Ladies and gentlemen, thank you for standing by. Welcome to the MetLife first quarter 2026 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. 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 you joining us for MetLife's first quarter 2026 earnings call. Before we begin, I 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 and Head of MetLife Investment Management. Also available to participate in the discussion are other members of senior management. Last night, we released an earnings call presentation which addresses the quarter. It is available on our website. John McCallion will speak to this presentation in his prepared remarks. An appendix to the deck features disclosures, GAAP reconciliations, and other information which you should also review.
After prepared remarks, we will have a Q&A session, which will end promptly at the top of the hour. As a reminder, please limit yourself to one question and one follow-up. Now, over to Michel.
Thank you, John. Good morning, everyone. This was an excellent quarter and a strong start to the year as we demonstrated the full earnings power of MetLife, guided by our New Frontier strategy. Adjusted earnings were ahead of last year for all operating business segments, with across-the-board top-line growth. Margins were resilient. We deployed capital with discipline, investing responsibly in growth and returning excess capital to shareholders. Importantly, this quarter's performance was balanced and repeatable. Each of the key elements that drive our strategy, diversified businesses, disciplined capital allocation, and investment portfolio and balance sheet strength all came together to demonstrate the promise and resilience of MetLife's superior value proposition. Year one of New Frontier was about building the right engine to drive growth and establish MetLife as a high-quality compounder over time.
Year two is about acceleration and driving execution across our portfolio of market-leading businesses where we serve more than 100 million customers. The first quarter provides early evidence that we're moving forward with urgency and discipline and are well-positioned to deliver against the ambitious financial commitments we've established. Turning to first quarter results, we reported adjusted earnings of $1.6 billion or $2.42 per share. Adjusted earnings increased 18% from the prior year period. adjusted earnings per share increased 23% year-over-year, faster than earnings growth, reflecting our steady capital management. Adjusted premiums, fees, and other revenues, excluding pension risk transfers, increased 10% year-over-year. Growth was broad-based, spanning nearly all businesses and regions. Variable investment income totaled $518 million pre-tax, marking the third consecutive quarter of above-expectation VII.
The first quarter result was near the top of the range we announced last month and driven by higher private equity returns, roughly 2.9%, aided by strong venture capital performance. Adjusted return on equity was 17% at the top end of our 15%-17% target range and far above our cost of capital. Our direct expense ratio was 11.9%, an improvement from last year and favorable relative to our full year target. This result is even more impressive when you consider the integration of PineBridge, a business with a structurally higher expense profile typical of asset managers. Turning to the performance of our business segments, starting with Group Benefits, the segment generated adjusted earnings of $439 million, up 19% year-over-year.
Life mortality in the quarter was exceptional, as working population mortality continues to trend favorably and was further helped by a light flu season this year. Total sales were up 15% in the quarter, and Adjusted PFOs, excluding participating contracts, rose 4%. Within National Accounts, our persistency is in the high 90s%, and our average customer tenure is more than 20 years, illustrating the strength of Group Benefits contribution to our recurring revenue model and its consistent compounding of value over time. Looking ahead, our market leadership, scale, and enduring customer relationships position us well to drive growth in the most attractive segment of the U.S. life insurance market. Employers continue to see the value of benefits beyond medical coverage as a cost-effective way to support their employees' health and financial security journeys in a tight economy.
Moving to Retirement and Income Solutions, or RIS, we reported adjusted earnings of $451 million, up 11% from a year ago, lifted by strong variable investment income. After a record-setting fourth quarter for pension risk transfers and longevity reinsurance, newer additions to the lineup, U.K. longevity reinsurance and retail annuity reinsurance, contributed $1.5 billion of new sales, further reinforcing the diversity of our product offerings. The breadth of our global retirement opportunity set is substantial and extends around the world to include top markets such as the United States, the United Kingdom, and Japan. These are markets where demographics are driving the demand for income, which our product suite is well-suited to provide. Turning now to Asia, the region delivered an outstanding quarter. Adjusted earnings of $487 million increased 31%.
Sales performance in the quarter was very strong as the region advanced 22% on a constant currency basis. In Japan, our largest market in Asia, we saw continued strength in both FX and yen-denominated products. We also benefited from a new corporate accident and health product introduced in the quarter. Altogether, Japan sales rose 26% on a constant currency basis. For Korea, our second-largest market in Asia, the combination of a solid economy and our product innovation has been a driver of growth with constant currency sales increasing 44%. In Latin America, adjusted earnings totaled $229 million, an increase of 5% despite the impact of last year's tax change in Mexico. Performance was supported by robust sales growth and persistency in the quarter, with sales increasing 20% and adjusted PFOs up 11%, both on a constant currency basis.
