Q4 2024 MetLife Inc Earnings Call
Okay.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Metlife fourth quarter and full year 2020 for earnings and outlook Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: Later, we will conduct a Q&A question and answer session instructions.
Speaker Change: Instructions will be given at that time.
Speaker Change: As a reminder, this conference is being recorded.
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 Metlife SEC filings with that I will turn the call over to John Hall Global head of Investor Relations.
John Hall: Thank you operator, and good morning, everyone. We appreciate you joining us for Metlife fourth quarter, 2024 earnings and near term outlook call.
John Hall: Before we begin I'd point, you to the information on non-GAAP measures on the Investor Relations portion of Metlife Dot com in our earnings release and in our quarterly financial supplements, which you should review.
Michel <unk>: On the call. This morning are Michel <unk>, President and Chief Executive Officer, and John Mccallion, Chief Financial Officer, and head of Metlife investment management.
Michel <unk>: Also participating in the discussion are other members of senior management.
Michel <unk>: Last night, we released a set of supplemental slides, which address the quarter as well as our near term outlook.
John Hall: They are available on our website John.
Speaker Change: John Mccallion will speak to those supplemental slides in his prepared remarks.
Speaker Change: An appendix to the slides features outlook sensitivities disclosures GAAP reconciliations and other information, which you should also review.
Speaker Change: After prepared remarks, we will have a Q&A session, which will end promptly at the top of the hour.
Speaker Change: As a reminder, please limit yourself to one question and one follow up.
Michele: With that over to Michele.
Michele: Thank you John and good morning, everyone.
Michele: Last night, Metlife reported fourth quarter and full year results that underscore the strength and resilience of our market leading portfolio of businesses in the face of constant change.
Michele: While unemployment in the U S has stayed at current levels and economic growth appears healthy.
Michele: And pace of anticipated interest rate cuts remain in question due to concerns about persistent inflation my glass capacity to execute across changing environments has been a hallmark of our success.
Michele: Past year 2024 brought to a close the five year period associated with our next horizon strategy.
Michele: The global pandemic shortlist banking crisis and volatile interest rates, we delivered on all our next horizon financial commitments return on equity free cash flow and operating leverage the market has recognized our strong fundamental performance as matlosz stock outperformed the standard and Poor's 500 index.
Michele: 2020 for Metlife did not go quietly until the end of the year.
Michele: And we do not trust on our laurels in December we hosted a well received investor day to rollout, our new frontier strategy, along with a refreshed set of financial commitments, while the basic tenets of next horizon focus simplify and differentiate ongoing anywhere.
Michele: Is that a different place than it was five years ago.
Michele: Our more front footed and more able to play offense.
Michele: Our new frontier strategy, it's more oriented towards growth and by that I mean responsible growth.
Michele: To build on this we have identified four strategic priorities as part of new frontier.
Michele: Together, they drive nearly 80% of adjusted earnings today and will fuel strong growth through the five year, New frontier strategy. The first is further extending our leadership in group benefits.
Michele: Second is capitalizing on our unique retirement platform.
Michele: Third is accelerating growth in asset management, while the fourth is expanding in high growth International markets.
Michele: Then here at Metlife, we do not sense town.
Speaker Change: Along with the rollout of our new frontier strategy, we announced several important transactions that activate across our new strategic priorities and which we believe will drive shareholder value for years to come and December Mcglasson General Atlantic announced the formation of Cherry tree.
Michele: Which will be a Bermuda based life and annuity reinsurance company.
Michele: We anticipate a combined equity investment of over $1 billion and the Chubb will join us as an anchor investor.
Territory will serve the growing demand for life and retirement solutions around the world.
Michele: The strategic use of reinsurance allows us to position Metlife to capture the growth in these trends and add to enterprise value.
Michele: Sure <unk> will also have rich metallize deep insurance and investing expertise.
Michele: One is the investment capabilities of General Atlantic also in December we announced an agreement to acquire Pine Bridge investments.
Michele: Leading global asset manager with approximately $100 billion in assets under management find bridge will substantially add to Metlife investment management by expanding its public and private credit offerings, especially on an international basis finally.
Michele: Signed an agreement to acquire the high yield and bank loan the strategic fixed income and the small cap equity teams from NASA real financial with about 6 billion of assets managed by those teams are new frontier strategy is more than just words on a page to measure our progress and hold ourselves accountable we have established.
Michele: This new five year commitments, we have introduced adjusted earnings per share is a new metric format life.
Michele: We're committed to achieving double digit adjusted EPS growth over the course of the new frontier period, with 60% driven by business and margin growth and the balance from disciplined capital management.
Michele: We have increased our adjusted return on equity target range to 15% to 17% up from our previous target range of 13% to 15%. We have also committed to cut another 100 basis points from our prior direct expense ratio target of 12, 3% during the five year period.
Michele: And finally, we have committed to $25 billion of free cash flow over the five year period up from our prior five year 20 billion dollar commitment.
Michele: You'll see when John discusses our 2025 outlook Disconnections are in alignment with our expectation for the near term now turning to our fourth quarter 2024 results last night, we reported adjusted earnings of $1 $5 billion or $2 90 per share up 14% from the prior year.
Michele: <unk> <unk>.
Michele: Excluding notable items in both periods, we reported adjusted earnings of $2 eight per share up 8%.
Michele: Variable investment income or VII was higher in the quarter due to improved private equity fund performance and we saw good momentum across most of our businesses shifting toward a full year of 2024, we generated adjusted earnings excluding notable items of $5 8 billion.
Michele: Strong volume growth and favorable underwriting along with market factors helped drive our results.
Michele: Pointing to our capital efficiency and our client posted an adjusted ROE of 15, 2% for the year.
Above our target range.
Michele: Our direct expense ratio was 12, 1%, beating our next horizon target range.
