MetLife, Inc. (MET) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed strong financial performance with a 7% increase in adjusted earnings and a $3 billion share repurchase authorization. Despite some challenges, such as lower Asia earnings and CECL reserves, management's optimistic guidance, strategic partnerships, and ongoing AI integration are positive indicators. The increased dividend and robust shareholder return plan further enhance sentiment. The Q&A section highlighted stable retirement spreads and growth in regional markets, reinforcing a positive outlook. Overall, these factors suggest a positive stock price movement over the next two weeks.
Key Financial Performance
Adjusted Earnings $1.4 billion or $2.02 per share for the second quarter, down 16% year-over-year. This was due to less favorable underwriting and lower investment margins.
Quarterly Adjusted Return on Equity 14.6%, well above the cost of capital and near the mid-teen target range, despite below-par variable investment income.
Direct Expense Ratio 11.7%, beating the annual target of 12.1%, reflecting strong expense management.
Free Cash Flow Returned to Shareholders $900 million in the form of common dividends and share repurchases.
Group Benefits Adjusted Earnings $400 million, down 25% year-over-year, due to less favorable life and non-medical health underwriting.
Group Benefit Sales Up 9% year-to-date, driven by growth in regional business.
Adjusted Premiums, Fees, and Other Revenues (Group Benefits) Grew 4% year-over-year.
Retirement and Income Solutions (RIS) Adjusted Earnings $368 million, down 10% year-over-year, mainly due to lower recurring interest margins.
Total Liability Exposures (RIS) Up 6% year-over-year, driven by growth in U.K. longevity reinsurance and general account products.
Asia Adjusted Earnings $350 million, down 22% year-over-year, due to less favorable investment and underwriting margins.
Asia Sales Up 9% on a constant currency basis, with Japan sales up 29% and Korea sales up 36% year-over-year.
General Account Assets Under Management (Asia) Up 6% year-over-year on a constant currency basis.
Latin America Adjusted Earnings $233 million, up 3% (15% on a constant currency basis), driven by volume growth and favorable Chilean encaje returns.
EMEA Adjusted Earnings $100 million, up 30% year-over-year, driven by volume and sales growth.
MetLife Holdings Adjusted Earnings $144 million, down 6% year-over-year, reflecting lower variable investment income and business runoff.
Cash and Liquid Assets at Holding Companies $5.2 billion, above the target buffer range of $3 billion to $4 billion.
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Operating Highlights
New product launches in Asia: Sales rose 9% on a constant currency basis, with Japan and Korea seeing sales jumps of 29% and 36%, respectively, following successful new product launches.
New strategic partnerships: Signed a strategic partnership with Workday to enhance benefits experience and distribution.
Market expansion in Latin America: Adjusted earnings totaled $233 million, matching the segment's all-time quarterly high results, with volume growth across the region and favorable Chilean encaje returns.
Growth in EMEA: Adjusted earnings of $100 million, up 30% year-over-year, driven by volume and sales growth across the region.
Expense management: Achieved a quarterly direct expense ratio of 11.7%, beating the annual target of 12.1%.
Capital return to shareholders: Returned $900 million to shareholders through dividends and share repurchases in the quarter.
Acquisition of PineBridge Investments: On track to close in the second half of the year, expanding the investment management platform.
Launch of Chariot Re: Launched with an initial $10 billion reinsurance deal to support growth in the diversified retirement platform.
Risk transfer deal with Talcott Financial Group: Aimed at reducing enterprise risk associated with capital markets, scheduled for a second-half close.
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Risk or Challenges
Economic Environment: The company is navigating an evolving and dynamic economic environment, which could pose challenges to its operations and strategic objectives.
Underwriting Margins: Less favorable underwriting margins were reported, particularly in Group Benefits and Asia, which could impact profitability.
Investment Margins: Lower investment margins, including less favorable variable investment income, were noted, which could affect financial performance.
Group Life Mortality Ratio: The Group Life mortality ratio was less favorable compared to the prior year, which could impact the Group Benefits segment.
Non-Medical Health Products: Elevated experience in non-medical health products was observed, which, while within normal range, collectively had a larger impact this quarter.
Recurring Interest Margins: Lower recurring interest margins in the Retirement and Income Solutions segment were reported, which could affect earnings.
Asia Underwriting and Investment Margins: Less favorable underwriting and investment margins in Asia were highlighted, which could impact the region's financial performance.
