To the Bank of America U.S. Financial Services. This is the MetLife presentation, and really pleased to have Michel Khalaf, President and CEO, and John McCallion, Head of Investment Management. Is this a new title or just a title that's been more?
Head of it for a while.
Yeah, head of it for a while, but more.
Couple of years.
It's obviously. Every day feels new. Okay, so that's good. And so we'll, I mean, we're going to get to investment management as it's a bigger part of the story. And for the audience, if you want to ask a question anytime, there's no order to my questions that can't be interrupted. So please, let's start with the three-year strategies and whatnot. You know, we are now, which is the, I guess, Next Horizon was the old one. These are, it's very hard. It sounds like Star Trek episodes. Of New Frontier and where we're at right now?
Sure, sure. Thanks for having us, Josh. It's given us a good excuse to escape New York weather. Strategy, New Frontier. We launched it just over a year ago. You know, at the time of strong growth, attractive returns, and lower risk. We commitments to back this, you know, this superior value proposition with 2025. One-year installment on this five-year strategy. In 2025, we delivered 10. And free cash flow. In addition, we shaved 40 basis points off of our direct expense. You know, I think this speaks to the efficiency mindset that we've built in the company, but also to the fact that investment impact as well. You know, as part of I'm pleased with the results of that we produced in 2025, but I'm also priorities we established back in December 2024. You know, those extending our lead in group benefits to capital.
Platforms, three accelerating growth and asset management, and four, highly attractive international growth markets. I'm very pleased that we've made significant progress. We got bigger in 2025, and strategic investments we made, especially on the leave and absence. Growth in that segment of the market. In retirement, we had Rei nsurance origination in 2025 in RIS, and we had 17% Third Sector growth in Japan. Multi-pronged, unique, retirement origination platforms. We closed on the in. Talked about reinsurance as a strategic capability for MetLife. You know, we further reinforced that with the launch. And, we completed two reinsurance transactions with Challenger. What this does, it gives us another tool in the tool. Generate assets for MetLife Investment Management to manage. And speaking of MIM, we closed on the PineBridge. And, we originated $22 billion in net flows. So, you know, what this.
We were at roughly $600 billion in AUMs. We're now at $740+ billion in AUM and Segment, which hopefully will allow investors to, I think, better recognize the, you know, the value of this business to the overall. You know, very strong growth, I would say across the board. I would just point to Mexico and Brazil. A very strong momentum consistent with what we talked about at Investor Day, and this is towards achieving $1 billion in earnings in the near term. You know, I think we, you know, we achieved this. When it comes to the overall environment, and you know, this brings me just to sort of emphasize businesses, but also of diversification, which I've called it a really superpower for MetLife. Just. We manage risk at the company, and it extends to everything from our investment portfolio to geography to.
and I think a good sort of measure of the effectiveness of this diversification is.
Well, I have no more questions. So let's go basic. I want to go through actually each one of the things that you mentioned one by one. EPS growth. So can we break that down into revenue, share reduction, and expenses. To exceed that basic formula that delivers on that?
Yeah, sure. And I just want to echo, thanks for having us here. And you know, you know, one thing to kind of be mindful of, you know, if you think about Next Horizon to New Frontier, you know, we really haven't had an EPS target. Through you know, quite a long journey of transforming our firm, right? And I think, as Michel referenced, we've really gotten to the, you know. That also gave us the confidence to establish an EPS target of double-digit EPS growth. And there's about a 60-40 split between earnings growth and capital management that would support that. You know, the legacy runoff business of MetLife Holdings, which is a legacy retail business of ours, that is shrinking. So that's less of a. Just felt right, as part of New Frontier to, you know, establish this as part of our, you know, ongoing commitments.
% ROE goal. Is there something about the nature of MetLife's capital-intensive business? Thinking about long-term, is this a 15%-17% year perpetuity, or will Liberty at the end of five years say, "Hey, look what's happening?
Yeah, I mean, obviously right now we're comfortable with the 15%-17% as part of New Frontier, but there are three, maybe, yeah, I guess three dynamics going on. You know, we probably are grow, you know, we probably have growth rates in the higher ROE businesses, across both. Second, you have the runoff of MetLife Holdings. And then third, which has been a theme for us, and it does take time. The value of our new business returns, which are unlevered IRRs. You know, we've been in the high teens for quite some time. Overall ROE of the firm, but that is part of what's allowed us to go from, you know, 12%-14% up to now 15%-17% over the last. I think those broad themes are still continuing.
