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    MET
    Earnings call· Dec 2024(Q4 FY24)

    METLIFE Q4 FY24 earnings call MET

    Feb 6, 2025 Source

    Executive summary

    MetLife Q4 FY24 — New Frontier Strategy and Strong Capital Returns

    MetLife concluded its "Next Horizon" strategy, exceeding all financial commitments, and launched its "New Frontier" strategy focused on responsible growth. The company reported strong Q4 and full-year 2024 results, driven by solid volume growth and higher variable investment income, despite some segment-specific underwriting pressures and currency headwinds. Strategic acquisitions and partnerships were announced to fuel future growth, alongside increased financial commitments for the next five years.

    Highlights

    5

    • Adjusted EPS was $2.09 in Q4 FY24, up 14% from the prior year period, or $2.08 (up 8%) excluding notable items.

    • Full-year 2024 adjusted ROE was 15.2%, exceeding the prior target range of 13% to 15%.

    • Full-year 2024 direct expense ratio was 12.1%, beating the 12.3% target.

    • Returned approximately $4.7 billion to shareholders in FY24, comprising $3.2 billion in share repurchases and $1.5 billion in common stock dividends.

    • Group Benefits full-year sales were up 8% in 2024, with underlying PFOs up approximately 5%.

    Concerns

    5

    • Group Benefits adjusted earnings were $416 million in Q4 FY24, down 11% due to less favorable nonmedical health underwriting margins.

    • RIS adjusted earnings were $386 million in Q4 FY24, down 8% year-over-year, driven by lower recurring interest margins and less favorable underwriting.

    • Latin America adjusted earnings were down 3% on a reported basis in Q4 FY24, masked by substantial currency headwinds.

    • Variable Investment Income (VII) for full-year 2024 was $1 billion, below the $1.5 billion target.

    • Expected adjusted earnings headwind of approximately $150 million to $175 million in 2025 due to U.S. dollar strengthening.

