MetLife, Inc.

So these are the two main items. Now, you know, putting these items aside, we're also very pleased to see our business continues to deliver. As you may recall, last quarter I mentioned that our earnings growth continues to be supported by strong and resilient business fundamentals, which are driving solid top-line growth. And that sales momentum that began last year has continued this quarter as well. And this reflects really the strength, the resiliency, and the diversity of our distribution franchise across the region, combined with a noticeable flight to quality. And then this emphasis on quality is also evidenced by a very solid persistency across the region, which combined with the strong sales momentum that I mentioned, has resulted in a 26% growth year over year in PFOs, on a constant rate basis. Now, about half of that growth came from the SPIA business in Chile, where our market share has increased, but the market as well has grown over the past quarter. So, you know, that's in a nutshell the story for LATAM this quarter. I hope this helps.

Yes, thanks. And then my second question, you guys bought back $1.1 billion in the quarter, a pretty strong number. Was there any acceleration in buybacks just given the market weakness and an opportunity to buy your shares at a more attractive price? And can you just give us a sense of the outlook for future levels of share repurchase for the balance of the year?

Yeah, hi, good morning, Elise. This is Michel. So, yeah, as I noted in my opening comments, we had our foot on the gas pedal a little bit in the second quarter in particular. So, you know, expect a modest, a modestly slower pace, I would say, in the second half. Our overall view has not changed. Our philosophy, our approach have not changed. You know, we're still comfortable with the $3 billion to $4 billion cash buffer over time. We'll get back to that. So, you know, no change in approach here. It's just that there, you know, we had an acceleration in the first half, so it'll be modestly slower in the second.

Thank you.

And our next question is from Eric Bass with Autonomous Research. Please go ahead.

Hi. Thank you. Can you provide some more color on the expected adjustment to retained earnings from adopting LDTI? And is this all being driven by the impact of bringing market risk benefits to fair value? Are there any meaningful reserve adjustments? And I guess given the rise in interest rates since you're in 20, should we expect the adjustment to be smaller today than what you're showing on the slide?

Eric Hegg, good morning. It's John. So, yeah, the impact of retained earnings affects both market risk benefits and a function of disaggregation. Disaggregation is about, I'd say, 20 to 25 percent of the number, so it's mainly you know, a function of the fact that, you know, under our, for our VAs and primarily GMIBs, also, by the way, GMDBs get now marked to market, which is a different debate. But GMIBs, they're all kind of accrual accounting, if you will, and now they're moving to mark to market. So that's the biggest driver. As we think about relative to initial impact that we disclosed, uh it's it's a little better as you get into you know kind of year-end 21 in terms of less of a of a change i think interest rates moved maybe 60 basis points on the 10-year and then it'll continue to decline if you will as you move into 2022 just given the the function of the rising rising rate environment so that's the those are the main drivers

Perfect, thanks. And then maybe if you could touch on your U.S. mortality experience this quarter across both group and holdings. And it looks like even ex-COVID margins were favorable versus your targets. So have you seen some of the elevated non-COVID mortality that have been a factor in recent quarters? Has that started to come down as well?

Good morning, Eric. It's Rami here. I'll start off with group, and Michelle and John will comment on holdings. So for the quarter, if you look at our ratio sequentially, I would say the decline can be broken down into four pieces. So the first one is just the lower frequency in terms of overall population deaths. The second piece is the material decrease in the percentage of deaths under 65, which clearly reduced the impact on the working age population. The third piece is the Q1 reserves, which completed favorably, which John spoke about, and that was less than a point or so. And then the final piece is we did see little by way of non-COVID excess mortality in the quarter. And as Michelle pointed out, the second quarter tends to be a bit lighter in general in terms of mortality. As we look at the rest of the year on the group business side, we're cautiously optimistic given the results here. And but clearly, you know, the trajectory of the pandemic is uncertain. At this point, I would say if you exclude COVID, we anticipate that our mortality ratio to be comfortably inside our range for the second half of the year for the group business.

Yeah, and just on just touching on holdings, I mean, we certainly saw, you know, kind of a reduction in claims in the quarter. We didn't really see a big impact at all for COVID and then on the if you just look at the life interest adjusted benefit ratio, you have to adjust for the reinsurance settlement, but excluding that it comes in at 43.8 and that's we just saw favorable non COVID claim experience in the quarter. Got it, thank you.

And our next question is from Sunit Kamath with Jefferies. Please go ahead.

Thanks, maybe just for Steve to start out with. Can you just maybe talk a little bit about your outlook for credit and the potential for credit losses if we move into recession? Is there any asset classes or sectors that you're paying particular attention to these days?