We're very comfortable with 15%-17%, but, but there certainly is, you know, kind of an upward.
Part of that, of course, is keeping your expenses down. You guys did the New Frontier presentation and had your expense ratio goals that went up, although I think that we knew that PineBridge was part of the plan at that time. So it was numbers.
Yeah, PineBridge was not part of the plan at the time. Obviously that came shortly thereafter, but what we provided at the, at Investor Day, we said over the five-year period, we would reduce our expense ratio by 100 basis points, and it'd be pretty radical. If the margin's 30, your expense ratio is 70, right? So, you know, that by nature is just going to put pressure on the expense ratio. What we said. Firm. And as Michel said, we came in 11.7 this year, relative to a 12.1. We are still going to make the 11.3. And it just goes to show, I think, the, the, you know, what we've been seeing in our firm across. Of leverage AI that it, you know, injecting that into those process reengineering, it's like a force multiplier. And we're, we're seeing the effects of that. And it's.
Committed to 11-3.
Okay. In terms of part of the goals, you want to grow, range over the five-year period. We're at the low end of that, of that range in 2025. What happened in 2025? And that's, look, if you're in the range still, but you're at the lower end of the range. Can you diagnose that a little bit?
Sure, sure. Yeah, we feel confident in the sort of main reasons for that, I would say. If you think about 2025, we were early movers in taking persistency [that] put pressure on our persistency for 2025. That was the right thing to do. And we've seen, you know, seasonality that you expect to see in that business. And, you know, with most of the, you know, you know, just early look at 1-1 renewals, very strong. So, you know, it's reverting back to where we would expect it to be. As, you know, again, we have a good sort of view of 1-1 sales, and those are looking really strong. We talked about this at Investor Day as we launched New Frontier, is that we had identified disability in. But as an industry leader, we thought it was an area where we could, we could accelerate our growth. We.
In things that sort of make life easier for employers and employees. We talked at Investor Day about MyLeave capability in that regard. And we're seeing these investments really resonate with customers. So that's driving. You know, the thing I would also mention, which again we talked about at Investor Day, is wanting to do more with fewer providers. And one of the ways that we are capitalizing on this and absence offering, you know, other products and services with that offering. New sales, one-on-one sales, on average, we're bundling four to five products with leave and absence. So, you know, areas I mentioned combined, those give us confidence in our ability to grow well within the 4%-7% range. And another thing I would mention.
This theme is diversification because, again, we are extremely well diversified in that business from a product. You know, that diversification also, you know, allows us to sort of adjust and perform, economic situations and conditions.
You made the comment about taking rates. Can you talk about trend a little bit in the various group lines, in terms of loss trend and what you're trying to compete with right now? Disability in life a little bit?
Yeah, sure. So on the life front, you know, we had, you know, 84%-89% range, and we did bring down that range to 83%-88% for the near term, you know, what we're seeing, where you see favorability. So we've seen that. I think the industry as a whole has seen that, and we've certainly benefited from it. Some of this favorability will, you know, persist going forward. And then on the disability front, you know, we sort of drove about a percentage point up in terms of our non-medical health ratio for the fourth quarter, you know, a slight increase in average severity on the block too we saw the quarter. And then I would say slightly. It's not, it wasn't sort of pronounced, but, you know, rates.
You know, again, if you look at the full year, we're still in line with expectations. Recoveries, although if you think about recoveries for the full year, they were ahead of expectations. So we don't believe that this sort of signals a trend, but that's really what sort of, you know, impacted our non-medical health ratio in the fourth quarter.
One or two others. A rise in cancer incidence among young working-age individuals. Is that—could that be affecting? No one knows whether that's happening and two, if there's any, any impact on trends from that?
We're not seeing that in our book. Keep a close eye on, but so far we haven't seen that in our book.
Do you have thoughts on employment? AI, especially with thing. But I think we'll attack sell-side research analysts first. That being said. We talk a little bit about what the future of employment is and what it means for the company?
Sure, sure. So first, maybe let me start by saying. I would say post-pandemic. You know, the expectation has always been that this would correct over time. I think we've seen some of that. Project our growth rates in any given year. You know, in terms of the headlines, you know, I meet with. You know, I'm not hearing CEOs say, well, you know, we're going to, because of AI, we're going to shed 30%-40% of our workforce in the next. You know, we want to do the same level of business with 50% less people. I think what I'm hearing is we think with AI, we can. More people to do it. And I think this speaks to sort of, you know, AI being, you know.