    Guidance & targets

    32
    CategoryTargetConfidence
    Adjusted EPS growth
    double-digit
    high materiality
    High
    Adjusted ROE target range
    15% to 17%
    high materiality
    High
    Direct expense ratio target
    11.3%
    medium materiality
    High
    Free cash flow
    $25 billion
    high materiality
    High
    Adjusted EPS growth
    double-digit
    high materiality
    High
    Adjusted ROE
    15% to 17%
    high materiality
    High
    Free cash flow ratio
    65% to 75%
    medium materiality
    High
    Direct expense ratio
    12.1%
    medium materiality
    High
    Variable investment income (pretax)
    approximately $1.7 billion
    medium materiality
    High
    Corporate and other adjusted loss (after tax)
    $850 million to $950 million
    medium materiality
    High
    Effective tax rate
    24% to 26%
    low materiality
    High
    Group Benefits adjusted PFO growth
    4% to 7%
    medium materiality
    High
    Group Life mortality ratio
    84% to 89%
    medium materiality
    High
    Group nonmedical health interest adjusted benefit ratio
    69% to 74%
    medium materiality
    High
    Group Benefits adjusted earnings (incremental)
    5% to 10%
    medium materiality
    High
    RIS total liability annual growth
    3% to 5%
    medium materiality
    High
    RIS total general account investment spread
    110 to 135 basis points
    medium materiality
    High
    MetLife Holdings adjusted PFOs decline
    approximately 4% to 6%
    medium materiality
    High
    MetLife Holdings adjusted earnings
    $650 million to $800 million
    medium materiality
    High
    Asia sales growth (constant currency)
    mid- to high single digits
    medium materiality
    High
    Asia general account AUM growth (constant currency)
    mid-single digits
    medium materiality
    High
    Asia adjusted earnings growth (constant currency)
    mid-single digits
    medium materiality
    High
    Asia adjusted earnings growth (reported)
    low single digits
    medium materiality
    High
    Asia adjusted earnings growth
    mid-single digits
    medium materiality
    High
    Latin America adjusted PFOs growth (constant currency)
    high single digits
    medium materiality
    High
    Latin America adjusted PFOs growth (reported)
    flat
    medium materiality
    High
    Latin America adjusted earnings growth (constant currency)
    high single digits
    medium materiality
    High
    Latin America adjusted earnings growth (reported)
    flat
    medium materiality
    High
    Latin America adjusted PFOs and adjusted earnings growth
    high single digits
    medium materiality
    High
    EMEA adjusted PFOs growth (reported)
    mid- to high single digits
    medium materiality
    High
    EMEA adjusted earnings quarterly run rate
    $70 million to $75 million
    medium materiality
    High
    EMEA adjusted earnings growth
    mid-single digits
    medium materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Group Benefits
    Adjusted earnings decreased due to less favorable nonmedical health underwriting margins. Full-year sales and underlying PFOs showed strong growth. The non-medical health ratio was within the annual target range, and the Group Life mortality ratio was at the bottom end of its target.
    Adjusted earnings (Q4 FY24): $416 millionAdjusted earnings (FY24): $1.7 billionFull year sales (FY24): up 8%Adjusted PFOs (FY24): up 4%Underlying PFOs (FY24): up ~5%Non-medical health interest-adjusted benefit ratio (Q4 FY24): 71.8%Group Life mortality ratio (Q4 FY24): 83.2%Group Life mortality ratio (FY24): 84.5%
    		—-11%—$416 million
    Retirement and Income Solutions (RIS)
    Adjusted earnings declined primarily due to lower recurring interest margins and less favorable underwriting, partially offset by higher variable investment income and solid volume growth. Total investment spreads increased sequentially, while core spread remained flat.
    Adjusted earnings (Q4 FY24): $386 millionAdjusted earnings (FY24): $1.6 billionLiability exposures (FY24): grew 3.4%Adjusted PFOs (Q4 FY24): up 26%Total investment spreads (Q4 FY24): 112 basis pointsCore spread (Q4 FY24): 108 basis pointsPRT inflows (U.S. and U.K. combined, FY24): ~$6.7 billion
    		—-8%—$386 million
    Asia
    Adjusted earnings significantly increased due to higher variable investment income and favorable underwriting margins, including positive reserve refinements. Full-year sales were down primarily due to Japan, but other markets like Korea, India, and China showed strong growth.
    Adjusted earnings (Q4 FY24): $443 millionAdjusted earnings (Q4 FY24, constant currency): up 52%Adjusted earnings (FY24): $1.7 billionAdjusted earnings (FY24, constant currency): up 21%General account AUM (amortized cost basis, FY24, constant currency): up 5%Sales (FY24, constant currency): down 5%Japan sales (FY24): down 18%Other Asia markets sales (FY24): up 21%
    		—50%—$443 million
    Latin America
    Adjusted earnings were down on a reported basis due to currency headwinds but showed strong constant currency growth driven by higher volume across the region. Adjusted PFOs also reflected strong constant currency growth and solid persistency.
    Adjusted earnings (Q4 FY24): $201 millionAdjusted earnings (Q4 FY24, constant currency): up 10%Adjusted earnings (FY24): $877 millionAdjusted PFOs (Q4 FY24): down 3%Adjusted PFOs (Q4 FY24, constant currency): up 9%
    		—-3%—$201 million
    EMEA
    Adjusted earnings increased due to solid volume growth and lower tax charges, partially offset by less favorable expense and underwriting margins. Adjusted PFOs showed strong growth on both reported and constant currency bases.
    Adjusted earnings (Q4 FY24): $59 millionAdjusted earnings (Q4 FY24, constant currency): up 31%Adjusted PFOs (Q4 FY24): up 10%Adjusted PFOs (Q4 FY24, constant currency): up 13%
    		—26%—$59 million
    MetLife Holdings
    Adjusted earnings were slightly down, largely due to foregone earnings from a reinsurance transaction. Favorable life underwriting provided a partial offset. Business runoff accelerated in 2024 due to higher life and variable annuity lapses.
    Adjusted earnings (Q4 FY24): $153 millionBusiness runoff (FY24): accelerated to roughly 9% of adjusted earnings
    		—-2%—$153 million
    Corporate and Other
    The adjusted loss increased year-over-year due to higher expenses and taxes, partially offset by higher variable investment income.
    Adjusted loss (Q4 FY24): $209 millionAdjusted loss (prior year Q4): $156 million
    		———-$209 million

    Operational metrics

    29
    Adjusted earnings
    $1.5 billionup 14% YoY
    Q4 FY24

    Company-wide adjusted earnings.

    Adjusted EPS
    $2.09up 14% YoY
    Q4 FY24

    Company-wide adjusted earnings per share.

    Adjusted EPS (excluding notable items)
    $2.08up 8% YoY
    Q4 FY24

    Adjusted EPS excluding notable items, with constant currency comparison.

    Adjusted earnings (excluding notable items)
    $5.8 billion
    FY24

    Company-wide adjusted earnings for the full year.

    Direct expense ratio
    13.1%
    Q4 FY24

    Elevated due to seasonal enrollment costs and higher employee-related costs and technology initiatives.

    Direct expense ratio
    12.1%below 2024 target of 12.3%
    FY24

    Full-year direct expense ratio, demonstrating consistent execution and efficiency.

    Variable investment income
    $293 million
    Q4 FY24

    Driven by private equity fund performance.

    Variable investment income
    $1 billionbelow 2024 target of approximately $1.5 billion
    FY24

    Full-year variable investment income, with real estate and other funds accounting for most of the shortfall.

