Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Third Quarter 2023 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Before we get started, I refer you to the cautionary note about forward-looking statements in yesterday's earnings release and to risk factors discussed in MetLife's SEC filings. With that, I will now turn the call over to John Hall, Global Head of Investor Relations.

Thank you, operator. Good morning, everyone. We appreciate you joining us for MetLife's third quarter 2023 earnings call. Before we begin, I’d point you to the information on non-GAAP measures on the Investor Relations portion of metlife.com, in our earnings release and in our quarterly financial supplements which you should review. On the call this morning are Michel Khalaf, President and Chief Executive Officer; and John McCallion, Chief Financial Officer. Also participating in the discussion are other members of senior management. Also last night, we released a set of supplemental slides which addressed the quarter. The slides are available on our website. John McCallion will speak to them in his prepared remarks if you wish to follow along. An appendix to these slides features GAAP reconciliations and other information which you should similarly review. As usual, after prepared remarks, we will host a Q&A session. We will end Q&A just prior to the top of the hour. In fairness to everyone, please limit yourself to one question and one follow-up. With that, over to Michel.

Thank you, John and good morning, everyone. As you can see from the report we posted last night, MetLife delivered another quarter of strong underlying results with sustained business momentum. MetLife's capacity to perform across a wide range of economic scenarios, there's a testament to the resilience of our all-weather strategy and is characterized by our unyielding focus on execution. And concentrating on those elements within our control, such as balance sheet security, investment performance, reserve adequacy, responsible growth, expense efficiency and capital deployment to name just a few, we have positioned MetLife to generate significant value for our shareholders and other stakeholders for many years to come. Turning to the quarter. We reported adjusted earnings of $1.5 billion or $1.97 per share. Notable items in the quarter included our annual actuarial assumption review and other insurance adjustments, which had a positive impact of only $14 million or $0.02 per share on adjusted earnings. Excluding notable items, adjusted earnings per share were $1.95, up 43% from a year ago. As we previously indicated Variable investment income of $179 million fell below our quarterly outlook expectation. Private equity returns totaled 1.4%, while real estate equity risk trailed at minus 3%. In the aggregate, net income for the third quarter was $422 million compared to $1.1 billion in the prior year period. The third quarter result reflects the negative impact of certain required accounting adjustments associated with our previously announced reinsurance transaction. Net derivative losses related to interest rate and foreign exchange hedges helped to protect our balance sheet further reduce net income. Our investment portfolio has stayed up in quality and continues to perform well. Underscoring that quality, the credit metrics associated with our real estate portfolio remain largely unchanged sequentially and we did not incur material credit losses during the…

Thank you, Michel, and good morning. I will start with the 3Q '23 supplemental slides which provide highlights of our financial performance including details of our Annual Global Actuarial assumption review. In addition, I'll provide updates on our value of new business metrics, our liquidity and capital positions, as well as our commercial mortgage loan portfolio. Starting on page three, we provide a comparison of net income to adjusted earnings in the third quarter. Net investment losses include the mark-to-market impact on securities that are expected to be transferred with the pending reinsurance transaction with Global Atlantic that we announced at the end of May. For GAAP purposes any increase in gross unrealized losses on these securities are required to be realized through net income until we close the transaction. Also, we had net investment losses from our normal trading activity in the portfolio, given the rising interest rate environment. In addition, we had net derivative losses due to higher interest rates and strengthening of the US dollar versus multiple currencies, primarily the Chilean peso and yen. That said, net derivative losses were partially offset this quarter by market risk benefit or MRB remeasurement gains due to higher interest rates. Overall, the portfolio remains well positioned. Credit losses continued to be modest and the hedging program performed as expected. The table on page four provides highlights of our Annual Actuarial Assumption Review and other insurance adjustments with a breakdown of the adjusted earnings and net income impact by business. Overall, the impact to adjusted earnings and net income was negligible. In Group Benefits, we had a favorable impact from assumption changes in individual disability, primarily due to lower incident rates and favorable recoveries. In Retirement and Income Solutions or RIS, we lowered our near-term assumption for mortality improvement which resulted…

[Operator Instructions] And we have a question from Ryan Krueger with KBW. Please go ahead.