Michele: Our group benefits business continues to demonstrate its leadership position and what I believe to be the most attractive segments of U S life insurance.
Michele: Group benefits generated adjusted earnings excluding notable items of $1 7 billion in 2024.
Michele: Full year sales were up 8% on strong growth in national accounts.
Michele: This is a business, where we believe that scale technology and discipline will carry the day.
Michele: We believe Metlife has the capacity to continue to grow faster than the market driven by the many scale benefits associated with our size.
Michele: And the new frontier.
Michele: Formula for group benefits growth is simple.
Michele: More employers more products and more employee participation and we are actively driving each of these elements.
Michele: Moving to retirement and income solutions or RIS adjusted earnings excluding notables totaled $1 $6 billion in the year.
Michele: Alright, yes continued to demonstrate the strength and breadth of its liability generation capabilities in 2024 hour liability exposures grew three 4% in the year.
Michele: Above the midpoint of our prior outlook range with strong contributions from structured settlements.
Michele: K longevity and funded reinsurance.
Michele: And U S pension risk transfer.
Michele: Shifting to our international businesses Asia posted adjusted earnings excluding notables of $1 7 billion in 2024 up 21% on the rebound in VII General account AUN grew 5% on a constant currency basis.
Michele: It's also a historic year for our Latin America business, which saw a record adjusted earnings excluding notables of $877 million.
Michele: <unk> substantial currency headwinds or.
Michele: Our expanded product portfolio in the region and our investments in digital distribution placed us in the pole position to further grow in this important region when I look across our business results for the year. What stands out is the balance of our adjusted earnings across segments, our three largest segments group benefits.
Michele: RIS and Asia, all posted adjusted earnings in the neighborhood of $1 $7 billion I have framed mcmorris balance and diversification as being a superpower something that has enabled us to generate the type of all weather performance achieved in 2024 moving.
Michele: Moving to capital management in the fourth quarter, our buyback activity was restricted due to pending announcements.
Michele: In total we still repurchased nearly $400 million of our common stock in the fourth quarter. We have started the new year strong having repurchased roughly $470 million of our common stock in January.
The full year 2024, we returned approximately $4 $7 billion to shareholders through $3 $2 billion of our common stock repurchases and $1 5 billion of common stock dividends.
Michele: Closing 2024 months at the end of next horizon, and the beginning of new frontier, where we are starting from a position of strength and with a greater emphasis on responsible growth.
Speaker Change: <unk> operates in highly attractive markets with deep competitive moat that we've constructed carefully over time.
Speaker Change: And we are poised to capitalize on the many global tailwind, which has informed our new frontier strategy.
Speaker Change: <unk> is well positioned to deliver strong responsible growth attractive returns and with lower risk.
Speaker Change: Not one or the other but all three and that is metallize unique value proposition now I'll turn it over to John to cover our performance and outlook in greater detail. Thank you Michelle and good morning, everyone I'll start with the <unk> 24, supplemental slides, which covers highlights of our financial performance, including an update on our liquidity and.
John: Capital position.
Speaker Change: In addition, I will discuss our near term outlook.
Speaker Change: Starting on page three we provide a comparison of net income to adjusted earnings in the fourth quarter and full year of 2024.
Speaker Change: Net income was $1 2 billion and $4 $2 billion for the fourth quarter and full year of 24, respectively.
Speaker Change: Difference between net income and adjusted earnings is attributable to net derivative losses, primarily due to the rise in long term interest rates and the strengthening of the U S. Dollar.
Speaker Change: That said derivative losses were partially offset by market risk benefit or MRV remeasurement gains due to higher interest rates. In addition, net investment losses were largely the result of normal trading activity on the portfolio in a rising interest rate environment and credit remained stable.
Speaker Change: As highlighted on the bottom of the page we had two notable items in the current quarter.
Speaker Change: That net to a positive impact to adjusted earnings of $10 million. This.
Speaker Change: This was primarily due to interest associated with a tax refund, partially offset by higher <unk> litigation reserves in the quarter.
Speaker Change: On page four we provide a year over year comparison of fourth quarter adjusted earnings by segment. Excluding total notable items in both periods.
Speaker Change: Adjusted earnings excluding total notable items were $1 4 billion.
Speaker Change: Up 1% and 3% on a constant currency basis.
Speaker Change: The increase was primarily driven by higher variable investment income and solid volume growth, which were partially offset.
Speaker Change: Set by less favorable recurring interest and expense margins compared to the previous year.
Speaker Change: Adjusted earnings per share excluding total notable items were $2 eight.
Speaker Change: Up 8% and 10% on a constant currency basis.
Speaker Change: Moving to the businesses group benefits adjusted earnings were $416 million down 11% from the prior year quarter.
Speaker Change: The key driver was less favorable non medical health underwriting margins compared to the prior year.
Speaker Change: The non medical health interest adjusted benefit ratio was 71, 8%, although above prior year was in line with expectations and within our annual target range of 69% to 74%.
Speaker Change: The group life mortality ratio was 83, 2% for the quarter.
Speaker Change: For the full year the ratio was 84, 5% at the bottom end of our 2024 target range of 84% to 89%.
Speaker Change: Turning to the top line group benefits adjusted <unk> on a full year basis were up 4% year over year.
Speaker Change: Participating contracts into account, which dampened growth by roughly 100 basis points.
Speaker Change: The underlying <unk> were up approximately 5% year over year within our 2024 target growth range of 4% to 6%.
Speaker Change: RIS adjusted earnings were $386 million and <unk> of 24 down 8% year over year.
Speaker Change: Primary drivers were lower recurring interest margins and less favorable underwriting partially offset by higher variable investment income.
Speaker Change: Solid volume growth also contributed to the year over year results.
Speaker Change: Our total investment spreads were 112 basis points in the fourth quarter up six basis points sequentially, mainly due to higher variable investment income.
