Q2 2024 MetLife Inc Earnings Call

Operator: 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.

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.

Operator: Before we get started, I refer you to the cautionary note about forward-looking statements and yesterday's earnings release and to risk factors discussing MetLife's SEC filings.

Speaker Change: 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 met lives SEC filings.

John Hall: With that, I will turn the call over to John Hall, Global Head of Investor Relations. Please go ahead.

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

John Hall: Thank you, operator.

John Hall: Thank you operator, good morning, all we appreciate you joining Metlife second quarter 2024 earnings call.

Michel Khalaf: Good morning, all. We appreciate you joining MetLife's second quarter.

John Mccallion: Thank you, operator. 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.

Speaker Change: 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 Hall: On the call this morning, our Michel Khalaf, President and Chief Executive Officer, and John McCallion, Chief Financial Officer. Other members of senior management are also available to participate.

John Mccallion: We released our supplemental slides last night, and they are available on our website. John McCallion will speak to them in his prepared remarks and appendix to the slides, features, disclosures, gap reconciliation, and other information for your review.

Unknown Executive: John McCallion will speak to them in his prepared remarks. Now, to Michel.

John Hall: Q&A will follow prepared remarks, and we'll end just before the top of the hour.

Operator: As a reminder, please limit yourself to one question and one follow-up.

Michel Khalaf: Now to Michel. Thank you, John, and good morning, everyone. We're very pleased with the second quarter results that we posted last night and believe the quarter clearly reflects MetLife's core strengths, including the momentum across our businesses and the greater predictability of our performance achieved through our company. This is our consistent execution. The expectations we shared about our performance came to pass in the second quarter, in line with our forecasts, and in some cases even better. After normal seasonal impacts in the first quarter, the performance of our flagship group benefits franchise shown through in the second quarter.

Michel Khalaf: We're very pleased with the second quarter results that we posted last night and believe the quarter clearly reflects Metlife's core strength. In the second quarter, we reported adjusted earnings of $1.6 billion, or $2.28 per share, up 18% from the prior year period. The strong result was driven by favorable underwriting, good volume growth, and higher variable investment income led by the positive performance I just mentioned. In total, net income in the second quarter was $912 million.

Michel Khalaf: Variable investment income or VII performed in line with the expectations we laid out in the first quarter, whether recovery and private equity returns partially offset by the performance of real estate funds, which so significantly narrower losses in the second quarter. The broad diversification of our businesses has proven to be a fundamental strength for MetLife, creating many natural offsets and allowing us to generate growth while navigating the tides of shifting business and economic dynamics. And our ability to generate strong recurring cash flow, coupled with our discipline to apply capital to its highest and best use, enables us to drive sustained long-term value for our shareholders.

Michel Khalaf: In the second quarter, we reported adjusted earnings of $1.6 billion, or $2.28 per share, up 18% from the prior year period. The strong result was driven by favorable underwriting, good volume growth, and higher variable investment income led by the positive performance I just mentioned. In total, net income in the second quarter was $912 million, substantially higher than $370 million in the prior year period. Strong adjusted earnings growth, added by our unwavering focus on execution, generated outstanding results measured by several of our key performance metrics.

Michel Khalaf: Substantially higher than $370 million in the prior year period. Strong adjusted earnings growth, aided by our unwavering focus on execution, generated outstanding results measured by several of our key performance metrics. Our drive to execute against our differentiated pillar is essentially funded by the success we've achieved through our focus and simplify pillars, as well as for them to receive their benefit and retirement payments. We see our capacity to invest in technology at Metlife's scale as a true differentiator relative to our competitors, which we believe will only get more impactful over time. Be assured; we understand that the power of AI commands great responsibility.

Michel Khalaf: Strix. Metlife posted a 17.3% adjusted return on equity in the quarter, well above our target range of 13 to 15%, and a powerful example of our ability to efficiently deploy capital and generate profitable growth for our shareholders. Metlife's direct expense ratio in the second quarter was 11.9%, an improvement year over year, and below our 12.3% annual target. As we have noted before, the positive leverage in this ratio is not only a measure of our ability to control costs, but also our capacity to grow revenue at a faster rate than expenses. And the second quarter, both top line growth and lower direct expenses, were contributors to our excellent quarterly expense ratio.

Michel Khalaf: When we established our next horizon strategy almost five years ago, it was supported by the interconnected foundational pillars of focus, simplify, and differentiate. Our success in executing against our focus pillar is evident in the high-teen internal rates of return we achieve on new business, and our strong enterprise-wide return on equity. Similarly, our success in executing against our simplified pillar manifests in our improving expense ratio. Our drive to execute against our differentiate pillar is essentially funded by the success we've achieved through our focus and simplified pillars. When we activate its next horizon, we committed to free up $1 billion of expense capacity to invest in growth initiatives and technology.

Michel Khalaf: And we have done so, matching both sides of this equation. This shows up in dozens of internal technology initiatives that are making it easier for customers to purchase our products, as well as for them to receive their benefit and retirement payments. We see our capacity to invest in technology at MetLife's scale as a true differentiator relative to our competitors, which we believe will only get more impactful over time. There are many tools in our toolbox that will help drive this advantage forward, including artificial intelligence or AI. From our standpoint, we believe MetLife's large pool of data puts us in an advantageous position, with AI having the potential to act as a force multiplier and further widen the divide in our favor.

Michel Khalaf: Yet, this is not just future talk. AI has been part of our Playbook at MetLife for years, and we are seeing many initiatives move to implementation to create seamless and personalized customer experiences, improve decision-making, and empower employees to focus on purpose for work. Be assured, we understand the power of AI commands. Great responsibility. With that in mind, we are at the vanguard of this topic and will be issuing our policy on the responsible use of AI in the third quarter.

Speaker Change: Personalized customer experiences improve decision, making and empower employees to focus on purposeful work.

Speaker Change: Be assured we understand the power of AI commands great responsibility with that in mind, we are at the Vanguard of this topic and it will be issuing our policy on the responsible use of AI in the third quarter shifting to our business segment results.

Michel Khalaf: Shifting to our business segment results, our leading group benefits business reported adjusted earnings of $533 million, representing an all-time quarterly record, as group life mortality experience snapped back from the seasonally impacted first quarter. Group life mortality registered a benefit ratio of 79.1% in the second quarter. For the year-to-date period, the group life benefit ratio is now firmly at the lower end of our annual target range of 84% to 89%.

Michel Khalaf: Our leading group benefits business reported adjusted earnings of $533 million, representing an all-time quarterly record, as group life mortality experience snapped back from the seasonally impacted first quarter. On a national accounts basis, employers with greater than 5,000 employees, we are driving penetration across employer groups via new products and greater employee participation. On a regional accounts basis, employers with less than 5,000 employees, we are seeking to accelerate growth via a more refined distribution focus, a broader suite of products, and by attacking white space, the absence of any employer-offered benefits.

Speaker Change: Our leading group benefits business reported adjusted earnings of $533 million, representing an all time quarterly record as group life mortality experience snapped back from the seasonally impacted first quarter.

Speaker Change: Group life mortality registered a benefit ratio of 79, 1% in the second quarter for the year to date period. The group life benefits ratio is now firmly at the lower end of our annual target range of 84% to 89%.

Michel Khalaf: Grant. Our growth strategy and the attractive group benefit space is twofold. On the national accounts basis, employers would greater than 5,000 employees. We are driving penetration across employer groups via new products and greater employee participation. On the regional accounts basis, employers would less than 5,000 employees. We are seeking to accelerate growth via a more refined distribution focus, a broader suite of products, and by attacking white space, the absence of any employer-offered benefits. Across both avenues of growth, national and regional, increasing enrollment and utilization of voluntary products are primary elements of boosting sales and margins.

Michel Khalaf: Moving to RIS, underscoring the breadth of our liability origination in this segment. Looking to Latin America, top line and bottom line results were strong, again, despite some currency headwinds. We simplified the structure of our business and refocused it on protection products with strong free cash flow, producing positive, tangible results. Moving to capital and cash, Metlife is well-capitalized, and our capacity to generate strong, recurring free cash flow allows us to meet our commitments and provides flexibility to proactively seize attractive growth opportunities.

Michel Khalaf: Moving to RIS, business momentum was evident in our retirement and income solution segment, which enjoyed several notable wins. These included two jumbo pension rest transfer deals totaling $3.5 billion, a $2.2 billion stable value addition, as well as $3.3 billion of UK longevity insurance, underscoring the breadth of our liability origination and the segment. Beyond these wins, we continue to see strong flow for structured settlements, where we are the market leader with more than $700 million sold in the second quarter. In Asia, we enjoyed solid growth across a range of metrics, while sales in Japan have been impacted by currency fluctuations. Assets under management in Asia continue to grow, rising 5% on a constant currency basis in the quarter.

Michel Khalaf: Outside of Japan, sales were up 60% on the strength of a large group sale in Australia. Looking at some currency headwinds, adjusted premiums, fees, and other revenues were up 12% on a constant currency basis, pointing to sustained business momentum in Mexico, Chile, and Brazil. EMEA adjusted earnings rose 10% year over year on strong volume growth and higher recurring interest margins. Adjusted PFOs were up 12% on a constant currency basis due to strong sales across the region.

Speaker Change: Outside of Japan sales were up 60% on the strength of a large group said in Australia.

Speaker Change: Looking to Latin America topline and bottom line results were strong again, despite some currency headwinds.

Speaker Change: Adjusted premiums fees and other revenues were up 12% on a constant currency basis, pointing to sustained business momentum in Mexico, Chile, and Brazil EMEA.

Speaker Change: EMEA adjusted earnings Rose, 10% year over year on strong volume growth and higher recurring interest margins.

Speaker Change: Adjusted P. F O's were up 12% on a constant currency basis due to strong sales across the region. Our business in EMEA is an example of our efficiency mindset at work, we simplified the structure of our business and refocused it on protection products with strong free cash flow producing positive tangible results.

Michel Khalaf: Our business in EMEA is an example of our efficiency mindset at work. We simplified the structure of our business and refocused it on protection products with strong free cash flow, producing positive tangible results.

Michel Khalaf: Moving to capital and cash, my life is well capitalized and our capacity to generate strong recurring free cash flow allows us to meet our commitments and provide flexibility to proactively seize attractive growth opportunities. And in the absence of compelling EMEA opportunities, we return capital to our shareholders. We were active on the capital management front in the second quarter from both an equity and debt standpoint. We paid common stock dividends of roughly $400 million, reflecting a 4.8% increase to our common stock dividend per share. We also bought back around $900 million of our common shares in the second quarter and repurchased about another $270 million dollars worth in July.

Speaker Change: Moving to capital and cash.

Michel Khalaf: This brings total common stock repurchased for the year through July to about $2.3 billion. We still have roughly $2.8 billion remaining on our board authorization. From a debt standpoint, we paid off or redeemed approximately $1.5 billion of debt and issued $500 million of senior debt. We have now largely pre-funded our 2025 maturing debt issue.

Michel Khalaf: We still have roughly $2.8 billion dollars remaining on our board authorization. From a debt standpoint, we paid off or redeemed approximately $1.5 billion of debt and issued $500 million of senior debt. We have now largely pre-funded our 2025 maturing debt issue. And finally, at the end of the second quarter, we had $4.4 billion of cash and liquid assets at our holding companies, which is above our target cash buffer of $3 to $4 billion.

