Wesley Carmichael

Wesley Carmichael from Wells Fargo asked about the less favorable experience in Group Disability during Q4 2025, specifically detailing the factors contributing to the non-medical health loss ratio and expectations for 2026. He also inquired about the opportunity for MetLife to gain market share in mandatory paid family leave and related products as more states roll out new programs.

Answer

Ramy Tadros, Regional President and U.S. Head of Business at MetLife Services and Solutions, attributed the Q4 disability pressure to slightly higher average severity and lower Social Security decisions, noting that while recoveries were slightly down in the quarter, full-year recoveries and incidence were largely in line with expectations, and this quarter's outcome doesn't indicate a trend for 2026. He highlighted mandatory paid family leave as a significant growth opportunity, leveraging MetLife's capabilities and product breadth, with PFML sales often bundled with multiple additional coverages.

Wesley Carmichael inquired about the opportunity for MetLife to gain market share in mandatory paid family leave and related products as more states roll out new programs, given the existing 'white space' in the U.S.

Answer

Ramy Tadros, Regional President and U.S. Head of Business, MetLife Services and Solutions, highlighted disability as an attractive growth area, with state-based regulations driving growth. He noted that MetLife's investments in digital capabilities and bundled product offerings, where PFML sales often come with multiple additional coverages, position them well to capitalize on this expanding market.

Wes Carmichael from Autonomous Research inquired about the potential impacts on MetLife from the reported acquisition of Bright House by Aquarian, specifically concerning assets under management (AUM) by MetLife Investment Management (MIM).

Answer

John McCallion, CFO of MetLife, congratulated Bright House on the reported acquisition. He affirmed MetLife's strong relationship with Bright House and its unique asset management capabilities. He stated that the key relationship is the asset management one and expressed anticipation for leveraging the partnership to support Bright House's strategic outcomes.

Wes Carmichael asked about the outlook for the base spread in Retirement and Income Solutions (RIS) and the potential impacts on MetLife from the reported acquisition of Brighthouse by Aquarian, particularly concerning MIM's managed assets.

Answer

John McCallion, CFO of MetLife, stated that RIS investment spreads, excluding variable investment income, were 102 basis points, up 1 basis point sequentially, and expected to remain relatively flat in Q4, with a potential temporary 2 basis point headwind from PRT asset repositioning. Regarding Brighthouse, he congratulated the team on the reported acquisition, affirmed MetLife's strong, long-standing asset management relationship with Brighthouse, and expressed intent to leverage this partnership going forward.

Wes Carmichael asked for more detail on surrender activity in Japan amid a strengthening yen and inquired about the outlook for MetLife's Funding Agreement Backed Note (FABN) business.

Answer

Lyndon Oliver, Regional President - Asia, noted that lower surrenders in Japan create a short-term earnings headwind but are a long-term positive for AUM growth, and that higher yen interest rates are a net positive for the business. Ramy Tadros, Regional President - U.S. Business, described the FABN program as well-established and stable, welcoming overall market growth as it attracts more investors and solidifies the asset class.

Wes Carmichael of Autonomous Research asked for details on surrender activity in Japan amid a strengthening yen and the impact of higher JGB yields. He also inquired about the outlook for the Funding Agreement Backed Note (FABN) business.

Answer

Lyndon Oliver, Regional President - Asia, noted that lower surrenders created a short-term earnings headwind but are now back in line with expectations, and higher yen rates are a net positive, improving the economics of yen-denominated products. Ramy Tadros, Regional President - U.S. Business, described MetLife's FABN program as well-established and views the overall market growth as a net positive that attracts more investors and solidifies the asset class.

Wesley Carmichael inquired about the outlook for variable investment income (VII) for the year given market volatility and asked for an update on the implementation of the Economic Solvency Regime (ESR) in Japan.

Answer

CFO John McCallion stated that predicting private equity returns is difficult in the current environment, and as a result, the company plans to provide preliminary information on Q2 VII in early July. Regarding Japan's ESR, he reiterated that MetLife feels good about its operational readiness. He emphasized that since the company has always priced under an economic framework, the new regime does not fundamentally change its operations or its dividend policy expectations for the Japan business.

Wesley Carmichael of Autonomous Research inquired about developments in the long-term care (LTC) risk transfer market and the block's impact on free cash flow. He also requested more detail on the positive trends observed in Group Life mortality.

Answer

Executive Ramy Tadros noted constructive activity in the LTC risk transfer market but stressed that MetLife's own block is well-capitalized and performing as expected. CFO John McCallion clarified that the LTC block is currently a strain on cash flow as liabilities are still growing. Tadros attributed the favorable Group Life trends to improving mortality data for the working-age population, suggesting the full-year 2025 ratio could be in the lower half of guidance if trends persist.

Wes Carmichael asked if Unum could size the gross impacts of removing the morbidity improvement and mortality improvement assumptions. He also inquired if the increase in the net premium ratio (NPR) is expected to increase volatility in quarterly earnings for the closed block segment as more cohorts become capped under LDTI.

Answer

Chief Financial Officer Steve Zabel stated that Unum has not disclosed the gross impacts of removing morbidity and mortality improvement assumptions because they are highly interchanged and historically move together, viewed as one concept. Regarding the NPR, Mr. Zabel confirmed that its increase means lower future expected margins for LTC. He acknowledged that generally, more capped cohorts could lead to increased volatility in results, but this would depend on variations against expected outcomes and specific cohorts.

Wes Carmichael from Autonomous Research asked if Unum Group could size the gross impacts of removing morbidity improvement and mortality improvement assumptions separately, despite their offsetting nature. He also inquired if the increase in the net premium ratio (NPR) for Long-Term Care (LTC) is expected to increase quarterly earnings volatility in the closed block segment as more cohorts become capped under LDTI.