Variable Investment Income: Lower-than-expected variable investment income was a recurring theme, impacting multiple segments and overall earnings.
Statutory Adjusted Capital: A 3% decline in U.S. Statutory Adjusted Capital was reported, primarily due to derivative losses and dividends paid, which could affect financial stability.
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Guidance & Outlook
Group Life Mortality Ratio: Expected to continue its positive trend and be at or slightly below the bottom end of its annual target range in Q3.
Non-Medical Health Interest-Adjusted Benefit Ratio: Expected to improve by approximately 200 basis points from Q2 levels in Q3.
EMEA Quarterly Run Rate: Expected to continue running above its 2025 quarterly guidance of $70 million to $75 million for the remainder of the year.
PineBridge Acquisition: On track to close in the second half of 2025, expected to expand investment management platform.
Chariot Re Launch: Successfully launched with an initial $10 billion reinsurance deal, with more to come, supporting growth in the diversified retirement platform.
Talcott Financial Group Risk Transfer Deal: On schedule for a second-half close, expected to reduce enterprise risk associated with capital markets.
Variable Investment Income (VII): Preliminary information for Q3 expectations to be disclosed toward the end of September.
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Shareholder Return Plan
Common Stock Dividends Paid in Q2 2025: $400 million
Total Year-to-Date Dividends Paid: Over $2 billion
Historical Dividends Paid Since 2021: Nearly $16 billion
Share Repurchases in Q2 2025: Approximately $500 million
Share Repurchases in July 2025: Around $140 million
Total Year-to-Date Share Repurchases in 2025: Over $2 billion
Historical Share Repurchases Since 2021: Nearly $16 billion, reducing share count by more than 240 million shares
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Key Q&A
Q:Are you seeing anything surprising in terms of elevated claims or is it just random volatility?
A:Management is not seeing anything surprising. The nonmedical health ratio was pressured this quarter, but improvements are expected in the third and fourth quarters with a 2-point improvement in each. Dental business results are in line with expectations, showing seasonal patterns with favorability in the second half of the year. Disability incidents and recoveries are also in line with expectations. Pressure was seen in accident, hospital, and critical illness products, but these are expected to normalize in the outer quarters.
Q:What is the outlook for Chariot Re and sidecars in general?
A:Chariot Re is seen as a vehicle to enable growth, especially for opportunities beyond capital generation capabilities. The focus is on liabilities originated by MetLife, not third-party liabilities. A $10 billion transaction with Chariot was completed, and more MetLife liabilities are expected to be added.
Q:Can you provide more color on the strong sales in Japan and Korea and whether this growth can continue?
A:Sales in Asia increased 10% year-over-year in the first half. In Japan, sales were up 10%, driven by foreign currency products and a new single premium FX product launched in April. Korea saw a 41% increase in sales due to U.S. dollar-denominated products and bancassurance channel expansion. Sales in the rest of Asia increased 9%, driven by Korea and China. Management expects to be at the top end of the guidance range for Asia sales for the year.
Q:Would you expect retirement spreads to remain stable in the second half of the year?
A:Core spreads are expected to remain stable in Q3, with some seasonality in RIS margins due to real estate investments. Spreads are expected to revert to the low 100s in Q4. The Chariot reinsurance transaction will have a short-term impact on earnings but is expected to be accretive once excess capital is redeployed.
Q:Have you analyzed the disability pressure this quarter and its potential causes?
A:The disability pressure was related to two specialty clients with high claim amounts, not macro factors. Disability premiums are just above 10% of total PFOs, while dental premiums are about $5 billion.
Q:What caused the $235 million CECL reserves for commercial mortgage loans this quarter?
A:The reserves were due to anticipated charge-offs and losses emerging in 2025. This is seen as a sign of stabilization and price clearing levels. The impact on statutory risk-based capital is minimal, within normal levels of excess capital.
Q:What is driving optimism for nonmedical health results improving in the third quarter?
A:Optimism is based on seasonal patterns in dental, lack of macro impacts on disability, and normalization of claims across the portfolio. Management expects a 200 basis points improvement in each of the subsequent quarters.
Q:Why were Asia earnings lower despite strong sales?
A:Asia earnings were lower due to lower variable investment income and less favorable underwriting margins caused by a strengthening yen. However, full-year underlying earnings are expected to remain strong and in line with guidance.
