MetLife, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• New Frontier Strategy: Four strategic priorities include extending group benefits leadership, capitalizing on retirement platform, accelerating asset management growth, and expanding in high-growth international markets.
• Key Transactions: Formed Cherry Tree with General Atlantic and Chubb, acquired PineBridge Investments, and acquired certain teams from Mesero Financial.
• Fourth Quarter 2024: Adjusted earnings $1.5 billion or $2.09 per share, up 14% y-o-y. Full year 2024 adjusted earnings excluding notables $5.8 billion. Adjusted ROE 15.2% in 2024, direct expense ratio 12.1%.
• Group Benefits: Adjusted earnings $1.7 billion in 2024, 8% sales growth in national accounts.
• RIS: Liability exposures grew 3.4% in 2024, above outlook.
• International: Asia adjusted earnings up 21% y-o-y, Latin America posted record adjusted earnings despite currency headwinds.

Segment Performance

• Group Benefits: Adjusted earnings excluding notables of $1.7 billion in 2024, contributing ~29.3% of total adjusted earnings excluding notables. Fourth quarter 2024 adjusted earnings were $416 million, down 11% y-o-y. Full-year sales up 8% on strong growth in national accounts. Full-year adjusted PFOs up 4% y-o-y, underlying PFOs up ~5% within 4%-6% target range.
• Retirement and Income Solutions (RIS): Adjusted earnings excluding notables of $1.6 billion in 2024, contributing ~27.6% of total. Fourth quarter 2024 adjusted earnings were $386 million, down 8% y-o-y. Total liability annual growth guidance increased to 3%-5%.
• Asia: Adjusted earnings excluding notables of $1.7 billion in 2024, up 21% y-o-y. General account AUM up 5% on a constant currency basis.
• Latin America: Record adjusted earnings excluding notables of $877 million in 2024 despite substantial currency headwinds.
• EMEA: Adjusted earnings $59 million in 2024, up 26% y-o-y on a constant currency basis.
• MetLife Holdings: Adjusted earnings $153 million in 2024, down 2% y-o-y.
• Corporate and other: Adjusted loss $209 million in 2024, compared to an adjusted loss of $156 million in 2023.

Guidance

• 2025 Outlook: Expect double-digit adjusted EPS growth, adjusted ROE 15%-17%, maintain free cash flow ratio 65%-75% of adjusted earnings, target direct expense ratio 11.3% by 2029.
• 2025 Financials: Variable investment income expected ~$1.7 billion pretax. Corporate and other adjusted loss expected $850-$950 million after tax.
• Segment-Specific Guidance: Group benefits: Increase adjusted PFO growth target to 4%-7% annually. RIS: Total liability annual growth guidance 3%-5%, total general account investment spread 110-135 basis points. MetLife Holdings: Adjusted PFOs decline ~4%-6%, adjusted earnings guidance $650-$800 million. International: Asia sales mid-high single digits constant currency growth, Latin America adjusted PFOs and earnings high single digits constant currency growth, EMEA adjusted PFOs mid-high single digits reported growth.

Risks

• Interest rate cuts pace in question due to persistent inflation.
• Currency headwinds in international markets, especially Latin America and Asia.
• Complexity of risk transfer transactions in long-term care.
• Regulatory approvals and execution challenges for acquisitions like PineBridge Investments.

Question and Answer

• Q: Details on one-one renewals, competition pricing in group benefits A: Strong start in one-one, good renewals and persistency, dental business repricing contributing.
• Q: Elevated voluntary benefit loss ratios, nonmedical health loss ratio in 2025 A: No material deviations, midpoint of 2025 range expected.
• Q: Raising alternative return assumptions for 2025 A: Positive backdrops in private equity and real estate, private equity returns on track, real estate showing signs of stabilization.
• Q: Cherry Tree scope A: Intended to enhance capital flexibility, source liabilities including PRT and others, potential to reinsure third-party liabilities.
• Q: Long-term care risk transfer, free cash flow conversion A: More activity in risk transfer market, long-term care book well-capitalized, not providing much cash flow yet.
• Q: Commercial real estate losses, Chile pension reform A: Commercial real estate near trough, pension reform gradual with no material impact.
• Q: MIM segmentation, currency assumptions A: MIM segment to be broken out in 2025, currency assumptions based on forward curves with pressure in Latin America and Asia.