Sure. Thanks, Anit. You know, I think obviously there's still a lot of uncertainty and clearly volatility in the markets about where we're headed from a macro perspective. What I do is really sort of rewind the clock a little bit and remember, in a way we sound like a broken record, but we go back to really even pre-COVID where we were actually starting to get concerned about a recession occurring sometime in 2020 and started preparing the portfolio then. Our de-risking efforts started in a pretty big way, and I think Then, of course, was accelerated during coven and we went through over $8 billion of be risking in that time period and that really sort of set the portfolio in. A position that we're very comfortable with obviously we continue to watch as we go through this period now expectations of recessions again, of course, depending on how one defines a recession, I guess, these days. are clearly picking up but we're very comfortable with you know the risking we've done over the last couple of years. and think the portfolio is in very good shape. Obviously, we continue to have a cautious attitude, but opportunistic at the same time because we do see some attractive investments and we have the opportunity to do that. One metric that might be of interest too is just in looking at the portfolio. During the course of this year, we've actually had twice as many upgrades as downgrades, and I think that says a lot about how we've been positioning the portfolio and and our overall outlook. So we're very comfortable with where we are today.

Okay, thanks. And then I guess for Rami, on the group benefit side, I know QQ is a low quarter for sales, but just curious on any color from the conversations you're having with your clients around pricing, just given I'm assuming most of them are facing pressures across the board on costs from inflation. So just any color on how those conversations are going as we think about 1-1 next year?

Sure. You know, just with respect to your comment on sales, as we've kind of discussed earlier, the year-to-date drop in sales is very much a function of the record year we had last year, where we had a record number of jumbles. And as you know, these jumbles can be pretty lumpy. So this is something we expected in terms of the sales coming down. And I would just also point you to the fact that really the better measure to think about the overall growth of this business is the PFO number. And we're certainly very pleased with the PFO growth number that we're seeing this quarter. In terms of the pricing environment, I would say the market is competitive but remains rational. In aggregate, we have put in place price increases both on the life and the disability side to reflect our expectation of the coming environment, to reflect also a load with respect to the COVID deaths. And in aggregate, we are getting our target price increases, and we're also continuing to see very strong persistency in the book.

Okay, thanks.

And our next question is from Alex Scott with Goldman Sachs. Please go ahead.

Hi. First one I had for you was just to get your latest thoughts on MetLife holdings and the potential for risk transfer and, you know, also any commentary you'd have around if, you know, doing something, taking action on something in holdings could influence, you know, the way that these impacts look from LDTI.

Hey, good morning, Alex. It's John. I think overall on risk transfer, I'd say nothing new really to update. I mean, we've probably given a consistent message every quarter for quite some time now. And I think it's the same. And I think we're being very transparent. Our goal here is to continuously optimize. And we're trying to do that both in the form of internal actions, but also looking at opportunities to leverage the growing risk transfer market and You know, as a result, we continue to converse with, you know, with third parties. You know, our philosophy is there's no burning platform. We're happy to maintain, you know, our approach and continue to optimize internally, but we want the optionality to see if we can, you know, accelerate the appropriate release of capital and reserves. You know, I think the one thing that we continue to Just look at here is this isn't this a reinsurance transaction for us if we were to do something so. You know, as we think about our philosophy when we look at this is you know we view this as a long term relationship so it's this is one of those things that would take time. It take time to make sure that we feel grounded with a strong counterparty and structure and and kind of the approach, but you know I think we're continuing to evaluate that and that's been the case now for for some time. You know, in terms of the impact to LDTI, I don't know how to exactly answer that. I think one thing we have to be careful about is, you know, under LDTI, one of the things that probably did not come out as perfect was just there is some asymmetrical counting when you do enter into reinsurance, so you have to be mindful of that under GAAP. So it doesn't perfectly line up. I don't know how to perfectly answer your question that way because I guess the answer is depends. So I'm sure that's a great answer.

It's helpful, Collier. Thank you. And the follow-up I had was maybe just a question on sort of the broader economy. I mean, you guys get such an interesting look at the labor market, given your presence in the group benefits. I mean, Anything that you can give us color on, even maybe thinking through beyond the end of the quarter that you're seeing in labor markets and potential implications just more broadly for your business?

Hey, Alex. I would say the numbers we're continuing to track clearly is just overall eligibility in our book, and we have a highly diversified book of business, and we with the low unemployment levels, clearly those numbers continue to kind of increase and remain very solid. And we're seeing, you know, some kind of form of wage inflation come through as well. And both of these have been kind of tailwinds to the business. So we're kind of seeing in the book what you're seeing probably in the broader economy. And maybe that's kind of as much color as it can give you in terms of what we're seeing.

Got it. Okay. Thanks, guys.

And our next question is from John Barnage with Piper Sandler. Please go ahead.