Michel Khalaf: News. And finally, at the end of the second quarter, we had 4.4 billion dollars of cash and liquid assets at our holding companies, which is above our target cash buffer of 3 to 4 billion dollars.

Michel Khalaf: Turning to our recently published sustainability report, McCallife operates within a virtuous circle comprised of our customers, our people, our communities, and our shareholders, with the objective of delivering long-term value to each of these stakeholders. Perhaps nowhere is the success of these efforts more evident than in the pages of our annual sustainability report and can be found on McCallife's website. In it, you'll see highlights of our efforts to build more confident futures for our stakeholders and updates on our sustainability commitments. Among our many successes, I am pleased to mention that the McCallife Foundation has surpassed one billion dollars in total giving in its history. As a 156-year-old company, and the intent to log another 156 years more, sustainability is an essential part of Metlife's heritage.

Michel Khalaf: Perhaps nowhere is the success of these efforts more evident than in the pages of our annual sustainability report, which can be found on Metlife's website. In it, you'll see highlights of our efforts to build more confident futures for our stakeholders and updates on our sustainability commitments. Among our many successes, I am pleased to mention that the Metlife Foundation has surpassed $1 billion in total giving in its history, and the company intends to log another 156 years more. Sustainability is an essential part of Metlife's heritage.

Speaker Change: <unk> surpassed $1 billion in total giving in its history is at 156 year old company.

Speaker Change: And the intent to log on other hotter than 56 years more sustainability is an essential part of Metlife as heritage.

Michel Khalaf: As I close, one of the objectives of our Next Horizon Strategy was to emerge as a stronger, more predictable company as we approach the finish line of that five-year strategic cycle. We are on track to accomplish, if not exceed, each of the key targets and objectives we laid out relative to distributable cash, operating leverage, and return on equity. As I have said before, we do not stand still here at Metlife. We constantly look for opportunities to raise the bar and challenge ourselves further, pursuing these new challenges with passion and enthusiasm. Thank you, Michel, and good morning.

Michel Khalaf: As I close, one of the objectives of our next horizon strategy was to emerge as a stronger, more predictable company. As we approach the finish line of that five-year strategic cycle, we are on track to accomplish, if not exceed, each of the key targets and objectives we laid out relative to distributable cash, operating leverage, and return on equity. As I have said before, we do not stand still here at McCallife. We constantly look for opportunities to raise the bar and challenge ourselves further, pursuing these new challenges with passion and enthusiasm.

Speaker Change: As I close one of the objectives of our next horizon strategy was to emerge as a stronger and more predictable company.

Speaker Change: As we approach the finish line of that five year strategic cycle. We are on track to accomplish if not exceed each of the key targets and objectives, we laid out relative to distributable cash operating leverage and return on equity as I have said before we do not stand still here at Metlife.

Speaker Change: We constantly look for opportunities to raise the bar and challenge ourselves further pursuing these new challenges with passion and enthusiasm we.

Michel Khalaf: We are hard at work developing and pressure testing our next five-year strategy, which we are calling New Frontier. This will build on the core pillars of Next Horizon, while looking to accelerate growth, boost returns, and foster consistency. The first top on this journey will begin with our annual Board Strategy Review in September.

Speaker Change: We are hard at work developing and pressure testing our next five year strategy, which we are calling it new frontier.

Speaker Change: This will build on the core pillars of next horizon, while looking to accelerate growth boost returns and foster consistency.

Michel Khalaf: Subsequently, I look forward to sharing with you our plans for the future at our investor days scheduled for December 12 of this year.

John Mccallion: Now, I'll turn it over to John to cover our quarterly performance in more detail.

John Mccallion: Thank you, Michelle, and good morning. I will start with the 2Q24 supplemental slides, which provide highlights of our financial performance, and an update on our liquidity and capital position. Starting on page 3, we provide a comparison of net income to adjusted earnings in the second quarter. We had net derivative losses, primarily due to the strengthening of the US dollar versus the end, as well as higher interest rates. That said, derivative losses were partially offset by market risk benefit or MRB remeasurement gains due to the higher interest rates and stronger equity markets. Net investment losses were mainly the result of normal trading activity for fixed maturity securities in a higher rate environment.

Unknown Executive: I'll start with the 2Q24 supplemental slides, which provide highlights of our financial performance, as well as higher interest rates. That said, derivative losses were partially offset by market risk benefit or MRB remeasurement gains due to the higher interest rates and stronger equity markets. Net investment losses were mainly the result of normal trading activity for fixed maturity securities in a higher rate environment.

Unknown Executive: Overall, the investment portfolio remains well positioned, credit losses continue to be modest, and our hedging program performed as expected. However, this was partially offset by lower recurring interest margins. The group life mortality ratio was a record low of 79.1%, well below our annual target range of 84 to 89%, driven by favorable experience across all coverages. The strong group life results mirror the notably low number of U.S. deaths between the ages of 25 and 64 in April and May, according to CDC data.

John Mccallion: Overall, the investment portfolio remains well-positioned. Credit losses continue to be modest, and our hedging program performed as expected. On page 4, you can see the second quarter year-over-year comparison of adjusted earnings by segment, which should not have any notable items in either period. Adjusted earnings were $1.6 billion, up 9 percent and 11 percent on a constant currency. Davis, favourable underwriting, volume growth, and higher variable investment income drove the year-to-year increase. This was partially offset by lower recurring interest margins. Adjusted earnings per share were $2.28, up 18%, and up 20% on a constant currency basis. Moving to the businesses, group benefits adjusted earnings were $533 million, up 43% year-to-year, primarily due to favorable underwriting margins.

John Mccallion: The Group Black Mortality Ratio was a record low of 79.1%, well below our annual target range of 84% to 89%, driven by favorable experience across all coverages. The strong Group Black results mirrored the notably low number of US deaths between the ages of 25 and 64 in April and May, according to CDC data. Regarding non-medical health, the interest adjusted benefit ratio was 70.8% on the quarter, toward the bottom end of our annual target range of 69 to 74%, and below the prior quarter of 73.7%. Favourable disability results benefited from a reserve adjustment of approximately $30 million after tax.

Unknown Executive: Regarding non-medical health, the Interest Adjusted Benefit Ratio was 70.8% in the quarter, toward the bottom end of our annual target range of 69-74% and below the prior quarter of 73.7%. Favorable disability results benefited from a reserve adjustment of approximately $30 million after tax. Taking participating contracts into account, which dampened growth by roughly 200 basis points, Group Benefits 2Q24 year-to-date sales were up 11%. RAS investment spreads are 121 basis points, down 6 basis points sequentially. RAS-adjusted PFOs excluding pension risk transfers were up 4% year-over-year, primarily driven by strong sales of institutional income annuities as well as growth in UK longevity reinsurance.

John Mccallion: Turning to the top line, Group Benefits adjusted PFOs were up 3% year-over-year, taking participating contracts into account, which dampened growth by roughly 200 basis points. The underlying PFOs were up approximately 5% year-over-year, and at the midpoint of our 2024 target growth range of 4 to 6%. Group Benefits 2Q24 year-to-date sales were up 11%, driven by strong growth across most products, including our suite of voluntary products. RAS suggested earnings were $410 million, down 2% versus the prior year. Lower recurring interest margins were partially offset by higher variable investment income and strong volume growth. RAS investment spreads were 121 basis points, down 6 basis points sequentially, mainly due to the expiration of interest rate caps in the second quarter of 24.

John Mccallion: We anticipate that spread will remain between our annual target range of 115 and 140 basis points in the third quarter. Although we foresee an increase in variable investment income, it will likely be balanced out by reduced earnings from the expiration of the interest rate caps. RAS suggested PFOs, excluding pension risk transfers, were up 4% year-over-year, primarily driven by strong sales of institutional income annuities, as well as growth in UK longevity re-insurance. With regards to PRT, we had approximately $3.5 billion in deals in the second quarter, and continue to see an active market. Moving to Asia, adjusted earnings were $449 million, up 4% and 8% on a constant currency basis, primarily due to favorable underwriting margins and higher variable investment income.

Unknown Executive: With regard to PRT, we had approximately $3.5 billion in deals in the second quarter and continue to see an active market. Moving to Asia, adjusted earnings were $449 million, up 4% and 8% on a constant currency basis, primarily due to favorable underwriting margins and higher variable investment income. For Asia's key growth metrics, general account assets under management on an amortized cost basis were up 5% year-over-year on a constant currency basis, and sales were up 4% on a constant currency basis compared to a strong prior year quarter.

Speaker Change: Constant currency basis.

Speaker Change: Primarily due to favorable underwriting margins and higher variable investment income for Asia as key growth metrics General account assets under management on an amortized cost basis were up 5% year over year on a constant currency basis.

John Mccallion: For Asia's key growth metrics, general account assets under management on an amortized cost basis were up 5% year-over-year on a constant currency basis. Sales were up 4% on a constant currency basis compared to a strong prior year quarter, while Japan sales were down 19% year-over-year on a constant currency basis. Chris, primarily due to the impact of the involatility on foreign currency products. This was more than offset by strong sales growth of 60% in the rest of the region, including a large group case in Australia. Latin America adjusted earnings for $226 million, up 3% on a reported basis, and 8% on a constant currency basis, primarily driven by solid volume growth across the region and favorable underwriting.

Speaker Change: Sales were up 4% on a constant currency basis compared to a strong prior year quarter, while Japan sales were down 19% year over year on a constant currency basis.

Unknown Executive: While Japan's sales were down 19% year over year on a constant currency basis, this was more than offset by strong sales growth of 60% in the rest of the region, including a large group case in Australia. Latin America adjusted earnings for $226 million, up 3% on a reported basis and 8% on a constant currency basis, primarily driven by solid volume growth across the region and favorable underwriting. This was partially offset by lower Chilean and CAJE returns of a negative 2.4 percent in Q2 of 24 compared to a positive 1.4 percent in Q2 of the prior year, driven by growth across the region.

Speaker Change: Primarily due to the impact of yen volatility on foreign currency products.

Speaker Change: This was more than offset by strong sales growth of 60% in the rest of the region, including a large group case in Australia.

Speaker Change: Latin America adjusted earnings were $226 million up 3% on a reported basis and 8% on a constant currency basis, primarily driven by solid volume growth across the region and favorable underwriting.

John Mccallion: This was partially offset by lower Chilean and Cahay returns of a negative 2.4% in Q2 of 24, compared to a positive 1.4% in Q2 of the prior year. Latin America's top line continues to form well, as adjusted PFOs were up 9% or 12% on a constant currency basis, driven by growth across the region. Amia adjusted earnings were $77 million, up 10% and 20% on a constant currency basis, driven by volume growth and higher recurring interest margins. This was partially offset by less favorable expense margins year-over-year. Amia adjusted PFOs were up 7% and 12% on a constant currency basis, and sales were up 31% on a constant currency basis, reflecting strong growth in Turkey, the Gulf, and the UK.

Speaker Change: This was partially offset by lower Chilean and coffee returns of a negative two 4% in Q2 of 24 compared to a positive one 4% in Q2 of the prior year.

Speaker Change: Latin America's top line continues to perform well as adjusted <unk> were up 9% or 12% on a constant currency basis drew.

Unknown Executive: AMEA adjusted earnings were $77 million, up 10% and 20% on a constant currency basis, driven by volume growth and higher recurring interest margins. Metlife Holdings adjusted earnings were $153 million, down 27% versus the prior year quarter.

