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MI

METLIFE INC (MET)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid operating performance: adjusted EPS $1.96 (+7% YoY), adjusted ROE 14.4%, and premiums, fees and other revenues (PFOs) up 14% to $13.64B, driven by favorable underwriting and stronger variable investment income; GAAP net income rose 10% to $879M ($1.28) on net derivative gains offset by market risk benefit losses .
  • Versus Street: EPS modest miss (actual $1.96 vs consensus $2.01*) while revenue beat ($18.57B actual vs $18.08B*)—mix reflects underwriting strength and VII upside amid lower recurring interest margins; no notable items in the quarter .
  • Capital actions and risk reduction catalyze the equity story: board approved a new $3B share repurchase authorization, Q2 dividend raised 4.1% to $0.5675, and a reinsurance agreement to transfer ~$10B of U.S. retail variable annuity reserves to Talcott, reducing tail risk (~40% account value reduction) and securing ~$6B AUM mandates for MIM .
  • Segment mix: Group Benefits adjusted earnings +29% on favorable life mortality; RIS stable earnings with strong PRT and longevity flows; Asia down on tax rate change/underwriting, but sales ex‑Japan strong; LatAm and EMEA grew on volume .

What Went Well and What Went Wrong

What Went Well

  • Group Benefits: adjusted earnings rose 29% to $367M on favorable working‑age mortality; Group Life mortality ratio 84.8%, at the low end of the full‑year target (84–89%) .
  • Commercial flows: RIS adjusted PFOs surged to $2.43B (+199% YoY), including $1.8B U.S. PRT inflows and a $1B UK longevity jumbo case; liability balances +8% YoY .
  • Strategic de‑risking: Agreement to reinsure ~$10B VA and rider reserves expected to reduce tail risk (~40% account values) and deliver ~$250M statutory value; MIM secured ~$6B mandates from Talcott .
  • Quote – CEO: “We saw favorable underwriting, good volume growth and better variable investment income… and increased our common dividend per share… executing against [New Frontier] pillars” (Michel Khalaf) .

What Went Wrong

  • Asia earnings fell 12% (–9% CC) to $374M on less favorable underwriting and a Japan tax rate change (~$15M earnings impact) despite higher VII; Japan FX‑linked products remain pressured by yen volatility .
  • Recurring interest margins compressed, particularly in RIS: core spread declined ~7bps sequentially due to cap roll‑offs, flatter curve, and redeployment at lower spreads; management expects stabilization into Q2 .
  • Non‑medical health ratio at 74.1% was slightly above the 69–74% target range due to seasonal dental utilization; rate actions at 1/1 impacted persistency but set up margin normalization through the year .

Financial Results

Consolidated Performance (GAAP and Adjusted)

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Billions)$18.44 $18.67 $18.57
Premiums, Fees & Other Revenues ($USD Billions)$12.52 $14.48 $13.64
Net Income per Share (Diluted)$1.81 $1.78 $1.28
Adjusted EPS (Diluted)$1.95 $2.09 $1.96
Expense Ratio (%)19.9% 17.8% 18.9%
Direct Expense Ratio (%)11.2% 9.7% 10.7%
Adjusted Expense Ratio (%)19.8% 17.4% 18.4%

Segment Adjusted Earnings ($USD Millions)

SegmentQ3 2024Q4 2024Q1 2025
Group Benefits$373 $416 $367
Retirement & Income Solutions (RIS)$472 $386 $401
Asia$306 $443 $374
Latin America$221 $201 $218
EMEA$70 $59 $83
MetLife Holdings$182 $153 $154
Corporate & Other$(249) $(199) $(248)

KPIs and Operating Metrics

KPIQ3 2024Q4 2024Q1 2025
Group Life Mortality Ratio (%)85.6% 83.2% 84.8%
Non‑Medical Health Interest‑Adjusted Benefit Ratio (%)72.4% 71.8% 74.1%
VII (Pre‑Tax, $USD Millions)$162 $293 $327
VII (Post‑Tax, $USD Millions)$128 $800 (FY) $258
RIS Annualized General Account Spread (%)1.06% 1.12% 1.14%
Holding Companies Cash & Liquid Assets ($USD Billions)$4.5 $5.1 $4.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Share Repurchase AuthorizationOngoing~$0.36B remaining (May 2024 authorization) New $3.0B incremental authorization Raised
Common Dividend per ShareQ2 2025$0.545 $0.5675 (+4.1%) Raised
RIS Liability Balance GrowthFY 20253%–5% Upper end expected Raised
Group Life Mortality Ratio TargetFY 202584%–89%; midpoint lower half (~85.5%) Q1 84.8%; tracking toward lower end Improved trajectory
Effective Tax Rate on Adjusted EarningsFY 202524%–26% Q1 at 23.2% (below range) Below range (quarter)
VII DisclosureQ2 2025N/APreliminary VII info to be provided early July New disclosure
Regulatory Capital (U.S. RBC)2024 Year‑EndTarget 360% NAIC 388% actual (above target) Above target
Japan Solvency Margin RatioMar 31, 2025N/A~725% expected Strong