    Private equity fund return
    1.8%
    Q4 FY24

    Average return for private equity portfolio, reported on a 1-quarter lag.

    Real estate and other funds return
    0%
    Q4 FY24

    Average return for real estate and other funds, reported on a 1-quarter lag.

    Effective tax rate on adjusted earnings
    23.5%modestly below 2024 guidance range of 24% to 26%
    Q4 FY24

    Company-wide effective tax rate.

    Statutory operating earnings (U.S. companies)
    $4 billiondecreased by approximately $500 million YoY
    FY24

    Preliminary statutory operating earnings, impacted by reinsurance transaction and lower net investment income.

    Statutory net income (U.S. companies)
    $2.9 billion
    FY24

    Preliminary statutory net income.

    Distributable cash
    $20.7 billionabove $20 billion commitment
    2023-2024

    Generated over the 5-year Next Horizon period.

    Operating leverage capacity created
    $1.2 billionabove $1 billion commitment
    Next Horizon period

    Additional capacity created to accelerate growth.

    U.S. dollar strengthening headwind to adjusted earnings
    $150 million to $175 million
    FY25

    Expected impact from forward currency curve.

    Expected annual return for private equity
    9% to 11%
    Near-term

    Increased near-term expected annual returns.

    Expected annual return for real estate and other funds
    7% to 9%
    Near-term

    Increased near-term expected annual returns.

    RIS total investment spreads
    112 basis pointsup 6 basis points sequentially
    Q4 FY24

    Mainly due to higher variable investment income.

    RIS core spread
    108 basis pointsflat
    Q4 FY24

    Consistent with expectations, expected to stabilize from 2025 forward.

    PRT inflows (U.S. and U.K. combined)
    $6.7 billion
    FY24

    Total pension risk transfer inflows.

    PRT inflows
    $640 million
    early 2025

    A single plan written in the first part of 2025.

    Asia sales growth
    down 5%YoY
    FY24

    Lower Japan sales partially offset by other Asia markets.

    Japan sales growth
    down 18%YoY
    FY24

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

    Other Asia markets sales growth
    up 21%
    FY24

    Driven by solid growth in Korea, India, and China.

    Latin America adjusted PFOs growth
    down 3%
    Q4 FY24

    Reported growth masked by recent currency headwinds.

    EMEA adjusted PFOs growth
    up 10%
    Q4 FY24

    Reflecting strong sales across the region.

    MetLife Holdings life and variable annuity lapses
    higher
    FY24

    Contributed to accelerated business runoff.

    RIS liability exposures growth
    3.4%
    FY24

    Above the midpoint of prior outlook range.

    Industry KPIs

    7
    MetricValueDetails
    Capital returns$4.7 billionUSD
    ROE operating ROE15.2%%
    Net investment income$293 millionUSD
    Retention persistencywithin our kind of expectations
    Net premiums written earnedup 4%%
    Renewal rate change pricingwithin expectations
    Statutory regulatory capitalmore than ample

    Deals & partnerships

    3
    General AtlanticFormation of Chariot Re, a Bermuda-based life and annuity reinsurance company.over $1 billion

    Chubb will join as an anchor investor. Will leverage MetLife's deep insurance and investing expertise as well as General Atlantic's investment capabilities. Intended for liabilities to be sourced through MetLife initially (PRT, other RIS liabilities, Japan liabilities), with potential for third-party reinsurance down the road.

    PineBridge InvestmentsAcquisition of a leading global asset manager with approximately $100 billion in assets under management.

    Announced in December. Closing expected in H2 2025, pending regulatory approvals.

    Mesirow FinancialAcquisition of high-yield and bank loan, strategic fixed income, and small cap equity teams.about $6 billion

    Acquisition announced in December, involving teams managing approximately $6 billion in assets.

    Risks & headwinds

    6
    Persistent Inflation and Interest Rate UncertaintyNear-term

    Path and pace of anticipated interest rate cuts remain in question due to concerns about persistent inflation.

    Mitigation: MetLife's capacity to execute across changing environments has been a hallmark of its success.

    Currency Headwinds (U.S. Dollar Strengthening)FY25

    Expected headwind to adjusted earnings of approximately $150 million to $175 million in 2025.

    Mitigation: Impact is embedded in the non-U.S. segment outlooks; company operates with a diversified portfolio.

    Less Favorable Nonmedical Health Underwriting MarginsQ4 FY24

    Key driver for Group Benefits adjusted earnings being down 11% in Q4 FY24.

    Mitigation: The non-medical health interest-adjusted benefit ratio was in line with expectations and within the annual target range of 69% to 74%.

    Lower Recurring Interest Margins (RIS)Q4 FY24

    Primary driver for RIS adjusted earnings being down 8% year-over-year in Q4 FY24.