John Mccallion: MetLife Holdings adjusted earnings were $153 million, down 27% versus the prior year quarter. The primary driver was the foregone earnings due to the reinsurance transaction that closed in November. Corporate another adjusted loss was $220 million versus an adjusted loss of $228 million in the prior year. The company's effective tax rate on adjusted earnings in the quarter was approximately 24% and within a 2024 guidance range of 24 to 26%. On page five, this chart reflects our pre-tax variable investment income for the prior five quarters, including $298 million in Q2 of 24. Private equity portfolio, which makes up the vast majority of the VII asset balance, had a positive 2.3% return in the quarter, while our real estate equity funds had a negative 1.4% return in the quarter.

Unknown Executive: The company's effective tax rate on adjusted earnings in the quarter was approximately 24% and within our 2024 guidance range of 24 to 26%. On page five, this chart reflects our pre-tax variable investment income for the prior five quarters, including $298 million in Q2 of 24. As a reminder, both private equity and real estate equity funds are reported on a one-quarter lag. We anticipate that new money yields will remain above roll-off yields given the prevailing interest rate environment.

John Mccallion: As a reminder, both private equity and real estate equity funds are reported on a 1.4% lag. Looking ahead, we expect VII returns to continue to improve over the course of the second half of the year. On page six, we provide VII post-tax by segment for the last four quarters and the second quarter of 24. As you can see in the chart, Asia, RIS, and MetLife holdings continue to hold the largest proportion of VII assets given their long-dated liability profile. Now, turn it to page seven. The chart on the left of the page illustrates the split of our net investment income between recurring and VII for the last three years, including second quarters of 2023 and 2024.

Speaker Change: Turns to continue to improve over the course of the second half of the year.

Speaker Change: On page six we provide VII post tax by segment for the last four quarters in the second quarter of 'twenty four.

Speaker Change: As you can see in the chart Asia, our S and Metlife holdings continue to hold the largest proportion of VII assets given their long dated liability profile.

Speaker Change: Now turning to page seven the chart on the left of the page illustrates the split of our net investment income between recurring and VII for the last three years, including second quarters of 2023 and 'twenty four.

John Mccallion: Adjusted net investment income in Q2 of 24 was up $120 million year over year. Recurring investment income has benefited from higher interest rates, partially offset by the roll-off of interest rate caps. In addition, we have seen VII improvement driven by higher private equity returns. Turning your attention to the right side of the page, this shows our new money yield versus roll-off yield since second quarter of 21. Over the last nine quarters, new money yields have outpaced rolloff yields, consistent with higher interest rates. In the second quarter of 24, our global new money rate achieved the yield of 6.27%, 63 basis points higher than the rolloff rate.

Speaker Change: Adjusted net investment income in Q2 of 24 was up $120 million year over year.

Speaker Change: Recurring investment income has benefited from higher interest rates, partially offset by the roll off of interest rate caps.

Speaker Change: In addition, we have seen VII improvement driven by higher private equity returns.

Speaker Change: Turning your attention to the right side of the page that shows our new money yield versus roll off yield since second quarter of 'twenty one.

Speaker Change: Over the last nine quarters, new money yields have outpaced roll off yields consistent with higher interest rates in the second quarter of 24, our global new money rate achieved a yield of six 7%.

Speaker Change: 63 basis points higher than the roll off rate.

John Mccallion: We anticipate that the new money yields will remain above rolloff yields given the prevailing interest rate environment. However, the spread can fluctuate depending on the mix of sales across our businesses. Now moving to expenses discussed on page 8, this chart shows a comparison of our direct expense ratio for full year 2023 of 12.2% and the first two quarters of 24, both at 11.9%. As we have highlighted previously, we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results. Our Q2 direct expense ratio benefited from solid top line growth and ongoing expense discipline.

Unknown Executive: However, the spread can fluctuate depending on the mix of sales across our business. Now moving to expenses discussed on page eight, this chart shows a comparison of our direct expense ratio for full year 2023 of 12.2% and the first two quarters of 24, both at 11.9%. Our Q2 Direct Expense Ratio benefited from solid top-line growth and ongoing expense discipline, demonstrating our consistent execution and a sustained efficiency mindset. I will now discuss our cash and capital positions on page 9.

John Mccallion: Looking ahead, we would expect our direct expense ratio to be higher in the second half of the year, consistent with the seasonal nature of our business. That said, our performance year-to-date positions as well to achieve a full year, 2022 direct expense ratio of 12.3% or below, demonstrating our consistent execution in a sustained efficiency mindset. I will now discuss our cash and capital positions on page 9. Cash and liquid assets at the holding companies were $4.4 billion at June 30, which is above our target cash buffer of $3 to $4 billion, but down from $5.2 billion at March 31.

Unknown Executive: Cash and liquid assets at the holding companies were $4.4 billion at June 30th, which is above our target cash buffer of $3 to $4 billion. The sequential decline in holding companies' cash is primarily the result of approximately $1.5 billion used in April for a debt maturity and a debt redemption, partially offset by a $500 million senior debt issuance in June.

John Mccallion: The sequential decline in holding companies' cash is primarily a result of approximately $1.5 billion used in April for a debt maturity and a debt redemption. Partially offset by a $500 million senior debt issuance in June. Beyond this, cash and the holding companies reflect the net effects of subsidiary dividends, payment of our common stock dividend, and share repurchases of roughly $900 million in the second quarter, as well as holding company expenses and other cash flows. In addition, we have repurchase shares totaling approximately $270 million in July. For our U.S. companies, preliminary, second quarter year-to-date, 2024 statutory operating earnings were approximately $1.9 billion, essentially flat year-over-year.

Unknown Executive: Beyond this, cash in the holding companies reflects the net effects of subsidiary dividends, payment of our common stock dividend, and share repurchases of roughly $900 million in the second quarter, as well as holding company expenses and other cash flows. In addition, we repurchased shares totaling approximately $270 million in July. Finally, we expect the Japan solvency margin ratio to be approximately 670% as of June 30th, which will be based on statutory statements that will be filed in the next few weeks.

John Mccallion: While net income was approximately $1.3 billion, we estimate that our total U.S. Statutory adjusted capital was approximately $18 billion as of June 30, down 2% from March 31, 2024, primarily due to dividends paid and derivative losses, partially offset by operating earnings. Finally, we expect that Japan's solvency margin ratio to be approximately 670% as of June 30, which will be based on statutory statements that will be filed in the next few weeks. Before I wrap up, I would just like to highlight that we have an updated commercial mortgage loan slide as of June 30 in the appendix.

Unknown Executive: Before I wrap up, I would just like to highlight that we have an updated commercial mortgage loan slide as of June 30th in the appendix entitled, Generating Solid, Recurring Free Cash Flow. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join us. We'll go to our first question from Tom Gallagher at Evercore.

John Mccallion: Overall, the CML portfolio continues to form as expected with attractive loan-to-value and debt service coverage ratios, as well as the expectation of modest losses. In summary, the underlying strength of our business fundamentals was evident with strong top-line growth, disciplined underwriting, and prudent expense management. Our group benefits segment achieve record earnings. Higher interest rates continue to support flows and spreads, and we continue to see improvement in variable investment income. Metlife continues to move forward from a position of strength, with a strong balance sheet and a diverse side set of market-leading businesses, generating solid, recurring free cash flow, and we are committed to deploying this free cash flow to achieve responsible growth and build long-term sustainable value for our customers and our shareholders.

Operator: And with that, I'll turn the call back to the operator for your questions. Thank you.

Operator: We will now begin the question and answer session. If you have dialed in, who would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: Withdraw your question simply press Star one again.

Thomas Gallagher: We'll go to our first question from Tom Gallagher at Evercore. Good morning. I wanted to ask a couple on the group benefits business. First, can you just unpack the non-medical health results? How was the underlying disability versus dental? Also, can you just comment on pricing, maybe on both of those products, and how you think about renewals? Thanks.

Speaker Change: We'll go to our first question from Tom Gallagher of Evercore.

Tom Gallagher: Good morning.

Unknown Executive: Good morning. I wanted to ask a couple of questions about the group benefits business. First, can you just unpack the non-medical health results? What was the underlying disability?

Speaker Change: Wanted to ask if a couple on the group benefits business first is can you just unpack the non medical health results. How we're how was the underlying disability versus dental a weird. It also can you just comment on <unk>.

Speaker Change: Pricing, maybe on both of those products and how you think about renewals. Thanks.

Speaker Change: Yeah.

Ramy Tadros: Sure, Tom.

Ramy Tadros: Sure, Tom. Good morning. It's Ramy Tadros here.

Rami: Oh sure Tom Good morning, it's a it's Rami Todd was here.

Ramy Tadros: Good morning. It's Ramitadros here. So I think just from a headline ratio perspective, just to reference John's remarks, the overall ratio of 70.8, you want to just normalize that for one-off non-recurring reserve adjustment so that gets you back into kind of the 72.2 range.

Speaker Change: So I think just from a headline ratio perspective, just to reference John's remarks. The overall ratio of 78, you want to just normalized out for a one off nonrecurring reserve adjustment. So that gets you back into kind of the 72 points.

Ramy Tadros: So I think just from a headline ratio perspective, just to reference John's remarks, the overall ratio of 70.8, you want to just normalize that for a one-off non-recurring reserve adjustment. So that gets you back into kind of the 72.2 range. So on your question about dental and disability, so in the second quarter for dental, we did see utilization rates come down from the first quarter. And what you're seeing here is just normal seasonality in that business, where Q1 tends to be heavier in terms of utilization as these benefits are reset typically at the beginning of the year.

Speaker Change: Two range.

Ramy Tadros: On your question on dental and disability. In the second quarter for dental, we did see utilization rates come down from the first quarter. What you're seeing here is just normal seasonality in that business and where Q1 tends to be heavier in terms of utilization as these benefits reset typically at the beginning of the year. In terms of how we think about dental and dental pricing going forward, if you step back from the current quarter, as dental is an inflationary product and we do deploy a number of levers to ensure we manage and stay within our target margins.

Speaker Change: So on your question on on dental and.

Speaker Change: And disability so.

Speaker Change: In the second quarter for dental we did see utilization rates come down from the first quarter.

Speaker Change: And what Youre seeing here is just normal seasonality in that business.

Rami: And Q1 tends to be heavier in terms of utilization as these benefits are reset typically.

Rami: At the beginning of the year.

Speaker Change: And in terms of how we think about dental and dental pricing going forward. If you step back from the current quarter.

Ramy Tadros: And in terms of how we think about dental and dental pricing going forward, if you step back from the current quarter, as you know, dental is an inflationary product, and we do deploy a number of levers to ensure we manage and stay within our target margins. And the two I would highlight here are that the majority of our claims come within our network, which gives us a greater line of sight and control over margin.

Speaker Change: As you know dental is an inflationary product.

Speaker Change: And we do deploy a number of levers to ensure we manage and stay within our target margins.

Ramy Tadros: The two I would highlight here is that the majority of our claims come with our network, which gives us a greater line of sight and control over margin. The other key lever here is renewal pricing. This is a business where we remain disciplined in terms of our rate guarantee periods. In aggregate, we can reprise about 80% of our book every year. That's exactly what we've been doing. We've been seeing overall trends in the last year and a half. We've seen pressure on margins because of that, and we've been taking appropriate action, pricing action across the entire block in response to that trend.

