MetLife at Raymond James Conference: New Strategy Unveiled

On Wednesday, March 5, 2025, MetLife (NYSE: MET) presented its strategic vision at the Raymond James 46th Annual Institutional Investors Conference. The company, led by CFO John McCallion, outlined its "New Frontier" strategy, aiming for a higher return on equity and cost efficiency. While the strategy shows promise with growth targets and international expansion, challenges such as maintaining cost reductions and navigating economic cycles remain.

Key Takeaways

• MetLife aims to achieve a return on equity of 15% to 17% under its new strategy.
• The company plans to reduce unit costs by an additional 100 basis points over five years.
• MetLife Investment Management aspires to reach $1 trillion in assets under management.
• The company is focusing on growth in international markets, particularly in Latin America and Asia.
• MetLife is open to strategic acquisitions, particularly in group benefits and asset management.

Financial Results

• MetLife has set a new return on equity target of 15% to 17%, up from the previous 12% to 14%.
• The company projects distributable cash flow between $24 billion and $25 billion from 2024 to 2029.
• Aiming to reduce unit costs by 100 basis points over the next five years.
• Plans to further decrease the expense ratio, which has improved from 14.3% in 2015.

Operational Updates

• Group Benefits:

- Holds a 16% market share in the U.S. and 25% among national accounts.

- Targets 4% to 7% growth, outpacing the market’s 3% growth.

- Strategies include product expansion and broker market consolidation.

• MetLife Investment Management (MIM):

- Manages $600 billion in assets, with $180 billion from third parties.

- Aspires to grow to $1 trillion in assets under management.

- Acquisition of Pinebridge, with $100 billion AUM, is anticipated to close later this year.

• Retirement Business:

- Engaged in the $3 trillion pension risk transfer market.

- Launching Chariot Re in early 2025 to support retirement product growth.

Future Outlook

• International Markets:

- Mexico: Leading life insurer in Latin America.

- Brazil: Fast growth through digital banking partnerships.

- India: Increased ownership and partnership with Punjab National Bank.

- China: Profitable joint venture providing long-term growth potential.

• Cost Savings:

- Plans to reduce direct expense ratio further.

- Focus on growing revenues faster than expenses through efficiency and technology reinvestment.

Q&A Highlights

• MetLife is interested in smaller, strategic acquisitions in group benefits and asset management.
• Actively managing its runoff segment for de-risking solutions, including potential reinsurance deals.
• The company is optimistic about supportive trends in its key businesses and diversified market positions.

In conclusion, MetLife’s detailed strategy and financial targets were thoroughly discussed at the conference. For a more comprehensive understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Raymond James 46th Annual Institutional Investors Conference:

Wilma, Conference Call Host: Hello. Hello. Good morning, everyone, and thank you for joining us. We’re here with MetLife’s CFO, John McCallion. And, this is a generalist conference, so we’re going to focus a lot on MetLife’s strategy today.

First question for John, could you please start by discussing your new frontier strategy and provide a brief overview of Met’s different business segments and geographic mix? And please touch on the growth rates of Met’s businesses and their strategic advantages.

John McCallion, CFO, MetLife: All right. Well, thanks. Thanks for having me here, Wilma. It’s great to be here. And, probably the best way to start with our, you know, who we are as MetLife is, you know, we’re a well diversified multinational insurance company.

We’re about 60% of our earnings come from The U. S. And other 40% comes from outside The U. S. Our second largest country is Japan, and we’re well diversified across geography, risk, product, etcetera.

You know, we’ve been on a journey. We’ve we just finished our our last five year strategy and just had an investor day in December. They announced our new five year strategy called the New Frontier. And, you know, over the last five years, we’ve we’ve really been centered around three principles around focus, simplify, and differentiate. And during that time, we’ve been really relentlessly focused on execution.

That has been really the a big aspect, while also driving, you know, more attractive returns. And so, over that time, you know, we had an ROE that’s range of 12% to 14% when we started Next Horizon. Under New Frontier, which is the term the, the name of our next five year strategy, you know, our ROE targets are 15 to 17%. And so that has been a function of how we shifted our business mix over time. We see some strong trends that are supportive of our, of our strategy.