Answer

Tim Arnold (Heads of Colonial Life and Voluntary Benefits Lines) stated that Unum Group has not disclosed the gross impacts of removing morbidity and mortality improvement assumptions separately, as they are highly interchanged and historically move together. Regarding the net premium ratio (NPR), Arnold confirmed that its increase implies lower future expected margins and agreed that a higher number of capped cohorts under LDTI could generally lead to increased quarterly earnings volatility in the closed block, depending on variations from expected results.

Inquired about changes in the long-term care (LTC) risk transfer landscape and reinsurer appetite since Unum's deal was announced, and asked for a technical explanation of the quarterly movement in the LTC net premium ratio (NPR).

Answer

The LTC risk transfer market has seen increased interest following recent transactions, but deals remain complex. The NPR movement reflects experience across both capped and uncapped cohorts; unfavorable experience in capped cohorts impacts earnings directly, while in other cohorts it also increases the NPR as some of the impact is buffered by the reserve.

Wesley Carmichael asked for details on the long-term care experience, particularly the interplay between mortality and capped cohorts, and inquired about the drivers of the front-loaded expense ratio.

Answer

CFO Steven Zabel explained that slightly elevated claim incidents in uncapped cohorts were offset by favorable mortality in capped cohorts, resulting in underwriting profitability meeting expectations. The earnings shortfall was due to lower alternative asset income, which is expected to normalize. He attributed the higher Q1 expense ratio to the timing of investments and incentive costs, which will trend down through the year.

Wesley Carmichael asked about 2025 renewal pricing trends for Unum U.S. group disability and group life. He also inquired about the long-term care (LTC) premium rate increase program, questioning if its rapid pace was expected and if Unum is now largely finished with such increases.

Answer

Chris Pyne, Head of Group Benefits, noted that while the market is competitive, Unum aims for fair, stable pricing over time and expects more normalized persistency in 2025 after a strong 2024. CFO Steve Zabel stated that while Unum is pleased with the LTC rate increase progress, the pace may slow, and a 3-to-5-year timeline is still reasonable. He did not rule out future rate increase programs, stating it depends on the block's emerging experience.

Wesley Carmichael inquired about 2025 renewal pricing trends for Unum US group disability and life, and asked about the pace of the LTC premium rate increase program.

Answer

Chris Pyne, head of Group Benefits, noted that while 2024 persistency was strong, he expects more normalized levels in 2025 as more cases come to market, but Unum's value-added solutions support stable, fair pricing. Regarding LTC, CFO Steven Zabel confirmed the rate increase program is over 50% complete, ahead of schedule due to large state approvals. However, he cautioned that the future pace would likely be slower and that decisions on new programs depend on emerging block experience.

Wesley Carmichael from Autonomous Research asked about the long-term sustainability of favorable recoveries in the group disability business and inquired about recent trends in long-term care (LTC) incidence.

Answer

CFO Steven Zabel stated that the current level of operating performance and recoveries in group disability is sustainable, with a 60% benefit ratio being a good ongoing expectation, subject to market pricing dynamics. Regarding LTC, Zabel confirmed that elevated incidence has continued to dissipate, though at a slightly slower pace, giving them confidence in their existing long-term assumptions.

Wes Carmichael inquired about the outlook for Variable Investment Income (VII) in the fourth quarter, specifically asking for any insights into real estate transaction momentum.

Answer

CFO Joel Pitz stated that VII performed very well in Q3 across all asset classes. While real estate was below long-term expectations in operating earnings, a $25 million gain manifested below the line in NRCG due to a Q3 transaction. He confirmed more transaction activity was signaled for the latter half of the year, which materialized in Q3, and expected more of the same in Q4, maintaining an optimistic VII outlook for the second half.

Wes Carmichael inquired about the drivers of the actuarial assumption review in the life insurance segment, specifically experience-related assumptions and model refinements, and asked for insight into the variable investment income (VII) outlook for Q4.

Answer

CEO Deanna Strable and CFO Joel Pitz explained the assumption review as normal course refinements, reflecting technical model updates and experience, with model sophistication being two-thirds of the impact. They stressed it's GAAP-only, non-cash, and immaterial to the ongoing run rate or future outlook. CFO Joel Pitz noted strong VII performance in Q3, including a real estate gain in NRCG, and an optimistic outlook for Q4 due to expected transaction activity.

Wes Carmichael from Autonomous Research questioned the drivers behind the higher-than-expected performance fees in Investment Management and whether the full-year outlook remains in line with 2024. He also requested an update on the target date fund with an in-plan guarantee.

Answer

Kamal Bhatia, President & CEO of Principal Asset Management, stated that Q2 performance fees were driven by alternative debt strategies, diversifying from historical real estate equity drivers, and affirmed the full-year outlook is similar to 2024. Christopher Littlefield, President of Retirement & Income Solutions, confirmed the new target date product was launched but said it is in the 'very early innings' of client adoption.

Wesley Carmichael of Autonomous Research questioned the new business strategy in Specialty Benefits, focusing on dental pricing and sales, and also asked for the outlook on variable investment income (VII).

Answer

CEO Deanna Strable and Executive Amy Friedrich explained that lower sales were due to a tough comparison with a new PFML market in the prior year and disciplined pricing actions on dental. Friedrich expects the full-year 2025 loss ratio to improve over 2024. On VII, Interim CFO Joel Pitz stated that performance was pressured by lower hedge fund returns and expects most real estate transactions, a key VII driver, to occur in the latter half of the year, with the outlook dependent on market conditions.

Wesley Carmichael of Autonomous Research asked about the Life Insurance segment's operating margin, which has been trending below guidance, and inquired about the outlook for variable investment income (VII).

Answer

Executive Amy Friedrich stated that the current earnings run-rate for the Life segment is a good baseline and that ongoing impacts from the actuarial review are already embedded in Q3 results. President and COO Deanna Strable-Soethout explained that Q3 VII was pressured by negative private equity returns. She expects continued pressure but a gradual ramp-up, noting VII has improved in 2024 versus 2023.