Hey. Thanks. Good morning. Can you provide some color on how January 1 renewals are shaping up so far in Group Benefits and also both in terms of persistency in the pricing dynamic in the market?

Good morning, Ryan. It's Ramy here. I would say we're still in the middle of the season. Recall the middle part of the market is still kind of active right now. But from everything we can see so far, we are doing extremely well here. Persistency in national accounts continues to be exceptionally high. We are seeing a tick up in the jumbo activity into next year as well building on what we're doing this year. And with respect to our rate actions, we are getting the rates that the book needs in the market and continue to see that both in terms of new business as well as persistency.

Thanks. And then in terms of capabilities within in Group Benefits and M&A, you've done a couple of things to round out the portfolio. Is there anything else you'd be interested in at this point? Or do you feel like you have what you need to grow organically?

Yeah. Hi, Ryan, it's Michel. Yeah. I mean, I think we're very pleased with the capabilities that we've built with the transactions that we've done in the last few years in Group Benefits. I think they've been highly complementary and we're very pleased in how they've performed. Think about our Pet First acquisition our Versant acquisition. And we'll continue to invest in this business. We've said all along that this is a business where scale matters, and to continue to meet customer expectations, you have to continue to make meaningful investment, something that we've done, and I think that's translating in terms of the momentum we're seeing whether it's in variable benefits or in other areas. Whereas, we don't see any gaps, when it comes to our product set or our capabilities. We're always open to opportunities, if we think those make strategic sense, if we think they can help us accelerate revenue growth, whereas we see a path to continue to grow at within the range that we provided organically, if there was something that would help us accelerate that that would make sense strategically. And that would make sense from a valuation perspective as well. We look for the type of transactions that are accretive over time that clear a minimum risk-adjusted hurdle rate. And we're always going to also compare any transaction to other potential uses of capital. At the end of the day, our focus pillar is about deploying capital to its highest and best use. So hopefully, this helps.

Great. Thanks a lot.

Next, we go to the line of Tom Gallagher with Evercore ISI. Please go ahead.

Good morning. A couple of questions on capital. The SMR in Japan seems kind of low at 600% now. Is that something to watch? Or should we really be more focused on ESR since we're going to be pivoting to that new regime pretty soon. So that's the first question. The second is just the $1 billion increase in debt. Is that part of the permanent capital structure? Or are you pre-funding a maturity there?

Good morning, Tom it's John. Thanks. So first question on SMR. Yes, I think it's a balance when you start to look at these metrics. Obviously, we're looking forward at ESR higher rates are positive to ESR. So I think there's a transition happening in the market. We don't have any concerns with being at of roughly 600% right now. Also we have other tools if needed to the extent that rates would rise further we have other internal reinsurance transactions we could do as of now. So no concerns from a capital perspective or dividend capacity perspective. What was your second question?

The $1 billion debt increase.

On debt, yes, so we issued the debt in July. That is not considered permanent capital. That is to pre-fund a maturity in the first quarter of next year.

Okay. Thanks. And then just one other quick one. The slightly improved real estate returns expected for alternatives in 4Q. Is that because you have some property sales resuming and related gains? Or is that just marks being stable?

Yes. I think it's more of the latter. I think it's just we've in a way it's trailing a little bit of what's happened in PE, where we had kind of the markdown and then we've built – you've kind of gotten to a trough. And as we’ve said before we feel like we bump along the bottom here for a little bit on some of these fund related returns for sometime. So before we see kind of that U-shaped recovery. So it's more of that.

Okay, thanks.

Next we move on to Jimmy Bhullar with JPMorgan. Please go ahead.

Hi, good morning. So first I had a question on just retirement spreads. Should we assume that core spreads in the RIS business will maybe compress a little bit as you go through 2024, given expiration of caps? Or are there other puts and takes?

Good morning, Jimmy, it's John. As you said so good strong core spreads this quarter similar to last quarter just to you guide to fourth. We think something in the same vicinity maybe 135 to 40 is a good range to think about for fourth quarter. And then as you mentioned over the course of 2024 we will have some expiration of some of the caps. As we said before, this whole thing was constructed in a way for the caps to provide us time for the long rates to find their way into spreads. And those things you've seen that come through in a healthy way. So we'll give some more guidance on that on the outlook call and provide some more detail as to how to think about 2024.

