returns to remain pressured in the first quarter of twenty-four before trending higher.

Jimmy S. Bhullar: All you would have done it.

Jimmy S. Bhullar: Over the last several years.

Jimmy S. Bhullar: Yes, sure Jimmy it's John again, so just as a reminder for 2023, just rough rough percentages of the resolution about 30% was payoff or refinance.

John: Another 60 was these contractual extensions where the.

John: The borrower has to have to be in good financial condition, we have some pretty high level of requirements. There. So those are contractual and if you're if you meet those requirements and you have the right and they generally tend to be more floating.

John Mccallion: Finally, as a reminder, we include prepayment fees on fixed maturities and mortgage loans in VII. So now, I will discuss our near-term outlook for our business segments. Let's start with the U.S. on page 14, for example. This reflects the strong momentum in the business, particularly in voluntary products, as well as exceptionally strong persistency in our national accounts. Regarding underwriting, we expect 2024 underwriting margins to be generally consistent with 2023. As such, we are reducing our near-term group life mortality ratio and non-medical health interest-adjusted benefit ratio ranges by one percentage point, to 84 to 89 percent and 69 to 74 percent, respectively.

John: Rate nature loans, where they're just waiting to lock in fixed rates there was a less than 10% on just I'll say maturity extensions, where we agree with the borrower. It's a good you know that there's a good positive situation for us to extend and then there is you know kind of a couple of base of a couple of points of foreclosures.

John: You know in terms of 2024 about 10% of the balance comes due in terms of maturities. The overall P. B O that we have I'd said that the in terms of resolutions probably a similar mix to what we saw in <unk>.

John: As a percentage.

John: And I think in terms of you know we gave a little bit of magnitude. This past year in terms of what we thought were at risk loans and level of charge offs. Our view in 2024 is that we'd see a similar order of magnitude on both loans at risks and level of charge offs as well.

John Mccallion: Finally, keep in mind these are annual ratios, and both typically skew to the higher end of the ranges in the first quarter, given the seasonality of the business. For RAS, we are maintaining our 2-4% expected annual growth for total liability exposures across our journal account spread and fee-based businesses. Regarding investment spread, full year 2023 was 125 basis points and is expected to be relatively flat for the full year of 2024. This incorporates both the impact of the roll-off of our interest rate caps with maturities throughout 2024 and the offsetting benefit of VII re-emerging over the year as a more meaningful contributor. As such, we expect the investment spread range for 2024 to be 115 to 140 basis points. We have also provided updated RAS sensitivities for interest rate movements in the appendix. Sensitivities reflect the anticipated impact of interest rate cap maturities throughout 2024. As such, our sensitivity to SOFR declines throughout the year.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Next we go to the line of Elyse Greenspan with Wells Fargo. Please go ahead.

Elyse Greenspan: Hi, Thanks. Good morning. My first question is on the PRT side.

Elyse Greenspan: I think we'd start seeing right that the seasonality where deals are much more weighted to the fourth quarter. So just trying to get a sense of your outlook for 'twenty four and how we should think about.

Elyse Greenspan: The cadence of potential transactions there.

Speaker Change: Good morning, Elyse, it's from here.

Speaker Change: I think you're right to point out we've seen less of that seasonality where were seeing deals being done throughout the year.

Elyse Greenspan: In our outlook there remains pretty positive.

Elyse Greenspan: We continue to see a very.

Elyse Greenspan: A very healthy pipeline in particular pipeline the larger end of the market, where we are most competitive.

John Mccallion: For MetLife Holdings, we are expecting adjusted PFOs to decline by approximately 13 to 15% in 2024 and then decline 4 to 6% annually thereafter. Additionally, we are lowering the Adjusted Earnings Guidance Range to $700 to $900 million in 2024 to reflect the foregone earnings from the reinsurance transaction, as well as lower expected PE returns and natural runoff of the business. Now, let's look at the near-term guidance of our businesses outside the U.S. on page 15. For Asia, we expect the recent sales momentum to continue and generate mid-single-digit growth over the near term. In addition, we expect journal account AUM to maintain mid-single-digit growth.

Elyse Greenspan: And all the macro indicators in terms of what DB plan sponsors are saying in terms of the funding level the magnitude of asset sitting in frozen defined benefit plan or kind of indicate.