Wes Carmichael asked for an update on the progress of Globe Life's Bermuda reinsurance affiliate with the BMA and other regulators, inquiring if there are any changes to expectations regarding the uplift to pre-cash flow (previously $200 million) or the timing of this benefit. He also questioned the sensitivity of Net Investment Income (NII) to additional Fed cuts, given the company's well-matched floating rate assets and liabilities.

Answer

Tom Kalmbach, EVP and CFO, confirmed that Bermuda has approved their business plan, the company is established, and they are proceeding with licensing and U.S. regulatory approvals for reinsurance transactions and asset transfers. He reiterated the previous expectation of a $200 million benefit trending over time, with the earliest impact likely in 2027, as reciprocal jurisdiction status takes time. Frank Svoboda, Co-CEO, added that nothing has changed regarding the amount or timing, and more guidance will be available early next year after final approvals. Kalmbach estimated NII sensitivity to short-term rate changes at around $1 million for a 1% change, noting that required interest and floating rate debt financing costs would also decrease, offsetting some impact.

Wes Carmichael inquired about the progress of the Bermuda reinsurance affiliate, including updates from the BMA or other regulators, and whether expectations for cash flow uplift (previously $200 million) and timing (2027) remain unchanged. He also asked about floating rate exposure and the sensitivity of Net Investment Income (NII) to potential Fed rate cuts.

Answer

CFO Tom Kalmbach confirmed that Bermuda has approved the business plan, and the company is proceeding with licensing and U.S. regulatory approvals for reinsurance transactions. He reiterated that the $200 million benefit is expected to trend over time, with the earliest impact in 2027. Co-CEO Frank Svoboda added that there's no current information to change previous expectations on amount or timing, with more guidance expected early next year. Regarding NII sensitivity to Fed cuts, Kalmbach estimated a $1 million impact for a 1% change in short-term rates, noting that required interest and floating rate debt financing costs would also decrease, offsetting some impact.

Wes Carmichael of Autonomous Research asked for more detail on the technology driving the turnaround in the direct-to-consumer channel and whether there were any associated increases in corporate or administrative expenses.

Answer

Co-Chairman & Co-CEO J. Matthew Darden explained that the technology investments improve data utilization for automated underwriting, which increases the conversion rate of inquiries to policies. This improved ROI allows for increased marketing spend. Co-Chairman & Co-CEO Frank Svoboda clarified that this marketing spend is treated as a deferred acquisition cost, not a corporate or admin expense.

Wes Carmichael of Autonomous Research asked for more color on the positive developments in the direct-to-consumer channel, specifically the technology implemented and the channel's evolution from mail to digital. He also questioned if this shift resulted in higher corporate or administrative expenses.

Answer

Co-Chairman & Co-CEO J. Matthew Darden explained that technology investments improved the data-driven underwriting process, allowing for more efficient policy issuance without follow-up calls, which increases lead conversion. This improved ROI allows for expanded marketing spend. He noted that up to 80% of this business now comes through digital channels. Co-Chairman & Co-CEO Frank Svoboda clarified that the increased marketing spend is treated as an acquisition cost and does not flow through corporate or admin expenses.

Wes Carmichael of Autonomous Research asked for more detail on the technology driving the direct-to-consumer channel's turnaround and whether the associated marketing investments would increase administrative expenses.

Answer

Co-Chairman & Co-CEO J. Matthew Darden explained that the technology improves data utilization in underwriting, increasing the efficiency of converting digital leads into policies. This improved conversion ROI allows for increased marketing spend, which benefits both the DTC and agency channels. Co-Chairman & Co-CEO Frank Svoboda clarified that this marketing spend is treated as a deferrable acquisition cost, not an administrative expense.

Wesley Carmichael questioned how certain the guided $60-$100 million remeasurement gain is and what might drive the final result. He also asked if elevated lapses are expected in the MedSupp business due to rate increases.

Answer

CFO Thomas Kalmbach confirmed the gain is included in guidance but noted the range reflects the detailed assumption-setting process. Co-CEO Frank Svoboda added that Q2 data will influence the final number. Regarding lapses, Kalmbach expects only a small drop-off, and Svoboda noted that since rate increases are industry-wide, it should not cause a large-scale lapse event.

Wesley Carmichael of Autonomous Research questioned the capital management strategy, asking if more significant actions like reinsurance were being considered given the stock's valuation. He also asked about recent legal accruals and commercial paper levels.

Answer

Co-CEO Frank Svoboda affirmed that the company sees value in its shares and will continue to look for opportunities to manage capital aggressively, including potential front-end loading of buybacks. CFO Thomas Kalmbach explained the legal accrual relates to settlements of certain litigation claims and other legal expenses, separate from the major investigations. Svoboda added the goal is to reduce commercial paper by about $100 million to a more normal level around $300 million.

Wesley Carmichael of Autonomous Research asked for details on the assumption changes (mortality and lapse) that drove the life insurance unlocking, whether this resets expectations for future remeasurement gains, and for an update on the EEOC investigation concerning agent classification.

Answer

CFO Thomas Kalmbach confirmed the unlocking was due to updated long-term views on mortality and lapse, which is now reflected in the forward underwriting margin guidance. He and Co-CEO Frank Svoboda clarified that while assumptions are reset, continued favorable near-term mortality could still lead to future remeasurement gains. Co-CEO James Darden stated there were no material updates on the EEOC investigation, reiterating that its findings are non-binding and that courts have previously upheld their independent contractor model.

Wes Carmichael asked for W. R. Berkley's view on the property and property catastrophe reinsurance market, specifically the 'rotting of the apple' comment, and whether a significant turn is expected at the 1/1 renewals.

Answer

Rob Berkley, President and CEO, acknowledged dramatic rate increases and shifted attachment points in the property market. He expects further softening at 1/1 given recent performance and stated the company will adjust its posture from offensive to defensive based on its assessment of market margins.

