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MI

METLIFE INC (MET)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was a softer print: adjusted EPS of $2.02 missed consensus ($2.16*) and total revenue of $17.34B missed consensus ($18.46B*), driven by below-par variable investment income (VII) and less favorable underwriting margins, partly offset by volume growth and expense discipline .
  • Management underscored “all‑weather performance” under the New Frontier strategy, returning ~$900M to shareholders in dividends and buybacks, and posted a quarterly direct expense ratio of 11.7%, beating the full‑year target .
  • Segment trends: Group Benefits earnings fell on life and non‑medical health underwriting; RIS earnings dipped on lower recurring spreads; Asia earnings declined on less favorable investment and underwriting, while Latin America and EMEA strengthened on volume growth .
  • Forward set-up: management guided to sequential improvement in Group non‑medical health ratios (+200 bps in Q3 and again in Q4), Group life mortality at/just below range bottom in Q3, and EMEA above its $70–$75M quarterly guidance run-rate for the rest of 2025 .
  • Capital/catalysts: launch of Chariot Re with a $10B initial deal, PineBridge acquisition expected to close in 2H, and a variable annuity risk transfer with Talcott advancing; preferred Series G redemption announced for Sept. 15, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Expense discipline: direct expense ratio of 11.7% (vs full-year target 12.1%), and adjusted ROE of 14.6% despite weak VII; CEO emphasized “all-weather performance” and momentum across businesses .
  • International momentum: Asia sales up 9% (cc), GA AUM up 6% (cc); EMEA adjusted earnings +30% YoY; Latin America adjusted PFOs +8% and earnings +15% (cc) .
  • Strategic progress: launched Chariot Re ($10B initial reinsurance), PineBridge integration on track for 2H close, and Talcott variable annuity risk transfer moving forward .

What Went Wrong

  • Underwriting headwinds: Group Benefits adjusted earnings fell 25% on less favorable life and non‑medical health underwriting; non‑medical health interest-adjusted benefit ratio rose to 74.8% (above the 69–74% target) .
  • Investment pressure: VII declined to $195M, with CFO noting derivative losses from stronger equity markets and higher long-term rates impacting net income vs adjusted earnings .
  • RIS spreads and margins: RIS earnings down 10% YoY on lower recurring interest margins; reported spreads at 102 bps, down sequentially due to lower VII .

Financial Results

Headline vs Prior Year, Prior Quarter, and Estimates

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$17.82 $18.57 $17.34
Adjusted EPS ($)$2.28 $1.96 $2.02
Net Income EPS ($)$1.28 $1.28 $1.03
Adjusted ROE (%)17.3% 14.4% 14.6%
Direct Expense Ratio (%)10.3% 12.0% 11.7%
Consensus Revenue ($USD Billions)$18.57*$18.08*$18.46*
Consensus Adjusted EPS ($)$2.11*$2.01*$2.16*
# EPS Estimates11*13*13*
# Revenue Estimates5*5*5*

Values with * retrieved from S&P Global.

Segment Adjusted Earnings ($USD Millions)

SegmentQ2 2024Q1 2025Q2 2025
Group Benefits533 367 400
Retirement & Income Solutions (RIS)410 401 368
Asia449 374 350
Latin America226 218 233
EMEA77 83 100
MetLife Holdings153 154 144
Corporate & Other(220) (248) (233)

KPIs and Operating Metrics

KPIQ2 2024Q1 2025Q2 2025
Adjusted PFOs excl. PRT ($USD Billions)$11.77 $12.14 $12.39
Net Investment Income ($USD Billions)$5.21 $4.89 $5.66
Variable Investment Income ($USD Millions)$298 $327 $195
Holding Company Cash & Liquid Assets ($USD Billions)$—$4.5 $5.2
BVPS ($) / Adjusted BVPS ($)$33.30 / $53.12 $35.16 / $55.01 $35.79 / $56.23
Group Life Mortality Ratio (%)79.1 84.8 83.0
Non‑Medical Health IABR (%)70.8 74.1 74.8
RIS Spread (Annualized, %)1.21 1.14 1.02
Share Repurchases ($USD Millions)—~1,400 510 (Q2); YTD ~$2,100 incl. $140 in July

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Group Life Mortality RatioFY 202584–89% annual target Q3 expected at or slightly below bottom of range Maintained target; short‑term favorable trend
Non‑Medical Health IABRFY 202569–74% annual target ~200 bps improvement in Q3 vs Q2, and further ~200 bps in Q4 Raised near‑term improvement outlook
EMEA Adjusted EarningsQuarterly (2025)$70–$75M per quarter guidance Expect run‑rate above guidance for remainder of year Raised outlook
Effective Tax Rate (Adjusted)FY 202524–26% Q2 at ~24% (bottom of range) Maintained
VII (Pretax)Quarterly~$425M quarterly guidance; June disclosed $175–$225M range for Q2 Q2 VII $195M (within disclosed range; below quarterly guidance) Below guidance; disclosure protocol continued
Capital Actions2H 2025—PineBridge closing expected in 2H; Talcott variable annuity risk transfer on schedule New strategic actions
Preferred Dividends/RedemptionQ3 2025Declared preferred dividends for Sept. 15, 2025 Full redemption of Series G preferred on Sept. 15, 2025 Announced redemption