    Mitigation: Core spread is expected to stabilize from 2025 forward now that all remaining interest rate caps have matured.

    Chile Pension ReformGradual implementation over several years

    Some elements of the law will require adaptation of operations over time, but no material impact to business that cannot be mitigated.

    Mitigation: The private pension system continues in its current structure with adjustments; MetLife remains committed to providing high-quality pension management services.

    Commercial Real Estate (CRE) Market PressureNear-term, approaching the peak of the cycle or trough.

    Potential remaining impact of 1-2 points of RBC.

    Mitigation: Company has effectively reserved for losses; market is showing signs of stabilization with increasing transaction volumes.

    What to watch in Q1 FY25

    5

    Group Life mortality ratio

    Full year 2025 (check Q1/H1 trends)
    Current84.5% (FY24), 83.2% (Q4 FY24)
    TargetIn the bottom half of the 84%-89% guidance range for FY25

    Why it matters

    Indicates whether favorable population mortality trends persist, impacting underwriting profitability and potentially leading to better-than-expected results.

    However, for Group Life, 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 to be in the bottom half of the guidance range in 2025.

    Q&A highlights

    5

    Can you provide details on 1/1 renewals, including competition and pricing? Also, what is the impact of recent PRT market lawsuits on MetLife's business, and are you seeing any market shifts?

    1/1 renewals are off to a good start, with renewals and persistency within expectations, particularly in dental. The PRT market is well-established and regulated; MetLife saw $6.4 billion in inflows in 2024 and a $640 million deal in early 2025, with no material impact from lawsuits observed. The company remains confident in its 3-5% RIS liability growth target.

    “So in the here and now, we finished last year with a $6.4 billion of inflows for PRTs and healthy ROEs. And we're off to a really good start in '25. We had a $640 million plan that we wrote in the first part of '25.”

    asked by Ryan Krueger · answered by Ramy Tadros

    2 min read6 chapters

    Detailed Narrative

    01

    Next Horizon Achievements

    MetLife successfully concluded its 5-year Next Horizon strategy, delivering on all financial commitments despite market volatility🌐. The company achieved an adjusted ROE of 15.2% for FY24, exceeding its original 12%-14% commitment and the 13%-15% guidance. It generated $20.7 billion in distributable cash from 2023-2024, surpassing the $20 billion commitment, and created $1.2 billion of additional operating leverage capacity, demonstrating consistent execution and efficiency.

    02

    New Frontier Strategy and Priorities

    The company launched its "New Frontier" strategy, shifting towards responsible growth with a more offensive stance. This strategy identifies four key priorities: further extending leadership in group benefits, capitalizing on the unique retirement platform, accelerating growth in asset management, and expanding in high-growth international markets. These priorities collectively drive nearly 80% of current adjusted earnings and are expected to fuel strong growth through the 5-year strategy period.

    03

    Strategic Transactions and MIM Expansion

    In December, MetLife announced several strategic transactions aligned with its New Frontier goals. These include the formation of Chariot Re, a Bermuda-based life and annuity reinsurer with General Atlantic and Chubb, and the agreement to acquire PineBridge Investments, a global asset manager with approximately $100 billion in AUM, to expand MetLife Investment Management's (MIM) public and private credit offerings, especially internationally. MIM also signed an agreement to acquire high-yield, bank loan, strategic fixed income, and small cap equity teams from Mesirow Financial, adding about $6 billion in managed assets.

    04

    Capital Management and Shareholder Returns

    MetLife demonstrated strong capital management, returning approximately $4.7 billion to shareholders in 2024. This included $3.2 billion in common stock repurchases and $1.5 billion in common stock dividends. In Q4 2024, the company repurchased roughly $400 million of common stock, and in January 2025, it repurchased approximately $470 million, underscoring a continued commitment to disciplined capital deployment and shareholder value.

    05

    Variable Investment Income (VII) and Alternative Assets Outlook

    While full-year 2024 Variable Investment Income (VII) was $1 billion, below the $1.5 billion target, the company expects VII to be approximately $1.7 billion pretax in 2025. This outlook is supported by increased near-term expected annual returns for private equity (9%-11%) and real estate and other funds (7%-9%). Management anticipates a gradual improvement in VII throughout 2025, with returns trending higher in 2026 and 2027.

    06

    Commercial Real Estate (CRE) Market and Reserves

    Management expressed cautious optimism regarding the commercial real estate market, noting signs of stabilization in office vacancies, increasing lease signings, and a low construction pipeline. They believe the company has effectively reserved for potential losses, with any remaining impact likely limited to 1-2 points of RBC. Transaction volumes are also beginning to pick up, indicating a potential trough in the cycle.

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