Wes Carmichael asked for W. R. Berkley's view on property and property catastrophe reinsurance, specifically if conditions could turn at the 1.1% renewal or if it would take more time, given rhetoric about rate adequacy.

Answer

Rob Berkley (President and CEO) stated that the outcome depends on the 'feeding frenzy' at 1.1% and market aggression. He expects further softening at 1.1% given past performance, and the company will adjust its posture from offensive to defensive based on its assessment of margin.

Wes Carmichael from Autonomous Research asked about potential repositioning of the investment portfolio and the company's current view on rate adequacy in the property market.

Answer

President & CEO W. Robert Berkley, Jr. stated the fixed income portfolio is well-positioned and duration might be extended further if the yield curve steepens. On property, he said rates are still in a good place, but the company is being highly selective and will walk away from business if pricing becomes inadequate.

Wes Carmichael of Autonomous Research inquired about potential changes to the investment portfolio strategy and the company's view on rate adequacy in the large, shared, and layered property market.

Answer

President & CEO W. Robert Berkley, Jr. indicated the fixed income portfolio is well-positioned, with the potential to extend duration if the yield curve steepens. He described the large account property market as increasingly competitive, stating that while pricing is still generally adequate, the company is highly selective and prepared to walk away from underpriced risk.

Wes Carmichael asked if business mix had a similar impact on the expense ratio as it did on the loss ratio. He also requested more color on growth drivers within the Insurance segment beyond the previously discussed workers' compensation line.

Answer

Principal Financial Officer Richard Baio and Executive W. Berkley confirmed that ceding commissions from quota shares can affect the expense ratio, but it was a less significant factor in the current quarter. W. Berkley added that growth in other insurance lines is a combination of achieving necessary rate increases in areas like auto, while also growing through new exposures where market conditions and rate adequacy are favorable.

Wes Carmichael of Autonomous Research asked about the expected timing for providing updated long-term free cash flow projections. He also requested more detail on the heightened claim severity experienced in the life and runoff segments during the quarter.

Answer

Executive VP & CFO Edward Spehar stated that an outlook for future results is unlikely to be provided in 2025, as the company needs to first complete its ongoing strategic initiatives. Regarding mortality, Spehar noted that claim severity was about 18% higher than normal, with the impact being roughly two-thirds in the Life segment and one-third in the Run-off segment, reiterating that mortality fluctuates quarterly.

Wesley Carmichael asked for clarification on the financial impact of the mean reversion point change, the outlook for fixed annuity sales, trends in annuity surrenders, and the status of capital injected into the BLIC subsidiary.

Answer

CFO Ed Spehar quantified the mean reversion benefit as approximately $200 million. Head of Product and Underwriting David Rosenbaum noted that while the fixed annuity market is competitive, the company aims to build sales momentum while maintaining pricing discipline. Rosenbaum also explained that annuity outflows are driven by full surrenders as products exit their surrender charge periods, expecting 2025 flows to be at or above 2024 levels. Spehar concluded that the company's three-year plan includes dividends from subsidiaries to the holding company.

Wesley Carmichael asked for details on the drivers of the Risk-Based Capital (RBC) ratio in the quarter, including the impact of the capital contribution and reinsurance, and requested an update on the hedging strategy for the legacy VA portfolio and the timing of long-term free cash flow projections.

Answer

Chief Financial Officer Edward Spehar provided a detailed breakdown of the RBC drivers, attributing a benefit of over $400 million to strategic initiatives like a life reinsurance deal and stand-alone hedging for new Shield business. He noted this was offset by a roughly $350 million negative impact from interest rate movements and a $200 million increase in asset adequacy testing reserves for a legacy fixed annuity block. Spehar confirmed work on the legacy VA/Shield hedging strategy is ongoing and that its completion is necessary before releasing long-term free cash flow projections, which may delay them past the previously targeted mid-year timeframe.

Wesley Carmichael of Autonomous Research asked for conceptual details on the new hedging strategy for the legacy block, whether this would delay the planned free cash flow projections, and about any unusual items affecting the Run-off segment's run-rate earnings.

Answer

CFO Ed Spehar stated it was too early to provide details on the legacy block hedging strategy, which is expected to be developed into 2025. He confirmed they would want the strategy 'buttoned up' before providing free cash flow projections. Regarding the Run-off segment, he noted that while the overall underwriting margin was normal, the Run-off segment experienced higher claims, which was offset by favorable results in the Life segment, with no significant change to the run-rate earnings power.

Wes Carmichael of Autonomous Research asked for an update on the $50 million strategic spend in Employee Benefits, its progress, and the expected expense timing. He also followed up on the potential for additional retirement roll-up acquisitions.

Answer

EVP & CFO Michael Katz confirmed the ~$50 million investment in leave management capabilities is on track, with spending modestly weighted to the second half of 2025. CEO - Workplace Solutions Jay Kaduson added that the market response is positive, with cases already sold for a 1/1/2026 launch. On M&A, CEO & Director Heather Lavallee stated that Voya will be opportunistic but disciplined regarding retirement roll-ups, maintaining a high bar for capital deployment.

Wesley Carmichael from Autonomous Research questioned the asset mix from the OneAmerica acquisition and the drivers behind strong spread income yield in the Wealth segment.

Answer

CFO Michael Katz explained that the reported mix between full-service and recordkeeping is a temporary reporting function of the transition period and doesn't alter the deal's economics. CEO Heather Lavallee and Workplace Solutions CEO Jay Kaduson confirmed the acquisition is performing as expected with positive client feedback. Katz attributed the higher spread yield to purchase accounting rules, which elevated the yield calculation without changing the dollar income, and noted that repositioning the general account portfolio will be a gradual process.

Wesley Carmichael followed up on the OneAmerica deal, asking about any post-close surprises and retention experience. He also inquired about Voya's appetite for future M&A.

