MetLife’s Earnings Call: Mortality Normalization and PFO Growth Guidance Clash

Date of Call: Aug 6, 2026

Financials Results

• Revenue: Adjusted premiums, fees, and other revenues, excluding pension risk transfers, increased 5% year over year.
• EPS: $2.43 per share, up 20% YOY.
• Operating Margin: Adjusted return on equity was 17% at the top end of the 15 to 17% target range.

Guidance:

• Direct expense ratio target of 12.1% for 2026, on track to be beaten.
• Full-year adjusted earnings for MetLife Investment Management expected within the $240-$280 million range, likely toward the low end.
• Retained liability exposures growth for RIS expected to be 3% to 5% for full-year 2026.
• Company expects to maintain its 2027 guidance for MetLife Investment Management.

Business Commentary:

Strong Financial Performance and Strategic Model:

• MetLife reported adjusted earnings of $1.6 billion, or $2.43 per share, reflecting a 15% increase from the prior year period.
• Adjusted earnings per share increased by 20%, driven by favorable underwriting margins, strong volume growth, and disciplined capital management.

Group Benefits Segment Growth:

• The Group Benefits segment generated adjusted earnings of $503 million, up 25% year-over-year.
• The growth was attributed to favorable underwriting margins and volume growth, with a group life mortality ratio of 79%, indicating continued improvement in mortality trends among the working-age population.

Asia and International Markets:

• MetLife's Asia segment reported adjusted earnings of $420 million, up 21% reported and 25% on a constant currency basis.
• Growth was driven by strong performance across markets, particularly in Korea and Japan, supported by favorable equity markets and product innovation.

Capital Management and Shareholder Returns:

• MetLife repurchased approximately $700 million of common shares in the quarter, with total shareholder returns exceeding $2.4 billion year-to-date.
• The company announced a new $3 billion share repurchase authorization, reflecting confidence in its capital generation and long-term outlook.

MetLife Investment Management Expansion:

• MetLife Investment Management reported adjusted earnings of $57 million, up 6%, with total assets under management reaching approximately $748 billion.
• Growth was driven by the integration of Pinebridge Investments and ongoing expense management, positioning the segment for continued upward trajectory.

Sentiment Analysis:

Overall Tone: Positive

• CEO called it an "outstanding quarter" and "another clear demonstration of how our new frontier strategy is working." CFO stated it was "another strong demonstration of MetLife's earnings power." Adjusted earnings and EPS grew 15% and 20% YOY, respectively, with ROE at 17% at the top of target. Management expressed confidence in the strategy and capital deployment, highlighted by a new $3 billion share repurchase authorization.

Q&A:

• Question from Ryan Krueger (KBW): Could you give an update on what areas of the company would be potential areas you'd be interested in adding to if something comes about?
  Response: M&A philosophy unchanged; likely areas are asset management (complementary capabilities) and group (new solutions), but disciplined and opportunistic with a high bar for value creation.

• Question from Ryan Krueger (KBW): If group life mortality favorability continues, will there be a need to pass through to customers or maintain price?
  Response: Mortality favorability includes 2.5 points from prior development and lower claim severity; expects gradual normalization over the multi-year renewal cycle, not a sharp change.

• Question from Pablo Singson (JP Morgan): Can you talk about mortality experience for other blocks like individual life, corporate, PRT, and RIS?
  Response: RIS population (older/retiree) is performing in line with expectations and pricing; overall mortality is improving but faster in working-age populations than above 65.

• Question from Sunit Kamath (Jefferies): What is holding back PRT market growth and what needs to happen for better growth ahead?
  Response: PRT market is lumpy; first half of 2026 was lighter, but a stronger pipeline is expected in the second half. Diversification into UK funded reinsurance is helping offset slower US jumbo activity.

• Question from Sunit Kamath (Jefferies): What's different about your model in Japan amid market turmoil, and does it provide an opportunity to lean in?
  Response: Success driven by scale, diversification in distribution, product innovation, and execution excellence; sales momentum continues despite volatility, with strong performance across Asia.

• Question from Tom Gallagher (Evercore): Would you be interested in emerging market properties in Latin America if they become available?
  Response: No comment on market speculation; discipline is key. LATAM business is performing well, on a path to $1 billion in earnings, with Brazil being a fast-growing contributor.

• Question from Tom Gallagher (Evercore): Have you begun or considered portfolio repositioning in Japan and the US given higher interest rates?
  Response: ALM and risk management are considered holistically; no quick changes. Higher rates provide positive momentum over time, with diversified product mixes helping stabilize spreads.

• Question from Willame Birdis (Raymond James): What is your latest thinking on private equity, given recent trimming?
  Response: Expect a modest decline in PE allocation over time as distributions outpace contributions in the seasoned portfolio, but will continue investing opportunistically.