Elyse Greenspan: Our expectations of continued kind of Ah.

Elyse Greenspan: A high level of activity in this market.

Elyse Greenspan: <unk> into 'twenty four.

Elyse Greenspan: So no change in terms of our our view of the robustness of the pipeline.

Elyse Greenspan: Look I mean, if you step back and look at our I guess more broadly.

Elyse Greenspan: The liability exposures are all are up 3% year over year.

John Mccallion: We're expecting adjusted earnings to grow roughly 20% in 2024 as we assume VII to have a greater impact throughout the year. We are maintaining mid-single-digit adjusted earnings growth expectations over the remainder of the near term. For Latin America, we expect both adjusted PFOs and adjusted earnings to grow by high single digits over the near term. Finally, for EMEA, we are expecting sales to grow mid to high single digits and adjusted PFOs to grow mid-single digits over the near term. The forward curve assumes a strengthening of the U.S. dollar relative to most currencies in EMEA. As such, we project EMEA's adjusted earnings run rate to be roughly $60 to $65 million per quarter in 2024 and then grow by mid-single digits in 2025 and 2026 based on the forward curve for these currencies.

Elyse Greenspan: And most of that growth is coming from more spread earning general account business, which is actually growing at four.

Elyse Greenspan: And that's coming off.

Elyse Greenspan: 2022 where we had the $8 billion or PRT deal and that growth is not just PRT I mean, PRT was about $5 3 billion, but we're also seeing continued strength across a range of spread based product speed as structured settlements and below some of our products in our risk solutions business and so on.

Elyse Greenspan:

Speaker Change: Thanks, and then my second question.

Speaker Change: How should we think about a dividend.

Speaker Change: Dividends at the parent that you guys could take in 'twenty four if you could on.

Speaker Change: Upstream.

Speaker Change: All that you guys are getting from our holdings transaction.

Speaker Change: Yeah, Hi, Elyse, it's Michele thanks for the question.

Michele: So you know we talked about are the reinsurance transaction is providing us with significant financial flexibility and.

Michele: As you heard from John our RBC ratio is approximately 400%.

John Mccallion: Let me conclude by saying that MetLife delivered a solid quarter to close out another strong year. The underlying strength of our business fundamentals remains on display, with strong top-line growth coupled with disciplined underwriting and expense management. While VII remains below historical returns, core spreads remain robust and continue to benefit from the higher yield environment. While the current environment remains uncertain, we are excited about the outlook and growth prospects for our businesses over the near term and beyond. MetLife continues to move forward from a position of strength with a strong balance sheet, recurring free cash flow generation, and a diversified set of our market-leading businesses.

Michele: And I would just note here that Oh, the five point to Holdco cash does.

Michele: Does not does not yet include any of the reinsurer.

Michele: Reinsurance proceeds.

Michele: So the excess capital that's sitting in our statutory entities.

Michele: And it will ultimately migrate to the Holdco.

Michele: We view excess capital is fungible, and we will redeploy it overtime.

Michele: And in the absence of attractive organic or inorganic growth opportunities I think we built a good track record in terms of.

Michele: Being deliberate and expeditious.

Michele: Post a major divestitures and how we return capital to shareholders.

Michele: And as you've seen since we closed on the transaction, we've leaned into buy box with a especially in January.

John Mccallion: And we are committed to deploying capital to achieve responsible growth and build sustainable value for our customers and our shareholders. And with that, I will turn the call back to the operator for your questions. Ladies and gentlemen, if you would like to ask, press one then ask.

Michele: You know I wouldn't sort of consider January as.

Michele: The run rate for the full year, but we're going to continue to be opportunistic here hope that helps.

Speaker Change: And I would just add Elyse I mean, just to kind of put a final point on just the financial flexibility and the fungibility of that I mean.

Ryan: Hey, thanks. Good morning. My first question is on the ROE target. And you know, I recognize that you just raised the target by 100 basic points a year ago from 13 to 15. But it seems like your segment outlook would suggest something at least a bit above 15, you know, maybe something closer to 15 and a half. So I guess I just wanted to hear your perspectives on whether I'm thinking about that incorrectly. Or is there some potential upside to this, to this ROE based on the current trends you're seeing? Good morning, Ryan. It's John.

Speaker Change: We might.