Answer

CEO Heather Lavallee reported no surprises with the OneAmerica integration, citing positive feedback from clients and advisers, and confirmed retention is tracking in line with guidance. She stated Voya will remain disciplined but opportunistic regarding future M&A, seeking scale or new capabilities, while also focusing on capital-efficient partnerships. CEO of Investment Management Matt Toms highlighted the Sconset Re deal as an example of a targeted, strategic investment.

Wesley Carmichael asked if Voya's financial targets for the OneAmerica acquisition remain unchanged, specifically concerning potential shock lapses. He also sought clarity on the future EPS growth trajectory, referencing the prior 12-17% CAGR target.

Answer

Executive Michael Katz confirmed the $75 million earnings target for OneAmerica is unchanged and already accounts for a lower persistency rate of around 90%, which is protected by a deal earn-out. CEO Heather Lavallee added her excitement about the strategic fit. Regarding EPS, Katz stated it was too early for a specific 2025 guide but highlighted three key drivers: the $75M from OneAmerica, organic growth, and materially improved earnings from the Health Solutions repricing.

Wes Carmichael requested more color on the Undertaking Specific Parameter (USP) adjustment to the ESR and the timeline for internal model approval. He also asked about the impact of the changing macro environment in Japan on the appetite for selling first-sector savings products.

Answer

An unnamed executive explained the USP adds about 30 points to the ESR and is expected to be approved by March 31, 2026, while full internal model approval is some time away. The executive also noted that higher long-end yen yields are beneficial for their long-duration savings products. Masatoshi Kuide of Aflac Japan added that while market volatility may increase interest in stable products like Sumitas, it could also increase competition, and they are prepared to revise premium rates in an agile manner.

Wes Carmichael of Autonomous Research requested more detail on the ESR's undertaking-specific parameter (USP) adjustment and its approval timeline. He also asked if the changing macroeconomic environment in Japan was affecting Aflac's appetite for selling first-sector savings products.

Answer

CFO Max Brodén stated that Aflac expects the USP adjustment to be approved by March 31, 2026, and that full internal model approval is likely some time away. On savings products, Brodén noted that higher long-term yen yields are beneficial and create a competitive advantage. An Aflac Japan executive added that while market volatility may increase demand for stable products like Sumitas, it also increases competition.

Wesley Carmichael asked about the future trend of remeasurement gains and inquired about the agent recruiting environment in the U.S.

Answer

CFO Max Broden stated that while underwriting has been favorable, remeasurement gains may be less significant going forward as claims utilization normalizes. Virgil Miller, President of Aflac U.S., described the recruiting environment as competitive but affirmed their goal of recruiting around 10,000 agents annually, leveraging compensation plans and strong broker partnerships.

Wesley Carmichael questioned whether the sales force's focus on the Tsumitas product indicates a strategic shift toward a greater contribution from first sector sales in Japan, and if the product mix will become more balanced going forward.

Answer

Koichiro Yoshizumi explained the dual strategy is to use reinsurance to ensure profitability on first sector products while using them to drive new third sector sales. EVP and CFO Max Broden added that due to Japan's aging society and focus on asset management, retirement products like Tsumitas will become a more meaningful part of the portfolio, but Aflac will remain a predominantly third sector company.

Wes Carmichael from Autonomous Research asked if recent class action lawsuits in the PRT market are a hurdle to the expected pickup in jumbo activity. He also questioned if extra steps, like securitizations, are needed to deploy the newly recognized capital into a very large transaction.

Answer

President & CEO Tony Cheng acknowledged a recent market lull but expressed optimism, citing 'green shoots' in RGA's jumbo PRT pipeline. EVP & CFO Axel André clarified that the deployable capital is real and available to be put to work directly from excess capital held in their legal entities without requiring additional steps.

Wesley Carmichael asked for clarification on the accounting for the Equitable deal, specifically regarding LDTI and volatility, and inquired about RGA's appetite for large long-term care (LTC) reinsurance transactions.

Answer

CFO Axel Andre clarified that while a large portion of the Equitable block is not subject to LDTI, reinsurance accounting can provide some claims smoothing. Regarding LTC, Chief Risk Officer Jonathan Porter outlined RGA's disciplined approach, which considers partner quality, risk-return, product design, and maintaining a modest size for any single block. He confirmed RGA did not participate in a recent large industry LTC transaction.

Wes Carmichael inquired about the accounting impact on Equitable and RGA's appetite for LTC reinsurance structures.

Answer

CFO Axel André clarified that LDTI isn't the main driver, but reinsurance accounting smooths claims. CEO Tony Cheng emphasized RGA's discipline and criteria for LTC, including strategic partners and risk tolerance.

Wesley Carmichael asked for a broad outlook on the best capital deployment opportunities for 2025. He also questioned the potential long-term impact of recent litigation against pension risk transfer (PRT) plan sponsors on the market and RGA's deal pipeline.

Answer

President and CEO Tony Cheng stated that deployment opportunities are strong across all three major regions—Asia, EMEA, and the U.S.—each driven by different factors. Regarding PRT litigation, he asserted the claims are baseless and that RGA has seen no impact on its pipeline, noting the company had won a new transaction just days prior.

Wesley Carmichael asked for reasons behind the relative weakness in U.S. Financial Solutions despite a large PRT deal. He also inquired about the LDTI cohort mix of the recaptured business and its potential impact on earnings volatility.

Answer

CFO Axel Andre clarified the weakness was due to a lower origination rate in classic asset-intensive business, not PRT. President and CEO Tony Cheng added that pure asset risk is not RGA's primary sweet spot. Regarding the recapture, Axel Andre stated ~90% of the business is in uncapped cohorts. Chief Risk Officer Jonathan Porter noted the added volatility is modest and can be favorable as well.

Wes Carmichael of Autonomous Research asked about the drivers behind the $104 million GAAP remeasurement gain in the Group business and its potential run-rate impact. He also requested more color on the strong sales pipeline in Retirement Plan Services (RPS) for the second half of the year and the outlook for run-rate earnings.

