Ladies and gentlemen, thank you for standing by. Welcome to the MetLife First Quarter 2024 Earnings 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 turn the call over to John Hall, Global Head of Investor Relations.

Thank you, operator. Good morning, everyone. We appreciate your participation on MetLife's First Quarter 2024 Earnings Call. In addition to our earnings release, we issued a press release last night announcing a $3 billion increase to our share repurchase authorization. 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 discussions are other members of senior management. As usual, last night, we released our standard set of supplemental slides, which are available on our website. John McCallion will speak to them in his prepared remarks if you wish to follow along. An appendix to the slides features disclosures GAAP reconciliations and other information, which you should similarly review. After prepared remarks, we will have a Q&A session. Given the busy morning, Q&A will end promptly just before 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 last night's report, MetLife is getting off to a good start for the year. We delivered another solid quarter of financial results, reflecting strong top line growth, consistent execution and sustained momentum across our market-leading portfolio of businesses. We achieved this mindful that change and uncertainty remain constant in the current environment. Our resilience and consistency are made possible by the unwavering commitment of our associates, our unabated confidence in our all-weather Next Horizon strategy and our unyielding focus on controlling those factors we can control to drive value for our shareholders and other stakeholders. With change as a persistent backdrop, MetLife's 156-year track record of risk management is stable stakes for our customers and shareholders. As I addressed in my shareholder letter, central to this notion is protecting our balance sheet so we can meet the promises we've made to our policyholders and shareholders regardless of economic or geopolitical conditions. Risk management extends across virtually everything we do, the way we invest and manage our capital and liquidity to the way we price, underwrite and reserve for the products we sell. Another element of risk management at MetLife lies in our diversification. We operate across a range of products and geographies, many that have offsetting risk characteristics such as mortality versus longevity among others. Even within our business segments, we have diversification. Our Group Benefits business serves employers across a wide range of business sizes and industries and has customers in every state. A similar theme runs through Retirement and Income Solutions and can be seen in the multiple liability streams we are able to originate, capital markets, pension risk transfers, structured settlements, stable value, corporate-owned life insurance and longevity reinsurance, among others. Our diversification is at…

Thank you, Michel, and good morning. I will start with the 1Q '24 supplemental slides, which provide highlights of our financial performance and an update on our liquidity and capital position. Starting on Page 3, we provide a comparison of net income to adjusted earnings in the first quarter. We had net derivative losses, primarily due to the strengthening of the U.S. dollar versus the yen and Chilean peso as well as favorable equity markets and higher interest rates. That said, derivative losses were mostly offset by market risk benefit or MRB remeasurement gains due to the higher interest rates and stronger equity markets. Net investment losses were mainly the result of normal trading activity for fixed maturity securities in a rising rate environment. Overall, the investment portfolio remains well positioned. Credit losses continued to be modest and our hedging program performed as expected. On Page 4, you can see the first quarter year-over-year comparison of adjusted earnings by segment, which do not have any notable items in either period. Adjusted earnings were $1.3 billion, up 13% on a reported and constant currency basis. Higher variable investment income due to a rebound in private equity returns drove the year-over-year increase. Adjusted earnings per share were $1.83, up 20% and up 21% on a constant currency basis. Moving to the businesses. Group Benefits adjusted earnings were $284 million, down 7% year-over-year, primarily due to less favorable underwriting margins. The Group Life mortality ratio was 90.2%, a slight improvement versus Q1 of '23 of 90.5% and above the top end of our annual target range of 84% to 89% as Group Life's Mortality ratio tends to be seasonally highest in the first quarter. Regarding non-medical health, the interest adjusted benefit ratio was 73.9% in the quarter, at the top end of its…

[Operator Instructions] And we have a question from Suneet Kamath with Jefferies.

Just wanted to start with VII. John, you had mentioned, I think, a real estate loss of 5.8%. Can you just unpack that a little bit? Was that actually losses on sales or appraisals? And how do you see that tracking as we move through the balance of the year?

Sure, Suneet. Primarily appraisals and valuation. So we actually saw, if you recall, in the fourth quarter, it was fairly flat. Appraisals, they tend to lag a bit in terms of just market declines. And so we saw kind of a catch-up of that in the fourth quarter, which obviously gets reported here in the first quarter. Our view is that it will start to moderate. We probably still have some pressure in 2Q, but less so and then moderates through the rest of this year. And then we think you start to see things start to pick up in a positive way towards the latter part of this year into '25. That's kind of the outlook.