I think it speaks to the fact that the real prize with AI is on the productivity front. That's why also we like direct expense and expenses, not only expenses. So, you know, my sense is that, you know, productivity gains are going to drive, you know, new opportunities, including diversification being our friend here because, you know, again, when you're diversified by size of employer, by industry, by also offers you some built-in protection.
Let's switch to retirement a bit. You know. Of business. You know, obviously it's, it's very programmatic. How do you look at the rate environment and coming down? Any thoughts there?
Yeah, and I think one of the comments we mentioned last year is we felt 2025 points, maybe a basis point less or so, and plus or minus, you know, maybe in a 2 basis point range, throughout the four quarters. A variety of products that do well at the long end of the curve and the short end of the curve. That diversification allows for some stability. We see the stability there for just different reasons. For example, you know, we had a very large level of new flows in the fourth quarter. You know, you have some portfolio changes that have to occur. That tends to just. But one of the things we gave as part of the outlook was a little more clarity around RIS earnings, which we said would be relatively flat year. Balances.
We referenced the fact that now, in light of, and Michel referenced strategic reinsurance earlier, you know, leveraging reinsurance in a more. We've now, you know, been a little more clear on the, the growth metric for RIS being retained balances. That is net of reinsurance. To be more back-ended in the, in the second half of 2026. But spreads overall should, should remain relatively stable.
Word here, but 10 years ago I would call PRT maybe a greenfield business. Obviously it's a very much mature business. PRT in 10 years from now, is there anything left?
Yeah, I mean, I think there will be, I think. Just if you look at the sheer volume that's out there, you know, it's, you know, over a, well over a trillion. You know, you have very healthy funding levels that are supportive, again, of employers, plan sponsored. Be, you know, capacity, just, you know, in terms of capital, you know, going forward. But hasn't, this hasn't really dampened the market much. I mean, we had a record year last year, $14 billion in PRT. That we put on the books, with returns that are consistent with our enterprise returns. So we're really pleased with that when it comes to the business that we put on the books. And we operate in, you know, the jumbo end of the market, where we think underwriting, investment, and admin capabilities, you know, provide us with a, with a competitive advantage.
And we also continue to see lumpiness in terms of the business and how much comes to market in any given year, but I think this is going to be a growing market for the foreseeable future.
That you've gained by adding it to your arsenal?
Yeah, I think to, to Michel's point around the growth metrics and just the trends we're seeing in terms of, you know, the. We have, we mentioned, you know, growth we're seeing in Japan and the U.K. You know, one of the things we set out as part of the strategy is we wanted to make sure identity, you know, it allows us to, you know, supplement and provide capital to, you know, meet the growing demand. We had, in the first six months, we've closed two transactions. We've stood up the team. You know, we're, we're off and running across our platform. And I think there's, you know, a lot of opportunities ahead.
Again, I want to just bring. So let's pivot now to the latest segment, the investment management. And can we talk now that we see the numbers and we understand what they are, how should we be judging performance in MetLife Investment Management?
Yeah. Delighted that with the closing and with a day to spare, we closed PineBridge on December 30th. So, we're off and running now with, I mean, first, I mean, just the PineBridge acquisition, the team has come in 1-1 and it's just, you know, it's been really a one-team mentality right away. These, you know, across the platform, but we're off to a great start. You know, in terms of our objectives. But at the end of the day, you know, our main objective is to accelerate growth in, in EBITDA. And, you know, with the PineBridge acquisition in 2026, I should say, relative to 2025, as well as earnings, we, we gave a range of 240-280. And then from there. In earnings.
A lot of that will be the revenue synergies we see across the platform as well as through leveraging our, you know, the combined group. So we're super excited about what's ahead and, you know, even Challenger at RIS I've referenced before that, you know, if you think back to oriented business into and moving that to be fee-oriented because we obviously have an investment mandate along with General Atlantic.
Line number, but like, but there's not necessarily immediate math behind it. But will the main path to be getting there be organic growth?
Look, we have a big acquisition to absorb right now. We need to get that right. That's probably the most important thing for us. And I think, like I said, I'm very team. And I think the groups did an excellent job between sign and close, maintaining their momentum, which is not always that, but you know, basically, PineBridge came in with the AUM that we expected. So we're off to a great start. You know, feeding the two firms together. And then, you know, if we get this right, it'll give us the opportunity to think about, you know, getting this platform in a position based on integration.
So what capabilities did MetLife get with PineBridge and what enhanced PineBridge now have with those strategies because it's part of the MetLife family?