The region demonstrated strong underlying momentum in the quarter, led by employee benefits growth in Mexico, retirement annuity demand in Chile, and the ongoing expansion of Xcelerator in Brazil. Turning to EMEA, adjusted earnings of $110 million rose 33% with Adjusted PFOs up 15% on a constant currency basis. Our strategic focus on capital light, accident and health, and life products is delivering results. The cumulative impact of strong sales across multiple markets for the past several years is clearly showing up in Adjusted PFO and adjusted earnings growth. Before I move on, we made the difficult decision to divest our business in Ukraine, a phenomenal example of resilience in the face of the most challenging circumstances. Going forward, this market-leading franchise will be even better positioned to continue its growth trajectory with its new regional parent.
Now shifting to MetLife Investment Management or MIM, the new segment delivered adjusted earnings of $47 million, an increase of 68% following the first fully integrated quarter post the PineBridge acquisition. Institutional client assets under management decreased 1.9% sequentially during the quarter, mostly due to market depreciation in equity and public fixed income, as well as modest net third-party outflows. MIM's pipeline and forward commitments look strong, particularly within private assets. Let me briefly touch on artificial intelligence, which continues to play an important role in advancing our New Frontier strategy, strengthening how we run the company, and driving growth and efficiency. Over the past five years, we've invested more than $3.2 billion to simplify and modernize our technology ecosystem. That investment is delivering tangible at-scale benefits for our customers, associates, and operations.
As we continue to adopt AI responsibly, we're improving how we make decisions, enhancing how we serve customers, and reducing friction across the enterprise. Our work to embed AI across core operations, combined with consistent execution, is reducing complexity and costs while driving productivity and supporting growth and can be seen in the steady improvement in our direct expense ratio. For our customers, AI helps us respond faster, provide more relevant guidance, and make our products easier to understand, leading to increased uptake. Above all, governance and risk oversight are built into how we deploy AI, which is paramount given the trust placed in us by our customers. Shifting to cash and capital, we've been active on a number of capital management fronts.
First, we repurchased roughly $750 million of MetLife common shares and paid common dividends of around $370 million, for a total of roughly $1.1 billion returned to shareholders in the quarter. We repurchased nearly another $200 million of Met common shares in April, and we have $1.1 billion remaining on our existing authorization. Second, signaling our financial strength and flexibility, our Board of Directors announced a 4.4% increase in MetLife's common dividend per share. Finally, during the quarter, we opportunistically issued $1 billion of subordinated debt to support our balance sheet and provide growth capital. At its height, the offering was oversubscribed more than five times and was issued at tight relative spreads, indicating the value and confidence that the fixed income market attributes to MetLife's balance sheet.
It's important to note we executed these capital actions while also funding the quarter's substantial organic business growth. We closed the quarter with $3.9 billion of cash at our holding companies, which is at the top end of our $3 billion-$4 billion liquidity target buffer. Before I close, I would like to take a moment to welcome Dan Glaser and Michelle Seitz, who joined MetLife's Board of Directors in February. I am confident that Dan's deep experience in the insurance industry and Michelle's track record across investment management will serve MetLife shareholders well. In closing, this was an excellent quarter that illustrates the investment case for MetLife. Under New Frontier, the decisions we are making and the actions we are taking continue to translate into durable earnings power, capital flexibility, and attractive risk-adjusted returns across cycles.
Our New Frontier strategy is deeply informed by the environment around us. From demographic shifts and higher interest rates, the conversions of insurance and asset management, to the rapid proliferation of AI, we are positioning MetLife to benefit from these forces in a measured, commercially disciplined way. We are pleased with the fast start to the year. This quarter's performance strengthens our confidence in the outlook we have shared and reinforces our belief that New Frontier is the right strategy at the right time. With that, I'll turn it over to John to walk through the results in more detail.
Thank you, Michel, and good morning, everyone. As Michel mentioned, this quarter reflects not just strong headline results, but the continued strength of our earnings quality through strong growth, disciplined underwriting, expense control, and prudent capital management. I'll walk through the first quarter results, including updates on our investment portfolio, and we'll do so using the Q1 earnings call presentation. We'll start on page three. MetLife is off to a very strong start to the year, benefiting from the strength of our diversified market-leading businesses, disciplined capital management, and an ongoing efficiency mindset. In the first quarter, adjusted EPS grew 23%, while adjusted ROE reached 17% at the top end of our 15%-17% target range, and our direct expense ratio was 11.9%, beating our 12.1%, 2026 annual target.
Net income totaled $1.1 billion or $1.74 per share, while adjusted earnings for the quarter were $1.6 billion or $2.42 per share. The primary difference between net income and adjusted earnings was net investment losses, primarily stemming from normal trading activity within the fixed maturity portfolio. This quarter, we experienced a higher amount of trading losses because of a more substantial amount of portfolio rotations. In addition, this line included a modest loss as a result of a sale of a portion of our private equity limited partnership interest. As we've seen signs of improvement in the private equity secondary markets, we opportunistically divested roughly $750 million of private equity assets at the end of Q1 at a modest discount.