Speaker Change: Cause we have excess capital at the Opco, we might think differently at the Holdco it'll depend right I mean, I don't think we have to necessarily have it all at the Holdco. You know we have a range of three to four it might give us some ability to manage more no differently than that within that range, because we have excess at the opco. So I think we just want to I think that flexibility is the key.

Speaker Change: The point.

Speaker Change: Thank you.

Speaker Change: Next we go to the line of Alex Scott with Goldman Sachs. Please go ahead.

John Mccallion: Um, I think, uh, you know, we wouldn't debate your model calculations there. I think, you know, it's fair to say that. Uh, you know, we certainly are trending to the high end of that range, if not, um, with a plus sign. But, uh, you know, we just moved it a year ago and, um, I think we'll take a year here and take stock at that time, but I'd say, just maybe, just to help you with that one other thing. It's, um... Like I said, we'll take stock. We think over time, and we've been talking about this, that there has been, kind of, as a result of higher rates, there has been a shift in volume and returns on our business. So it wouldn't preclude us from doing it again.

Alex Scott: Hi, Good morning, first one I have is just going back to the guidance.

Alex Scott: Quickly could you frame for us.

Alex Scott: Much of the lower VII guide is maybe a little more specific to first quarter VII.

Alex Scott: And the results that you sort of already have eyes on it.

Alex Scott: This lag is opposed.

Alex Scott: Level setting like the ongoing expectation.

Alex Scott: Hey, good morning, Alex It's John.

Speaker Change: I'd love to say that we have great insights into.

John: As a result of having the lag but.

Speaker Change: I'm not so sure that are you know.

Speaker Change: That has proven out the way we thought it would each quarter I think all we know is that we think.

Speaker Change: So we kind of believe that it'll bump along that.

Speaker Change: <unk>.

John Mccallion: We just, I think, want to take some time to take stock. Okay. Makes sense.

Speaker Change: You know kind of the bottom again before becoming a more meaningful contributor in the you know the outer quarters.

John Mccallion: And then I think you said that you expected the RBC ratio to be around 400%. I would have thought it would have been maybe a little higher than that following the reinsurance transaction. Do you have any more color on whether there were any offsets?

Speaker Change: We think managers, even though the S&P jumped up in the quarter. It was kind of late in the quarter.

Speaker Change: We believe managers will be a bit cautious in their year end remarks and.

Speaker Change: Maybe remain conservative before writing investments upfront based on some of the public market multiples. So that's that's our that's kind of our base case assumption, we don't have a lot of insight yet in actual financial statements that have come through so we will obviously those will come through as we move through the quarter.

John Mccallion: Yeah, I think when we announced the deal, we thought this would give us 50 to 60 points. We still think it will. There's a little bit of what happens immediately and then how things trend in over time. Also, there's a lot of other things going on, fungibility, growth.

Speaker Change: Got it Okay. That's helpful. Maybe for a second one just on you know what you saw around pricing in group benefit maybe in the U S and Latam.

John Mccallion: We had some very sizable growth in RAS, so we've deployed some extra capital this year. So, you know, I think a lot of those things, but in terms of the deal economics that we outlined at the time of signing, everything came in as expected. Okay, great. Thank you. And next, we go to the line with Suneet Kamath and Jeffreys. Please go ahead.

Speaker Change: Around your enrollment and so forth I mean margins are really good or you're seeing any competition, that's starting to heat up there.

Speaker Change: Thanks, Alex since its Rami here I would say, we're really off to a strong start in 'twenty for if you look at 'twenty three overall sales were.

Suneet Kamath: Yeah, thanks, and appreciate all the color on the guidance, but maybe if we could just circle back to consolidated recurring NII, you know, I think you talked about a pretty big lift. 23. Thank you. Thank you. Any help in terms of what you think that could look like given all that, Hey Suneet, it's John. It's a good question.

Rami: We're up 9% year over year as John mentioned, and we saw a very strong persistency in line with our expectations and we also saw the rate actions that we were able to take also in line with our expectations across market segments.

John Mccallion: I mean, sometimes NII, it's, you know, it's a helpful metric, certainly from, I'd say, mix and just to show that, you know, higher rates have more than offset or actually offset, you know, some of the depression in VII. And I think the point of that slide is to show that we, you know, there's more power there once things kind of reemerge on the VII front. You know, sometimes it's a little hard with just translating NII to earnings.