Yeah, you know, I think they bring to us a bit of leveraged loan market, CLO platform. They bring a multi-asset platform. They help us grow our alternatives. And, you know, they're a bit more non-U.S., which is very complementary to our current platform. I think over 50% of their assets are distribution reach. And there's a net and the opportunity, you know, looking at the client set to find ways to cross out. We actually had some early wins already.
Well, let's talk about international a little bit. You know, certainly, I mean, I think that Japan's been a huge part of that. Japan and Korea are advanced markets in, in mature, but you've had a great deal of success in what some would call mature markets. Grow in a place where growth is not as strong as, as in other markets you're in?
Sure. Yeah. I mean, really pleased with the growth we're seeing in 2025. You know, I think to a large extent, this is down to our diversified distribution and product capability. You know, we know this market really well. I think there's a few things that are, you know, sort of from a macro perspective that industry for MetLife, I would say. You know, the one, I mean, there's renewed energy and dynamism and I think the recent elections probably reinforced that. You know, with a, with an. You know, people are having to start to save earlier. That's creating a new sort of generation of pre-for MetLife as well. So that's certainly a tailwind. And then with people living longer, they're also their needs when it comes.
You know, I think the other, you know, macro sort of trend that we're seeing is around, you know, with inflation now, you know, part of the system. To other market-linked instruments. And, you know, cash still represents close to 50% of savings in Japan. And move out of cash, things don't happen very quickly in Japan, but they are certainly, you know, market-linked instruments, the stock market has been doing well in, Japan. So, so I think those that create some tailwinds for the industry. You know, for us, you know, the, the thing I will mention as well is that 2/3 of our sales in 2025 came from U.S. dollar products. Context of a rising yen interest rates. This gives us the ability to proactively sort of go after that opportunity.
And then Korea, I think, is a great example of us taking the know-how, the expertise that we built in Japan and transferred. Been very strong there. The equity market has, you know, done remarkably well as well, which is, again, another. Our sales momentum. We feel good. Obviously, we had guided to this, so off of a strong base, I would say, we was, we still feel confident about delivering mid to high.
Imposed 90-day moratorium on sales at Prudential, mean that for a short period of time, MetLife is going to be a new product in the market?
No, I mean, I'm, you know, obviously I don't want to comment on, you know, other companies, be it as such, it's a competitive market. You have, you know, many competitors in Japan, including some local companies in that market. I think we've been demonstrating that. So that's why, that's really sort of.
Can you talk a little about the change in solvency ratios in Japan and what it means for your dividend capacity?
Economic framework in different jurisdictions. Japan's no different. And one of which we are very supportive of, which is why anything that's preferred to us, you know, where, you know, these economic frameworks, they take into account, you know, risks that are being taken. And that's really how we look at managing and, you know, our businesses across the globe. So, we talked about being within a 170-190 ESR ratio come the end of March. Still believe we're on track. Whether the U.S. Treasury or the 30-year JGB moves 100 basis points, either of them or both of them, you know, ALM is a very important concept under these new ESR frameworks, and we're very, very supportive of it.
If we pivot cohort, I think we're starting out at a goal for this year, 2026, at 68%. Why are you so confident in that market and in your opportunity?
We, you know, excluding notables, you know, we had the VAT issue in Mexico, which is an industry thing. We had record year in 2025, both from a top line and a bottom line perspective. That's not. Of years now. We feel confident in our ability to continue to grow both the top and the bottom line, in diversified channels and products that really continue to resonate in the market and, you know, a growth market for us. We've been growing faster than the market for, again, a number of years now. A lot of momentum in third-party and embedded insurance. Again, you know, based on our New Frontier strategy, we had invested in to enable this, you know, these channels and this growth. That's really resonated.
All in all, we feel really good about LATAM's continued momentum and trajectory. As I said, let's put it, let's say, near-term path to a $1 billion in earnings there.
Very good. And finally, let's close on variable investment income. Durable and wonderful, and then it's not been so great lately. Have we learned anything from the last decade that. And just what can we say here?
Yeah, I mean, I think we should start with it's been a very valuable asset class for us over. We've generated there, it's been excellent. So, but with a higher yielding environment, you know, we have to move into higher yielding fixed income oriented assets. And we'll probably continue here in 2025. The back end of the year, the back half of the year was very strong that there's kind of a continued upward trend here. But we stayed with the 9% annualized return for 2026.
Time. Really appreciate John, Michel, and John for being here. If you have any questions, sure you can. Insurance, the next session is going to be with Everest. Thank you.