Think about kind of the demographic shifts you see globally, aging population, higher interest rates. We’re seeing the convergence of asset management insurance being a strong trend, and I’m sure we’ll touch on that a little bit later and how we fit into that. And and then lastly, just higher interest rates in general, which are supporting the demand for, broadly speaking, the fixed oriented products that we see. And then lastly, you know, one of our largest businesses is group benefits in The US. We’re the largest group benefits, non health group benefits provider, in The United States about three times, the size of our next competitor.

And again, similarly speaking, you know, employers are seeking opportunities to grow their offerings to their employees, driving their employee value proposition, and we think we’re well positioned for that. So maybe I’ll stop there. I’m sure there’s other questions that could probably answer some of

Wilma, Conference Call Host: the things you just mentioned. Sure. I think you touched on some of the targets, but they’re very strong from the new, recent investor day. ROE 15% to 17% versus the prior 13% to 15% and the double digit EPS growth. Could Could you talk about what gives you the or a little bit more about what gives you the confidence that you can achieve those targets?

John McCallion, CFO, MetLife: Yes. And maybe another thing to touch on is, this is a recurring revenue model. So in any one year, obviously, sales are important and we want to grow our sales. But it is, and maybe some of the attractiveness of this convergence of asset management and life insurance. There’s a concept of permanent capital.

There’s a concept of these are illiquid, contracts and liabilities that ensure allow you to kind of manage through cycles. So there’s a strong recurring revenue and cash flow aspect to our business. All of those things, give us confidence in some of the targets that we have coupled with the shifts that we’ve made over the last several years in terms of business mix, and how we operate the firm. So what gives us so talk about the ROE for a second. As I said, large shift in the range, our target range for ROE over the five year period going from 12% to 14% at the beginning of next horizon to our next strategy of 15% to 17% being the target.

I’d say the primary drivers of that are probably three things. One, we measure our new business mix using a concept called value of new business. It’s it’s basically finding the present value of your distributable cash flows in your products. And the IRRs on those products and those new sales have been kind of high teens for the last several years. And in this business, it takes time for that new business to find its way into your enterprise returns.

But the fact that we’ve been doing it for the last five ish years, you’re starting to see that manifest itself in our overall enterprise business model. Second is, we do have a runoff block of business. That runoff block of business most likely has an ROE in the high single digits. So as that continues to run off and we are growing our other high returning businesses that mix shift is helping our returns. And then the third thing is we’ve been relentlessly focused on our unit costs.

When we started this journey probably a decade ago, you know, we’ve seen our unit cost drop 200 basis points. We now have set as part of our next horizon, sorry, our new frontier strategy, another 100 basis point decline in unit costs over the next five years. And that has been a combination of just you know and no stone goes unturned coupled with the introduction of technology, process reengineering and other factors and really growth. It’s a growth metric for us, right. We want it.

We think we can grow revenues faster than we can grow expenses, and drive and leverage our scale to really be a scale advantage. So those are some of the things. One other thing I’d highlight, in this in New Frontier, we added an additional external metric of our EPS growth, and that wasn’t in our last five year strategy. And it’s a function of probably the things I just talked about, but it does take time to shift this business mix and we’ve seen that shift. And I’d say the trends that we’re seeing across the board in all of our key businesses, going back to the points I made earlier, they’re you know, those are the things that give us the confidence in our new set of metrics.

Wilma, Conference Call Host: Great. Thank you for that answer. Med is number one in group benefits in The U. S. With 16% market share and 25% share with national accounts.

Even with MET’s level of scale, the group business is guided to grow at four percent to 7% versus 3% for the market. What are some of the ways that MET can extend its leadership in group benefits?

John McCallion, CFO, MetLife: Yeah. So again, group benefits, non health benefits for employers. We see a few things occurring from a trend perspective. First, sixty percent of employers are looking to add product to this platform, again to improve their employee value proposition. We’re seeing consolidation in broker.

This is a broker led business, intermediary business. And we have some of the strongest relationships with the biggest brokers who are beneficiaries of consolidation. And then third thing I’d highlight is, we’re still we’re trying, I’d say investing significantly to engage the end employee and consumer. Technology will be a key aspect to that value proposition. And so growing the employee participation rates is going to be critical.