The transaction structure, like previous secondary sales we've completed, will allow MetLife Investment Management to continue managing the assets from the sale. While this is a prudent approach to managing our investment allocation, it also supports growth in our third-party asset management business. Moving to page four, we present adjusted earnings for each segment and corporate and other, showing a total year-over-year increase of 18% and 15% in constant currency to $1.6 billion, driven by higher variable investment income, strong volume growth, and favorable underwriting margins, partially offset by lower recurring interest margins. Adjusted earnings per share were $2.42, up 23% and 20% on a constant currency basis, with strong earnings growth supported by disciplined capital management. Now moving to the businesses.
Group Benefits adjusted earnings were $439 million, up 19% year-over-year, largely driven by favorable life underwriting and volume growth. The Group Life mortality ratio is 80.1% for the quarter, better than our 2026 target range of 83%-88%, reflecting continued favorable mortality trends among the working age population. Our non-medical health interest adjusted benefit ratio was 75.8%, which was above our annual target range of 70%-75%, in line with seasonally higher expectations for dental. Within disability, higher average severity also impacted the quarter, along with higher incidence from paid family leave. Group Benefits had strong sales in the quarter, up 15%, primarily driven by growth across both core and voluntary products.
Adjusted PFOs increased 2%, reflecting underlying growth of approximately 4%, partially offset by a two-point headwind from participating contracts, which have limited impact on earnings. RIS adjusted earnings were $451 million, up 11% year-over-year, primarily driven by higher variable investment income and favorable underwriting margins. Mortality in our annuity business was lower compared to Q1 of 2025. However, underwriting margins remain elevated due to a large structured settlement contract reserve release in the quarter. Despite RIS's strong results in Q1, we still expect full year adjusted earnings to be between $1.6 billion-$1.8 billion that we provided on our outlook call. Total investment spread was 119 basis points at the top end of our 100 basis points-120 basis points guidance range.
Core spread ex VII was in line with expectations at 95 basis points and down 4 basis points sequentially as we continued rotating the large Q4 inflows, primarily from PRT mandates. RIS continues to benefit from the strength of its origination platform. While top-line metrics were masked by a tough compare versus the prior year quarter, which had PRT inflows of $1.8 billion, RIS Adjusted PFOs excluding PRTs were up 58%, driven by strong growth in U.K. Longevity reinsurance, post-retirement benefits, and structured settlements. Asia adjusted earnings were $487 million, up 31%. The primary drivers were higher variable investment income and strong volume growth. Asia's key top-line growth metrics continued their strong momentum in Q1. General account assets under management at amortized costs were up 7% on a constant currency basis.
A key driver were Asia sales, which were up 22% on a constant currency basis, primarily driven by Japan and Korea, reflecting the traction that we are seeing from new product launches in both markets, all while maintaining pricing and underwriting discipline throughout. Latin America adjusted earnings were $229 million, up 5% year-over-year. On a constant currency basis, adjusted earnings were down 9%, reflecting the Mexico VAT change and less favorable taxes versus the prior year quarter, which more than offset strong volume growth across the region and favorable underwriting.
Latin America delivered strong top-line growth, with Adjusted PFOs up 25% or 11% on a constant currency basis, and sales were up 20% on a constant currency basis, driven by strong growth in Brazil, Mexico, and Chile, a clear indicator of sustained demand and continued execution across this franchise. EMEA adjusted earnings were $110 million, up 33% and 28% on a constant currency basis, primarily driven by robust volume growth. Adjusted PFOs increased 19% or 15% on a constant currency basis, and sales rose by 17% on a constant currency basis, with broad-based growth across the region. The strong top-line growth over the last several years is translating into a stronger, more consistent earnings power.
Turning to MetLife Investment Management or MIM, adjusted earnings were $47 million in the first quarter, up from $28 million a year ago, in line with the outlook we provided in February. The primary drivers were business growth, including the acquisition of PineBridge and favorable expense margins. With the first quarter reflecting seasonally higher expenses, we expect adjusted earnings to improve as the year progresses, aided by the continued progress integrating the PineBridge business. Institutional client outflows were approximately $2 billion during the quarter, reflecting elevated market volatility and the impact of bringing the two platforms together. However, outflows have stabilized the latter part of Q1 and so far in April, we're seeing a solid pipeline ahead.
Corporate and Other reported an adjusted loss of $177 million in the first quarter, compared to a loss of $129 million a year ago. The year-over-year change was driven by foregone earnings from the prior year strategic reinsurance transactions, lower recurring interest margins, and less favorable expense margins. This was partially offset by higher variable investment income. The company's effective tax rate on adjusted earnings in the quarter was 24% at the bottom end of our 2026 guidance range of 24%-26%. Now we'll move to page five. This chart reflects our pre-tax variable investment income for the four quarters of 2025 and the first quarter of 2026, which was $518 million.