Michel, on your comments for future share buybacks. I think you used the word measured pace. Is that measured pace relative to what you did in the first quarter? Or is that relative to what you did in April? And is the plan to exhaust the $3.6 billion authorization in 2024?

Yes. Suneet, thanks for the question. So yes, I did use the word measure, and I was referring to the first quarter. But I think as you've seen in the first quarter and what you've seen from us over time is that we do move expeditiously and deliberately to return capital to shareholders, especially in the absence of other high-value capital deployment opportunities following divestments. We did so following the spin-off of our former retail business following the sale of Auto and Home, and we closed on our risk transfer deal in the fourth quarter. So looking ahead and without me getting overly prescriptive, I would say that we lead into the first quarter at a pace that is greater than what you might see for the balance of the year.

Next, we go to the line of Ryan Krueger with KBW.

First, I just wanted to clarify one thing on the variable investment income comment. John, did you say that you expected to be towards the higher end of the range that you had given for the balance of the year?

Yes. Ryan, it's John. I think Suneet's question was focused on real estate. And so I think what we're just trying to -- and regarding outlook in terms of the real estate funds and so we saw a negative return this quarter of 5.8%. I mentioned I thought it would be less negative next quarter, but we still think there'll be a little pressure in just kind of the appraisals coming through and then it will start -- it will kind of moderate from there and start to have an upward trajectory is kind of the way we put it.

Okay. Got it. Other question was on the Group Benefits business. Can you talk more about the competitive environment you're seeing at this point as you went through January 1 renewals as well as what you saw with persistency and pricing?

Sure, Ryan. It's Ramy here. I would say, in terms of our view of the competitive dynamics of the group business, it really hasn't changed. I mean, we've always talked about this as a competitive marketplace. And one, because of the short-tail nature of this business is on the whole rationale. And we also think and see that this is a market where there are many avenues for differentiation beyond price. And look, if you have the scale to invest in the business, you can create true differentiation in this market and grow profitability -- and grow profitably. So the price, while important, becomes one out of multiple factors in the consideration set. So with that background, we're very pleased with our growth in sales this year. You saw a 25% increase in sales year-over-year. I should note that the strength of that momentum was across the board. So life, disability, dental as well as our voluntary suite of products. And from a pricing perspective, we're very pleased with the rate adequacy we got for that new business. And we're also very pleased with the rate increases that we got on renewals that were commensurate with our targets. So it's not a pretty solid picture, both in terms of the growth, persistency as well as the pricing and the rate increases.

Next, we move on to Wes Carmichael with Autonomous Research.

I had a question on pension risk transfer. I know you guys didn't have any deals in the quarter. But there were some deals that were done that were reasonable size and your peers has plenty of capital to support this marketplace right now. And there's actually another ongoing call right now that one of your peers are saying that PRT is not that good of a business this year, there's not as much spread. So I'm just wondering if pricing is getting more competitive there, if there's any dynamics changing in the marketplace.

Thank you. It's Ramy here again. Look, the -- we're coming off a very successful 2023 year in terms of PRT, we had 5 cases totaling more than $5 billion in premium, and that was off the back of a record year in '22, where we wrote more than $12 billion of premiums. This business is lumpy. So I would remind you, we did not win any deals in Q1 of '23 either, and we did not win any deals in Q1 of '24. But having said that, we continue to see a very robust pipeline ahead of us, particularly for the jumbo end of the market, where we focus. And this is not surprising. We've got very healthy funding levels of defined benefit plans and the desire for large plan sponsors to derisk. And we see this trend continuing for many, many years, and we're well positioned to win our fair share of the market here. From a pricing perspective, I would just emphasize what we've always said is that we look at these jumbo PRT deals with an M&A lens, and you kind of need to do that given the large quantum of capital that any given deal can consume. And we're very disciplined to ensure that we deploy that capital to its best and highest use. So we evaluate each transaction carefully. We will only deploy capital if the risk-adjusted returns are healthy and the ROEs are aligned with our enterprise targets. And as you look forward, we still see this as a large profit pool, a big opportunity and one where we're going to get our fair share.