Answer

CFO Chris Nezepore explained the GAAP remeasurement gain is an expected result of favorable disability trends tracking better than long-term reserve assumptions. For RPS, CEO Ellen Cooper highlighted a 50% YoY increase in first-year sales, driven by a new stable value product, and confirmed a healthy sales pipeline for H2. Nezepore added that while stable value outflows have been a headwind, they moderated in the quarter, and the business continues to show underlying growth and expense discipline.

Wesley Carmichael of Autonomous Research asked for more color on the quarterly RBC ratio movement and its sensitivity, and for a rule of thumb on how a recession could impact the group disability loss ratio.

Answer

Chief Financial Officer Christopher Neczypor clarified that the RBC ratio remains comfortably above the 420% target and the disclosure did not signal a material change. Regarding disability performance, he pointed to prior commentary indicating that approximately 100 basis points of the 2024 margin improvement was from the supportive macro environment, suggesting that portion could face pressure in an economic downturn.

Wes Carmichael asked about the apparent return of aggregate treaties during mid-year renewals and Arch's appetite for writing that business.

Answer

CEO Nicolas Papadopoulo stated that Arch has not seen a material comeback of aggregate treaties. He noted that while the company has always written a very small portion of this business, its teams have not seen or supported a significant return of these structures in the market.

Wesley Carmichael asked for more color on primary companies retaining more risk and inquired about borrower behavior and recessionary indicators in the mortgage business.

Answer

Executive Nicolas Alain Papadopoulo explained that cedents retaining more risk in well-performing lines like 'other property' is a normal part of the cycle. CFO François Morin stated it is 'too early' to see recessionary indicators in the mortgage portfolio, emphasizing that the book's strong fundamentals, high credit quality, and embedded equity make it resilient.

Wesley Carmichael of Autonomous Research asked for more detail on the favorable reinsurance development, the specific lines of business experiencing margin erosion from competition, and the drivers of the recent tick-up in mortgage insurance delinquencies.

Answer

Executive François Morin specified that reinsurance reserve releases were almost entirely from short-tail property lines, with casualty being flat. Executive Nicolas Alain Papadopoulo identified public D&O and excess cyber as areas with the most significant margin pressure. Morin explained that about half of the MI delinquency increase was expected and driven by catastrophe-affected areas, which historically have very high cure rates.

Wes Carmichael of Autonomous Research followed up on the Medicare Supplement discussion, asking for specifics on repricing efforts. He also questioned the competitive landscape in the fixed annuity market, particularly regarding new capital from private equity.

Answer

CFO Paul McDonough addressed repricing, stating that due to a modest uptick in claims, the company is submitting rate filings with an average requested increase in the 10% range, effective in Q1 of the following year. CEO Gary Bhojwani handled the competition question, acknowledging intense competition in the broader annuity market but emphasizing that CNO's focus on the middle-income segment, with smaller average policy sizes, insulates it from the most aggressive competitors.

Wes Carmichael from Autonomous Research followed up on the Medicare Supplement business, asking for specifics on repricing efforts, and also questioned the competitive landscape in the fixed annuity market, particularly regarding new capital entrants.

Answer

CFO Paul McDonough stated that in response to a modest rise in claims, the company is pursuing average rate increases of around 10% for its Medicare Supplement products, effective in Q1 of the next year. CEO Gary Bhojwani addressed annuity competition, acknowledging it is intense but clarifying that CNO operates in the underserved middle-income market, which is not the primary focus of most competitors, including private equity-backed firms.

Wes Carmichael of Autonomous Research followed up on Medicare Supplement, asking for details on repricing actions, and also questioned the competitive landscape for fixed annuities in the middle-income market.

Answer

CFO Paul McDonough stated that in response to a modest rise in claims, the company is filing for average rate increases of around 10% for its Medicare Supplement products, effective in Q1 of next year. CEO Gary Bhojwani addressed competition, noting that while the broader annuity market is competitive, most players target high-net-worth clients, leaving CNO's middle-market niche less contested.

Wes Carmichael followed up on the Medicare Supplement discussion, asking for color on repricing efforts. He also questioned the competitive landscape in the fixed annuity market, particularly regarding new capital from private equity.

Answer

CFO Paul McDonough responded that due to a modest uptick in Medicare Supplement claims, the company is filing for average rate increases in the 10% range, which would be effective in Q1 2026. CEO Gary Bhojwani addressed annuity competition, acknowledging it is intense overall but stating that CNO faces less direct competition as it focuses on the middle-income market with smaller average account sizes, a segment not typically targeted by asset managers.

Wesley Carmichael of Wells Fargo Securities asked about the potential for continued elevated share buybacks and sought clarity on the difference between GAAP revenue recognition and cash flow for Medicare Advantage fees.

Answer

CFO Paul McDonough stated CNO is inclined to 'lean in' on buybacks, citing $250 million in holdco liquidity against a $150 million minimum. He explained that the Medicare Advantage fee income decline was an accounting issue under ASC 606, where a sales mix shift to newer carriers required a temporary constraint on revenue recognition despite a 42% increase in policies sold. He expects this to reverse over time.

Wesley Carmichael of Autonomous Research asked for clarification on the core earnings power of the long-term care (LTC) business given recent favorable results, and also inquired about near-term consumer demand and product opportunities.

Answer

CFO Paul McDonough explained that the 10% run-rate ROE for 2024 adjusts for outperformance in LTC, supplemental health, and other annuities, where experience was at the high end of expectations; 2025 guidance assumes a reversion to the mean. CEO Gary Bhojwani noted that while recently refreshed products have seen good demand, he does not anticipate major new product launches in the next 2-3 years as the company prioritizes the technology modernization initiative.

Wesley Carmichael asked when CNO expects to reaccelerate advertising spend following the election cycle pullback and inquired about the run-rate margin for the Annuity segment, given recent quarterly fluctuations.