Rami: So while there is competition and it is a competitive market when we think about pricing as well as persistency I think all the non price factors of differentiations that we've talked about in the past are all playing into our favor here and we've been able to hold margins and as you've seen we've expanded.

Rami: The margin outlook.

Rami: One one I can give you a bit of a flavor on that we're still in the midst of it but initial indications in terms of our sales growth are in the 5% to 10% again year over year.

John Mccallion: So we're a little cautious about always unnecessarily giving a target around that because, you know, we have different products that perform well in different environments and, ultimately, it's a spread and, you know, so I think we're a little hesitant to kind of forecast for you. I think the point of that slide was to indicate that it shows the growth in our business. It shows that we're well diversified. You know, we can perform well in a variety of economic environments, and I think that's really the, probably the theme to take away. So sorry I didn't get to your, maybe your exact question or answer, but that's probably the best I can do. Okay, I got it. And then as we think about the benefit of the caps in 23 and what that looks like in 24 as they roll off, should we think about the improvement in VII is essentially those two kinds of net as a wash, or is one kind greater than the other? I just want to get some additional color.

Rami: With really solid growth across the product portfolio across both core and voluntary. So these are really good indicators for us both in terms of volume and margin as we look into <unk> into 'twenty four.

Speaker Change: Understood. Thank you.

Speaker Change: And ladies and gentlemen, we have time for one last question from John Barnidge with Piper Sandler. Please go ahead.

John Bakewell Barnidge: Good morning, Thank you very much for the opportunity maybe sticking with group benefits.

John Bakewell Barnidge: Can you maybe talk about growth in employee count among your corporate partners, whether it's larger in the small or the jumbo in maybe a viewpoint of one one renewables with that thank you.

Speaker Change: Yeah, Hey, John.

Speaker Change: I don't have that number handy specifically in terms of the employee count that the best thing you could look out for an indicator for that is just overall employment levels. Because we have a very diversified book up and down market is highly diversified by industry. So you can think of us as reflecting the broader economy in terms of our employee count.

Speaker Change: But the one that I would look at more closely is and this is where we see a lot of white space with respect to employee causes the penetration rate in the workspace.

John Mccallion: Yeah, it's a great question. I think what you just said at the end around, you know, in terms of them being a wash is a pretty good way of thinking about it. So, you know, we had 125 basis points last year all in for 2023. We gave a range of 115 to 140 for next year. I think the midpoints, you know, a little above, it's at 127, I guess, if you did the math. And our view is, yeah, the interest rate cap will roll off throughout the year and then VII will emerge throughout the year and essentially, you know, this offsets the decline there and so we think the best way to think about the spreads for the year is relatively flat to what you saw for the full year of 23.

Speaker Change: We still see plenty of opportunity to drive penetration of our own products, but the voluntary or employee paid and that's through the deployment of the right technology. The right tools, the right engagement capabilities and that's really what's been fueling our voluntary growth over the past few years, and that's where we see.

Speaker Change: Our continued future growth opportunities.

Speaker Change: Yeah.

Speaker Change: Thank you for that my follow up question, you talked about the frequency of asbestos claims.

Speaker Change: <unk> declined as expected can you maybe talk about that versus what the assumption was thank you.

Speaker Change: Yeah, Hey, good morning, John It's John.

John Mccallion: It will give and take here and there, you know, as we point out on the slide, we think VII in the first quarter will continue to be pressured. Obviously, the caps haven't fully rolled off yet, so we'll still have income from them, and then as VII emerges, you'll see the caps roll off, and they'll essentially be offset. Okay, that's helpful. Thanks. Next, we have a question and John Gallagher. Go ahead.

John: So as we said you know this is a you know something.

John: Something that we look at each.

John: Third or fourth quarter, where we conduct our experienced study like.

John: This is a this.

John: This is an exposure where there is a declining claim count, but what hasnt declined as expected or as fast as expected as some of the severe severe claims so the larger claims and thats really what we chewed up this quarter again, it's a kind of a run off claim count exposure.

Tom Gallagher: Hi, so your assumed alternative returns are now around 7.5% for 24, and I think the RBC risk charge, if I was to do a weighted average, would be 15-20% on most of that portfolio. Have you considered pivoting some of the portfolio into assets with comparable, let's say 7% yields like private credit or just other fixed income, but much lower risk charges?