And Michel, I think you talked about higher rates increasing the attractiveness of your products. Just wanted to get a little perspective on capital deployment and how you're thinking about allocating capital towards growth in capital-intensive businesses where you can generate good IRRs versus buying back more stock, which continues to be pretty strong.

Yes. Sure, Wes. Thanks for the question. So our philosophy and approach is that we want to support organic growth. We've been doing so consistently. And you can see from our VNB disclosures the returns that we've been able to generate high teens and paybacks in the sort of mid-single digits. We like a good balance in terms of supporting organic -- deploying capital in support of organic growth. We continue to be in the flow looking at potential M&A transactions. We consider M&A to be a strategic capability here, but we're extremely disciplined when it comes to strategic set and sort of a consistent basis globally by which we look at M&A transactions. And then excess capital, as we've said, belongs to our shareholders. We want to continue to have an attractive dividend yield, and you can see that we increased our dividend by 4.8%. And then share repurchases, it's also sort of part of the equation. And so it's that balance that we like to maintain. And -- but we're certainly very keen on continuing to deploy capital in support of organic growth at attractive returns.

And next, we move on to Jimmy Bhullar with JPMorgan.

So first on the question for John on your spreads in RIS. Healthy overall, but we saw a sequential decline in spreads, excluding variable investment income. And I think you attributed that to the expiration of some of the interest rate cap. So I'm wondering if you could give us some idea on the trajectory of that? And should we assume sort of a similar level of an impact from caps that are expiring in the next few quarters? And when should we assume that dynamic is going to be over?

Jimmy, thanks for the question. Yes, I think it's pretty much in line in terms of the roll off of the -- given the roll-off of the cap. So in terms of XVII, that was generally in line. I think VII came in better than we expected. As you recall, we talked about a 115 to 140 spread range for the segment. So the middle of the range was 127 for the year. We still think that's the right answer. And the way we got there was that we have a kind of a quarterly roll off of these interest rate caps. Remember, we bought these back a while ago when there wasn't a risk of rising rates, but is to protect against a short-end rise fairly quickly so that it allows the long end to kind of emerge in over time. It's basically worked as planned. But they all effectively roll off for the most part throughout this year. So in terms of expectations, we will see another -- so I think it was 10 bps maybe decline between 4Q and 1Q. I think 8% to 10% next quarter is not a bad estimate. It will depend on what VII does next quarter. We still think VII has kind of a reemergence to occur. So we had a good quarter this quarter, but that can gradually grow throughout the year, probably a bigger growth in the second half and then probably have one more quarter of 8 to 10 bps occurring, and it flattens out between third and fourth quarter. Basically, it's minimal, if not immaterial roll off. So that's how to think about the roll off, and that's how we get to the midpoint of that range when we gave the guidance. So we -- obviously, in the past, we've spent quite a bit of time on XVII. We're happy to give that number, but we're really looking at the total spread all in now and as you think about the reemergence of VII.

Okay. And then for Ramy, on margins and Group Benefits. I think group life margin, you had assumed that they'd be weak in 1Q because of seasonality. Dental claims picked up as well. And do you attribute most of that to seasonality as well? Or are you seeing just higher incidents for some reason?

Jimmy, it's basically seasonality story. As you know, with dental claims, the benefits reset at the end of the calendar year. So come January, you just get to see more utilization as the claims reset. And therefore, that's just a seasonally higher ratio. If you look at our overall non-medical health ratio, this first quarter seasonality is baked into our guidance ranges. I remind you, these are annual ranges, and our expectations are at this point, that will be well within our range, 69% to 74% for the full year. And I would also remind you that we did lower that range by 1 point earlier this year. So very much a seasonality story and feel very good about being within that range for the full year.

And next, we move to Tom Gallagher with Evercore ISI.

Just a few follow-ups to Jimmy's questions. John, if I followed your math that would suggest about 20 basis points of lower base spreads for RIS versus Q1 level if I look at towards the end of 2024. Is that directionally right?

Yes, 8 to 10, you took the top end of that range, but sure, it's close -- 16 to 20.

18 to 20?

Yes.