Answer

CEO Gary Bhojwani explained that the D2C advertising pullback is typical for an election cycle and that spending will increase once ad costs normalize, likely in the next one to two quarters. He also highlighted a strategic shift, with 30% of D2C leads now coming from non-TV sources. CFO Paul McDonough stated that the current period's annuity margin is fairly reflective of the run rate after accounting for recent assumption changes related to surrenders.

Wes Carmichael of Autonomous Research followed up on the Employee Benefits segment, asking if the company would sacrifice its high margins to drive growth in the life product. He also asked for an update on the potential impact of auto parts tariffs and whether the AARP relationship influences this exposure.

Answer

Chairman & CEO Christopher Swift and Head of Employee Benefits Mike Fish clarified they would not sacrifice margin for growth, as they price products with a long-term 6-7% margin view. On tariffs, Swift stated he feels more optimistic, believing any 2025 impact can be absorbed within current loss picks, especially given recent agreements with Japan and Europe.

Wes Carmichael of Autonomous Research asked for qualitative color on how RenaissanceRe's Florida cat exposure has changed post-renewals and what level of industry loss might be needed to recatalyze pricing in the property cat market.

Answer

President & CEO Kevin O'Donnell explained that the growth in Florida brought the company's Southeast wind market share, as a percentage of equity, back to pre-Validus acquisition levels. He also opined that given higher reinsurance attachment points, an industry loss would likely need to be larger than events like Hurricanes Helene or Milton to significantly move market pricing.

Wesley Carmichael asked about the expected timing for potential subrogation benefits from the California wildfires and any recoupments from the FAIR Plan. He also requested context for the company's outlook of achieving a 'solid ROE' for the full year.

Answer

CEO Kevin O'Donnell stated that it would be 'false precision' to provide a timeline for subrogation or recoupment, as the underlying regulatory and investigative processes are complex and in early stages. To contextualize the ROE potential, he noted that if the Q1 catastrophe losses had occurred in Q4 2024, the company's full-year 2024 ROE would still have been above 15%, demonstrating the portfolio's strong underlying earning power.

Wes Carmichael of Autonomous Research asked about the sustainability of the strong 10% premium growth in the middle market business. He also questioned if social inflation is as pronounced in middle and small accounts as it is for national accounts.

Answer

Greg Tislowski, President of Business Insurance, attributed the strong growth to a combination of strong rate, exposure change, near-historically high retention, and active underwriters, without providing a forward-looking forecast. CEO Alan Schnitzer stated that while social inflation is seen across the entire book, it is probably more pronounced in larger business with higher limits.

Wes Carmichael asked about the sustainability of the strong 10% premium growth in the middle market business. He also questioned if social inflation is as pronounced in middle and small accounts as it is in national accounts.

Answer

Greg Tislowski, President of Business Insurance, attributed the strong middle market growth to a combination of strong pricing, high retention, and record new business, without providing a forward-looking forecast. CEO Alan Schnitzer commented that while social inflation is seen across the entire book, it is likely more pronounced in larger business with higher limits.

Wes Carmichael questioned the sustainability of the strong 10% premium growth in middle market Business Insurance. He also asked if social inflation's impact is as pronounced in smaller accounts as it is in national accounts.

Answer

Greg Tislowski, President of Business Insurance, attributed the strong middle market growth to a combination of strong rate, exposure change, near-record retention, and active underwriters. Chairman and CEO Alan Schnitzer noted that while social inflation is likely more pronounced in larger business with higher limits, it is a factor seen across the entire book.

Wesley Carmichael of Autonomous Research requested more detail on the favorable reserve development in Business Insurance, specifically regarding workers' compensation. He also asked about the company's approach to share buybacks amid macroeconomic uncertainty.

Answer

Daniel Frey, CFO, confirmed the favorable development was almost entirely driven by workers' compensation, with no other significant offsetting movements. On capital management, Mr. Frey stated the philosophy is unchanged. He noted Q1 buybacks were moderated due to the California wildfires but expects to continue repurchasing shares over time to manage excess capital, rather than timing short-term market moves.

Wesley Carmichael of Autonomous Research US LP questioned the rationale and timing of the common equity raise during the quarter. He also asked about the drivers behind the significant sequential increase in the cost of funds, the performance of the alternative investments portfolio, and the outlook for surrender activity.

Answer

CEO Christopher Blunt stated the equity raise proceeds will be thoughtfully deployed into new business, noting their patience in Q1 has been rewarded with better spreads now. CFO Conor Murphy added the capital was raised at the end of Q1, with deployment occurring in Q2. Regarding the cost of funds, they attributed the rise to temporary factors like lower surrender income and cash yields. Murphy also clarified that within the alts portfolio, the direct lending book outperformed the LP portfolio, and that surrender activity in Q2 is expected to be similar to Q1.

Wesley Carmichael of Autonomous Research asked for an updated perspective on future growth rates for net sales and AUM, and the associated capital management strategy. He also questioned the drivers of the sequential compression in core ROA and its expected trend, the significant decline in MYGA sales, and how changes in the regulatory world influenced the executive leadership transition.

Answer

CEO Christopher Blunt expressed strong optimism for growth, citing secular demand from baby boomers and new distribution partners. CFO Wendy Young added that F&G continues to find solutions to fund this growth. On ROA, Young attributed the sequential dip to prepayments and expects it to rebound in 2025 through active management. Blunt noted the MYGA sales decline was a deliberate capital allocation choice to prioritize higher-return FIA products, not a sign of weakening demand. He also clarified that the leadership changes reflect the need for dedicated focus on the increasingly complex, and opportunity-rich, offshore and regulatory environment.

Wesley Carmichael asked for details on the actuarial assumption review, particularly the drivers of elevated surrenders. He also inquired about the company's capitalization and management of its Cayman reinsurance entities and followed up with questions on new money allocation and the size of the alternatives portfolio.