Speaker Change: As our core spread remained flat at 108 basis points consistent with expectations.
Speaker Change: RIS adjusted <unk> were up 26%, primarily driven by growth across several products, most notably PRT.
Speaker Change: Including UK funded reinsurance as we highlighted at Investor Day, we completed our inaugural funded reinsurance transaction for approximately $300 million demonstrating the successful relationships that we have built with leading UK insurers.
Speaker Change: This brings our total PRT inflows for both the U S and UK combined to approximately $6 7 billion for 2024.
Speaker Change: Moving to Asia, adjusted earnings were $443 million up, 50% and 52% on a constant currency basis.
Speaker Change: Primarily due to higher variable investment income and favorable underwriting margins.
Speaker Change: Which included positive reserve refinements that benefited adjusted earnings by roughly $30 million.
Speaker Change: For Asia as full year 2024 key growth metrics.
Speaker Change: General account assets under management on an amortized cost basis were up 5% year over year on a constant currency basis and sales were down 5% on a constant currency basis versus 2023.
Speaker Change: Lower Japan sales were partially offset by other Asia markets, which were up 21%, most notably due to solid growth in Korea, India and China.
Speaker Change: In Japan sales were down 18% year over year, primarily due to the impact of yen volatility on foreign currency products.
Speaker Change: Latin America adjusted earnings were $201 million down, 3%, but up 10% on a constant currency basis.
Speaker Change: I'm really due to higher volume growth across the region.
Speaker Change: She offset by lower our Chilean <unk> returns versus a strong Q4 'twenty three.
Speaker Change: Latin America's top line continues to perform well, although reported growth rates are being masked by recent currency headwinds adjusted <unk> were down 3%.
Speaker Change: But up 9% on a constant currency basis.
Speaker Change: My strong growth and solid persistency across the region.
Speaker Change: EMEA adjusted earnings were $59 million up, 26% and 31% on a constant currency basis.
Speaker Change: Primarily driven by solid volume growth and lower tax charges in the quarter.
Speaker Change: This was partially offset by less favorable expense margins and underwriting margins year over year.
Speaker Change: EMEA adjusted <unk> were up 10% and 13% on a constant currency basis, reflecting strong sales across the region.
Speaker Change: Metlife Holdings adjusted earnings were $153 million down 2%.
Speaker Change: Largely driven by foregone earnings as a result of the reinsurance transaction that closed in November of 2023.
Speaker Change: Favorable life underwriting was a partial offset.
Speaker Change: Corporate and other adjusted loss was $209 million versus an adjusted loss of $156 million in the prior year higher expenses and taxes were partially offset by higher variable investment income year over year.
The company's effective tax rate on adjusted earnings in the quarter was 23, 5% modestly below our 2024 guidance range of 24% to 26%.
Speaker Change: On page five this chart reflects our pretax variable investment income for the four quarters and full year of 2024.
Speaker Change: Variable investment income was $293 million in Q4, driven by the private equity portfolio, which had an average return of one 8% in the quarter.
Speaker Change: Our real estate and other funds had an average return of essentially zero in the quarter.
Speaker Change: As a reminder, p/e and real estate and other funds are reported on a one quarter lag and accounted for on a mark to market basis for the full year variable investment income or VII was $1 billion below our 2024 target of approximately $1 5 billion.
Speaker Change: But well ahead of the prior year.
Speaker Change: Real estate and other funds accounted for most of the shortfall while P/e returns were largely in line with our annual 2020 for expected returns.
Speaker Change: On page six we provide VII post tax by segment and corporate and other for the four quarters and full year 2024.
Speaker Change: As reflected in the chart Asia Rs and Metlife holdings continue to hold the largest proportion of VII assets.
Speaker Change: Given their long dated liability profiles.
Speaker Change: However, as a reminder, each business has its own discrete portfolio aligned and matched Jewish liabilities.
Speaker Change: Asia's VII portfolio outperformed in the quarter generating more than 50% of the total.
Speaker Change: Turning to page seven this chart shows a comparison of our direct expense ratio over eight quarters and full year 2023 and 2024.
Speaker Change: Our direct expense ratio in <unk> of 24 was elevated at 13, 1%, reflecting the impact from seasonal enrollment costs in group benefits as well as higher employee related costs and technology initiatives.
Speaker Change: That said as we've highlighted previously we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.
Speaker Change: For the full year of 2024.
Speaker Change: Expense ratio was 12, 1%.
Speaker Change: Below our 2024 target of 12, 3%.
Speaker Change: We believe this result, once again demonstrates our consistent execution and focus on a sustained efficiency mindset.
Speaker Change: I will now discuss our cash and capital position on page eight overall, Metlife is well capitalized with more than ample liquidity.
Speaker Change: We had share repurchases of roughly $400 million in the fourth quarter and have repurchased shares totaling $470 million in January.
Speaker Change: In terms of statutory capital for our U S companies preliminary 2024 statutory operating earnings were approximately $4 billion. While net income was approximately $2 9 billion.
Speaker Change: Statutory operating earnings decreased by approximately $500 million year over year.
Speaker Change: Primarily driven by impacts of the reinsurance transaction in November of 2023, and lower net investment income, partially offset by favorable underwriting.
Speaker Change: On page nine this chart shows the final tally and beating our five year financial commitments under next horizon, our full year 2024 adjusted ROE.
Speaker Change: A 15, 2% was above our original 12% to 14% commitment made in 2019 and above our 13% to 15% guidance for 2024.
Speaker Change: For the year 2020 through 2024, we generated distributable cash of.
Speaker Change: $27 billion above our $20 billion commitment and created $1 2 billion of additional operating leverage capacity to accelerate growth above our $1 billion commitment now, let's turn to page 11 for further details on our near term outlook starting with the overview.