Speaker Change: And the two I would highlight here is that the majority of our claims come with their own network, which gives us a greater line of sight and control over margin.

Ramy Tadros: And the other key lever here is renewal pricing. And this is a business where we remain disciplined in terms of our rate guarantee periods. And in aggregate, we can reprice about 80% of our book every year. And that's exactly what we've been doing.

Speaker Change: And the other key lever here is renewal pricing and this is a business where we remain disciplined in terms of a rate guarantee periods and in the aggregate.

Speaker Change: We can reprice about 80% of our book every year.

Ramy Tadros: So we've been seeing overall trends in the last kind of call it year and a half take up, and we've seen pressure on margins because of that. And we've been taking appropriate action, pricing action across the entire block in response to that trend. At this stage, most of these actions are behind us. We've implemented them across the book.

Ramy Tadros: At this stage, most of these actions are behind us. We've implemented them across the book, and going forward will continue to monitor the trend and take actions as necessary, but just think of that as more business as usual of how you manage an inflationary product like dental.

Ramy Tadros: And going forward, we'll continue to kind of monitor the trend and take actions as necessary. But just think of that as more business as usual in how you manage an inflationary product like dental. On disability, I would say the underlying block is running very much in line with expectations.

Ramy Tadros: On disability, I would say the underlying block is running very much in line with expectations. We see some slight increases in incidence, but severity has come down and we continue to still see very strong recoveries. The core business continues to be healthy and very much in line. I would say just on renewals, in aggregate, we're hitting our target renewal pricing across the book, and we're still maintaining very strong persistency here. We feel pretty good about both the new business, both about the renewal pricing coupled with persistency, and you clearly need to watch both in this business.

Ramy Tadros: We see some slight increases in incidence, but severity has come down, and we continue to still see very strong recoveries. And so, you know, the core business continues to be healthy and very much in line. And I would say just on renewals, in aggregate, you know, we're hitting our target renewal pricing across the book. And we're still maintaining very strong persistency here. So we feel pretty good about both the new business and the renewal pricing coupled with persistency. And you clearly need to watch both in this business, putting some pressure on sales and pricing. Is there, are you guys seeing that? Are you?

Speaker Change: We're still maintaining very strong persistency here, so we feel pretty good about both the new business, both about the renewal pricing, coupled with persistency and utility to watch both in this business.

Thomas Gallagher: Great, thanks for that, Ramy.

Speaker Change: Great. Thanks, Thanks for that Rami and just my quick follow up.

Ramy Tadros: Just a quick follow-up. How are you feeling about the level of competition in the market? We've heard about new entrance, putting some pressure on sales and pricing. Are you guys seeing that, or are you not affecting you in terms of margin and pricing? The short answer is that it's not affecting us. I would overall characterize the market as competitive, largely rational. You occasionally see aggressive pricing, but that is more of an outlier than the norm here, Tom. Our perspective here is also informed by ongoing rigorous surveillance. We look at every single metric in the market on an ongoing basis, and I would say we have not seen any evidence of a change in the competitive environment.

Speaker Change: How are you feeling about the level of competition in the market, we've heard about new entrants.

Speaker Change: Putting some pressure on sales and pricing.

Speaker Change: Are you guys seeing that or are you.

Unknown Executive: not affecting you in terms of margin and price. So, while price is important, the basis of how we compete extends to multiple factors beyond price. We'll move next to Suneet Kamath at Jeff.

Speaker Change: Is it not affecting you in terms of margin and pricing.

Tom: I mean, the short answer is that it's not affecting us I would overall characterized the market as competitive a largely rational you occasionally see aggressive pricing, but that is more of a of an outlier than the norm here Tom.

Speaker Change: I mean, our perspective here is also informed by ongoing rigorous surveillance, we look at every single metric.

Tom: In the market on an ongoing basis and I would say we have not seen any evidence of a change in the competitive environment.

Ramy Tadros: The key point here for us is, as we've always talked about before, we have positioned this business to compete on a range of factors, inclusive of price. So, while price is important, the basis of how we compete extends to multiple factors beyond price. This is ultimately a scale business; capabilities matter, experience matters, product breadth matters, and the ability to invest, which comes with scale, also really matters. So some of the new entrants that you've referenced are pretty small in terms of their overall premium size. They largely operate at the very small end of the market with network capabilities, and we haven't seen any meaningful impact or any impact on our book from those new competitors.

Tom: The key point here for US is as we've always talked about before we have positioned this business to compete on a range of factors.

Tom: Inclusive of price.

Speaker Change: So while price is important the basis of how we compete extends to multiple factors beyond price.

Speaker Change: This is ultimately a scale business capabilities matter experience matter product breadth matters and ability to invest which comes with scale also really matters. So some of the new entrants that you've referenced are pretty small in terms of their overall premium size.

Speaker Change: The largely operate.

Speaker Change: The very small end of the market with a narrower capabilities and we haven't seen any meaningful impact or any impact on our book from from those new competitors.

Thomas Gallagher: Great, thanks.

Speaker Change: Great. Thanks.

Jeffries: We'll move next, just in the comments at Jeffries.

Speaker Change: Well move next to Simeon Commerce at Jefferies.

Jeffries: Thanks.

Simeon Commerce: Thanks, Good morning, maybe just to follow up on group benefits.

Jeffries: Good morning. Maybe just to follow up on ungroup benefits. The earnings power of this business has improved pretty substantially. I mean, normally think about this as maybe a $400 million business, and excluding the reserve release, you're over 500 million.

Speaker Change: The earnings power of this business has improved pretty substantially I mean normally think about this as maybe a 400 million dollar business and.

Ramy Tadros: Excluding the reserve release, you're over $500 million. Is that a sustainable level of earnings power for this business, or is there anything that we should be thinking about that maybe broke the right way in the, Yeah, good morning. It's Ramy here again. I think the one item I would point you here is the group life ratio. This is a historical low for us. And the lower volume, if you step back and look at the CDC data in terms of all-cause death in the U.S. population, that has come down significantly in the second quarter as well.

Speaker Change: Excluding the reserve release, you're over $500 million.

Ramy Tadros: Is that sort of a sustainable level of earnings power for this business, or is there anything we should be thinking about that maybe broke the right way in the quarter?

Ramy Tadros: Yeah, good morning. It's from here again. I think the one item I would point to here is the group life ratio. This is a historical low for us. It's mainly driven by lower volume. And the lower volume, if you step back and look at the CDC data, in terms of the all cost death in the US population, that has come down significantly in the second quarter as well. So I would say that's the one here that was tailwind in the quarter, which we're pleased with.

Ramy Tadros: So I would say that's the one here that was a tailwind in the quarter, which we're pleased with. But if you think about our expectations on a go-forward basis, we think mortality will kind of moderate back in line with historical levels. You'll still see the, [inaudible] Transcription by CastingWords. Hey, thanks.

Ramy Tadros: But if you think about our expectations on a go-forward basis, we think mortality will kind of moderate back in line with historical levels. You'll still see the seasonality that you see in this business.

Ramy Tadros: And so, you know, a better view of that on a run rate basis, I'll bring you back to our guidance range. And if you look at that on a year-to-date basis, we're about 84.7. So I think that's the one that you want to kind of look out for in terms of the one item this quarter, which was material, which gave us a bit of a tailwind here. But if you look at that on a year-to-date basis, we're about 84.7. So we're about 84.7. So we're about 84. I got it. That makes sense.

Suneet Kamath: And then I guess on RIS in terms of the spreads. I mean, I think last quarter you guided to maybe eight to ten bits of sequential compression. I think you came in much better than that. So just curious what you did to be that too. And then how should we be thinking about the progress of that spread, you know, as we kind of transition to 3Q and then ultimately 4Q?

Speaker Change: Been much better than that so just curious what you would attribute that to and then how should we be thinking about the progress of that spread as we kind of transition to <unk> and then ultimately <unk>.

Speaker Change: Yeah.

John Mccallion: Yeah, thanks, Suneet.

Speaker Change: Yeah. Thanks, Sidney it's John good morning.

John Mccallion: It's John. Good morning. You know, so as you mentioned, so in the quarter we came at 121 basis points. That was within the 115 to 140 guidance. And then, if you exclude VII, it was 119. And so a couple of things, right? We saw continued improvement in VII in the quarter. As you mentioned, we expected a decline from the first quarter as a result of lower recurring interest margins, you know, due to the roll-off of the interest rate caps. And you know, we did anticipate it to be eight to ten. It came in less. And it's primarily due to higher than expected interest rates, which we took advantage of during the course of the quarter.

Speaker Change: Yes, so as you mentioned during the quarter. We came in at 121 basis points that was within the $1 15 to $1 40 guidance.

Speaker Change: And then if you exclude VII was 119 and so a couple of things right. We saw continued improvement in VII in the quarter.

Sidney: As you mentioned, we expected a decline from first quarter as a result of lower recurring interest margins.

Sidney: Due to the roll off of the interest rate caps in.

Sidney: We did anticipate it to be eight to 10. It came in less and that was primarily due to higher than expected interest rates, which we took advantage of during the course of the quarter and so so.

John Mccallion: And so it was a little better than we thought. You know, having said that, I think our guidance that we gave last quarters, we continued to believe another eight to ten would occur during the course of the Q3 on a XVI as most of the remaining interest rate caps mature, you know, over the course of the next few months. And then, you know, we should see spread stabilizing Q4. Most of the in-the-money interest rate caps purchased, you know, primarily during kind of pre and even in the COVID era, matured by then. So, you know, that's kind of how I would kind of play out the rest of this year.

Sidney: So it was a little better than we thought having.

Sidney: Having said that I.

Sidney: I think our guidance that we gave last quarter as we continued to believe another eight to 10 would occur during the course of the Q3.

Sidney: On a ex VII is most of the remaining interest rate caps mature.

Sidney: Over the course of the next few months and then.

Sidney: We should see spreads stabilize in Q4 most of the in the money interest rate caps purchased primarily during kind of pre.

Sidney: And even in the Covid era matures by then so.

Sidney: That's kind of how I would kind of play out the rest of this year and I think if you go back to what we said at the outlook call, which was we thought all in 2024 would would show a all in spreads similar to 2023.

John Mccallion: And, you know, I think if you go back to what we said at the Outlook call, which was, we thought all in 2024 would show an all-in spread similar to 2023. That's generally where we're trending towards.

Sidney: That's generally where we're we're trending towards.

Suneet Kamath: Okay. Thanks, John.

John Hall: Okay. Thanks, John.

Ryan Krueger: Next, I'll move to Ryan Krueger at KBW. Hey, thanks. Good morning. I guess on Japan, could you get some perspective on the sales environment there? You know, I can keep you as a tougher year-ago comparison, but you had some declines in sales. So, just hoping to get a little more color on the different product areas there.

Speaker Change: Next we'll move to Ryan Krueger at VW.

Unknown Executive: Good morning. I guess on Japan, could you give some perspective on the sales environment there? You know, I think it was a tougher year ago, but you had some declines in sales. So just hoping to get a little more color on the different product areas.

Ryan Krueger: Hey, Thanks, good morning.

Ryan Krueger: On Japan could you give some perspective on the sales environment there.

Sidney: Yes.

Speaker Change: Tougher year ago comparisons.

Sidney: Decline.

