Skip to content
    MET
    Earnings call· Mar 2025(Q1 FY25)

    METLIFE Q1 FY25 earnings call MET

    May 1, 2025 Source

    Executive summary

    MetLife Q1 FY25 — Strong Earnings and Capital Management Amidst Market Volatility

    MetLife delivered solid Q1 FY25 results, demonstrating the resilience of its diversified business model amidst rising recession odds and market volatility. The company accelerated capital returns, including a new $3 billion share repurchase authorization and a 4.1% dividend increase, while strategically de-risking its legacy variable annuity business through a $10 billion reinsurance transaction. Underlying growth in international segments and strong RIS liability inflows underscore the company's 'all-weather' strategy, though private equity returns were below outlook.

    Highlights

    6

    • Adjusted earnings of $1.3 billion or $1.96 per share, up 7% from the prior year period (11% on a constant currency basis).

    • Group Benefits adjusted earnings increased 29% to $367 million due to favorable life underwriting margins.

    • RIS U.S. PRT sales resulted in $1.8 billion of inflows, contributing to 8% YoY liability balance growth.

    • Asia sales grew 10% on a constant currency basis, driven by strong performance in Korea and China.

    • A new $3 billion share repurchase program was authorized, bringing total authorization to $3.4 billion, and the common dividend per share increased by 4.1%.

    • Cash and liquid assets at holding companies were $4.5 billion, exceeding the target buffer of $3 billion to $4 billion.

    Concerns

    5

    • Private equity funds gained 1.6% in the quarter, below the implied quarterly outlook return.

    • Asia adjusted earnings decreased 12% (9% constant currency) to $374 million due to lower underwriting margins and a $15 million tax adjustment in Japan.

    • Latin America adjusted earnings were down 6% on a reported basis (up 7% constant currency) to $218 million, impacted by foreign exchange rates.

    • MetLife Holdings adjusted earnings declined 3% to $154 million due to business runoff, with the VA risk transfer resulting in $100 million in foregone annual adjusted earnings.

    • The effective tax rate on adjusted earnings was 23.2%, modestly below the 2025 guidance range of 24% to 26%.