Speaker Change: Based on the foreign currency curve. The U S. Dollar is expected to further strengthen which creates a headwind to adjusted earnings growth of approximately $115 million to $175 million in 2025.
Speaker Change: This impact is embedded in the non U S segment outlooks that I'll discuss in a moment.
Speaker Change: The forward interest rate curve project's long term interest rates should be stable and the yield curve to steepen.
Speaker Change: Positive development and.
Speaker Change: And we use an assumption of 5% annual return for the S&P 500 for our near term targets. These are consistent with our new frontier commitments that we announced at Investor day.
Speaker Change: We expect to achieve double digit adjusted EPS growth.
Speaker Change: We expect adjusted ROA to be in the range of 15% to 17%.
Speaker Change: We expect to maintain our two year average free cash flow ratio of 65% to 75% of adjusted earnings which supports our five year commitment to generate 25 billion plus of free cash flow.
Speaker Change: Also given our continued focus on expense discipline, we target, reducing our expense ratio down 100 basis points to 11, 3% by 2029, and therefore for 2025, we are lowering our direct expense ratio guidance to 12, 1% down from 12, 3% in 2024.
Speaker Change: Specifically for 2025 variable investment income is expected to be approximately $1 $7 billion pre tax.
Speaker Change: Our corporate and other adjusted loss is expected to be between $8 $50 million to $950 million after tax.
Speaker Change: And we are maintaining our expected effective tax rate range of 24% to 26% at the bottom of the page youll see certain interest rate sensitivities relative to our base case, reflecting a relatively modest impact on adjusted earnings over the near term.
Speaker Change: Further sensitivities are in the appendix to these slides.
Speaker Change: On page 12, the chart reflects our expectation of VII average asset balances to be stable in 2025, we.
Speaker Change: We are increasing our near term expected annual returns for private equity to be between 9% to 11% and we're also increasing our expected returns for real estate and other funds to be in a range of 7% to 9% over the near term.
Speaker Change: In 2025, we expect both PE and real estate and other funds to be toward the lower end of their respective ranges before trending higher in 2026, and 2027 and finally as a reminder, we include prepayment fees on fixed maturities and mortgage loans and VII.
Speaker Change: So now I will discuss our near term outlook for our business segments lets start with the U S on page 13.
Speaker Change: For group benefits, we are increasing our adjusted <unk> growth target to 4% to 7% annually over the near term.
Speaker Change: We are maintaining our near term underwriting guidance ranges group life mortality ratio of 84% to 89%.
Speaker Change: And group non medical health interest adjusted benefit ratio of 69% to 74%.
Speaker Change: Please keep in mind. These are annual ratios in both typically skew to the higher end of the ranges in the first quarter given the seasonality of the business.
Speaker Change: However for group life.
Speaker Change: If the positive trend we have seen in the last couple of quarters persist into the first half of the year, we expect the full year ratio be in the bottom half of the guidance range in 2025.
Speaker Change: Lastly, we expect group benefits adjusted earnings to benefit from factors outside of underwriting.
Speaker Change: Largely from continued change in our product mix greater operating efficiencies and higher investment income this will add an incremental 5% to 10% to adjusted earnings in 2025.
Speaker Change: For our as we've talked about the business being comprised primarily of spread and fee earnings to that end, we provide a long term balanced growth range for total liabilities, which can be used to project, our future spread and fee balances.
Speaker Change: And in light of the opportunity, we see under new frontier.
Speaker Change: We are now increasing our total liability annual growth guidance to 3% to 5%.
Speaker Change: The total spread guidance range for the upcoming year can be applied to our projected general account balances to get a good proxy for our pretax spread income before expenses.
Speaker Change: We expect 2025 total general account investment spread to be 110 to 135 basis points, assuming the forward curve holds and based on our VII estimate for 2025.
Speaker Change: We anticipate our core spread to stabilize from 2025 forward now that all remaining interest rate caps have matured.
Speaker Change: On spread earnings total fee and underwriting income net of expenses adds an incremental 5% to our as adjusted earnings.
Speaker Change: For Metlife Holdings, we are expecting adjusted PFS to decline approximately 4% to 6% in 2025, and we are lowering the adjusted earnings guidance range to $6 $50 million to $800 million in 2025.
Speaker Change: The business run off accelerated in 2024 to roughly 9% of adjusted earnings as life and variable annuity lapses were higher during the year.
Speaker Change: Now, let's look at the near term guidance for our segments outside the U S on page 14.
Speaker Change: For Asia, we expect sales to grow mid to high single digits on a constant currency basis over the near term.
Speaker Change: In addition, we expect general account on a constant.
Speaker Change: Currency basis to maintain mid single digit growth.
Speaker Change: Asia adjusted earnings in 2025 are expected to grow mid single digits on a constant currency basis, and low single digits on a reported basis given the yen weakness assumed in the forward curve.
Speaker Change: For 2026 and 2027 adjusted earnings are expected to grow mid single digits on both a reported and constant currency basis.
Speaker Change: For Latin America, we expect both adjusted <unk> and adjusted earnings in 2025 to grow high single digits on a constant currency basis.
Speaker Change: And flat on a reported basis.
Speaker Change: The foreign currency rates.
Speaker Change: Which assumes Mexican in Chilean pesos weaken in 2025.
Speaker Change: For 2026, and 2027, we expect adjusted <unk> and adjusted earnings to grow high single digits on both a reported and constant currency basis.
Speaker Change: Finally for EMEA, we are expecting adjusted PFS to grow mid to high single digits on a reported basis.
Speaker Change: Adjusted earnings, we expect EMEA as new quarterly run rate to be $70 million to $75 million in 2025, and then grow mid single digits in 2026 2027.
Speaker Change: Let me conclude by saying that Metlife delivered a solid quarter to close out another strong year.