Thank you very much, and good morning. So you had an IBNR reserve release in both group and Latin America. Is there any tail that we should be thinking about for subsequent quarters from that?

John, it's John. Just when you say tail, you're referencing just more releases. Is that what you mean? Yes, correct. Yeah. Look, I think our, you know, this is a reserve. The reserve was put up at the point in time based on best estimates. I think in both cases, you know, the facts are that actuals have emerged different than expected. And so that's just the, you know, kind of the simple answer to why there was a release. I wouldn't assume there is a tail because if we assume there was more, we would have taken it. So right now, our best estimates are what we have up on our balance sheet. But I think just like we do every quarter, we'll continue to evaluate and review the emergence of actuals. And if there are refinements needed, we'll make them.

OK, thank you. And then my follow up to that, if we're talking about emergence versus expected, the LDTI disclosure. Can you maybe talk about, is there any unrealized insurance margin? That's something we've seen from other companies that have large operations in Japan. Thank you for the answer.

Yeah, sure, John. It's John again. Look, I think the reality on that one is it's really a function of mix of business. And I think that's, you know, if you listen to my earlier response to earnings and how, you know, some things are in scope and others are not, that's a major driver to kind of that outcome You know, many of our segments are not materially impacted by LDTI. Many of the products we sell, you know, are not as well. And that includes, like, Asia, where, you know, some of those products are out there that show that unrealized. In Asia, you think about in Japan, our flagship products are not subject to this. If you think about some of the, you know, I wouldn't say all products, but, you know, some of the FX products that we sell, they're all under FAS97. So it's a little bit of a different probably situation for us. And so I get, like I said, it really depends on mix of business to answer that question.

Thank you very much.

Next we go to Andrew Kligerman with Credit Suisse. Please go ahead.

Good morning. Most of the questions have been asked, but I'm wondering, you know, as we look at another excellent quarter at MetLife, if there's anything transformative that you need to do from an M&A perspective and anything that you think in your business lines that could change kind of or improve MetLife.

Yeah, hi, good morning, Andrew. So I don't think, you know, if we look at our portfolio, I think, you know, we don't see any major gaps when it comes to that portfolio. We're really well-pleased. As you know, we've gone through a major transformation that got us to this point. We believe we have the right strategy. Having said that, M&A is a strategic capability, and if we see opportunities to accelerate revenue growth in certain businesses where we you know, we believe potentially, you know, doing something organically might make sense or, you know, bring in a capability that can help drive our competitive advantage, you know, we'd certainly be, you know, be open to doing so. And, you know, look, we look at a lot of, you know, deals and, you know, maybe the sort of lack of deals should not suggest to you that there's a lack of activity. Uh, here, um, you know, we increased our shareholding, uh, in our India JV, uh, in the first quarter to 47%. Um, so, you know, we, we continue to be active, but we're also very disciplined and whatever we do has to make strategic sense for us as well.

Thanks, Michelle. And then with regard to a pension risk transfer, I think you said you did three deals at two plus billion. Um, you know, maybe a little color around the pipeline. It seems like there are a lot of new players in pension risk transfer that we didn't see three years ago. So do you think that pipeline will continue to be robust and that we'll have quarters like this one?

Good morning, Andrew. It's Rami here. I mean, as you know, the activity in the first half of the year was pretty substantial in the PRT space. Year to date, we've written $3.8 billion worth of deals, and that comes after a successful fourth quarter where we wrote $3.6 billion worth of deals. So that's, you know, cumulatively about $7.5 billion year over year. The pipeline continues to be pretty active and pretty robust, as Michelle mentioned. And we are focused on a specific part of that pipeline where we enjoy our own kind of set of competitive advantages, namely the jumbo end of the plans. And there are fewer competitors there. When you go down size, clearly there are more competition and more providers. But where we play, it's a narrower set of competitors because of the size of the transactions that we bid for.

Thanks, Rami.

And ladies and gentlemen, we will now turn the conference back to the CEO, Michel Halaf.

Thank you all for joining us this morning. I know it's a busy morning. Our second quarter results add to MetLife's track record of consistent, strong performance and provide further evidence of the strength and momentum of our well-diversified market-leading businesses. With our clarity of purpose, a compelling all-weather strategy, and a relentless focus on execution, we are well positioned to deliver superior value to all our stakeholders. Thank you and have a great day.

Ladies and gentlemen, this conference is available for digitized replay after 11 a.m. Eastern Time today through August 12th at midnight. You may access the replay service at any time by dialing 866-207-1041 and enter the access code of 249- Again, that dial-in number is 866-207-1041 or international 402-970-0847, access code 2495088. And that does conclude your conference for today. Thank you for your participation. You may now disconnect.