The higher than implied quarterly run rate in Q1 was driven by private equities, which had an average return of 2.9%, while real estate and other funds had an average return of 0.8%. As a reminder, PE and real estate and other funds are reported on a one-quarter lag and accounted for on a mark-to-market basis. On page six, we provide VII post-tax by segment and corporate and other for the four quarters of 2025 and Q1 of 2026. Most of the VII assets are concentrated in Asia, RIS, and corporate and other, consistent with the long-term nature of these obligations. As of March 31, 2026, total VII assets stood at $18.2 billion. Asia represented nearly half of these assets, while RIS and corporate and other accounted for about 30% and 20% respectively.
As always, we manage the business assuming a normalized level of VII over time and remain comfortable with our full year outlook. Let's discuss our private fixed income portfolio on page seven. We've been investing in private assets, including private fixed income for decades with a proven track record of disciplined underwriting, strong governance, and alignment with our liability profile. This chart shows our private fixed income portfolio valued at approximately $85 billion as of March 31st. The majority of these investments are in traditional private placements and infrastructure. Like our general account, this portfolio is high quality, around 95% is investment grade. It's well-diversified and built to perform across market cycles. We also have limited exposure to segments generating the greatest attention in today's market.
We have no exposure to Business Development Companies or BDCs, and our middle market loan exposure is under 1% of our general account. Lastly, private assets offer strong relative value, especially when matched with our long-term illiquid liabilities. With prudent management, these assets deliver extra returns through direct origination, stronger covenants, and collateral protections. Let me turn to page eight. We provide a summary of our software and software-related investments. We've cast a wide net here to comprehensively address this area of focus. We have a deliberately minor allocation and a highly diversified portfolio. Across both direct and indirect investment, the portfolio is predominantly investment grade, diversified by issuer, structure, and strategy, and positioned high in the capital structure. Our $2.5 billion direct exposure, or 0.6% of our general account, is largely concentrated in market-leading, well-capitalized technology companies with robust liquidity profiles.
The $6.3 billion of indirect exposure, representing 1.4% of our general account, is diversified across funds and structures with credit protections and conservative positioning that limit downside risk. Within private equity, software exposure totals $1.3 billion spread across a highly diversified set of investments where returns and cash flows will naturally vary across the investments. Most of our venture capital exposure of $3.5 billion is skewed towards AI firms, which are benefiting from higher valuations and contributed positively to returns this quarter. For example, our venture capital portfolio generated a 6.8% return this quarter. In short, our software exposure is intentional, well-controlled, and not an area of concern from a risk or capital perspective.
Turning to expenses on page nine, our direct expense ratio was 11.9% in Q1 2026, ahead of our full year target of 12.1%. This compares with 11.7% for the full year 2025 and 12% in the first quarter of last year. This quarter's performance was driven by strong PFO growth and continued expense discipline, which allowed us to successfully absorb the roughly 50 basis point impact from the PineBridge acquisition that we previously disclosed, while still coming in ahead of target. We continue to manage expenses on a full year basis, and this quarter reinforces confidence in our ability to deliver against our 2026 target. Moving to slide 10, MetLife continues to operate from a position of strong capital and robust liquidity.
As of March 31st, cash and liquid assets at the holding companies totaled $3.9 billion, toward the high end of our target cash buffer range of $3 billion-$4 billion. During the first quarter, we returned approximately $1.1 billion to shareholders, including approximately $750 million of share repurchases, and we repurchased approximately $200 million of additional shares in April. Our capital actions reflect confidence in both the near-term earnings and long-term free cash flow durability. For our U.S. companies, our 2025 combined NAIC RBC ratio was 379%, well above our target ratio of 360%. Preliminary first quarter 2026 statutory operating earnings were approximately $610 million, with net income of approximately $170 million.
Our estimated U.S. statutory adjusted capital on an NAIC basis was approximately $16.2 billion as of March 31st, down 5% from year-end 2025, primarily due to seasonally higher U.S. entity dividends paid in Q1, partially offset by operating earnings. Finally, in Japan, we expect our initial economic solvency ratio, or ESR, to be in the middle of our 170%-190% target range for fiscal year ending March 2026, following completion of regulatory filings in June. In summary, MetLife delivered an excellent first quarter, reflecting disciplined execution across the enterprise as we enter year two of our New Frontier strategy. Broad-based top-line growth, strong returns, and expense discipline underscores the quality and the durability of earnings, while strong capital, liquidity, and free cash flow support disciplined and consistent capital management.
Our high quality, well-diversified investment portfolio built on decades of private asset experience and risk management positions us well through market cycles with limited exposure to areas under the greatest scrutiny. Taken together, these results reinforce our confidence in MetLife's ability to compound value over time and deliver attractive, dependable returns for shareholders. With that, I will turn the call back to the operator for your questions.
We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Suneet Kamath with Jefferies. Your line is open. Please go ahead.
Great. Thank you. Good morning. I wanted to start on group life. I guess for Ramy, we've seen working age mortality trend has been improving, I guess, for a couple years now. I'm just wondering if you've done some more work in terms of what's driving that, and if you think this trend that we've seen is sustainable? Thanks. I don't think we can hear the answer, or at least I can't.