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology InitiativesQ1: Xcelerator digital platform reached 4.5M customers and $200M adjusted PFOs Gen AI adoption across programming, call centers, claims; modernizing systems/data; partnerships incl. specialized AI providers Expanding digital/AI deployment
Macro/Interest Rates & DerivativesQ4: Net derivative losses on higher long-term rates; adjusted earnings resilient Net derivative losses primary driver of variance between net income and adjusted earnings; VII below plan Continued sensitivity; managed disclosure of VII
Group Benefits UnderwritingQ1: Favorable life underwriting margins lifted earnings Less favorable life and non‑medical health; outlook for sequential improvement in H2 Near-term normalization expected
RIS Spreads & Asset MixQ1: Strong PRT sales; spreads stable ex VII Spreads ex VII stable; slight Q3 seasonality from real estate JV; Chariot Re lowers exposure short term Stable core; short-term headwinds
Regional Trends (Asia, LATAM, EMEA)Q4: Asia earnings up on VII; EMEA/LATAM steady growth Asia sales up 9% (cc); EMEA above guidance run-rate; LATAM high single/double-digit top-line growth (cc) Solid momentum internationally
Regulatory/Legal & LTCQ4: Various notable items; litigation/tax adjustments Active dialogue on LTC risk transfer; structure/price discovery ongoing Evaluating solutions; no immediate transaction

Management Commentary

  • “Although the second quarter does not demonstrate the full earnings power of MetLife, we're confident in our ability to deliver on the commitments of our New Frontier strategy.” — Michel Khalaf, CEO .
  • “We generated a quarterly adjusted return on equity of 14.6%... while also absorbing below par variable investment income.” — Michel Khalaf .
  • “Our direct expense ratio of 11.7%... provides another proof point of our ongoing expense discipline.” — John McCallion, CFO .
  • “On July 1, we successfully launched Chariot Re... with an initial $10 billion reinsurance deal and more to come.” — Michel Khalaf .
  • “EMEA’s quarterly run rate [is] expected to run above its 2025 quarterly guidance of $70–$75 million for the remainder of the year.” — John McCallion .

Q&A Highlights

  • Group non‑medical health: pressured in Q2 across several products but within normal fluctuations; management expects ~200 bps improvement in Q3 and another ~200 bps in Q4; Group life mortality expected at or slightly below range bottom in Q3 .
  • Chariot Re outlook: strategy intends to reinsure MetLife‑originated liabilities (not third party) with more transactions expected; initial $10B completed on schedule .
  • Asia sales drivers: Japan/Korea strength on product launches (foreign currency annuities), yen strengthening improving product economics and persistency, near-term impact from lower surrender income (~$15–$20M) .
  • RIS spreads: core spreads expected stable ex VII; modest Q3 seasonality from real estate JV (hotels) with reversion in Q4; short-term $15–$20M headwind from Chariot Re within RIS .
  • Credit reserves: ~$200M+ CECL reserve uptick on commercial mortgages reflects orderly resolution and stabilization; minimal impact on capital management/dividends .
  • LTC block: pursuing risk transfer opportunities; transactions are complex; book remains well-capitalized/reserved; rate actions progressing .
  • LATAM growth: diversified franchises across Mexico, Chile, Brazil and embedded insurance platform (Accelerator) scaling with digital partners .

Estimates Context

  • Q2 2025 results missed consensus on adjusted EPS ($2.02 vs $2.16*) and total revenues ($17.34B vs $18.46B*). Sequentially, adjusted EPS improved vs Q1 ($1.96) while revenues declined vs Q1 ($18.57B). # of estimates: EPS (13*), revenue (5*) .
  • Q2 2024 saw a beat on adjusted EPS vs consensus ($2.28 vs $2.11*) while revenues were below consensus ($17.82B vs $18.57B*) .
  • Drivers of the Q2 miss: VII at $195M vs ~$425M quarterly guidance and derivative losses from stronger equities/higher rates; underwriting less favorable across Group .

Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Expect sequential improvement in Group non‑medical health margins (Q3/Q4) and Group life mortality favorable within the target range; a setup for adjusted EPS stabilization despite macro volatility in VII .
  • Core profitability: Adjusted ROE at 14.6% underscores earnings power; expense discipline (11.7% direct ratio) provides downside protection .
  • International diversification: Asia sales momentum and EMEA run-rate above guidance should support H2 earnings mix; LATAM continues double-digit (cc) top-line growth .
  • Capital and catalysts: ~$5.2B holding company cash and continued buybacks/dividends; execution on Chariot Re, PineBridge close in 2H, Talcott risk transfer are positive strategic catalysts .
  • RIS spreads: Core spreads ex VII stable with modest Q3 seasonality; VII remains a swing factor—management will continue pre‑announcing ranges intra‑quarter .
  • Credit normalization: CECL reserve uptick appears manageable, not altering capital return trajectory; watch office exposure trend lines .
  • Stock narrative: Misses tied to VII/underwriting look transitory; H2 guide (Group/EMEA improvements) plus strategic transactions present a constructive setup if VII normalizes and underwriting trends revert .