    Guidance & targets

    8
    CategoryTargetConfidence
    Group Life mortality ratio
    84% to 89%
    medium materiality
    High
    Non-medical health interest-adjusted benefit ratio
    toward the middle of the target range of 69% to 74%
    medium materiality
    High
    RIS liability balance growth
    upper end of 3% to 5%
    medium materiality
    High
    Effective tax rate on adjusted earnings
    24% to 26%
    medium materiality
    High
    Direct expense ratio
    12.1%
    medium materiality
    High
    Asia sales growth
    mid- to high single digits
    medium materiality
    High
    Group Life mortality ratio
    around 84%
    medium materiality
    High
    Group Benefits adjusted PFOs growth
    4% to 7%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Group Benefits
    Adjusted earnings increased significantly due to favorable life underwriting margins from lower mortality. The Group Life mortality ratio was at the low end of the target range. Non-medical health ratio was slightly above target due to Q1 seasonality and dental rate actions, but expected to normalize. Reported PFO growth was masked by favorable mortality impact on participating contracts and dental rate actions.
    Adjusted earnings: $367 millionAdjusted earnings YoY growth: 29%Life underwriting margins: Favorable due to lower mortalityGroup Life mortality ratio: 84.8%Non-medical health interest-adjusted benefit ratio: 74.1%Adjusted PFOs YoY growth: 2%Underlying PFOs YoY growth (ex-participating contracts): 4%
    		———$367 million
    Retirement and Income Solutions
    Adjusted earnings were up slightly, driven by higher variable investment income and favorable underwriting, partially offset by unfavorable recurring interest margins. Strong business momentum with significant PRT inflows and a large UK longevity reinsurance case. Total liability exposure grew robustly.
    Adjusted earnings: $401 millionAdjusted earnings YoY growth: 1%Total investment spreads: 114 basis pointsTotal investment spreads QoQ change: +2 basis pointsU.S. PRT sales inflows: $1.8 billionExcluding PRTs, adjusted PFOs YoY growth: 14%U.K. longevity reinsurance jumbo case contract value: $1.7 billionTotal liability exposure YoY growth: 8%General account liabilities YoY growth: 7%
    		———$401 million
    Asia
    Adjusted earnings declined due to less favorable underwriting margins and a tax adjustment in Japan. However, key growth metrics remain healthy with strong sales growth on a constant currency basis, particularly in Korea and China. Japan sales were down due to yen volatility but are showing sequential momentum.
    Adjusted earnings: $374 millionAdjusted earnings YoY growth: -12%Adjusted earnings YoY growth (constant currency): -9%Impact of Japan tax rate adjustment: -$15 millionGeneral Account assets under management (amortized cost) YoY growth (constant currency): 5%Sales YoY growth (constant currency): 10%Japan sales YoY growth: -8%Other Asia sales YoY growth (constant currency): 41%
    		———$374 million
    Latin America
    Adjusted earnings were down on a reported basis due to foreign exchange rates (Mexican peso weakness), but up significantly on a constant currency basis due to higher volume growth and favorable tax items. Top line continues to perform well with strong growth and solid persistency.
    Adjusted earnings: $218 millionAdjusted earnings YoY growth: -6%Adjusted earnings YoY growth (constant currency): 7%Adjusted PFOs YoY growth: 1%Adjusted PFOs YoY growth (constant currency): 14%
    		———$218 million
    EMEA
    Adjusted earnings and PFOs grew strongly on both reported and constant currency bases, driven by solid volume growth across the region.
    Adjusted earnings: $83 millionAdjusted earnings YoY growth: 8%Adjusted earnings YoY growth (constant currency): 14%Adjusted PFOs YoY growth: 8%Adjusted PFOs YoY growth (constant currency): 12%
    		———$83 million
    MetLife Holdings
    Adjusted earnings declined due to the runoff nature of the business. The segment is being optimized through risk transfers, including the recently announced VA reinsurance deal.
    Adjusted earnings: $154 millionAdjusted earnings YoY growth: -3%
    		———$154 million

    Operational metrics

    22
    Adjusted earnings
    $1.3 billionup 1% YoY
    Q1 FY25

    Reported adjusted earnings.

    Adjusted EPS
    $1.96up 7% YoY
    Q1 FY25

    Reported adjusted earnings per share.

    Adjusted return on equity
    14.4%
    Q1 FY25

    Company-wide adjusted ROE.

    Direct expense ratio
    12%vs 11.9% in Q1 FY24
    Q1 FY25

    Efficiency metric, full year target is 12.1%.

    Pretax variable investment income
    $327 millionup sequentially, below implied quarterly run rate of $425 million
    Q1 FY25

    Variable investment income for the quarter.

    Private equity returns
    1.6%below implied quarterly outlook
    Q1 FY25

    Private equity fund returns.

    Real estate and other funds returns
    2%
    Q1 FY25

    Real estate and other fund returns.

    Cash and liquid assets at holding companies
    $4.5 billionabove target cash buffer of $3 billion to $4 billion
    March 31, 2025

    Holding company liquidity position.

    U.S. statutory operating earnings
    approximately $600 million
    Q1 FY25

    Preliminary statutory operating earnings.

    U.S. statutory net income
    approximately $500 million
    Q1 FY25

    Preliminary statutory net income.

    Total U.S. statutory adjusted capital
    approximately $16.4 billiondown 6% from year-end 2024
    March 31, 2025

    Primarily due to dividends paid, partially offset by operating earnings.

    Foregone adjusted earnings from VA risk transfer
    $100 million
    annually

    Offset by annual hedge cost savings of $45 million.

    Hedge cost savings from VA risk transfer
    $45 million
    annually

    Associated with the block of business transferred.

    VA balances decline
    over 50%
    since 2019

    Total VA balances decline, reflecting reinsurance transaction.