Yeah, sorry. Let me. Hold on a second. Hang on. No, that thing's broken. Here. That thing broke.
Suneet, can you hear me now?
I can. Thank you.
Okay. Sorry, we've had a problem with the mic here. Thank you for the question, and let me just give you maybe a bit of color on the quarter, and then give you a sense of how we think about the sustainability of the results. You know, we're very pleased with the results in the quarter. We've got about two points of favorable prior quarter development coming through. We did see about another half a point of favorable severity, which can kind of fluctuate quarter to quarter. As you noted, we are also seeing overall favorable working age mortality when you look at the CDC data. Look, there's a lot of different potential drivers for that favorability. Some include a pull-forward effect from a COVID perspective.
Some include the impact of GLP-1 drugs, and a lot of other pieces, that we're researching and looking into, which, you know, I'm not gonna go through all the details right now. When you step back and think about what this means for our results, you know, keep a couple of points in mind. One is, you know, while we operate in a competitive environment, this is also a market where we particularly can differentiate on factors beyond price. We talked about the strategy in terms of how we bring a value proposition to our clients, especially those who are looking to do more with fewer.
Life insurance is often bundled with other coverages, such as disability and dental and voluntary, and this allows us, from a bundling perspective, to look at overall customer profitability and protect overall margins. From a specific life perspective, if the favorability that we see does persist and does become credible, and these are ifs, we would expect some portion of it to flow back into pricing. That would happen gradually over time. Think of that happening in years, not quarters, if you think about our underwriting ratio. Hope that helps.
Yeah, that's helpful. I guess maybe shifting gears to Japan, it seems like we're seeing a lot more actions by regulators in that country, and I think the secondment issue that you were part of, I think is an industry-wide issue. I'm just curious if you can give us an update on what's going on there, and if you're aware of any other reviews by the regulators that could impact Met's franchise there. Thanks.
Hey, Suneet, it's Lyndon here. Look, this issue, as you described, has impacted several companies across the industry, and we obviously take this matter very seriously. We've conducted a very comprehensive review all across the company. All the seconded employees have returned to their positions, and we've discontinued the practice. We've taken lots of steps to kind of work with our customers, our partners, and regulators to resolve the issue. All the details of the review we've undertaken, all the corrective actions that we've put in place can be found on our website. We're in conversations with the FSA about lots of different things. The press release noted we had a reporting order, all our discussions with the regulators continue to be confidential right now.
Okay, thanks.
Yeah, and I think just to add to that, Suneet, I mean, just to reemphasize the It's an industry issue. We're not seeing any impact on our business and results and sales, as you saw in the quarter. I think as Lyndon said, which kind of we're working through it. All of us, like the whole industry, are working through addressing this with the regulator, and I think we don't see this as anything with any specific company. It's more just a change in industry practice.
Okay. Thanks, John.
Our next question comes from Ryan Krueger with KBW. Your line is open. Please go ahead.
Hey, thanks. Good morning. Maybe I'll start with an opposite side of a Japan question. You had quite strong sales there. Can you talk a little bit more about the positive dynamics you're seeing that drove this and how you're thinking about the rest of the year?
Hey there, it's Lyndon. Let me take that. We did have a very strong quarter. We're very pleased with the performance we've seen in the quarter. Sales are up 22% year-over-year. Let me give you some color about Japan and the rest of Asia. Let's start with Japan. Sales in Japan were up 26% year-over-year, and that's really driven by distribution strength across all of our channels. We've also benefited from very successful product launches in the quarter. We saw life sales grow. That was driven by the yen variable product as well as a U.S. dollar single premium product. In the A&H products, we launched a new product in the quarter, and A&H sales were actually up 77% year-over-year.
Strong performance in the yen, in the yen A&H portfolio. When we look at annuity sales, they've remained steady against what was a very strong comparative in the prior year. We continue to see some momentum in U.S. dollar single premium products. An important dynamic for the quarter was our mix of business between yen and dollar products was close to 50/50, reflecting a very diversified product portfolio. Going to the rest of Asia, sales there were up 18% year-over-year, and here Korea was a key driver. Sales growth was up 44%. Here too we saw momentum in our U.S. dollar sales, where we've been able to leverage what we've done in Japan with U.S. dollar product as well as our investment expertise and take it to Korea.
We also saw strength in our Korean won product there, and that was driven primarily by the strong macroeconomic environment, particularly the rising equity markets. We're off to a strong start for the quarter. Now looking ahead, we can expect a little bit of moderation in year-over-year growth rates, just given the strong prior comparatives. We really expect the momentum we have to continue going into the second quarter.
Thank you. On non-medical health, could you give us a little more color on the key drivers that impacted this quarter and also just how you're thinking about the rest of the year?