Q:Can you provide more details on surrender activity in Japan and its impact?
A:Surrenders have decreased, creating a short-term headwind for earnings but driving higher sales and AUM growth. Higher yen interest rates are improving product economics, and U.S. dollar-denominated products remain attractive.
Q:What is the outlook for the FABN program?
A:MetLife issues $6 billion to $8 billion annually in the FABN market, benefiting from favorable funding costs. Growth in issuance is seen as positive, attracting more investors and establishing FABN as a widely appealing asset class.
Q:What are your expectations for the PRT market in the second half of the year?
A:Management expects a number of jumbo cases to transact in the third and fourth quarters. The U.S. PRT market is expected to grow due to strong funding levels and plan sponsors' desire to de-risk. In the U.K., MetLife participates as a reinsurer, issuing longevity swaps and providing reinsurance on a funded basis.
Q:How is MetLife implementing GenAI in its processes?
A:MetLife has been modernizing legacy systems, enhancing data quality, and reengineering processes to integrate AI. GenAI is being used in programming, call centers, and claims, driving both efficiency and growth. Partnerships with key players and specialized providers are also aiding implementation.
Q:Would MetLife consider transacting with its long-term care block or other blocks in Holdings?
A:MetLife is exploring LTC transactions but emphasizes price and structure. The LTC block is well-capitalized and performing in line with expectations. The Talcott transaction is expected to close in the second half of the year, and other risk transfer opportunities are being explored.
Q:Is MetLife seeing any impact on supplemental health businesses from adverse performance in the health insurer sector?
A:No impact is observed. Claims in the voluntary suite of products are running in line with expectations, and there is no trend impact from the major medical business.
Q:What is driving growth in the regional group market?
A:Regional markets contributed significantly to a 9% year-to-date sales increase. MetLife competes on capabilities, employer and employee experience, and broker relationships in a competitive but rational market.
Q:What is fueling better-than-expected growth in LatAm?
A:LatAm growth is driven by strong franchises in six markets, diversified products, and distribution channels. The embedded insurance platform, Accelerator, has issued $300 million in PFO and serves 5 million customers, contributing to growth across all lines of business.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the outlook for Chariot Re's growth opportunities and the exact drivers for the $235 million CECL reserves. Additionally, while optimism for nonmedical health results was explained, the response lacked detailed evidence for the expected normalization of claims.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Chariot
Chief
Conference
Executive
Financial
Frontier commitment
Group
Head Investor
Japan Korea
Joel
LLC Research
MetLife Investment
MetLife capital
Officer
Regional President
Research Division
Securities LLC
VP
ability
acquisition PineBridge
addition
benefit experience
client
currency basis
date
frame
funding
maturity
participation
platform
power MetLife
priority
region
return risk
slide
stock
transfer deal
MET Transcript
MetLife, Inc. (MET) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong performance and strategic advancements, such as the successful Chariot Re launch and favorable financial ratios. The Q&A session reveals management's confidence in overcoming challenges, with positive updates on nonmedical health and MIM's growth. Despite some unclear responses, the overall sentiment is positive due to strategic initiatives like the PineBridge acquisition and efficient capital structures in Japan. The stock price is likely to experience a positive movement, within the 2% to 8% range, as the company demonstrates resilience and growth potential.
MetLife, Inc. (MET) Presents At KBW Insurance Conference 2025 Transcript
Neutral9-3
MetLife, Inc. (MET) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call revealed strong financial performance with a 7% increase in adjusted earnings and a $3 billion share repurchase authorization. Despite some challenges, such as lower Asia earnings and CECL reserves, management's optimistic guidance, strategic partnerships, and ongoing AI integration are positive indicators. The increased dividend and robust shareholder return plan further enhance sentiment. The Q&A section highlighted stable retirement spreads and growth in regional markets, reinforcing a positive outlook. Overall, these factors suggest a positive stock price movement over the next two weeks.
MetLife, Inc. (MET) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call presents a mixed picture: strong group benefits earnings and share repurchases are positives, but declines in Asia and Latin America earnings, along with uncertainty in spreads and market volatility, are concerns. The Q&A highlights management's cautious outlook, especially regarding RIS spreads and variable investment income. The positive impact of share repurchases and dividend increase balances against the negative aspects, leading to a neutral sentiment. Without a market cap, the prediction is neutral as the positives and negatives seem to offset each other.
MET Slides
MET Report
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