Speaker Change: Our fourth quarter and full year results reflected the strong underlying fundamentals across our portfolio of businesses. We continue to move forward from.
Speaker Change: From a position of strength with a strong balance sheet recurring free cash flow generation and a diversified set of market leading businesses.
Speaker Change: As we complete the final leg of our next horizon journey. We are pleased to have exceeded all the commitments that we made.
Speaker Change: Now as we forge our way into the new frontier, our strategic priorities position us well to deliver on our unique value proposition.
Speaker Change: Accelerating responsible growth and generating attractive returns with lower risk.
Speaker Change: And with that I'll turn the call back to the operator for your questions.
Speaker Change: Thank you the floor is now open for questions.
Speaker Change: If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again.
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Speaker Change: Again press star one to join the queue.
Speaker Change: Your first question comes from the line of Ryan Krueger with <unk>. Please go ahead.
Speaker Change: Hey, Thanks. Good morning. My first question was for Rami Group can you give some additional details and color on one one renewals what you thought in terms of.
Speaker Change: Competition pricing and other factors that you would highlight.
Rami: Sure Ryan good morning.
Speaker Change: So I would say.
Speaker Change:
Speaker Change: So a really good start and one one.
Speaker Change: We've had a renewed.
Speaker Change: <unk> and persistency within our kind of expectations are we're particularly pleased with the renewal actions on the dental business, which we've talked about before in terms of getting our targeted rate actions.
Speaker Change: As well as maintaining a very strong persistency.
Speaker Change: So off to a really strong start and one one and.
Speaker Change: That's part of the reason why we really also feel good about taking <unk> guidance range from four to seven which is a one point increase from where we were last year.
Speaker Change: Thanks, and then a question on the I guess somewhat broader question on the PRT market. There were a number of lawsuits targeted again one specific.
Speaker Change: Provider and plan sponsors that shows them, it's got an expanded to a couple of more.
Speaker Change: That is up in <unk>.
Speaker Change: But at this point, but I guess just curious how.
Speaker Change: Are you starting to see any level of.
Speaker Change: And that in that market as planned sponsors might be more concerned about this lawsuit activity or or is it not really having much of an impact is for you guys at this point.
Speaker Change: Hey, Ryan it's from here again.
Speaker Change: Look it's very hard to forecast what if any impact this is going to have on the market.
Ryan: Well it may be helpful is just to share with you what we're seeing as of now right.
Ryan: So one this is a very well established market. It does operate within the rules and regulations, which govern planned sponsors responsibilities and a very robust solvency regulation, which cover and insurance companies and within that context. The PRT products off are really valuable solution to plan sponsors and retirees.
Ryan: So in the here and now we finished last year with the $6 $4 billion of inflows for PRT and a healthy <unk> and we're.
Ryan: After a really good start in 'twenty five we had a.
Ryan: $640 million plan that we wrote.
Ryan: And the first part of 'twenty five.
Ryan: And the factors that we talked about that we will continue to drive this market in terms of the funded status the financial and the industrial logic will persist and.
Ryan: This is also reflective of the pipeline. So we still see a pipeline we still see interest here.
Ryan: And we haven't really seen any material impact.
Ryan: On the market.
Ryan: And just to step back outside of PRT and think about our RIS liability origination and in general are inclusive of all the pieces, we talked about on our Investor day as well as the Adjacencies that we talked about.
Ryan: We still feel really good that we will deliver on a 3% to 5% balanced growth over the near term.
Ryan: Which is also a point up from where we were last year. So in aggregate, we still feel really good about that range sitting here today.
Ryan: Great. Thank you.
Tom Gallagher: Your next question comes from the line of Tom Gallagher with Evercore. Please go ahead.
Tom Gallagher: Good morning.
Speaker Change: First question for Rami as well some peers have called out elevated voluntary benefit loss ratios this quarter.
Speaker Change: Did you also see that and when I consider that impact plus the benefits you expect to get from dental repricing.
Speaker Change: Would you say non medical health loss ratio is going to be better or worse in 'twenty five versus 24.
Tom Gallagher: Hey, good morning, Tom I would say for accident and health, we arent seeing any material deviations outside of what you would call normal range of expectations and we look at this on a product by product basis remember, it's not one single product so.
Tom Gallagher: I wouldn't say, we've seen any material deviations here and we continue to see very robust growth here.
Tom Gallagher: With a really solid margins.
Tom Gallagher: If you think about next year versus this year, we did finish.
Tom Gallagher: 24 about less than a point above the midpoint of our range, we haven't changed the range for next year. So.
Tom Gallagher: Good starting point for 25 is to go back to the midpoint of the range on the non medical health ratio, which does factor in some of the improvements around dental that you you mentioned as well.
Speaker Change: Gotcha, so like a point better or is it reasonable base case.
Midpoint of the range is where we point to so I think that's a that's where I would start.
Speaker Change: Good.
Speaker Change: Just for a follow up.
John Hall: John just on raising alternative return assumptions for 'twenty fives.
Speaker Change: What's what's the thought process there is it.
Speaker Change: Just general market performance do you have some line of visibility into.
Speaker Change: Into Q1, because obviously you haven't met any any of the lower quarterly expectations for 'twenty four so curious why why raise it now.
Tom Gallagher: Hey, good morning, Tom.
Tom Gallagher: Yeah. So there's two components there and VII, we have our private equity LP investments and then we have some real estate and other funds.
Tom Gallagher: So I think on the in the private equity obviously is a much bigger proportion as you saw on the slide in terms of average assets. So we have a few things going on obviously theres been a tailwind with public equity markets.
Tom Gallagher: That has been the case it hasnt really shown itself in the private market, yet, but we think that that is still.
Beneficial.
Tom Gallagher: Our sense is that the underlying operating companies are benefiting from that.
Tom Gallagher: Starting to sense and increase in exit activity beginning so like the backlog is starting to remove them or get better.