John: You know as we've been seeing that for some time, but in the last 12 months.

John: Just a slightly different trend that we needed to adjust for I mean, the overall overall reserves just above $350 million.

Speaker Change: Thank you very much.

Speaker Change: And I'll now turn the conference back to John Hall for closing remarks.

John A. Hall: Great. Thank you operator, and thank you everybody for joining us this morning have a great day.

John Mccallion: I'm just thinking about it from the perspective of... We've had two years of underperformance. Your outlook for a third year is below those levels, and rates are higher. And if I think about both your cost of capital and ROE, I think it would be a fairly meaningful positive. I'm not recognizing you can't do this overnight, but is that something you consider pivoting or shifting to? Thanks. Good morning, Tom. It'

Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.

John Mccallion: I think the last point you made about you can't do this overnight is an important piece, but I think the direction of travel, you know, that's probably a fair point. And I think we've talked about the fact that, you know, we are in a different rate environment, so the relative value of investments is probably different than where they were when it was lower for longer. We pride ourselves on diversification, so it's not that we would make an abrupt shift, but we do believe that making some tweaks to allocations is appropriate in different environments, and I think what you're referencing is one that we would lean towards. We've had...

Speaker Change: Okay.

Speaker Change: We're sorry your conferences ending now please hang.

Speaker Change: Yep.

John Mccallion: It's an asset class where you have prior commitments, and those then get deployed judiciously, and actually, there are probably some really good opportunities right now that we're leveraging. Having said that, we think distributions will likely outpace new contributions, just given our revised level of new commitments, and I think over time you would see a moderate shift in allocation in that asset class versus others. Okay, thanks.

Ramy Tadros: And then just a question on group benefits. The 100 basis point improvement in the margin target, or at least the loss ratio targets. Can you comment on what's driving that? Is that it?

Ramy Tadros: Stable Pricing, Sustainablely Hired Disability, or Lower Disability Loss Ratios and maybe a little bit on the group life side. What you're thinking. Good morning, Tom. It's Ramy here.

Ramy Tadros: And I would say at the highest level in terms of our near-term outlook here that this is driven by the changing business mix, both in terms of the customer segments that we serve as well as the products that we offer. So from a customer perspective, we've executed well on our strategy to target higher growth in regional markets. We're seeing the benefits of that in terms of growth. Regional markets have grown two to three percentage points higher than the overall average. And we see a clear path for that growth to continue. And the regional market is a segment that does carry a lower loss ratio across both the life underwriting ratio and non-medical health.

Ramy Tadros: And we're also seeing a shift from a product perspective. We've executed well on our employee benefit strategy in general and voluntary strategy in particular. And in voluntary, we've seen double-digit growth over many years, and we expect that to persist in the future given customer needs and the opportunity to drive penetration in the workplace. And the loss ratio here tends to be also more favorable to the overall portfolio. So between that customer segment and that product view, if you think about this over time, we feel kind of a shift to the outlook is warranted. But let me tell you what it's not been driven by.

Ramy Tadros: On the life ratio, this quarter was very favorable, and it's really driven, as John pointed out, by the population mortality experience. So this is not one quarter that makes a trend. This is one quarter here that was favorable, and we do expect the Q1 numbers to pick up given the seasonality of Clive claims. And then on the disability side, our outlook in terms of the ratios does include an expectation that the profitability of our disability line of business will moderate over time. But that is outweighed by the other factors that I've just mentioned.

Ramy Tadros: And back to Q1 as well, just remember there's also seasonality in that ratio in Q1, given the seasonality of the dental business. So, net, net, think about them as business makers. Customer and product mix that's really driving this shift downwards in the ranges. That's helpful, thanks. And next, we go to the line. Go ahead.

Jimmy: So first, a question on retirement spreads. Can you discuss the driver of the sequential decline in spreads each of the last two quarters? How much of this is being driven by a mix of business versus maybe competition because what we're seeing is your yields have gone up, but the crediting rates seem to be rising even faster. Good morning, Jimmy. It's John.