    Remaining VA balances
    $24.5 billion
    March 31, 2025

    Expected total VA balances after reinsurance transaction.

    Traditional group retirement variable annuities
    roughly $9 billion
    March 31, 2025

    Significant portion of remaining VA balances, with limited guarantees.

    Private equity distributions
    over $600 millionwell in excess of earnings
    Q1 FY25

    Distributions from private equity funds.

    RIS liability balances growth
    8%
    YoY

    Growth in liability balances.

    Office leasing activity growth
    strongest since mid-2019
    Q1 FY25

    Indication of real estate market momentum.

    Real estate investment activity growth
    roughly 10%
    YoY

    Investment activity in real estate.

    RIS core spread decline
    7 basis points
    QoQ

    Decline in core investment spread.

    Interest rate cap roll-off drag
    5-6 basis points
    QoQ

    Expected drag on RIS spreads from remaining interest rate cap roll-off.

    Industry KPIs

    6
    MetricValueDetails
    Capital returns$1.8 billionUSD
    ROE operating ROE14.4%%
    Net investment income$327 millionUSD
    Retention persistencySolid
    Life specific when present$1.8 billionUSD
    Statutory regulatory capital388%%

    Product announcements

    2
    ProductTypeDetails
    New U.S. dollar-denominated productlaunch
    New single premium life productlaunch

    Deals & partnerships

    3
    Talcott Resolution Life Insurance CompanyReinsurance of approximately $10 billion of U.S. retail variable annuity and rider reserves.approximately $10 billion

    The transaction will accelerate the runoff of MetLife's legacy business, positively reduce the company's enterprise risk, and substantially lower the company's retail variable annuity tail risk, reducing account values by approximately 40%.

    MesirowAcquisition of teams from Mesirow to expand MetLife Investment Management.

    Intake of teams from Mesirow acquired in the quarter, contributing to MIM's aspirational path to $1 trillion in total assets under management.

    PineBridgeAcquisition of PineBridge, a substantial step towards MIM's aspiration.

    A substantial down payment towards achieving MetLife Investment Management's aspiration for $1 trillion in total assets under management.

    Risks & headwinds

    7
    Uncertain economic backdrop and market volatility2025

    odds of a recession on the rise

    Mitigation: All-weather nature of market-leading businesses, recurring revenue business model, primary profit driver (mortality) largely uncorrelated to economy, higher long-term interest rates helpful for RIS/MIM demand, investment portfolio risk-off for several years, focus on levers like discretionary expenses without sacrificing strategic growth investments.

    Foreign currency exchange headwindsQ1 FY25

    unfavorable foreign currency exchange

    Mitigation: Underlying growth of international businesses could start to emerge as a tailwind as strong dollar weakens.

    Lower private equity returnsQ1 FY25

    Private equity funds gained 1.6% in the quarter, which is below our implied quarterly outlook return.

    Mitigation: Well-diversified seasoned portfolio in private equity funds; over $600 million of distributions came through in Q1.

    Impact of Japan tax rate increaseQ1 FY25

    adjustment of a deferred tax asset to reflect an increase in Japan's effective tax rate. This reduced Asia's adjusted earnings by approximately $15 million in the quarter.

    Non-medical health interest-adjusted benefit ratio above targetQ1 FY25

    74.1%, slightly above our target range of 69% to 74%.

    Mitigation: Dental utilization is seasonally highest in Q1; expected to be toward the middle of the target range in Q2; disciplined underwriting actions on dental block.

    RIS recurring interest margins unfavorableQ1 FY25

    unfavorable recurring interest margins

    Mitigation: Strong liability growth (PRT, UK longevity, stable value) offsetting spread impact on earnings; spreads likely to stabilize in Q2.

    MetLife Holdings business runoffQ1 FY25

    adjusted earnings were $154 million, down 3% due to the runoff of the business.

    Mitigation: Continuing to look for opportunities to optimize this legacy block through risk transfers, such as the VA reinsurance deal.