Okay. And then on the CRE portfolio, the metrics almost seem deceptively too good and stable. But you mentioned you've resolved 88% of your 2023 maturities. Are you resolving them similar to how you would have done in the past like in terms of either extending them yourself or third-party financing or stuff? Or are there differences in how the loans are being – how the maturities are being resolved now versus maybe a few years ago when things were much more stable than CRE?

Yes, it's John, again. Thanks. I take issue with your deceptively comments. But besides that only kidding. But on the maturities, it's roughly speaking, we've talked about these contractual extension options. That's been about 60% of the maturities and how they've all had contractual right. If you're in good standing, you meet all the financial tests. They tend to be in the mid-50s LTV. So strong financial metrics, almost 30% as well in terms of paid off or refinanced. And then the remainder is probably 10% of that is loan modifications, and then the remaining small single digits is the foreclosure or net payoff, which is honestly that level is somewhat similar to what we've seen in the past. So, nothing out of the ordinary given the environment. So I think overall, roughly in line with historical, maybe the people on the contractual options those are floating rate. They're tending to wait to see when they lock in their long-term rates. So, maybe there's been a little extra, in terms of contractual extension options, but nothing out of the ordinary. I think is the way to think about it.

And the remaining 12% that's just like a matter of time and you're going through stuff? Or is there something unique about those properties, either by property location or otherwise?

Yes. And the -- the levels I gave you just now, they incorporate what we expect for the remaining 12%. So nothing unique or out of the ordinary. So I think -- I think the punchline, we would share is everything is effectively in line, with what we said in the first quarter when we gave an outline of what our expectation was for the year.

Thank you.

And our next question is from the line of Suneet Kamath with Jefferies. Please go ahead.

Thanks. Just first question on the value of new business side. So the amount of capital, you've been deploying has sort of been the $3.7 billion. It's pretty similar to what you did in 2018 and 2019. But given where interest rates are, are you seeing incremental opportunities to deploy more capital in the business? And then relatedly, should we expect that IRR of 17% which I acknowledge is pretty healthy, does that have upside in this rate environment?

Good morning. Sumeet. It's John. Good question. So just in terms of deployment of capital remember last year, I mean just one reason for that I,s we had IBM case that came through in the third quarter of last year. But nonetheless, like you pointed out, very strong unlevered IRRs strong payback periods. Very pleased with the results. We saw some great results actually in Japan as well. That's actually helping boost the VNB as well over the course of 2022. In terms of IRRs, some of the things we've talked about is we do see I think broadly speaking yes I mean we're starting to see demand for these annuity-type products to pick up, right? So I think a volume aspect is emerging. I'd say, it's still emerging in the institutional and retail space broadly speaking. In terms of IRR and pricing, typically the rate environment will price in. These -- the counterparties were buying or selling however you want to look at it, they're pricing in the current rate environment. So I wouldn't expect a big uptick in IRRs. I think 17% IRR is a pretty healthy level to be at. But we'll see how things evolve.

Okay. Got it. And then just on capital should we expect a pickup in the sort of the pace of buyback once you close the Global Atlantic deal?

Yes. Hi, Suneet. It's Michel. So really pleased, with the fact that we've secured all regulatory approvals for the Global Atlantic transaction. As we had mentioned, we expect that to add about 60 points to our RBC and we consider that to be excess capital. When we announced the transaction we increased the authorization by $1 billion and that was to signal the sustainability of our buyback activity. We also have a track record post major divestitures of returning capital and a deliberate and expeditious manner. So I would suggest that we would conduct ourselves in the same manner here.

Okay. Thank you.

And our next question is from Wes Carmichael with Wells Fargo. Please go ahead.

Hey, Good morning. A follow-up on the Group business. It seems like we're seeing pretty favorable results across the industry maybe not deceptively good but definitely good. But just wondering what your outlook is for the industry to retain better margins in that business or if it's kind of given back over pricing in the next couple of years?