• Question from Willame Birdis (Raymond James): Is group PFO growth around 4% sufficient, or are there plans to accelerate it towards 7%?
  Response: PFO growth is within the multi-year range (4-7%); pleased with momentum and underlying indicators like sales and persistency, with variability by year.

• Question from Joel Hurwitz (Dowling): Can you provide color on non-medical health experience (dental, disability, PFML) in the quarter?
  Response: PFML claims normalized lower in Q2; disability results favorable due to investments in data analytics and recoveries; dental showed normal seasonality, with better H2 expected.

• Question from Joel Hurwitz (Dowling): What is driving the re-acceleration of PFO growth in Asia and its sustainability?
  Response: AUM growth in retirement is key, but PFO growth from fast 60-type business (e.g., yen product) is also contributing as sales momentum continues.

• Question from Wes Carmichael (Wells Fargo): How do you think about base spreads trending in the back half of the year given the rate environment?
  Response: Core spreads were 100 bps, at the top of the 95-100 bps range; expects a more normalized midpoint for Q3 due to seasonal reversal in real estate returns.

• Question from Wes Carmichael (Wells Fargo): With favorable mortality, where do you expect the group mortality ratio to come in for the back half?
  Response: Normalization items seen in Q2 are not expected to repeat in H2; ratio will fluctuate with seasonality, but current trend suggests moderation.

Contradiction Point 1

Group Life Mortality Ratio Normalization Outlook

Conflicting guidance on when and how mortality favorability will normalize.

Wes Carmichael (Wells Fargo) - Wes Carmichael (Wells Fargo)

2026Q2: The group life mortality ratio was 79% in Q2, with 2.5 points of favorability... This is expected to normalize gradually. - Rami Rahim(Executive, Group Benefits/RIS)

With favorable group mortality trends and Q2 normalization, what is the outlook for the group mortality ratio for the remainder of the year and full year? - Ryan Krueger (KBW)

2026Q2: The two points of normalization seen in Q2 are not expected to repeat in H2, providing a good best estimate for future trends. - Ramy Tadros(Executive, Group Benefits/RIS)

Contradiction Point 2

Group Benefits PFO Growth Target for 2026

Inconsistency in communicating the target growth rate for the current year.

Wilma Birdis (Raymond James) - Wilma Birdis (Raymond James)

2026Q2: The 4%-7% PFO growth range is a multi-year guide. In any given year, results can fluctuate between the low and high end... - Rami Rahim(Executive, Group Benefits/RIS)

What are the current PFO growth targets and plans for acceleration toward the 7% range, considering growth options and market dynamics? - Wilma Burdis (Raymond James)

2026Q2: Group Benefits shows strong top-line momentum: sales growth, double-digit growth in small-employer segment... The 4%-7% range is multi-year... - Ramy Tadros(Executive, Group Benefits/RIS) and John McCallion(CFO)

Contradiction Point 3

Group Life Mortality Trend Sustainability and Outlook

Contradiction on whether favorable mortality trends are temporary or sustainable.

Ryan Krueger (KBW) - Ryan Krueger (KBW)

2026Q2: The group life mortality ratio was 79% in Q2, with 2.5 points of favorability... This is expected to normalize gradually. - Rami Rahim(Senior Executive, Group Benefits)

Will MetLife need to adjust pricing to pass on favorable mortality benefits to customers, or can they maintain these favorable rates? - Suneet Kamath (Jefferies)

2026Q1: The favorable mortality trends are supported by factors like a potential COVID pull-forward effect and the impact of GLP-1 drugs... some portion of this favorability could flow back into pricing gradually over time - Ramy Tadros(Senior Executive, Group Benefits)

Contradiction Point 4

Non-Medical Health Ratio Seasonality and Outlook

Contradiction on the expected moderation of the non-medical health ratio in the second half.

Joel Hurwitz (Dowling) - Joel Hurwitz (Dowling)

2026Q2: Overall, the non-medical health ratio is expected to improve in the back half. - Rami Rahim(Senior Executive, Group Benefits)

Can you provide details on the non-medical health performance in the quarter, specifically for dental, disability, and PFML? - Ryan Krueger (KBW)

2026Q1: [The ratio] is expected to moderate in the second half of the year. - Ramy Tadros(Senior Executive, Group Benefits)

Contradiction Point 5

PFO Growth Target and Guidance

Guidance for PFO growth rate appears inconsistent between quarters.

Wilma Birdis (Raymond James) - Wilma Birdis (Raymond James)

2026Q2: The 4%-7% PFO growth range is a multi-year guide. In any given year, results can fluctuate between the low and high end... - Rami Rahim(Head of Group Benefits)

Is the company targeting ~4% group PFO growth in the current environment or plans to accelerate towards 7%, and what growth options and market dynamics are influencing this strategy? - Suneet Kamath (Jefferies)

2025Q4: The company is pleased with the momentum and its position within the range. - Rami Rahim(Head of Group Benefits)