Speaker Change: So just hoping to get a little more color on the different product areas there.

Lyndon Harris: Hey, Ryan. It's Lyndon Harris. So, let me give you some color on sales across Asia, including what we're seeing in Japan. So, sales for the quarter grew 5%, including our devastated operations in Malaysia. We also saw a 5% growth in assets and the management. While Japan single premium FX sales were impacted by the end weakness, we did see an offset when we look at the cross-the-rest of Asia. Japan sales were lower in the single premium US dollar products, but as you said, we're up against a tough comparative. In the second quarter, the week again did impact the overall market for foreign currency products.

Sidney: Hey, Ryan its Linden here. So let me give you some color on sales across Asia.

Sidney: Including what we're seeing in Japan.

Sidney: So sales for the quarter grew 5%, including our divested operations in Malaysia, we.

Sidney: We also saw a 5% growth in assets under management.

Unknown Executive: While Japan's single premium FX sales were impacted by the yen weakness, we did see an offset when we looked at across the rest of Asia. Japan's sales were lower in the single premium U.S. dollar products, but as you said, we're up against a tough comparative. Look, we have a diversified portfolio, and we are rebalancing our product mix between yen and U.S. dollars. So if you look at the outlook for yen products, it has improved with the higher interest rates and also with the positive macro environment that we're seeing in Japan. Now we have introduced a couple of new products, both a variable life as well as a cancer product earlier this year, and they both have performed very well.

Sidney: <unk>.

Sidney: While Japan single premium FX sales were impacted by the yen weakness.

Sidney: We did see an offset when we look at across the rest of Asia.

Speaker Change: Japan sales were lower in the single premium U S dollar products, but as you said, we are up against a tough comparative.

Sidney: In the second quarter, the weaker yen did impact the overall market for the foreign currency products.

Lyndon Harris: And so, if we look at the overall bank of market, this market is shrunk, but we continue to maintain our share in this space. Look, we have a diversified portfolio, and we are rebalancing between product mix between yen and US dollars. So, if you look at the outlook for yen products, it has improved with higher interest rates and also with the impositive macro environment that we're seeing in Japan. Now, we have introduced a couple of new products, both the variable life as well as the cancer product earlier this year, and they both have performed very well.

Sidney: And so if we look at the overall bank market. This market has shrunk, but we continue to maintain our share in this space.

Speaker Change: Look we have a diversified portfolio and we are rebalancing between product mix between yen and U S. Dollars. So if you look at the outlook for yen products. It has improved with the higher interest rates and also with the positive macro environment that we're seeing in Japan.

Speaker Change: Now we have introduced a couple of new products, both the variable life as well as the cancer product earlier this year and they both have performed very well.

Lyndon Harris: We've got other product launches planned in the pipeline, some coming in later this year as well as at the beginning of next year. So, we've got strong growth in the rest of Asia, and that's also contributing to the overall story. We saw solid performance in Korea, in China, in India, and also strong euro of your growth in all these countries. And then in the quarter, in Japan, we benefited from a large group case, which came on risk in the second quarter. If we look at the outlook, first half actual sales were in line with the prior year, and we expect a similar trend as we go to the second half.

Unknown Executive: We've got other product launches planned in the pipeline, some coming in later this year as well as at the beginning of next year. We've got strong growth in the rest of Asia, and that's also contributing to the overall story. We saw solid performance in Korea, in China, in India and also strong year-over-year growth in all these countries. And then in the quarter in Japan, we benefited from a large group case which came on risk. So given this, we expect full year sales for Asia to be flat year over year. Yeah, and I would just, just to correct, you know, it's a large group case in Australia. I think he mentioned Japan, but

Sidney: We've got other product launches planned in the pipeline some coming in later this year as well as at the beginning of next year.

Sidney: We've got strong growth in the rest of Asia and that's also contributing to the overall story, we saw solid performance in Korea in China in India, and also strong year over year growth in all these countries.

Sidney: And then in the quarter in Japan, we benefited from a large group case, which came on risk in the second quarter.

Sidney: If we look at the outlook first half actual sales were in line with the prior year and we expect a similar trend as we go through the second half. So given this we expect full year sales for Asia to be flat year over year.

Lyndon Harris: So, given this, we expect full-year sales for Asia to be flat year over year. I hope that helps.

Sidney: Hope that helps.

Speaker Change: And I would just just to correct yeah. It's a large group case in Australia, I think you mentioned, Japan, but.

Lyndon Harris: It's a large group case in Australia. I think he mentioned Japan, but... Oh, sorry. Yeah, in Australia, you know. Thanks.

Sidney: Oh, sorry, yeah in Australia.

Unknown Executive: Thanks. One quick follow up. I think you, I think there's been some elevated surrender activity in Japan, uh... have some asymmetrical uh... impacts when rates rates rise but as we know the overall economic value of the businesses uh... improved so the other thing we saw in this quarter is it's generally a heavier cash out quarter for us we have higher dividends we pay taxes so there's a little bit of uh... of timing there, And then, as you mentioned, you know, the new ESR comes into effect April 1st of 2025.

Speaker Change: Thanks, One quick follow up I think you I think theres been some elevated render activity in Japan.

Lyndon Harris: One quick follow-up. I think there's been some elevated surrender activity in Japan. Any more info on that? And to what extent has that impacted Irving in recent quarters? Yeah, now we did see some benefit in earnings. We saw a 4% increase in adjusted earnings on a reported, as well as an 8% increase on a constant currency basis. This was driven both by favorable underwriting given by the surrenders as well as variable investment income. When you look at surrender activities, it was higher than expected in the quarter given we had the week again as some customers choose to lock in some of their gains.

Speaker Change: Just any more info on that and to what extent has that impacted earnings in recent quarters.

Speaker Change: Okay.

Speaker Change: Yeah now we did see some benefit in earnings we saw a 4% increase in adjusted earnings on a reported as well as an 8% increase on a constant currency basis. This was driven both by favorable underwriting given by by the surrenders as well as variable investment income when you look at surrender.

Sidney: Our activities.

Sidney: It was higher than expected in the quarter, given we had the weaker yen as some customers choose to lock in some of the gains.

Lyndon Harris: And if we look at the VII in the quarter, Asia does get a higher allocation of real estate equity funds in the quarter. And so, in the quarter, we did see better performance in the real estate relative to the prior year. We've also had good expense management in the quarter, and that's contributed to the stronger earnings.

Sidney: And if we look at the VII in the quarter.

Speaker Change: Asia does get a higher allocation of real estate equity funds in the <unk>.

Sidney: And so in the quarter, we did see better performance in the real estate relative to the prior year.

Sidney: Also had good expense management in the quarter and that's contributed to the stronger earnings.

Lyndon Harris: If you look at the outlook for the year, we expect full year earnings to kind of remain strong in line with guidance. VII performance will continue to be a factor that will impact our earnings going forward.

Sidney: If you look at the outlook for the year, we expect full year earnings to kind of remain strong in line with guidance.

Sidney: High performance will continue to be a factor that will impact our earnings going forward.

Wesley Carmichael: Thank you. We'll go next to Wes Carmichael at Autonomous Research. Hey, good morning. Thanks for taking the question. Maybe just focusing on Japan for a second, but with the SMR ratio around 670% in the quarter, could you maybe just give us an update regarding the transition to ESR in Japan if there's been any material changes and how you're feeling about implementation at this point?

Speaker Change: Thank you.

Speaker Change: We will go next to Wes Carmichael at Autonomous research.

Wes Carmichael: Hey, good morning, Thanks for taking my question, maybe just focusing on Japan for a second but with the SLR ratio around 670% in the quarter could you maybe just give us an update regarding the transition to ESR in Japan, if there's been any material changes in how youre feeling about implementation at this point.

John Mccallion: Hey, hey, Wes, it's John. Good morning. So, as you mentioned, 670% is our estimate for the quarter. We'll file that in a few weeks.

Speaker Change: Hey, Hey, Wes it's Jon good morning.

Wes: So as you mentioned was 670 is our estimate for the quarter will file that in a few weeks.

John Mccallion: Just like to start out by saying no concerns around capital generation or dividends, right? And that ratio tends to have some asymmetrical impacts when rates rise, but as we know, the overall economic value of the business is improved. So the other thing we saw in this quarter is it's generally a heavier cash out quarter for us. We have higher dividends; we pay taxes. So there's a little bit of timing there.

Speaker Change: Just like to start out by saying no no concerns around capital generation or dividends right.

Speaker Change: And that ratio tends to.

Speaker Change: I have some asymmetrical impacts when rates rates rise, but as we know the overall economic value of the businesses improve so the other thing we saw in this quarter is generally a heavier cash out quarter for us we have higher dividends, we pay taxes, so there's a little bit of of timing there.

John Mccallion: And then, as you mentioned, the new ESR comes into effect April 1st of 2025. We'll report on that for the first time March 31st of 2026. And that is more of an economic framework, one of which that we have typically managed this business. We've used economic as well as status. We think about product pricing and development and things like that.

Speaker Change: And then as you mentioned you know the new ESR comes into effect April one.

Speaker Change: 2025, we will report on that for the first time March 31, 2026, and that is more of an economic framework, one of which that we have typically manage this business. Yeah. We've used economic as well as status, we think about like product pricing and development and things like that so.

Unknown Executive: We'll report on that for the first time on March 31st, 2026. And just maybe, switching to the commercial mortgage loan portfolio, I think the loan to value ratio has deteriorated a little bit, at least, quarter over quarter. But could you give us an update on your watch list? Any loans that are in the foreclosure process? And if there's any proper, okay.

John Mccallion: So that's kind of a good place to start from. In addition, I'd say implementation is going well. We don't see any big issues. There's some few items that we're just continuing to work through with the regulator. But even if those don't come to fruition, we can certainly manage, but we're hopeful to make some improvements to the current situation. All in, we're comfortable. And I'd say supportive of moving from the SMR to the ESR.

Speaker Change: So that's.

Speaker Change: Kind of a good place to start from and.

Speaker Change: In addition.

Speaker Change: Yeah, I'd say implementation is going well, we don't see any big issues or some a few items that were just continuing to work through.

Speaker Change: You know with the regulator.

Speaker Change: But even if those don't come to fruition, we can certainly manage but we're hopeful to make some improvements to the you know kind of the current situation all in where we're comfortable and I'd say I'd.

Speaker Change: I'd say are supportive of moving from the <unk> to the ESR.

Speaker Change: Yeah.

Wesley Carmichael: Thanks, John. Just maybe switching to the commercial mortgage loan portfolio.

Speaker Change: Thanks, John and just maybe switching to the commercial mortgage loan portfolio.

John Mccallion: I think the loan value ratio has deteriorated a little bit, at least in office, quarter over quarter. But could you give us an update on your watch list, any loans that are in the foreclosure process, and if there's any properties where you might be expecting to take them on balance sheet? Thanks. Okay. Great. Thanks, Wes.

Speaker Change: Undervalue ratios deteriorated a little bit at least in office quarter over quarter, but could you give us an update on your watch list any loans that are in the foreclosure process and if theres any properties, where you might be expecting to take them on balance sheet.

Speaker Change: Thanks.

Unknown Executive: Thanks. Thanks, Wes. There is a lot in there to unpack, but let me maybe start with my LTV.

Speaker Change: Okay, great. Thanks, Thanks, Wes a lot in there to unpack, but let me just maybe start with Ltvs. So as you mentioned.