    What to watch in Q2 FY25

    5

    Non-medical health interest-adjusted benefit ratio

    Q2 FY25
    Current74.1% (Q1 FY25)
    TargetToward the middle of 69% to 74%

    Why it matters

    This ratio was above target in Q1 due to seasonality and dental actions; its normalization in Q2 is key for Group Benefits profitability.

    The non-medical health interest-adjusted benefit ratio was 74.1%, slightly above our target range of 69% to 74%. Dental utilization is seasonally highest in the first quarter, and we expect the ratio to be toward the middle of the target range in Q2.

    Q&A highlights

    6

    Why did RIS base yield and spreads decline sequentially and YoY, excluding VII? Is further decline or stabilization expected?

    RIS spreads declined due to the remaining roll-off of interest rate caps (5-6 bps drag) and lower-than-expected rates/flatter curve preventing effective repositioning. Higher-yielding structured securities saw more paydowns, redeployed at lower spreads. However, RIS saw strong liability growth (8% YoY, expecting upper end of 3-5% FY25 guidance) from PRT ($1.8B inflows), UK longevity reinsurance ($1.7B jumbo case), and stable value, offsetting spread impact on earnings. Spreads are likely to stabilize in Q2.

    “We did have a 7 basis point decline in the core spread. When we were going through this back in February, we did expect a decline. We had the remaining roll-off of the interest rate caps. We expected that to be a 5- or 6-point drag but had expected to partially offset that with certain management actions in the quarter. However, we had some -- rates were different. The path of rates were different. We had lower rates than expected. We had a flatter curve than expected and so it became a bit difficult to reposition the portfolio and leverage some of our tools we had to offset that cap roll-off.”

    asked by Jimmy Bhullar · answered by John McCallion

    2 min read6 chapters

    Detailed Narrative

    01

    New Frontier Strategy Execution

    MetLife is actively executing its New Frontier strategy, focusing on responsible growth, attractive returns, and lower risk. This was demonstrated by the variable annuity risk transfer and the expansion of MetLife Investment Management (MIM) through acquisitions, aiming for $1 trillion in AUM. The company emphasizes its 'all-weather' business model, which has proven resilient in past challenging environments and is expected to navigate current market volatility🌐.

    02

    Capital Management and Shareholder Returns

    The company accelerated capital management activities in Q1, returning $1.8 billion to shareholders through dividends and share repurchases. A new $3 billion share repurchase program was authorized, bringing the total authorization to $3.4 billion. The Board also increased the common dividend per share by 4.1%, reflecting confidence in financial strength and flexibility.

    03

    Variable Annuity De-risking

    MetLife announced a significant risk transfer deal with Talcott Resolution Life Insurance Company, reinsuring approximately $10 billion of U.S. retail variable annuity and rider reserves. This transaction is expected to accelerate the runoff of legacy business, reduce enterprise risk, and substantially lower retail variable annuity tail risk, decreasing total VA balances by over 50% since 2019.

    04

    Investment Portfolio and Market Conditions

    MetLife's investment portfolio has been risk-off for several years, positioning it well to absorb recessionary stress. While private equity returns were below the implied quarterly outlook at 1.6%, real estate funds showed recovery with average returns of approximately 2%. The company noted that office leasing activity in Q1 was the strongest since mid-2019, suggesting a trough in real estate values, though uncertainty persists.

    05

    International Business Momentum

    Despite foreign currency headwinds🌐, MetLife's international businesses showed strong underlying growth. Asia sales were up 10% on a constant currency basis, driven by Korea and China, and Japan sales are gaining momentum with a new U.S. dollar-denominated product. Latin America adjusted earnings were up 7% on a constant currency basis, reflecting strong volume growth and solid persistency.

    06

    Japan ESR Implementation

    MetLife expressed confidence in the implementation of Japan's new Economic Solvency Ratio (ESR) framework, effective April 1. The company feels operationally ready and notes that its historical pricing under an economic framework aligns well with the new statutory framework, with no expected change to its dividend policy related to Japan.

    AI-generated summary of the company’s earnings call. Not investment advice.