John Mccallion: The simple answer just sequentially for us is, you know, the lower rates late in the quarter caused a bit of compression on the spread number just how the you know we had the caps were in the money, and lower rates were you know came in, so it was different than the forward curve at the time of the third quarter when we gave the 135 to 140 range came in at 134 x BII so that's the that's the main driver, it And then on the CRE portfolio, you mentioned resolving all of the maturities for 23, can you give us a sense of how much of your book is coming due over the next one to two years, especially in office properties? And as you're resolving these loans, are you having to extend more of them than you have in the past? Or are you resolving them similar to how you did for the last time?

John Mccallion: Yeah, sure, Jimmy. It's John again. So just as a reminder for 2023, just rough, rough percentages of the resolution about 30% was payoff or refinance. Another 60 was these contractual extensions where the borrower has to have to be in good financial condition. We have some pretty high level of requirements there. So those are contractual. If you meet those requirements, then you have the right and they generally tend to be more floating, rate nature loans where they're just waiting to lock in fixed rates, there's a less than 10% on just I'll say maturity extensions where we agree with the bar it's a good you know that there's a good positive situation for us to extend and then there's you know kind of a couple base of a couple points of foreclosures, You know, in terms of 2024, about 10% of the balance comes due in terms of maturities, the overall PBO that we have.

John Mccallion: I'd say that, you know, in terms of resolutions, probably a similar mix to what we saw in terms of percentage, and I think in terms of, you know, we gave a little bit of magnitude this past year in terms of what we thought were at-risk loans and the level of charge-offs. Our view in 2024 is that we'd see a similar order of magnitude on both loans at risk and the level of charge-offs Thank you. And next, we go to the line with Elyse Greenspan with Wells Fargo. Please go ahead.

Elyse Greenspan: Hi, thanks. Good morning. My first question is on the PRT side.

Ramy Tadros: You know, I think we've stopped seeing the seasonality where deals are, you know, much more weighted to the fourth quarter. So just trying to get a sense of your outlook for 24 and how we should think about, you know, the cadence of potential transactions. Good morning, Elyse. It's Ramy here.

Ramy Tadros: I think you're right to point out we've seen less of that seasonality. We're seeing deals being done throughout the year. And our outlook there remains pretty positive. We continue to see a very healthy pipeline, in particular a pipeline at the larger end of the market where we are most competitive. And you know, all the macro indicators in terms of what DB plan sponsors are saying, in terms of the funding level, the magnitude of assets sitting in frozen defined benefit plans all kind of indicate expectations of continued levels of activity in this market into 24. So no change in terms of our view of the robustness of the pipeline.

Michel A. Khalaf: And look, I mean, if you step back and look at RIS more broadly, the liability exposures are up 3% year over year. And most of that growth is coming from our spread earning general account business, which is actually growing at 4, and that's coming off 2022, when we had the $8 billion PRT deal, and that growth is not just PRT. I mean, PRT was about $5.3 billion, but we're also seeing continued strength across a range of spread-based products, be they structured settlements and be they some of our products in our risk solutions business and so on. And then my second question, how should we think about, you know, dividends to parents that you guys could take in 24 as you could, you know, look to upstream, you know, the capital that you guys are getting? Yeah, hi, Elyse, it's Michel.

Michel A. Khalaf: Thanks for the question. So, you know, we talked about the reinsurance transaction as providing us with significant financial flexibility, and, you know, as you heard from John, our RBC ratio is approximately 400%, and I would just note here that the 5.2 Holtco cash does not yet include any of the reinsurance proceeds. So the excess capital is sitting in our statutory entities, and it would ultimately migrate to the holding company. You know, we view excess capital as fungible, and we will redeploy it over time.

Michel A. Khalaf: And in the absence of attractive organic or inorganic growth opportunities, I think we have built a good track record in terms of being deliberate and expeditious post-major divestitures and how we return capital to shareholders. You know, and as you've seen, since we closed on the transaction, we've leaned into buybacks, but, you know, especially in January, I wouldn't sort of consider January as a monthly run rate for the full year, but we're going to continue to be opportunistic here. I hope that that helps.

Alex Scott: And I would just add, Elyse, just to kind of put a finer point on just the financial flexibility and the fungibility of that. I mean, we might, you know, because we have excess capital at the OPCO, we might think differently about the whole thing, it'll depend, right? I mean, I don't think we necessarily have to have it all at the whole company, you know. We have a range of three to four, and it might give us some ability to manage more, you know, differently within that range because we have excess at the OPCO. So I think we just want to; I think flexibility is the key point. Thank you. And next, we go to the line of Alex Scott with Goldman Sachs. Please go ahead.