John Mccallion: A lot in there to unpack, but let me just maybe start with my LTV. So, as you mentioned, and we kind of forecasted this in the first quarter. We thought a year prior, we had kind of given some peak to trial views. We thought it had another 10% broadly to go in some of the more distressed areas. And, as you know, when we go through our annual appraisal process, it happens throughout the year. We typically wait for the second quarter; we find it hard to do it in the first quarter because we'd like to get financial information in our hands before we start that.

Unknown Executive: So as you mentioned, and we kind of forecasted this in the first quarter, we thought, you know, a year prior, we had kind of given some peak to trough views, we thought it had another 10% broadly to go in some of the more distressed areas. And, as you know, when we go through our annual appraisal process, it happens throughout the year. Uh, look, I think it's playing out as expected. Um, you know, last year we had write-offs of roughly 20. We think this year you're kind of closer to maybe a hundred, but maybe below.

Speaker Change: And we kind of forecasted this in the first quarter, where we thought.

Speaker Change: Your prior we had kind of given some peak to trough views. We thought it had another 10% broadly to go in some of those in more distressed.

Speaker Change: Areas and as you know when we go through our annual appraisal process that happens throughout the year, we typically wait for the second quarter.

Speaker Change: We find it hard to do it in the first quarter, because we'd like to get financial information in our hands before we start that so <unk>.

John Mccallion: So, you know, 2Q tends to be a heavy evaluation quarter. And so that's kind of what we saw happen, generally in line with expectations. Overall, LTV ticked up a point overall, a couple points more in office. And then, as we look out for the rest of this year, probably the heavier ones were done in the second quarter. We'll still see some, I'd say modest deterioration, maybe another point overall in the second half, and a little more, maybe a couple points in office. Look, I think it's playing out as expected. Last year, we had write-offs of roughly 20.

Speaker Change: <unk> tends to be a heavy.

Speaker Change: Reevaluation quarter, and so that's kind of what we saw happen generally in line with expectations overall.

Speaker Change: LTV ticked up a point overall, a couple of points more in office.

Speaker Change: And then as we look out for the rest of this year.

Speaker Change: The heavier ones were done in the second quarter, we will still see some I'd say modest deterioration maybe another point overall.

Speaker Change: In the second half and a little more maybe a couple of points and in office.

Speaker Change: Look I think it's playing out as expected.

Speaker Change: Last year, we had write offs of roughly 20, we think this year you're in kind of closer to maybe 100, but maybe below.

John Mccallion: We think this year you're in kind of closer to maybe 100, but maybe below. So still modest. We had a little under 30 million year-to-date so far. And we think we're on track for kind of that, you know, kind of closer to 200 million of write-offs for the year, very well within, you know, kind of the modest area for us in terms of our capital and size and position. So, again, we think, you know, the environment is, despite the pressure, you know, economic growth remains healthy, and that's actually good news for real estate fundamentals. You know, despite the office sector still probably has some, you know, kind of some work to do there, but you also have a moderate construction pipeline, which is benefiting all properties.

Speaker Change: So still modest.

Unknown Executive: So still modest. We had a little under $30 million in write-offs year to date so far, and we think we're on track for kind of that, you know, kind of closer to a hundred million of write-offs for the year. Very well within, you know, kind of the modest area for us in terms of our capital and size and position. So again, we think. Hey, good morning.

Speaker Change: We had.

Speaker Change: A little under $30 million year to date, so far and we think we're on track for kind of that kind of closer to $100 million of write offs for the year very well within kind of the modest area for us in terms of our capital in size and position so.

Speaker Change: Again, we think.

Speaker Change: The environment is despite the pressure economic growth remains healthy and and that's actually good news for real estate fundamentals.

Speaker Change: Despite office sector is still probably has some.

Speaker Change: I have some work to do there, but you also have moderating construction pipeline.

Speaker Change: Which is benefiting all properties and so you know this is how this this this sector generally works out it takes time it doesn't happen overnight you need to be well positioned going into it.

John Mccallion: And so, you know, this is how this, this, this sector generally works out. It takes time. It doesn't happen overnight. You need to be well positioned going into it to, you know, to be able to kind of manage through the, you know, kind of the pressure and the distress. And it generally, the demand and supply factors to typically work themselves out.

Speaker Change: To you know to be able to kind of manage through the.

Speaker Change: Kind of the pressure in the distress and generally the demand and supply factors typically work themselves out. So all in all I think things are performing as expected for us and no change to our view.

John Mccallion: So, all in all, I think things are performing as expected for us, and no change to our view.

Speaker Change: Okay.

John Mccallion: Thanks, Jack.

John Hall: Thanks, John.

John Hall: Okay.

Jimmy Bueller: We'll move next to Jimmy Bueller at JP Morgan. Hey, good morning. My questions are mostly answered, but I just wanted to follow up on a couple of points. First, on Japan, the decline in sales that you saw, how much of that is just a function of comps and maybe the volatility in the yen depressing sales of the 4X products versus an uptick in competition or price reduction by competitors or other market dynamics that are causing you to actively go back.

Speaker Change: We'll move next to Jamie Mueller at Jpmorgan.

Unknown Executive: My questions are mostly answered, but I just wanted to follow up on a couple of points. First, on Japan, the decline in sales that you saw, how much of that is just a function of comps and maybe the volatility in the yen depressing sales of the Forex products versus an uptick in competition or price reductions by competitors or other market dynamics that are causing you to actively pull back? Hey Jimmy, it's Lyndon here.

Jamie Mueller: Hey, good morning, my questions were mostly answered, but I just wanted to follow up on a couple of points.

Jamie Mueller: First on Japan, the decline in sales that you saw how much of that is just a function of comps and maybe.

Speaker Change: The volatility in the yen depressing.

Jamie Mueller: Sales.

Speaker Change: The forex products versus.

Speaker Change: An uptick in competition or price reductions by competitors or other market dynamics that are causing you to actively pullback.

Lyndon Harris: Hey Jimmy, it's Lyndon here. So, yeah, look, we did have a tough comparison last year. I think sales in Japan were up over 40% when we look at last year. So that is driving a lot of the, a lot of the results this year. But we are also seeing a week again, and this is impacted the overall market for foreign currency products. The bank market, as I said, has declined, but we continue to maintain our market position over there. So I do think the volatility in the end is driving some of the decline we're seeing in sales.

Jimmy: Hey, Jimmy it's.

Jimmy: Linden here. So yes look we did have a tough comparative last year I think sales in Japan were up over 40%.

Lyndon Oliver: So yeah, look, we did have a tough comparative last year. I think sales in Japan were up over 40% when we look at last year. So that is driving a lot of the results this year. But we are also seeing a weaker yen, and this has impacted the overall market for foreign currency products.

Speaker Change: When we look at last year, so that is driving a lot of the lot of the results. This year, but we are also seeing a weaker yen.

Speaker Change: This has impacted the overall market for foreign currency products the bank market as I said it has declined but.

Lyndon Oliver: The bank market, as I said, has declined, but we continue to maintain our market position over there. So I do think the volatility, in the end, is driving some of the decline we're seeing in sales. And then on RIS spreads, I think you've been clear that there are interest rate caps that are expiring later this year or in the third quarter, but should we assume that they'll stabilize in 4Q on a core basis, XVII?

Speaker Change: But we continue to maintain our market position over there so I do think.

Speaker Change: The the volatility in the yen is driving some of the decline we're seeing in sales.

Jimmy: Okay.

Jimmy Bueller: Okay.

Jimmy Bueller: And then on RIS spreads, I think you've been clear that there's interest rate caps that are expiring later this year, or in the third quarter, but should be assume that they'll stabilize in 4Q on a core basis XVI and then are there other puts and takes that you're thinking about going spread going into next year, whether it's caps or sort of maturity of blocks or anything else, the business coming out as an undercut period that would drive a shift in spread margins one way or the other. Hey Jimmy, it's John. Good morning. Yeah, as there's a loot into in kind of the opening remarks and earlier is that we do have another quarter of 8 to 10 bips is what we forecasted, etc.

Speaker Change: And then on RIS spread I think you've been clear that there is interest rate caps that are expiring later this year or in the third quarter, but should we assume that they will stabilize and <unk> on a core basis ex VII and then are there other puts and takes as you're thinking about god spreads going into.

Lyndon Oliver: And then are there other puts and takes as you're thinking about spreads going into next year, whether it's caps or sort of maturity of blocks or anything else, business coming out of the surrender period that would drive a shift and spread margins one way or the other? And then, on competition in Japan, is it still rational, or are you seeing any evidence of price reductions with higher interest rates and that? Look, I mean, it is a competitive environment.

Jimmy: Next year, whether it's.

Jimmy: Gaps or.

Speaker Change: So the majority of blogs or anything else of that business coming out of surrender period that would drive a.

Speaker Change: A shift in spread margins, one way or the other.

Jimmy: Hey, Jimmy it's John Good morning.

Jimmy: Yes, as I was alluding to in kind of the opening remarks and in earlier is that.

Jimmy: We do have another quarter of eight to 10 bps is what we've forecasted.

John Mccallion: We thought we were going to have 8 to 10 this quarter, but interest rates were a bit higher than we had assumed at the time we were discussing this in the Q1, and we took advantage of that in a few different things we could do. So then the remainder, the most of the remaining interest rate cash roll off this quarter. And then you should see stabilization. Also, we're projecting VII to marginally increase each of the next two quarters as well, kind of similar to the trend that we saw here. So that would be kind of the offset comment I'd make to you, and then you should see some stabilization in the Q4.

Jimmy: I said earlier, we thought we were going to have eight to 10 this quarter, but interest rates are a bit higher than.

Jimmy: We had assumed at the time, we were discussing this in the Q1 and we took advantage of that in a few different things we could do so then the remainder the Moe.

Jimmy: Of the remaining interest rate cash roll off this quarter and then you should see a stabilization also we're projecting VII to.

Jimmy: Marginally increase each of the next two quarters as well kind of similar to the trend that we saw here so that that would be kind of the offset comment I'd make.

Jimmy: To you and then you should see some stabilization in the Q4 in terms of beyond that we'll wait for outlook two to go through that information.

John Mccallion: In terms of beyond that, we'll wait for Outlook to go through that information.

John Mccallion: And then on competition in Japan, is it still rational, or are you seeing any evidence of price reductions with the higher interest rates in that market? Look, it is a competitive environment, but I would say it's rational where we always see a player get a more aggressive response in a while, but we continue to maintain our pricing discipline and our focus on profitability.

Speaker Change: And then on competition in Japan is it still rational or are you seeing any evidence of price reductions with the higher interest rates in that market.

Lyndon Oliver: But I would say it's rational that we always see a player get more aggressive once in a while, but we continue to maintain our pricing discipline and our focus on profitability. We've got a very diversified distribution Platform, we've got a wide range of products in both yen as well as US dollars, we've got good investment origination capabilities, along with strong internal reinsurance capabilities. So all this combined puts us in a good position, allows us to differentiate and maintain our competitive position in the market. Thank you. We'll go next to Elyse Greenspan with Wells Fargo. Good morning, Elyse.

Speaker Change: Look I mean, it is a competitive environment.

Speaker Change: I would say, it's rational where we always see a player and get more aggressive sponsored a while but we continue to maintain our pricing discipline and our focus on profitability. We've got a very diversified distribution platform. We've got a wide range of products that both yen as well as U S dollar.