Good morning, Wes. It's Ramy here. I mean, look, I think a couple of points to note here. So one we're of course extremely pleased with our record quarter here which is by the way a record even, if you exclude the notable in the quarter. In general, what we tend to see in our results is there's seasonality. And while the dynamics are different by product line in aggregate the third quarter tends to be the most favorable over the course of the year. If I think for us specifically on a go-forward basis, you should think about the mortality ratio which is below the guidance for this quarter. Think about that coming back in the fourth quarter to be within line for our guidance range. The other one, I would perhaps talk about here is disability. I mean, disability continues to perform really well both with respect to incidents and recovery levels. Some of this favorability is stemming from a favorable macro environment. And we believe that, favorability will over time. It's not going to happen in any given quarter but will over time come back into pricing. But having said that, and I'll refer back to kind of Michel's comments on having real focus and strategic intent here in terms of how we're investing in this business. The favorability we're seeing in disability is coming from solid underwriting return to health capabilities deployment of data technology, predictive analytics in how we're running this business in particular investments we're also making in the live and absent space. Those are resonating really well in the market. And we believe over time, will allow us to fuel further growth and maintain very robust margins here. And those are not going away. Those are differentiating capabilities that we have and distinct competitive advantages that we will maintain and continue to invest in.

Thanks, Ramy. And maybe sticking with the US on the pension risk transfer market, it seems like maybe the market for full plan terminations has been heating up a little bit. I'm just wondering, if you're willing to participate in those deals and also what the pipeline looks like as the fourth quarter has been pretty busy historically.

Thanks. So we're pretty pleased with our performance this quarter. So year-to-date we've had $3.5 billion worth of sales. We've also added another $600 million of premium so far in the fourth quarter. And we see a very healthy pipeline ahead and really with a lot of visibility into 2024. And in particular in the jumbo end of the market which is where we focus and where we have distinct competitive advantages. Our focus so far has been on the immediate with RV only part of the market and we see significant pipeline there and we're able to win business at healthy IRRs. But we always continuously evaluate opportunities here. And as we've always stated it's value over volume here. And so if we see opportunities with the right IRRs and the right returns and the right risk profile we're always going to be looking to evaluate those as we go forward.

Thank you.

Next we go to the line of Alex Scott with Goldman Sachs. Please go ahead.

First one I had for you on is LatAm. We continue to see good growth there. I think in the comments you mentioned some of the digital initiatives and things like that. But I wanted to see if you could extrapolate further just on the sustainability of the really robust growth that you've seen in PFOs and how we should think about that business going into?

Yes. H, Alex. Thanks for the question. This is Eric. So we're overall very pleased with our results for the quarter. This is the fourth consecutive quarter of adjusted earnings in the $200 million range. The quarter's results are primarily driven by volume growth, favorable underwriting as well as foreign currency tailwinds which were partially offset by lower recurring interest margins. And on the top-line side, the positive trajectory continues as you mentioned with solid double-digit growth consistent with our expectations. We're seeing growth across the region in both our retail and group business. We've been very deliberate in expanding beyond our core avenues of growth developing third-party distribution channels such as banks financial institutions retailers and others. And we've made significant technology-related investments in that space. And a good example is what you referred to that Michel mentioned and is opening around the launch of our new integrated platform, which provides embedded insurance capabilities for our distribution partners and thus creating a differentiating competitive advantage for us across the region. So all these factors combined with our disciplined underwriting pricing as well as efficiency focus are contributing to the solid earnings performance and sustained momentum.

Very helpful. And then second question was on net investment income. Wanted to see if you could help us just with the benefits of higher interest rates and what it means really for net investment income trajectory more broadly across the organization. And then also interested if there's any tactical things you can do anything you're doing allocation-wise that we should consider related to net investment income?