Sure, Ryan. It's Ramy here. If you think about the quarter, three kind of drivers I would point to. First is dental. Very much performing in line with our expectations. We did observe the seasonally higher dental utilization coming through in the quarter, which does impact the ratio. We would expect that utilization to moderate in the second half of the year, and that's kind of consistent with historical trends. For disability, we did experience higher disability claims. Those were coming from the impact of new state-mandated Paid Family Leave programs. These new programs have a claim pattern with higher upfront claims that tend to normalize.
Here again, we would expect that impact to also moderate in the second half of the year. The third factor, which John referenced in his prepared remarks, we did see slightly elevated severity in LTD. It's important to note that while this was elevated on a year-to-year basis, when we look at it sequentially, it was actually flat over the last three quarters. We don't really see any evidence of a trend here in terms of severity and very much in line with kind of quarterly fluctuations that we would see. If you put all of these pieces together, from an aggregate perspective, back to your question, we would expect this ratio to moderate, but look for that moderation in the second half of the year, if you think that coming through our numbers.
Thanks, Ramy.
Our next question comes from Wes Carmichael with Wells Fargo. Your line is open. Please go ahead.
Hey, good morning. Thank you. First question was on RIS spread. I think the core spread declined a little bit sequentially, but you've also brought on a lot of new business from PRT and other products over the past two quarters. Any help on how you're thinking about core yield or spread and how that should trend if there's any uplift from deploying some of that cash or reallocating some assets going forward?
Yeah, thanks for the question. Good morning, Wes. It's John. As you mentioned, RIS spreads for the quarter were 119 basis points and down about 5 basis points in total sequentially, but honestly at the top end of our 100 basis points-120 basis point guidance range. VII contributed about 24 basis points, you know, that was essentially flat, which reflected obviously our strong private equity performance. If you exclude VII, core spreads were 95 basis points. That 4 basis points of sequential decline was largely in line with expectations we discussed in February. As we had guided, you know, obviously we had a large volume of new flows in Q4, primarily from the PRT mandates.
That created a bit of a headwind in Q1 as we continued to rotate a portion of the portfolio. As we look ahead into Q2, we do expect some improvement from lower asset rotations, but we're also operating in an environment where the yield curve remains persistently flat with the short end higher than maybe relative to our outlook expectation of the curve steepening. That actually puts a bit of a headwind on us. I think taken all together, our expectation for Q2 is that core spreads will remain close to where we are in Q1, maybe slightly above, you know, modest improvement in Q2. Total spreads will continue to track to our full year range.
Got it. Thanks, John. Second, I guess Sun Life issued a press release last week that they're settling a class action lawsuit with policyholders. In the release, I guess they noted that they can seek recourse from MetLife for, I guess around CAD 200 million on a gross basis. Realize that's small, but just wanted to see if that's something that we should be thinking about as a near-term impact in MetLife.
Yeah. Hey, hey, Wes. It's Michel. Thanks for the question. I believe you're referring to the April 30, yes, press release by Sun Life. You know, the claims made by Sun Life can best be characterized as baseless and misleading. MetLife was not named a defendant in the reference class action suit. Sun Life has taken no legal action to enforce the alleged indemnity claim against MetLife. As a matter of fact, there are currently no legal proceedings between the parties. We vigorously dispute that we owe Sun Life any indemnity whatsoever for the claims made in the underlying settlement. You know, the last thing I would say is that Sun Life and only Sun Life is responsible for its own decisions and actions in this matter.
Thank you, Michel.
Our next question comes from Tom Gallagher with Evercore. Your line is open. Please go ahead.
Good morning. First one, John, did you say $170 million of stat net income in Q1 ? If so, anything in particular that was weighing on that result? How, maybe more broadly, how are you feeling about capital generation to start the year overall?
Yeah. Hey, hey, Tom. Good morning. You know, on stat capital, I mentioned in the opening remarks we had about a 4% decline in the quarter. The, you know, the largest reason for that is, as I mentioned, dividend seasonality for our U.S. entities. We typically take a larger dividend in the first quarter while dividends from our non-U.S. entities, you know, are weighted more heavily towards the remaining quarters. That's typically been a historical practice for us in around capital management throughout the year. I think importantly, nothing's really changed in terms of our capital trajectory or capital generation. I mean, you know, we continue to demonstrate a free cash flow ratio of 65%-75% and remain confident to do that throughout New Frontier.
You know, finally, you know, in 2025, we saw an RBC ratio of 379%, well above our 360%. Very much in line with where we've operated over the last several years. You know, overall we, you know, we believe this continues to reflect our strong capital, you know, resilience and discipline, and there's nothing really to call out. I mean, you saw some normal, I'd say level of credit losses in the quarter, a little higher trading losses, and, you know, just this kind of just general seasonality of Q1. You can go back and see that it's pretty consistent with prior quarters.