Okay. And then for -- and Ramy, for Group Benefits, I just want to make sure I have the right expectation here. The -- if I look at last year, and I look at the last 3 quarters of the year, I think earnings averaged around $450 million, that's probably $170 million, $180 million above what you did in Q1 this year. So is it fair to say you still expect to grow above the $450 million earnings level for the next 3 quarters? In other words, it was just worse seasonality this year. And then is it -- and said another way, it sounds like dental utilization was quite high. You fully expect to recover and see a big earnings snapback in dental for the balance of the year.

Tom, I mean the way you can triangulate to an earnings number is take our top line and our guidance ratio. So from a top line perspective, we're still very much within the 4% to 6% range. We got a 6% PFO growth this year -- this quarter, but think of that ratio being close to the midpoint of the range for the full year. And for sure, think of both non-medical health, which includes dental moderating for the full year. So think of that going towards the midpoint of the range. And think of the same thing happening with the life underwriting ratio. So very much a seasonality story for this quarter. Remember, as Michel alluded in his remarks, that seasonality was kind of masked in the last few years with COVID and different behaviors on the dental side and clearly on the mortality side in terms of what we've seen. And that's just now returning to a more regular pattern, if you will. So I hope that helps you think through the guidance growth, both given the top line number that I've articulated as well as the midpoint of these ratios for the full year?

That does. And if I could just sneak in one other follow-up. So dental utilization, you would fully expect that to be far lower in 2Q than 1Q? Or is there going to be some tail on that where you might see some level of higher utilization and lower earnings into 2Q as well, would you say?

I mean Q3 tends to be the lightest. So you'd expect it to come down in the second quarter. Q3 will be a lot lighter. So there's going to be always -- there will be a decrease, whether it's going to happen as a sharp cliff in Q2 and then another one in Q3 or different pattern, it's hard to predict. But again, think of it as a full year range and think of that ratio coming to the midpoint for the full year.

And Tom, maybe I'll just add a follow-up again on your first question. I mean, I think also just you only focused on XVII. But as I said, I think what's really important is that we think of the all-in spread here, and that's -- all of that is very much in line with what we gave in the outlook for the midpoint of the range.

Next, we move on to Brian Meredith with UBS.

This is Justin Tucker on for Brian. My first question is about RIS. When looking at the structured settlement results, could you kind of help us understand how much of the demand is driven by the favorable interest rate environment? And then how much of it is driven by the courts opening and social inflation? And then furthermore, just curious about the sensitivity to those factors. If interest rates do decrease, do you think that has a bigger impact on structured settlement demand versus a dampening of social inflation?

It's Ramy here. I mean I would say interest rates is the primary driver of this. You have seen coming out of the pandemic, call it, pent-up demand with the courts being closed and some of that clearly kind of did cause an increase in volumes earlier on. That's now stabilized, and it's very much an interest rate-driven volume increases. And you do have given court settlements have increased. You do have some social inflation component. But I would say interest rates is the primary one. We are a major player in this market. The market has grown substantially over the last few years, and we have maintained a pretty good share in that market. And it's a very specialized market in terms of the distribution channel, the underwriting, et cetera. And we're extremely pleased both with the volume, but as importantly, with the ROEs and the returns we're able to achieve in this market.

Great. And then my follow-up question is just on Latin America. Sales were flat year-over-year. I'm just kind of curious about what you're seeing in the overall market for demand and what you expect with sales going forward?

Yes. Justin, thanks for the question. This is Eric. So overall, we're pleased really with our results this quarter. This is a good start of the year after what was a record year in 2023. The quarter's results are primarily driven by favorable underwriting, some of which we don't expect to recur strong encaje returns and solid volume growth. And to your question, from a top line perspective, we've seen all key markets contributing to the high solid -- high single-digit PFO growth, and that was supported by a solid sales and strong persistency. So from a sales perspective, specifically, this quarter is a tough compare given that last year, we had a 36% growth, which included 2 large employee benefits and corporate pension sales in Mexico and Brazil. Now if you exclude these 2 sales from 2023, our sales are up roughly 10% year-over-year. So all in all, we're really pleased with the growth trajectory and the momentum in the region. And we believe that the outlook guidance we provided is still a reasonable run rate for the remainder of the year.

And we have no other questions. I'll be turning the conference back to John Hall for closing comments.

Great. Thank you very much, operator, and thank you, everybody, for joining us this morning on a very busy day.

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