John Mccallion: Hi, good morning. First, what I have for you is just going back to the BII guide quickly. Could you frame for us, you know, how much of the lower BII guide is maybe a little more specific to first quarter BII and what you see in results that you sort of already have eyes on since it's lagged, as opposed to, you know, level setting, like the ongoing expectations? Hey, good morning, Alex. It's John.

John Mccallion: I'd love to say that we have great insights into, you know, as a result of having the lag, but I'm not so sure that that has proven out the way we thought it would each quarter. I think all we know is that we, we think, you know, we kind of believe that it will bump along the, um, you know, kind of the bottom again before becoming a more meaningful contributor in the, you know, the outer quarters. You know, we think managers, even though the S&P jumped up in the quarter, it was kind of late in the quarter, uh... we believe managers will be a bit cautious in their year-end remarks and maybe remain conservative before writing investments up based on some of the public market multiples. So that's that's our, that's kind of our base case assumption.

John Mccallion: We don't have a lot of insight yet on the actual financial statements that have come through, so we'll obviously those will come through as we move through the quarter. Got it. Okay, that's helpful. Maybe for a second one on what you saw around pricing in group benefits maybe in the U.S. and Latin America around year-end enrollment and so forth. I mean, margins are really good. Are you seeing any competition that's starting to heat up? Thanks Alex, it's Ramy here.

Ramy Tadros: I would say we're really off to a strong start in 24. If you look at overall sales, we're up 9% year over year, as John mentioned, and we saw very strong persistency in line with our expectations, and we also saw the rate actions that we were able to take also in line with our expectations across market segments. So while there is competition, and it is a competitive market, when we think about pricing as well as persistency, I think all the non-price factors of differentiation that we've talked about in the past are playing into our favor here, and we've been able to hold margins, and as you've seen, we've expanded the margin outlook. 1.1. I can give you a bit of a flavor of that; we're still in the midst of it, but initial indications in terms of our sales growth are in the 5% to 10% again year over year, with really solid growth across the product portfolio, across both core and voluntary.

Ramy Tadros: So these are really good indicators for us both in terms of volume and margin as we look into 24. Thank you. Ladies and gentlemen, we have time for one last question from John Barnidge. Go ahead.

John Bakewell Barnidge: Good morning. Thank you very much for the opportunity, maybe sticking with the group that I said. Can you maybe talk about growth and employee count among your corporate partners, whether it's larger than the small or the jumbo in maybe a viewpoint of one on one renewables with that? Thank you. Yeah, hey John, I don't have that number handy, specifically in terms of employee count. The best thing you could look at for an indicator for that is just overall employment levels because we have a very diversified book, an up and down market, it's highly diversified by industry, so, you know, you could think of us as reflecting the broader economy in terms of our employee count. But the one that I would look at more closely, and this is where we see a lot of white space with respect to employee counts, is the penetration rate in the workspace. We still see plenty of opportunity to drive penetration of our own product, be it voluntary or employee-paid, and that's through the deployment of the right technology, the right tools, the right engagement capabilities, and that's really what's been fueling our voluntary growth over the past few years, and that's where we see continued future growth opportunities.

Ramy Tadros: Thank you for that. My follow-up question: you talked about how the frequency of asbestos claims hasn't declined as expected. Can you maybe talk about that versus what the assumption was?

John Bakewell Barnidge: Thank you. Yeah, hey, good morning, John. It's John.

John Mccallion: So, as we said, this is something that we look at each third or fourth quarter when we conduct our experience study. This is an exposure where there is a declining claim count, but what hasn't declined as expected or as fast as expected are some of the severe claims, so the larger claims. And that's really what we trued up this quarter. Again, it's a kind of a runoff, you know, claim count exposure. You know, as we've been seeing that for some time, but in the last 12 months, we just saw a slightly different trend that we needed to adjust for. I mean, the overall reserves are, you know, just above $350 million.

John Mccallion: Thank you very much. And I'll now turn the conference back to John Hall for, Great. Thank you, operator. And thank you, everybody, for joining us this morning. Have a great day. Ladies and gentlemen, we're sorry, your conference is ending now. Please hang up.