Gotcha. My follow-up is, just want to ask a higher level strategy question on the investment side. What are you thinking about things? I know you have some reallocations going on with PRT and the like. If I guess starting on your commercial mortgage loan portfolio, I notice you've been shrinking that a lot. It looks like you're not originating as much on that side or at least retaining as much on that side. I take that to mean you're a little more cautious going forward on the CML side. Where are you reallocating and where are you more bullish? Is it private credit or just a little bit of color on what are you thinking more broadly about where you're looking to allocate new dollars?
Hey, hey, Tom. It's a good point, I think like with any environment, in the way we approach it is obviously we think about relative value, right? You know, this is why it's so important to have a diversified platform where you have strength and capabilities across a number of asset classes because quite honestly, some asset classes can look, you know, more challenging at different times. I'd say just on your point of real estate, you know, we are continuing to see an environment there where we have seen liquidity and price discovery pick up, and we expect this trend to continue through the year. It's helped kind of normalize pricing and things like that.
So there are, I'd say, improving opportunities, surprisingly, you know, new issuance and new, you know, origination spreads are still relatively tight. We're being selective when it comes to that, and we think that's the best approach in this asset class. To your question about what else are we looking at, I think we have a variety of different capabilities within the private assets. Asset-backed financing probably is one of the places where we're seeing, you know, opportunities for risk-adjusted returns that are, you know, very strong. You know, I think within each asset class we can find it but maybe at broad themes around sectors, that's probably on a relative scale place that is showing better value.
Okay, thanks.
Your next question comes from Joel Hurwitz with Dowling. Your line is open. Please go ahead.
Hey, good morning. First one on MIM, with PineBridge now on board, can you maybe talk about the outlook for flows or provide some more color on the strong pipeline that you mentioned in your prepared remarks? Can you also talk about the ability to leverage some of the international distribution that comes with that acquisition?
Hi Joel, it's John. Good morning. You know, look, I'd just start out by saying, you know, we're very excited about what's ahead for MetLife Investment Management. This is the first quarter post-acquisition. While it's still early, we're really encouraged by the progress that we've seen across integration, client engagement, pipeline development. You know, from an integration perspective, you know, we really were focused on being quick and deliberate out of the gate. You know, we announced a new MIM leadership team, which took a combination of both firms. You know, we're in process of consolidating key investment platforms to drive, you know, operating synergies. You know, we've started out of the gate being, you know, focused on being a one MIM platform.
You know, that was really all those holistically, that was a strategic rationale for, you know, bringing these two firms together. We've been proactive with clients and consultants, you know, in terms of our outreach and our vision, talking about these investment capabilities, and the feedback's been consistently positive. We're seeing, you know, really some great opportunities for early signs of cross-selling to begin to emerge. I think I'd just say overall, you know, the early days have just continued to reinforce the strategic fit of PineBridge. You know, in terms of, you know, new pipeline, I'd say it's well diversified. We see the, you know, some being committed, new commitments. We have opportunities for deploying capital under existing mandates. We have some late stage client activity.
I think all in all, you know, as you know, with the institutional asset management, it can be inherently lumpy and episodic at times. I think what we're really excited about, the engagement and the momentum that we're seeing, is very positive and highly constructive, and we're just seeing those, you know, these opportunities develop across asset classes and geographies. As you point out, one of the attractive things about PineBridge coming together is they really brought an international non-U.S. footprint to us. About 50% of their AUM is outside the U.S. We spend a lot of time with the teams, you know, kind of thinking about how we can, as I said earlier, you know, think about those cross-sell opportunities and we're finding a lot of opportunities out of the gate.
You know, just as we step back, despite, you know, this being early integration and there's some natural, I'd say, you know, I'll say, early day, consolidating, situations that occur in terms of flows, we feel very good about the demand that's there for our products, the depth of the pipeline that we're seeing, and our ability to continue to generate new net flows.
Got it. That was very helpful. Then maybe Ramy, can you just talk about what you're seeing from a competitive landscape across the various markets you play in the group space? Just any color on sort of the drivers of the top line in group ex participating policies being towards the lower end of your target range?
Thanks, Joel. Maybe let me just hit the top line question first. You know, as we described before, participating policies do impact PFOs but don't really impact our earnings. We always like to think about the true measure of top-line growth is one that does exclude participating policies. You know, this quarter we saw a slightly over 4% growth using that metric. As the industry leader continuing to grow at these levels, and if you look at it in absolute terms, we're certainly very pleased with our growth rate here. Look, while we compete in a competitive environment, we have a value proposition that's resonating in the marketplace and continuing to deliver for our customers and therefore deliver for our shareholders.
From a driver's perspective, it's really been hitting on all cylinders this quarter. We have improved persistency that was broad-based, particularly evident in our dental book. We've also achieved all of that persistency while meeting our expectations in terms of rate actions across the business. Very strong momentum in terms of sales, broad-based across core and voluntary. We continue to drive our strategy that we talked about at Investor Day from a re-enrollment perspective. We talked about those twin gaps of a confusion gap and a protection gap, and how our ability to bridge them is gonna drive better enrollment results, and we're seeing that with double-digit voluntary product growth in our portfolio.