Tom Gallagher: I think there is probably a more accommodating regulatory and business friendly environment ahead of us. So I think theres a number of positive backdrops that lead you to.
Tom Gallagher: To kind of our view for private equity the.
Tom Gallagher: Private equity returns for the year, they actually weren't far off if not they might have been actually on target relative to the guidance. We gave last year. So really just kind of moving it up a point so that takes a big I'll say the majority of the VII balance.
Tom Gallagher: Then you're left with real estate and other than that and that.
Tom Gallagher: Asset class, probably underperformed our expectation last year, but you know we're starting to see in your ear hearing there's some bit of optimism beginning.
Tom Gallagher: In the real estate market is showing signs of stabilizing.
Tom Gallagher: And so our view is that we're going to start to see recovery in values in 2025, So those combined factors there.
Tom Gallagher: Give us a view that.
Tom Gallagher: Next year will be better than this year, we still think that there'll be a gradual improvement throughout the year. So we don't think you get in the first quarter to call. It the run rate or divide one seven by four we think its still lower but we think we're above where we were here.
Tom Gallagher: Here in the fourth quarter. So hopefully that gives you a sense of our thinking.
Tom Gallagher: That does thank you.
Speaker Change: Your next question comes from the line of <unk> Kumar with Jefferies. Please go ahead.
Kumar: Great. Thanks, I wanted to go to the RIS spread guidance, if I look at the 110 to 135, it looks like excuse me that might be five basis points below what you originally guided to for 2024.
Kumar: And but you've taken your VII up and I thought you said core spreads were supposed to be stable. So I'm just trying to understand what would explain that delta if I'm remembering correctly.
Kumar: Yeah.
Kumar: Hey.
Kumar: Good morning City that John so.
Kumar: Let me try to.
Kumar: Let me give you my maybe way of thinking about it and I'll come back to your specific question of the relative to the last year's guidance. So.
Kumar: So we ended this fourth quarter at 112, which was up six basis points sequentially. We were flat on the core spread it went away.
Kumar: And then as we look ahead. Our view is that we expect 2025 total spread to be like as we said 110 to 135, if you take the midpoint of that it's actually above the 2024.
Kumar: Actual spread that we ended with right.
Kumar: So what you could do in that so you see a bit of recovery in VII.
Kumar: Being forecasted.
Kumar: Coupled with stabilizing core spreads.
Kumar: And in 25, so you know all of the.
Kumar: Interest rate caps have rolled off that was one of the things that started to depress core spreads. During the course of 2024, those hedges performed as intended which was to protect us from a sharp rise of interest rates and an inverted curve and so now we think of core spreads stabilizing into 'twenty five and quite honestly.
Kumar: For the near term and we typically are pretty hesitant about talking about more than one year, but I think we're starting to see.
Kumar: You know I think.
Kumar: A steepening of the curve will be positive eventually it could have a little pressure on us in the in the near term as we repositioned some of the portfolio, but it also gives us the ability to implement other tools that we have.
Kumar: So you know.
Kumar: Maybe there's a few points of one or two point pressure in 'twenty five relative to the 108.
Kumar: But we think quickly kind of reverts back to that so you think of like the 106 to 108 over the near term is a pretty good sense of what our core spread where you're going to see a lot more stability.
Kumar: In the spread as we go forward and.
Kumar: Especially as we put on new business, they tend to be accretive now to spread as well. So again, it's I think it's a very positive backdrop, but that maybe helps to try to reconcile I think relative to last year I think the biggest probably delta is just the roll off of the interest rate caps relative to this year.
Kumar: Okay that makes sense.
Speaker Change: Excuse me and then I'm curious.
Speaker Change: Can you just talk about what sort of blocks of business you'd be interested in using that vehicle for us at PRT is it sort of retail annuities can you can you use it domestically and internationally just some color about the scope of what youre thinking there would be helpful. Thanks.
Michelle: Sure Good morning, Michelle.
Michelle: So just taking a step back let me just say, we're very pleased with the progress.
Michelle: We're making here and really excited about the growth opportunities that will allow us to capture.
Michelle: And keep in mind, we've been at work on this with our with our partner General Atlantic for less than a year.
Michelle: So we're continuing to move at pace to fully capitalize on operation Operationalize the company.
Michelle: And again the intention here is to create a long term strategic partnership with territory.
Michelle: You know as we mentioned.
At Investor Day.
Michelle: Really this is intended to enhance our capital flexibility.
Michelle: And to allow us to generate additional liability growth beyond our balance sheet capacity if need be.
Michelle: So.
Michelle: And the other aspect to this is that it will allow us to.
Michelle: Convert this additional growth in two high.
Michelle: High value earnings for our form S. One.
Michelle:
Michelle: I think we said also that.
Michelle: Our intention here is that for the first few years.
Michelle: The liabilities will be sourced through my life.
Michelle: And but you know the possibility it doesn't exist.
Speaker Change: Down the road Cherry tree May reinsure liabilities from third parties as well.
Michelle: And.
Michelle: But it is sourced through Metlife.
Michelle: <unk> sort of.
Michelle: PRT and other liabilities sourced by our S as well as potentially Japan liabilities.
Michelle: So hopefully this gives you a bit of color.
Michelle: Okay. Thanks.
Michelle: Okay.
Speaker Change: Your next question comes from the line of Alex Scott with Barclays. Please go ahead.
Alex Scott: Hey, good morning.
Alex Scott: First one I had for you is actually on.
Alex Scott: Metlife investment management.
Alex Scott: I'm sure you saw there there was in the news articles, suggesting that maybe brighthouse financial would potentially look to sell itself and I'm not asking you to opine on that but what I'm more interested in is if you could.
Alex Scott: Frame for us what kind of impact you could potentially have in Metlife investment management.