Good morning, Alex. It's John. So a couple of things to point to for your question. We've given some sensitivities to interest rate movements in the past. And I think those are still fair approach to thinking about the impact generally driven by the benefits of roll-off and reinvest and you're seeing that on the slides we shared. So that has an incremental benefit. Obviously, we've also done a lot to reduce our interest rate sensitivity over the years. So it's not a hockey stick per se but there's inertia there as you look at some of those sensitivities. So I don't know if I have a number to give, because gross numbers maybe get lost, but those sensitivities are more from an earnings perspective and those are probably pretty good things to follow and think through as you kind of model out earnings growth. In terms of tactical. I think, there's always tactical asset allocations that occur. We have a view of relative values that we take into account. But certainly as rates grow fixed-oriented products going to grow in relative value. And we're seeing some unique opportunities out there. It's very helpful to have a wide breadth of product and expertise to work through the opportunities that are in the space and that's scale. That scale is a big benefit. So we're excited for the opportunities that are out there. And having done that we've been maintaining an up in quality mentality when it comes to investments. And with these rates it's worked pretty well.

Thank you.

Our next question is from John Barnidge from Piper Sandler. Please go ahead.

Good morning. Thank you. Question about the value of new business slide that's updated not around IRRs, but can you talk about how higher rates in your outlook for that volume to possibly increase along with the value of new business? Thank you.

Hey, John, it's John. Thanks for the question. I think there's a couple of ways to think through that as I mentioned in the earlier comment, I mean, we are seeing an increase in demand. And that is -- we've been able to solve that fairly efficiently with just annual capital generation. And that -- but we do think that it is going to grow and we are constantly considering different ways to take advantage of that. I think eventually as -- and maybe a little bit to an earlier question as volume and demand grows that could improve pricing to some degree. Right now I think it's fairly consistent and adjust with interest rates. But there is dynamics between volume and how that can also improve value but that will take some time.

Thank you very much. And my follow-up question. I know we're in the thick of renewal season for group benefits, but some retailers have started to comment about the impact from GLP or obesity treatment. How do you -- is that something that's come up within the renewal conversation at all? Just wanted to ask that. Thank you.

Yes. We're not really -- it's Ramy, here John. We're not really seeing any of those having any kind of material effect on our book of business. And remember, we're not in the major medical we're not providing Rx. We are group life players and none of that is really having any material impact at this point.

Thank you.

And our next question is from Mike Ward with Citi. Please go ahead.

Thanks guys. Good morning. I was just wondering if you could comment on the trends in Asia. It seems like the economy in Japan at least is reengaging or reopening. So any thoughts on maybe the near-term outlook there?

Hey, Mike it's Lyndon here. So just as we look at broadly Asia, I'll just comment on sales and then maybe we can getting Japan more specifically. Overall, we've had a very strong quarter and year-over-year sales continue to be very strong. We've seen a 5% growth overall and in Japan 3%. In Asia, in total we've been up 8% and that's driven broadly between Korea and China. If we look at the economy in Japan, it is really strong but our sales are primarily driven by interest rates. And so the stronger interest rates have really helped us. So as long as that continues, we think we've got a really solid platform on which to leverage the higher sales.

Thanks. And then, maybe just could you guys maybe speak to your appetite, specifically for inorganic growth in the US around voluntary benefits that would be helpful. Thanks.

Hi Mike. It's Michel. So, as I mentioned earlier, whereas we don't see any gaps when it comes to our Group Benefits business here. We've been growing voluntary at -- in the high-teens for a number of years. The employee paid component of our sales is also growing. We're always open to do something inorganically, if we feel that it fits strategically, if it adds the capability, if it helps us accelerate revenue growth, provided it is accretive over time and provided it also compares favorably to other potential uses of capital. So whereas there are no gaps, we have M&A as a strategic capability here and we'll deploy it as we believe it makes sense to do so. And if it's a better use of capital compared to other potential uses.

Thanks Michel. Maybe just one follow-up on that. Is capesize something that makes you consider or not consider M&A in group overall?

Meaning, Mike, you're referring to sort of deal size?

No, sorry, like the target market employer size?

I mean not really. I mean I would say, we have scale across our businesses and across markets. It's more around does one plus one equal more than two, if you like in terms of what we have and what we are potentially acquiring.

Okay. Thank you.

And we will turn the conference back to John Hall.

Great. Thank you everybody for joining us on this very busy morning for insurance earnings and have a nice day. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.