All over, I would say as the industry leader with clear competitive differentiators, we're very pleased with the top line momentum here.
Got it. Thank you.
Your next question comes from Tracy Benguigui with Wolfe Research. Your line is open. Please go ahead.
Thank you. Good morning. I just wanted to go back to MIM. You mentioned some third-party outflows. Did that come from PineBridge defections or somewhere else?
Hey, good morning. Good morning, Tracy. Yeah, no, I think it's a mix, right? You know, we did have some expected post-close activity, I'll call it, early in the quarter. We had, just as you would typically have, client allocation shifts that aren't unusual to start the year. It was a mix of both.
Got it. Just would appreciate an update on your annuity reinsurance flow. How many cedents are part of that right now?
Hey, Tracy. We have, as of this point, two partners that we're working closely with on the reinsurance side. I would just give you a bit more color on that is, you know, we're working with partners who appreciate what we can bring to the table in terms of our financial strength, investment capabilities, liquidity, and capital flexibility. I would also say we are also very selective in terms of who we partner with because we look at the quality of the liabilities being originated And, in particular, we look at the cost of funding for those liabilities. So we think these are win-win partnerships and really speaks to the strategy of looking to go after adjacencies which play to our strength.
You know, Michel mentioned that in his opening remarks in terms of retail reinsurance. The other adjacency that we're seeing a lot of tailwinds in is the U.K. longevity reinsurance. You know, year to date between those two pieces, we have $2 billion of inflows here, and these are businesses that were basically started from scratch from Investor Day to sitting here today 18 months later.
Thank you.
Our next question comes from Pablo Singzon with JP Morgan. Your line is open. Please go ahead.
Hi. Thank you. First, could you comment about your outlook for EMEA? Earnings were above the quarterly run rate you had provided before and operations there don't seem to be affected by what's going on in the Middle East. I'm just curious how you're seeing the rest of the year unfold there. Thank you.
Just to make sure, Pablo, you said EMEA? Is that what you said?
Yes, that's correct, John. The earnings being stronger and operations not being affected by the conflict in the Middle East.
Hi, Pablo. It's Michel again. We're really, really pleased with EMEA's performance. I would say that's been building over a couple of years now, where strong sales growth is translating into PFO growth and earnings growth as well. I think that's also reflective of the highly efficient structure that we have in EMEA, especially in Europe. With regards to the situation in the Middle East, just to give you a sense of EMEA's earnings, about 2/3 come from Europe, 1/3 from the rest of the region, and about 50% of that 1/3 comes from Turkey and Egypt.
You know, clearly, you know, we've been keeping a close eye on what's happening in the region. Our first order priority is the safety and wellbeing of our associates there. So far we, you know, we have not seen any, you know, any impacts, and I think EMEA's performance in the quarter is, you know, provides evidence of that. You know, we think that, you know, provided the situation stabilizes from here, you know, we're not gonna see any impacts and, if we do, they're not gonna be material to EMEA overall and certainly not to MetLife's overall results as well.
I would just add, Pablo, just in terms of outlook. You know, obviously this was a very strong quarter. I wouldn't consider this to be a run rate. You know, we had a $90 million-$ 100 million quarterly run rate as part of the outlook, and we're probably trending towards the middle to upper end of that range is where we're going forward.
Thank you. That's clear. Then the second question, disability maybe for Ramy again. Do you think the trends you've seen so far, right, so you called out severity, paid family leave, would those require repricing beyond normal course? I guess how you frame how you might be positioning the book today versus the past several years when results for the industry are just very strong?
Yeah. Well, just in terms of our overall approach for pricing here, you know, we have the ability to reprice about 50% of the book every year, in terms of our disability book, and that's driven by a combination of client-specific experience as well as our outlook. I would say from an LTD perspective, what we've seen from a one quarter of severity this quarter, and I talked about this being flattish over the last three quarters, we're not seeing any evidence that would say would merit an overall repricing of the book. You know, outside of the severity that we talked about, the performance is very much in line with our expectations, be it in terms of incidence or closure or recovery rates.
We feel pretty good about where the book sits today, but we'll continue to monitor this and clearly reflect an individual customer by customer experience. For the Paid Family Medical Leave, I talked about the nature of the product. I think of it as an expanded STD product, and I talked about the front-end nature of those claims. Clearly, as we get a more credible experience, as we get into the outer quarters, we will look at repricing actions as needed. But the front-end nature of this isn't a surprise to us. This is how these plans effectively work. Again, I'll come back to the fact that we kind of reprice about 50% of this business every year. Think of this as a BAU in terms of hitting our target margins and our pricing actions.
Thanks, Ramy.
That is all the time we have for questions today. I will now turn the call back to John Hall for closing remarks.
Thank you, everybody, for joining us this morning, and have a great day.
This concludes today's call. Thank you for attending. You may now disconnect.