Lyndon Harris: We've got a very diversified distribution platform. We've got a wide range of products at both the end as well as US dollar. We've got good investment origination capabilities along with strong internal reinsurance capabilities. So all this combined kind of puts us in a good position, allows us to differentiate and maintain our competitive position in the market.

Jimmy: <unk>.

Jimmy: We've got good investment origination capabilities, along with strong reinsurer internal reinsurance capabilities. So all this combined kind of puts us in a good position allows us to differentiate and maintain our competitive position in the market.

Elyse Greenspan: Thank you. We'll go next to a least green span with Wells Fargo.

Speaker Change: Thank you.

Jimmy: We'll go next to Elyse Greenspan with Wells Fargo.

Elyse Greenspan: I thank some.

Elyse Greenspan: Hey, Thanks. Good morning, My first question, maybe starting off on the PRT side can you just give some color just on what you see in the pipeline for the back half of this year and just any change in the competitive market for that business.

Ramy Tadros: Good morning. My first question, you know, maybe starting on the PRT side, can you just give some color just on what you see in the pipeline for the back half of this year and just any change in the competitive market for that?

Ramy Tadros: Good morning, Elyse. It's Ramy here. With respect to the pipeline, we're still seeing a pretty healthy pipeline here, particularly on the larger end of the market, which is where we focus and where we have competitive advantages. If you step beyond the next couple of quarters, there are just secular trends here that both really well for us and how we're positioned. If you survey corporate DB plan sponsors and survey after survey, including hours, they all point to a significant and rising proportion of those planned sponsors who are looking to de-risk and transfer the risk. You also have a very large stock of corporate DB assets, three trillion.

Speaker Change: Oh good.

Ramy Tadros: It's It's Ramy here. You know, with respect to the pipeline, we're still seeing a pretty healthy pipeline here, particularly on the larger end of the market, which is where we focus on where we have competitive advantages. And, you know, if you step beyond the next couple of quarters, they're just secular trends here that bode really well for us and how we're positioned. If you survey corporate DB plan sponsors and survey after survey, including ours,

Rami Todd: Good morning, Elyse, it's it's rami here.

Speaker Change: With respect to the pipeline, we're still seeing a pretty healthy pipeline here, particularly on the.

Speaker Change: Larger end of the market, which is where we focus on where we have competitive.

Speaker Change: Competitive advantages.

Speaker Change: Step beyond the next couple of quarters there Justice.

Speaker Change: Secular trends here that bodes really well.

Jimmy: For us on how were positions. If you survey corporate DB plan sponsors in survey after survey, including ours.

Ramy Tadros: They all point to a significant and rising proportion of those plan sponsors who are looking to de-risk and transfer the risk. You also have a very large stock of corporate DB assets, $3 trillion if you look at the private market only. And you've got funding status that's pretty good, which makes all of these risk transfers a lot more affordable. So these will always be lumpy, but sitting here now looking at the rest of the year, we're seeing a pretty healthy jumbo pipeline.

Jimmy: They all point to a significant and rising proportion of those planned sponsors who.

Jimmy: Looking to Derisk and transfer the risk.

Jimmy: You also have a very large stock of corporate DB assets three trillion and if you look at the private market only.

Ramy Tadros: If you look at the private market only, and you've got funding status, that's pretty good, which makes all of these risk transfers a lot more affordable. These will always be lumpy, but sitting here now looking at the rest of the year, we're seeing a pretty healthy, jumbo pipeline. We're also very pleased with what we've done this quarter. As you saw, we did $3.5 billion of PRT, and we're clearly very pleased with our performance here.

Jimmy: And you've got funding status, that's pretty good which makes all of these risk transfer is a lot more affordable so.

Speaker Change: These will always be lumpy, but I'm sitting here now looking at the rest of the year. We're see we're seeing a pretty healthy jumbo pipeline and we're also very pleased with what we've done this quarter. As you saw we did see another $1 billion of PRT and we're clearly very pleased with with our performance here.

Ramy Tadros: And we're also very pleased with what we did this quarter. As you saw, we did $3.5 billion in PRT, and we're clearly very pleased with our performance. Thank you.

Jimmy: Yeah.

Lyndon Harris: Thank you. And maybe the second question, do an Asia, the earnings were pretty strong in the quarter. I think you guys called out favorable underwriting, maybe in the prepared remarks. Anything just more to think about, just kind of the run rate earnings. I think that segmented anything that stood out in the quarter.

Lyndon Oliver: And maybe, um, you know, the second question, uh, on Asia, the earnings were, you know, pretty strong in the quarter. I think you guys called out favorable underwriting in the prepared remarks. Anything, you know, just more to think about just kind of the run rate earnings within that. Yeah, hi, Elyse, it's Lyndon here.

Speaker Change: Thank you.

Speaker Change: And maybe.

Speaker Change: The second question.

Speaker Change: The earnings were pretty strong in the quarter I think you guys called out favorable underwriting maybe in the prepared remarks.

Speaker Change: Anything more to <unk>.

Speaker Change: Think about this kind of the run rate earnings.

Speaker Change: And that segment anything that stood out in the quarter.

Lyndon Harris: Yeah, hi Elise, it's Lyndon here. As I said earlier, I mean, we're pleased with the overall results in Asia or earnings in the quarter. We did see higher than expected surrender activity, and that was driven by the week of the end as some customers start to lock in their gains. And that was higher than expected in the quarter. In addition, we did see Asia does get a higher allocation of real estate equity funds. And in the quarter, we saw better performance in real estate relative to the prior year. So those two are sort of drivers for the strong earnings results in the quarter for Asia.

Lyndon Oliver: As I said earlier, we're pleased with the overall results in Asia for earnings in the quarter. We did see higher than expected surrender activity, and that was driven by the weaker yen as some customers started to lock in their gains. And that was higher than expected in the quarter.

Speaker Change: Yes <unk>.

Linden: Linden here.

Speaker Change: As I said earlier I mean, we're pleased with the overall results in Asia.

Speaker Change: Earnings in the quarter, we did see higher than expected surrender activity and that was driven by the weaker yen as some customers start to lock in their games.

Lyndon Oliver: In addition, we did see Asia get a higher allocation of real estate equity funds. And in the quarter, we saw better performance in real estate relative to the prior year. So those two are sort of drivers for the strong earnings results in the quarter for Asia. We'll take our next question from John Barnidge at Piper's. Good morning.

Speaker Change: And that was higher than expected in the quarter.

Speaker Change: In addition, we did see Asia does get a higher allocation of real estate equity funds and in the quarter, we saw better performance in real estate relative to the prior year. So those two are sort of drivers for the strong earnings results in the quarter four for Asia.

Lyndon Harris: Thank you.

Speaker Change: Thank you.

John Barnidge: We'll take our next question from John Barnage at Piper Sandler. Good morning. Thank you for the opportunity. With the capital regime change in Japan, is there an opportunity to broaden out and promote a platform, create more capital-like model?

Speaker Change: We will take our next question from John Barnidge at Piper Sandler.

Speaker Change: Yeah.

Unknown Executive: Thank you for the opportunity. With the capital regime change in Japan, is there an opportunity to broaden out? So look, I think that's something we've always had in place for quite some time. We actually have two Bermuda entities right now, and we've had them for close to a decade in place. So it's a tool we have used and probably one that we will use. Thanks for the answer, John.

John Barnidge: Good morning, Thank you for the opportunity with the capital regime change in Japan is there an opportunity to broaden out the Bermuda platform.

John Barnidge: Create more capital light model. Thank you.

John Mccallion: Thank you.

John Mccallion: Hey, John, it's John. Good morning. I'll take that one. So look, I think that's something we've always had in place for quite some time. We actually have two Bermuda entities right now. And we've had them for close to a decade in place. So it's a tool we have used and probably one that we have used successfully with some of our Japan products. I think ESR will allow you to reevaluate some of that. and determine what's fit for purpose. And it's really, we look at one of the factors we always consider as we try to take our own internal economic model and think about what's a prudent level of capital, and then we evaluate that relative to some of the jurisdiction requirements.

Speaker Change: Hey, John It's John Good morning, I'll take that one.

John Hall: So look I think that's something we've always had in place for quite some time now we actually have two Bermuda entities right now.

John Hall: And we've had them for close to a decade in place. So it's a tool we have used and probably one that we have used.

Speaker Change: Successfully with with some of our Japan products.

Speaker Change: You know I think ESR will allow you to reevaluate some of that.

Speaker Change: And determine what whats fit for purpose.

Speaker Change: And it's really we look at one of the factors. We always consider is we tend to take our own internal economic model and think about what's a prudent level of capital and then we evaluate that relative to.

Speaker Change: Some of the.

Speaker Change: You know jurisdiction requirements, so, but certainly Bermuda has been and continues to be an optimization tool for us and and I think we'll continue to do that not just and by the way not just with Japan, sometimes we use it with other jurisdictions as well.

John Mccallion: But certainly, Bermuda has been and continues to be an optimization tool for us. And I think we'll continue to do that. And by the way, not just with Japan; sometimes we use it with other jurisdictions as well.

Speaker Change: Yeah.

John Barnidge: Thanks for the answer, John. And the whole question is on the opportunity to leverage the large data that you have. Can you talk about the opportunity set? Is it about driving greater profitability or revenues or close range of persistency?

Michel Khalaf: And my follow-up question is on the opportunity to leverage... Can you talk about the opportunity set? Is it about driving greater profitability or revenues or close rates of persistency? Thanks. Hi John, it's Michel.

Speaker Change: Thanks for the answer John and my follow up question is on the opportunity to leverage the large data that you have can.

Speaker Change: Can you talk about the opportunity set isn't about driving greater profitability.

Speaker Change: Revenues.

John Hall: Close rates and persistency.

Michel Khalaf: Thanks. Yeah, hi, John. It's Michelle. Thanks for the question. So, you know, as I, as I mentioned in my, in my remarks, you know, we've been investing in technology and capabilities, and you know, that's part of our sort of the efficiency mindset that we've built here, freeing up capacity to make those important investments. And, you know, the fact that, you know, we have size here, we have, you know, a lot of data, obviously, you know, is an advantage because we're able to leverage this data.

John Hall: Thanks.

Michel Khalaf: Thanks for the question. As I mentioned in my remarks, we've been investing in technology and capabilities, and that's part of the efficiency mindset that we've built here, freeing up capacity to make those important investments. And the fact that, you know, we have size here, we have, you know, a lot of data, obviously, is an advantage because we're able to leverage this data. And I would say there are three areas where, you know, we've seen, you know, in some cases, early signs, and in other cases, more advanced signs of, you know, real impact on progress.

Michel: Hey, John It's Michel Thanks for the question.

John Hall: As I mentioned in my.

John Hall: My remarks.

Speaker Change: You know we've been investing in technology.

Speaker Change: <unk> technology and capabilities.

Speaker Change: And.

Speaker Change: That's part of our sort of the efficiency mindset that we've built here freeing up capacity to make those important investments.

Speaker Change: And you know the fact that.

Speaker Change: No we have size here, we have a.

Speaker Change: A lot of data, obviously has an advantage because we're able to leverage this thing at all.