Answer

CFO Wendy Young explained the assumption review included a minor, short-term update for elevated surrenders and an update for GMWB utilization that creates a one-time charge but reduces future volatility. Regarding Cayman, Young and CEO Chris Blunt emphasized that the entities are managed conservatively on a statutory basis, with all treaties approved by the Iowa regulator, and that the primary difference from onshore is the use of more specific mortality tables, not lower capital requirements. On investments, Blunt stated that new money allocation rotates between public and private assets based on opportunity and that the true alternatives portfolio is around 6%, slightly above the long-term target of ~5%.

Wesley Carmichael asked for the baseline EPS figure for the company's growth target and for an update on the strategy for its Prismic reinsurance subsidiary.

Answer

CFO Yanela Frias confirmed the adjusted baseline for the EPS growth target is $13.67. She stated that Prismic's strategy is unchanged and it remains one of several tools for managing risk. Its pipeline is focused on financing new business, balance sheet optimization, and third-party blocks, though she noted these transactions are complex and take time.

Wesley Carmichael asked about Prudential's excess capital position in Japan under the upcoming ESR rules, the strategic direction under incoming CEO Andy Sullivan, the sensitivity of Japan surrender activity to yen fluctuations, and the path to improved profitability in individual life underwriting.

Answer

CFO Yanela Frias stated that capital levels in Japan are expected to remain strong post-ESR implementation. Incoming CEO Andy Sullivan noted it was premature to detail his strategy but that the transition is going well. On Japan, Mr. Sullivan explained that while yen appreciation is expected, the business is diversifying into yen products to mitigate surrender risk. On underwriting, Head of U.S. Businesses Caroline Feeney-Pfundstein attributed recent adverse results to episodic large claims and highlighted the successful derisking of the GUL block to improve stability.

Wesley Carmichael sought more details on the new intermediate-term financial targets that will replace the quarterly EPS baseline and asked about the potential significance of the new medical stop-loss business.

Answer

Yanela Frias, Chief Financial Officer, explained the shift to intermediate-term targets is to better align with the long-term nature of the business and will be implemented with Q4 results. Caroline Feeney, Head of U.S. Businesses, described the entry into medical stop-loss as a strategic diversification that will be scaled thoughtfully, expecting it to remain a small portion of the business mix in the near term.

Wesley Carmichael asked for details on the unfavorable assumption review impact in the Individual Life business and whether it would have an ongoing effect on earnings or cash flow. He also inquired if Prudential shares the view of some competitors that real estate equity returns will improve in the second half of the year.

Answer

Chief Financial Officer Yanela Frias clarified that the negative impact in Individual Life was due to lower-than-expected surrender rates on guaranteed universal life policies post-COVID, which will have a small ongoing impact on operating income but is not expected to be meaningful for statutory capital. Controller and Principal Accounting Officer Rob Axel stated that Prudential's real estate group forecasts continued, though smaller, valuation declines for the remainder of the year, indicating the market may not have reached its trough yet.

Wesley Carmichael requested quantification of the components within the 2025 margin guidance and asked for more color on submission trends driving confidence in new business.

Answer

CFO Janice Hamilton declined to break out the individual components of the margin guidance but noted M&A benefits would merge into underlying margin expansion over time. CEO Tim Turner added that new business flow is very strong, led by firm casualty markets like transportation and construction, a rebound in professional liability, and 'fabulous' performance in binding and programs.

Wesley Carmichael from Autonomous Research asked about the potential for more large, lumpy outflows in the Group Retirement segment in 2025 and requested an update on the Blackstone relationship, including AUM and yield uplift.

Answer

CEO Kevin Hogan explained that while the company will provide a heads-up on known large account losses, recent outflows were primarily lower-margin mutual fund assets. He also stated that Blackstone managed approximately $69 billion in assets at year-end and originated nearly $4.5 billion in Q3 with a coupon of just under 6.6%.

Wesley Carmichael of Autonomous Research inquired about the expected sales ramp and 2025 contribution from the new RILA product and asked about the future use of capital within the Bermuda entity.

Answer

CFO Elias Habayeb noted that while the initial reception for the RILA product is very strong, the company is not providing specific 2025 targets yet. Regarding Bermuda, he described it as a key part of the capital management toolkit, currently focused on supporting new business, but with future potential for portfolio transactions or attracting third-party capital to enhance shareholder returns.

Wesley Carmichael of Autonomous Research asked if Corebridge expects future pressure on the cost of funds for new business due to competition. He also inquired about near-term opportunities to expand shelf space in retail annuities.

Answer

President and CEO Kevin Hogan clarified that the cost of funds on new business is already higher than the in-force portfolio. He expressed confidence that demand for fixed and fixed index annuities will remain strong, as current crediting rates are attractive for long-term savings. Regarding distribution, Hogan stated that Corebridge is already on the shelf of every major distribution firm and highlighted recent strength in the broker-dealer channel, including wirehouses.

Wesley Carmichael of Autonomous Research asked for framing on top-line growth expectations and the strategic importance of maintaining current credit ratings following S&P's negative outlook.

Answer

CFO Mark Kociancic indicated that while there is no formal guidance, overall growth will be lower than in prior years due to casualty discipline, though the international insurance business is expected to continue its strong growth. He affirmed that the A+ financial strength rating is 'fundamental' and 'secure,' and while the S&P negative outlook is respected and will be managed, it is not a major concern.

Wesley Carmichael of Autonomous Research asked if the social inflation component of loss trends is still accelerating and sought more rationale for the decision to cease providing detailed forward guidance.

Answer

Executive James Williamson stated that while social inflation is not abating, he wouldn't say it's accelerating, and their conservative loss picks are built to thrive in the current environment. Regarding guidance, he explained the decision was straightforward: the time spent on detailed guidance has not created shareholder value, and he believes direct, plain-spoken transparency on results is a more constructive approach.