Alex Scott: Asset manager, there's private equity backed companies engaged there and were interested in managing general account.
Alex Scott: How would that affect potential.
Alex Scott: Potentially you're positioning like how much money do you make up their general account management etcetera.
John: Yes, good morning, it's John.
John: First thing is you know we don't comment on specific client p&l's, so probably wont get that out of me today, but up there, they're an excellent customer and client of ours.
John: We take we take pride in the fact that we have them as a customer and particularly given our historical relationship in the.
John: Historically I have personal relationships, we all have I think it's a surprise client for us and we really value it.
John: We've read we read the papers as well in and heard that as well and so.
John: Look we've had other situations overtime occur we think we offer a unique value proposition and and provide some unique capabilities. That's what we've been building here and in Metlife investment management, we continue to do that.
John: Looking to grow our capabilities and you saw that most recently in some of the announcements that we made so we think we have a unique offering having said that we recognize that.
John: Things can change over time, and we think we're well diversified.
John: You know client base.
John: And you know, we'll have to manage things as they come but we are pretty excited about the things that we have to offer.
John: Yeah.
John: Got it totally understand.
John: Second one maybe.
John: On capital deployment.
John: Holdco cash in a really strong spot.
John: Would be interested to though if you could comment at all about how much capital is behind statutory capital spine.
John: The holdings business at this point.
John: And how to think about if you did find opportunities there how that could add to the capital flexibility you have and then.
John: Lee.
Lee: You know are there are there areas that you look to add too.
John: In terms of inorganic activity.
John Hall: Yeah, Hey, Alex it's John.
Speaker Change: It's probably a little bit of a too broad of a question that for us to answer I think as we've talked about we are a very effective at managing Metlife holdings at the same time, we take a very you know we have a third party view in and talked with third parties to see if there's a opportunity for.
Speaker Change: Kind of something that makes sense, that's accretive to our firm from a risk adjusted basis.
Speaker Change: There's a lot of different variables and factors that go into.
Speaker Change: The outcomes of that.
Speaker Change: The items that drive value creation so.
Speaker Change: Probably a little hard to kind of give that broad answer.
Speaker Change: Also you have to just diversification benefits you have to consider as well and things like that so at the end of the day is performing very well for us when we think there's an opportunity you've seen us take action.
Speaker Change: If not there's no burning platform for us and we're happy to manage as effectively ourselves. We think we have the unique capability to do that.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Wes Carmichael with Autonomous Research. Please go ahead.
Wes Carmichael: Hey, good morning, Thank you.
Wes Carmichael: And maybe just following up on the last question and maybe a little bit less broad, but particularly on long term care and haven't gotten a lot of attention lately, but I think last quarter. You made some comments on the risk transfer market that seems somewhat constructive and.
Wes Carmichael: I was just curious if theres any further developments there in terms of pricing or bid ask and just maybe if I think about that block in particular.
Wes Carmichael: As long term care.
Wes Carmichael: Kind of flow into the free cash flow conversion ratio for the company because I know a lot of the runoff in holdings is pretty high cash flow profile.
Yes.
Rami: Hey, good morning, it's Rami here look like we talked about last quarter, we are seeing more activity in that risk transfer market.
Rami: When deals get announced it means youre getting more convergence between sealants and reinsurers and that's encouraging.
Rami: Having said that these are always complex transactions to execute.
Rami: Time.
Rami: Our objective for any risk transfer deal is always the same we want to maximize shareholder value and continuing to serve our customers and from the former price matters for these deals and so those structure.
Rami: But in the interim specific to our book would say well capitalized well reserves recall, we are under the New York DFS reserving standards were held to a higher bar here.
Rami: The book is well managed.
Rami: Performing in line with our expectations and we continue to have a really successful rate action program, that's allowing us to kind of have obtained the necessary premium increases and continuing to provide coverage. So that's kind of a bit of an update in terms of where we stand and I'll, let John talk about the free cash.
Rami: Hello piece of it yes sure it.
Rami: Is it is a block of business that is growing its liabilities over time still so it has not reached peak. So at the end of the day, it's actually not providing.
Rami: Much in the way of cash flow. These David if any thing it continues to strain. It just given you have to grow you're continuing to grow liabilities to the peak so hopefully that helps.
Rami: No. It does thank you. Thank you very much.
Speaker Change: My second question was just on the positive trends in group life that you mentioned that may persist through 2025 can you provide a little bit more color on what you've seen recently and could this be something that persist a little bit longer term.
Hey, good morning, it's from here.
If you look at the public data and the recent trends and the CDC population data in particular for the working age population QC favorability in that data year over year, and given our size and diversification.
Speaker Change: The favorability in the population do you know is working its way into our internal ratios here.
Speaker Change: And that's probably the major driver as to why we came below the lower end of our range.
Speaker Change: For 2024.
Speaker Change: We're still watching it I think I would say if the positive trends that we have seen in terms of population mortality continue and continuing to say the first half of 'twenty five.
Speaker Change: We would expect that for the full year, we would be in the bottom half of our guidance range on the mortality ratio as John alluded to so very much population data driven and without favorability working into our into our numbers.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Jimmy Buhler with Jpmorgan. Please go ahead.
Jimmy Buhler: Hey, good morning, I just had a couple of questions. The first one is on commercial real estate and if we look at your portfolio. Your metrics are fairly stable, although they've been getting slightly worse over the last few quarters, both on the coverage ratio.
Speaker Change: And.
Speaker Change: On the loan to value, but not materially so how should we think about losses coming in from that over the course of this year and has the market stabilized are you do you think there's more pain to go through a go as you go through this year and then secondly.
Speaker Change: On pension reform in Latin America, there's been a.
Speaker Change: A lot of concern about.
Speaker Change: The Chilean market and it comes and goes but I think recently there have been even some reports about potential rationalization of some of the businesses. So just wondering if you have any insights on.