Michel Khalaf: And I would say there are three areas where, you know, we've seen, you know, in some cases early signs and, in other cases, you know, more advanced signs of, you know, real impact on progress. One is around the customer experience. And again, if you think about that, very important in terms of meeting not only current, but, you know, future customer expectations, driving our competitive advantage. I think the other area where we're seeing potential impact is, you know, around driving revenue growth. So, you know, technology and data can help drive that.

Speaker Change: And I would say there are three areas where.

Speaker Change: We've seen you know.

Speaker Change: In some cases early signs in other cases, you know more advanced signs of.

Speaker Change: Real impact on progress one is around the customer experience.

Speaker Change: Experience.

Michel Khalaf: One, And again, if you think about that, it's very important in terms of meeting not only current but, you know, future customer expectations and driving our competitive advantage. I think the other area where we're seeing a potential impact is around driving revenue growth, so, you know, technology and data can help drive that. And the third area is around efficiency. And, you know, again, here, we see significant opportunities. You can see from our direct expense ratio, which has come in below the 12-3 guidance that we provided in the first half. And our expectation is that, you know, whereas we see sort of a pickup in the second half, which is typical, we will still expect to come in under the 12-3. And, you know, I would say going forward, those investments that Thank you for that.

Speaker Change: And again, if you think about that very important in terms of meeting not only current but future customer expectations driving our competitive advantage.

Speaker Change: I think the other area, where we're seeing.

Speaker Change: Potential impact is around <unk>.

Michel Khalaf: Driving revenue growth.

Speaker Change: So technology and data can help.

Speaker Change: Drive that and the third area is around efficiency.

Michel Khalaf: And the third area is around efficiency. And, you know, again, here, you know, we see significant opportunities. You know, you can see from our direct expense ratio, which has come in at below the 12-3 guidance that we provided in the first half. And our expectation is that, you know, whereas we'll see sort of a pickup in the second half, which is typical, we will still expect to come in under the 12-3. And, you know, I would say going forward, you know, those investments that we're making and our ability to leverage data will continue to, you know, to drive sort of a downward trend when it comes to that as well.

Speaker Change: And again here.

Speaker Change: We see significant opportunities.

Speaker Change: You can see from our direct expense ratio, which has come in below the 12 three guidance that we provided in the first half.

Speaker Change: And our expectation is that whereas we see sort of a pickup in the second half.

Speaker Change: Which is typical we will still expect to comment under the 12 three and.

Speaker Change: I would say going forward.

Speaker Change: Those investments that we're making and our ability to leverage data will continue to.

Speaker Change: You know to drive sort of a downward trend when it comes to that is one.

John Barnidge: Thank you for that.

Speaker Change: Thank you for that.

Michael Ward: And we'll move next to Mike Ward at City. Thanks, guys. Good morning. I was hoping to ask about holdings to your skin. I'm curious how active those discussions are. Any kind of pressure or change in activity to execute before Fed cuts, or isn't it agnostic to that?

Speaker Change: And we'll move next to Mike Ward at Citi.

Mike Ward: Thanks, guys good morning.

Speaker Change: I was hoping to ask about holdings to your skiing.

Mike Ward: I'm curious how active discussions or any.

Speaker Change: Any kind of pressure or change in activity to execute before fed cuts.

Speaker Change: Or is it agnostic to that but any update.

John Mccallion: Hey, Mike. Good morning. It's John. Thanks for the question. I think I can't remember the last time we spoke about this, but I'd say that obviously we did the transaction back in November of last year, and I think the environment has continued to progress as a way. I think we would put it. We are still in the same position today, which is that we are continuing to meet with third parties. We continue to explore opportunities. You know, this needs to be kind of a win-win, but there's no burning platform where we have to do something.

Speaker Change: Hey, Mike Good morning, it's John Thanks for the question.

Unknown Executive: I think, I can't remember the last time we spoke about this, but I'd say that, you know, obviously, we did the transaction back in November of last year. And I think the environment has continued to progress is the way I think we would put it. We are still in the same position today, which is that we don't, you know, we are continuing to meet with third parties, and we continue to explore opportunities. You know, this needs to be kind of a win-win. But there's no burning platform where we have to do something.

Speaker Change: I think I can't remember the last time, we spoke about this but I'd say that obviously, we did the transaction back in November of last year, and and I think the environment has continued to progress as the way I think we would put it we are still in the same position today, which is that we don't we are.

Unknown Executive: Continuing to meet with third parties, we continue to explore opportunities. This.

Speaker Change: This needs to be kind of a win win.

Speaker Change: There's no burning platform, where we have to do something so it's a real it's an opportunity it's not a requirement for us to or a necessity for us and so but that requires continuous discussions evaluations reviews.

John Mccallion: So it's a real, it's an opportunity. It's not a requirement for us to or necessity for us. And so, but that requires continuous discussions, evaluations, reviews. You know, we did a large non-traditional life transaction last year. We generally have traditional life blocks left. We have obviously LTC, and then we have VA. And you know, obviously, the traditional life is very attractive to people, but it's also very attractive to us in terms of returns. So I think, you know, that would be a price one. And then the other ones, there's limited supply of partners that would be willing to kind of think about that.

Unknown Executive: So it's a real, it's an opportunity, it's not a requirement for us to, or a necessity for us. And so, but that requires continuous discussions, evaluations, and reviews. You know, we did a large non-traditional life transaction last year; we generally have traditional life blocks left.

Speaker Change: We did a large non traditional life transaction last year, we generally have traditional life blocks left we have obviously, our LTC and then we have VA and.

Unknown Executive: We have, obviously, LTC, and then we have VA, and, you know, obviously, traditional life is very attractive to people, but it's also very attractive to us in terms of returns. So I think, you know, that would be a price one. And then the other ones, there's a limited supply of partners that would be willing to kind of think about that. So you're talking about a more narrow universe.

Unknown Executive: Obviously, the Attritional is very attractive to people, but it's also very attractive to us in terms of return. So I think that would be a price one and then the other ones you know there's limited supply of.

Speaker Change: Partners that would be willing to kind of think about that so youre talking about a more narrow universe. So you continue to discuss those things and we're happy to manage it ourselves, but if we're able to find unique opportunities then we'll do that but I would say it's gotten it's.

John Mccallion: So you're talking about a more narrow universe. So you continue to discuss those things, and we're happy to manage it ourselves. But if we're able to find unique opportunities, then we'll do that. But I would say it's gotten, it's, you know, discussions continue, but no material changes in terms of momentum.

Unknown Executive: So you continue to discuss those things, and we're happy to manage them ourselves. But if we're able to find unique opportunities, then we'll do that. But I would say it's gotten, you know, discussions continue, but no material changes in terms of momentum. And then maybe on private credit, it seems to be an area of attention, maybe a bit, maybe a bit frothy. Just curious how you guys see that landscape. Are you leaning in or being more cautious? And I guess, like, what's your strategy? How do you balance having the ability to originate directly versus, you know, investing in some of the boutique shops? Hey, it's John again.

Speaker Change: Discussions continue but no material changes in terms of momentum.

Michael Ward: Helpful, thanks, Sean.

Sean: Helpful. Thanks, Sean.

John Mccallion: And then maybe on, on private credit seems to be an area of attention, maybe a bit, maybe a bit frosty. Just here's how you guys see that landscape. Like, you know, are you leaning in or being more cautious? And I guess, like, what's the, what's your strategy? You know, how do you balance having the ability to originate directly? Versus, you know, investing in some of the boutique shops, you know, that you've done.

Speaker Change: And then maybe on the on private credit seems to be an area of attention.

Speaker Change: Maybe a bit maybe a bit frothy.

Speaker Change: Just curious how you guys see that landscape are you leaning in or being more cautious and I guess.

Speaker Change: What's the what's your strategy, how do you balance.

Speaker Change: Having the ability to originate directly.

Speaker Change: Versus investing in.

John: Some of the boutique shops.

Speaker Change: <unk> that you've done.

Sean: Yeah.

John Mccallion: Hey, John again, it's, it's an interesting question. I think, first, definitionally, private credit probably has 100 different definitions out there. So that's always a tough one to kind of decide which one you're talking, which everyone's talking about. But I think at the end of the day, you know, we have been in private credit, broadly speaking, for 150 years. I mean, you can, you can pretty, if you cast a wide net there, you know, whether it's our, you know, commercial mortgage loan origination. We have an ag loan platform with the largest ag loan lender outside of the US government.

John Mccallion: It's a, it's an interesting question. I think, first, definitionally, private credit probably has a hundred different definitions out there. So that's always a tough one to kind of decide which one you're talking about, which everyone's talking about. But I think, at the end of the day, you know, we have been in private credit, broadly speaking, for 150 years, right? I mean, you can, you can be pretty broad if you cast a wide net there, you know, whether it's our, you know, commercial mortgage loan origination; we have an ag loan platform with the largest ag loan lender outside of the US government.

Sean: Hey, it's John again, it's a it's an interesting question I think first definition of private credit probably has 100 different definitions out there. So that's always a tough one to kind of decide which one you talk which everyone's talking about but I think at the end of the day, we have been in private credit broadly speaking for 150 years right. I mean, you can you can predict.

Speaker Change: If you cast a wide net there.

Sean: Whether it's our commercial mortgage loan origination we haven't add loan platform with largest add loan lender outside of the U S government.

John Mccallion: You know, we're, I think we're the number one infrastructure lender as well. And so, and, you know, but we typically were higher grade, and we have some higher yielding products as well. And so we have a number of origination platforms is something we've talked about for, you know, over the years as a unique capability for us. And so, but, to your point, it's an area that everyone has been jumping into. So now you need to be much, you know, very disciplined in your approach.

John Mccallion: You know, we're, I think we're the number one infrastructure lender as well. And so, and, you know, but we typically were higher grade, and we have some higher yielding products as well. And so we have a number of origination platforms is something we've talked about over, you know, over the years as a unique capability for us. And so it, but, but to your point, it's an area that everyone has been jumping in. So now you need to be much, you know, very disciplined in your approach. There is kind of a hot, you know, kind of view around the term private credit.

Speaker Change: You know where I think we're the number one infrastructure lender.

Sean: And as well so.

Sean: But we typically were higher grade and we have some higher yielding products as well and.

Sean: And so we have a number of origination platforms is something we've talked about over you know over the years has a unique capability for us and so.

Sean: So but to your point, it's an area that everyone has been jumping in so now you need to be much very disciplined in your approach.

Speaker Change: There is kind of a hot you know kind of view around the term private credit and so you know we we have we have approached it our way which is.

John Mccallion: And so, you know, we have approached it our way, which is for the long term; is the way we think about it. And so, you know, I think that's your star approach, and everyone has their own unique approach to it. But we're, you know, there are sectors that are much more competitors today that I think, you know, we would say you need to be mindful of. James John.

Sean: For the long term is the way, we think about it and so you know I think that's your star approach and everyone has their own unique approach to it but where there are sectors that are much more competitive today that I think we would say you need to be mindful of.

John: Thanks, John.

Operator: And that concludes our Q&A session.

Sean: And that concludes our Q&A session I will now turn the conference back over to John Hall for closing remarks.

John Hall: I will now turn the conference back over to John Hall for closing remarks. Great, thank you, operator, and thanks everybody for joining us this morning.

John Hall: Great. Thank you operator, and thanks, everybody for joining us this morning have a great summer.

Operator: Have a great summer. And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.

Please wait; the conference will begin shortly. Thank you.

Sean: Please wait the conference will begin shortly.

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