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Variable Investment Income (VII)Q3: VII lower; adjusted EPS held; Q4: VII improved with higher PE returns Q1: $327M pre‑tax, below implied run rate but up sequentially; plan early July update Stabilizing sequentially; cautious outlook
RIS Spreads & CapsQ3/Q4: recurring margins pressured by rates Q1: core spread −7bps sequentially due to cap roll‑offs, curve, paydowns; expect stabilization into Q2 Near‑term stabilization
Mortality & Group BenefitsQ3/Q4: mortality improvement supporting earnings Q1: Group Life mortality 84.8% at low end; full‑year likely toward lower end Favorable mortality persists
Asia (Japan FX, tax)Q3: Japan FX products under pressure; Asia earnings benefitted from VII Q1: Asia earnings down on underwriting and Japan tax increase (~$15M), but Korea/China sales strong Mixed; ex‑Japan strong
Capital & De‑riskingQ4: robust buybacks, strong RBC; cash above buffer Q1: $3B buyback, $10B VA reinsurance reducing tail risk; holding company cash $4.5B Accretive capital returns; risk profile improved
CRE PortfolioQ4: cautious tone; metrics stable Q1: office leasing strongest since mid‑2019; sector at trough; resolve reserves over ’25–’26 Gradual normalization

Management Commentary

  • CEO tone on resilience and strategy: “The underlying fundamentals of our portfolio of businesses remain strong… focused on executing against [New Frontier] pillars… agreement to reinsure approximately $10 billion… substantially lower our retail variable annuity tail risk” .
  • CFO framing of GAAP vs adjusted: “Net derivative gains… mostly offset by MRB remeasurement losses… adjusted earnings up 1% (5% CC); adjusted EPS $1.96 up 7%” .
  • On RIS momentum and balance growth: “Strong Q1 for PRTs with $1.8B inflows… robust UK longevity pipeline… expect upper end of 3%–5% balance growth” .
  • On VII outlook: “Q1 pretax VII $327M… given uncertainty, we plan preliminary information in early July” .
  • On VA reinsurance economics: “Transaction reduces enterprise risk; value received aligns with our expectations… hedge cost savings ~$45M annually” .

Q&A Highlights

  • RIS spreads: Sequential decline driven by cap roll‑offs, flatter curve, and redeployment at lower spreads; management expects stabilization and earnings net‑net flat relative to expectations .
  • VA risk transfer valuation: Foregone adjusted earnings ($100M annually) offset by hedge cost savings ($45M); ~$250M statutory value; significant reduction in equity/interest‑rate tail risk .
  • Buybacks pacing: $1.4B in Q1 and $150M in April; expect a more measured pace going forward; capital priorities unchanged (organic first, strategic inorganic, then returns) .
  • Group Benefits/dental: Non‑medical health ratio seasonally high in Q1; 1/1 dental rate actions impacted persistency but support margin normalization toward mid‑range for full year .
  • Asia sales: Other Asia up 41% CC (China/Korea strength); Japan momentum building in banca with new USD product launched late Q1 .

Estimates Context

  • Q1 2025 EPS vs consensus: Actual adjusted EPS $1.96 vs Primary EPS Consensus Mean $2.01* → modest miss (~−2.4%); 13 estimates .
  • Q1 2025 revenue vs consensus: Actual total revenues $18.57B vs Revenue Consensus Mean $18.08B* → beat (~+2.7%); 5 estimates .
  • Commentary: Street likely revises marginally higher on revenue strength (underwriting, PRT flows, VII), but EPS path hinges on recurring interest margins and VII cadence into Q2; management’s early‑July VII disclosure should anchor revisions .
    Values retrieved from S&P Global.*

Q1 2025 vs Estimates

MetricConsensusActualSurprise
Primary EPS ($)2.009*1.96 Miss (~−2.4%)*
Revenue ($USD Billions)18.075*18.569 Beat (~+2.7%)*
Primary EPS – # of Estimates13*——
Revenue – # of Estimates5*——
Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix of beat/miss: Revenue strength and underwriting offset recurring margin pressures; small EPS miss reflects spread compression and MRB headwinds—watch VII cadence and core spreads in Q2 .
  • De‑risking thesis: VA reinsurance materially lowers tail risk and volatility while expanding third‑party AUM at MIM; equity story tilts toward lower risk, steadier cash returns .
  • Capital returns: $3B new buyback and a 4.1% dividend increase signal confidence and support total shareholder return; holding company cash remains above buffer .
  • Segment drivers: Group Benefits’ mortality tailwind and disciplined dental pricing underpin margins; RIS growth in PRT/longevity continues even as spreads normalize .
  • FX/tax in Asia: Near‑term earnings drag from Japan tax change and FX product pressure, but ex‑Japan sales momentum (China/Korea) provides offset .
  • Near‑term catalysts: Early‑July VII disclosure; closing of Talcott VA transaction (2H25) and MIM mandates ramp; watch PRT pipeline resilience amid rate/market volatility .
  • Medium‑term thesis: Diversified “all‑weather” portfolio with disciplined expense culture (direct expense ratio ~12%), recurring cash generation, and strategic risk reduction supports attractive ROE and TSR profile .