Speaker Change: What is going on there.
John: Yeah. Thanks, Jimmy it's John Good morning.
John: On the commercial mortgage front and in the market.
John: As you you know we all know there's been some recent pressure over the last few years and but I think there's the backdrop you now is starting to build some kind of optimism for the for the going forward, obviously, there's been strong economic growth.
That continues to remain healthy.
John: And you're starting to see some even some real estate fundamentals beginning even in office.
John: It's showing signs of bottoming, it's still probably not quite there yet, but it's showing signs office vacancies likely peaked.
John: In 2024.
John: You see the remote work starting to reverse.
John: You see lease signings have been increasing and so.
John: All in all and then you couple that with like a low construction pipeline all of that starts to give itself the ability to start to make a shift in terms of where things are I think even vacancy rates across other properties are at historical averages if not below.
John: And then and then last thing I'd highlight is youre beginning to see signs of transaction volumes.
Up even you know honestly I think we had a $80 million level of $90 million of gains this quarter on sales so you're starting to see transactions. When you so look.
John: As we look forward, we think we've you know we're approaching the peak of the cycle.
John: Or trough whichever way you want to put it.
John: And so we think from an LTV perspective, we probably have hit our our point, maybe you know maybe theres a little more change, but I think where we've kind of hit it in terms of ltvs and and looking forward in terms of losses, we've pretty I would say we've effectively reserved for.
John: For the most part if not all.
John: For losses, so right now, it's just kind of getting getting to the kind of the end of letting the dust settle.
John: Probably the best way to think about what's left is we probably we might have a point or two.
John: <unk> of RBC is maybe a better way to kind of size. What this means as opposed to maybe charge offs or losses, because we probably have been fully reserved now.
John: And all else equal obviously.
John: And so once all the dust settled maybe there's another point or two on average in terms of.
John: The impact of the cycle and so they put.
John: To put it.
Speaker Change: Thanks, Eric.
Speaker Change: Jimmy and regarding the Chile pension reform so yeah, you're right. After you know almost a decade of debate.
Speaker Change: Pension reform was approved last week by the Chilean Congress. So now with this recent development basically we have more clarity on what's next and you know in a nutshell the key takeaways from from this reform are threefold.
Speaker Change: One the private pension system.
Speaker Change: <unk> continues in its current structure.
Speaker Change: A few adjustments.
Speaker Change: The second is that employer contributions will be gradually increased over time.
Speaker Change: The third is in terms of implementation to reform will be gradual and take several years.
Speaker Change: So some elements of the law will require us to adapt our operations over time.
Speaker Change: And we don't foresee any material impact to our business that we that we wouldn't be able to mitigate.
Speaker Change: And we continue to remain very much committed to.
Speaker Change: Providing high quality pension management services to our customers.
Speaker Change: As we navigate a decent changes overtime.
Speaker Change: Thank you.
Speaker Change: Due to time constraints. Our last question comes from the line of Elyse Greenspan with Wells Fargo. Please go ahead.
Elyse Greenspan: Hi, Thanks. Good morning, My first question is on a man.
Speaker Change: It's included within corporate.
Speaker Change: John I know in December you told US you guys would start breaking it out right here. So could you give us a sense of how much earnings name contributed in 'twenty four and the growth that you're expecting hub and then in 2025 within home within your guide.
Elyse Greenspan: Hey, good morning Elyse.
Speaker Change: Look, we'll we'll do all that when we start to break breakout this segment the way.
Speaker Change: And the reason why I hesitate to start doing that now is what we tried to do today was is provide you the outlook based on our current state and as you just said Mems incorporated.
Speaker Change: And that so it but it's spread out so we I'm reluctant to kind of throw out a number that then creates other confusion. So I think for modeling purposes, I would stick to kind of the segmentation that we have today.
Speaker Change: As we said at Investor Day, we expect to report Mem as a segment in 'twenty five but in light of the recent announcement with Pi of time Bridge. We are now aiming to do that in.
Speaker Change: To coincide with the closing of the transaction in China.
Speaker Change: All he said that you worked very hard all of you and that we wanted to make it easier for you to do all your model changes. So that was a you can thank him in due time so.
Speaker Change: We expect the timing of the close to be in the second half of 'twenty five we have a number of regulatory approvals that we have to.
<unk> done, but the team is working intensely to get those completed so that would be our timing of when we'd give more info in them.
Speaker Change: And then one last quick one it sounds like you guys are using the forward curve right for some of the currency assumptions within the guide I'm just trying to get a sense like if there is upside or downside.
Speaker Change: Downside risk to some of the international earnings.
Speaker Change: As you know currency moves during 2025.
Speaker Change: Yeah, that's correct to lease we tend to just lock in on the 12 31 forward curves.
Speaker Change: And you know I think the places where we're seeing the most change over the last three months is primarily Latin America.
Speaker Change: You saw that mostly through throughout the fourth quarter happen.
Speaker Change: So the average for the year is is.
Speaker Change: It is really kind of pressured there.
Speaker Change: I think from here, we see maybe a little more weakening from the spot rate. So I think at the end of 2025, it's somewhere a little above 21, where we're maybe hovering in the twenty's today.
Speaker Change: And then and then also Asia as well so we use a forward curve I think we're in like the yen today is in the 154 range or so something like that and where I think the forward curves as spot rate will be one.
Speaker Change: Low fifties somewhere around there. So so theirs I think on average there's a little pressure if you take the average for the year. So it's a little bit of a headwind.
Speaker Change: As well as some of the other Asia Asian currencies, so hopefully that helps.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I will now turn the call back over to John Hall for closing remarks.
Speaker Change: Thanks, everyone for joining us have a great day.
Speaker Change: This concludes today's call you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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Speaker Change: Okay.
Speaker Change: Thank you.
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Speaker Change: Yes.
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