As I said before, we’re about three times the size of our next competitor. We see we’ve actually increased our growth targets in this business. We look at it as at the higher end of the employer set, so call that 5,000 above, we refer to that as national accounts. We are with 90 plus percent of the top 100 companies and 80 plus percent of the top 500 Fortune 500 companies. And our view is that we can grow product there with those existing relationships.

As we move into down market, we think we can grow. It’s a little more fragmented of a market, so call that 5,000 and below. We can grow our employee relationships or employee customers, employer customers, as well as add product. And then the third piece to why we think we can grow GDP plus is we believe that it’s still an underpenetrated employee participation rate, so we can grow that significantly. Consumers are still under insured.

Financial wellness is a key aspect of the employer value proposition. So we bring product to that concept and we think across the border, all those things, we’ve been able to grow our target for growth rates in this business to 4% to 7%, which again we’d point out is a GDP plus type story.

Wilma, Conference Call Host: Great. Some very, very good stats in there. Please discuss growth trends for MetLife’s third party asset management business, MetLife Investment Management or MIM?

John McCallion, CFO, MetLife: Yes. One of the other trends that we see is this convergence of asset management and insurance. We’ve been investing in our insurance balance sheet for one hundred and fifty plus years. So we are a seasoned investor. About ten years ago, we moved to manage third party money.

So right now, we have about $600,000,000,000 of assets under management, about $180,000,000,000 of that give or take is third party assets. Our clients are other insurance companies, corporate and public pensions, sovereign wealth funds, etcetera. We also do some sub advisory. We’re broken down into kind of three broad verticals. We have a public fixed income total return offering.

We have a private credit and asset offering, and we have a real estate offering. Just to give some stats, you know, in our Investor Day slides, you’ll see, you know, we’re the number one infrastructure debt manager in the world. We are the largest real estate manager in the world based on P and I’s ranking. So a number of strong statistics that support our go to market strategy. And the tailwinds, as we talked about, are very powerful here, right, particularly on the lending side.

Higher rates are make these fixed oriented product more attractive. And we’re seeing that and we think that trend will be continued to be supportive, obviously demographic shifts, things like that as well. So, we’re a top 25 institutional asset manager today and we have an aspiration to grow that to about a trillion of assets under management. And recently, we just signed a deal to acquire Pinebridge, about a 100,000,000,000 of assets under management. We think that will close sometime in the second half of this year, very complementary in its nature in terms of what it adds to our capabilities today.

And so overall, we think organic growth will be obviously our core way of growing, but complemented by some inorganic activity.

Wilma, Conference Call Host: Okay. Thank you. What are the largest drivers of growth in Met’s core retirement business? How do you see Chariot Re assisting with Met’s goals of expanding liability origination? And what is the intended scope of the business?

And is everything still on track for a 01/2025 launch of Cheriory?

John McCallion, CFO, MetLife: Yes. So the one of the we came up with four trends in New Frontier, obviously the employee benefit growth trend. So that obviously supports our market leading employee benefits business. We talked about a retirement trend across the globe and we have two areas where that is important for us. In The U.

S, that’s our institutional retirement business. And then in Japan, we have a retail retirement business as well. And we can talk a little bit about just the trends we’re seeing there. In The U. S.

Market, some of the things you may have heard, you know, there’s a trend around pension risk transfer. So corporate firms transferring those liabilities and the management of those pension liabilities to insurance companies. And that generally has been supported by the fact that they are over 100% funded on average. You know that’s a 3,000,000,000,000 plus market that we expect over time will continue to transfer from the corporates to the life insurance segment. There’s also a trend in The UK that’s similar, smaller in terms of its size is probably more like a trillion and a half in terms of size.

But again, that’s even more overfunded. So those are that gives you the backdrop for why this will continue. And we see a lot of opportunity in this collective space. We have a series of other, I’ll call it, annuity type products in this segment, structure settlements. We’ve seen an increase in settlements that have been coming through.

We’re the number one player in that space. We have started to introduce ourselves as in U. In The UK funded REIT, so it’s a way for us to add capital to that pension market in The UK. And then we’re also exploring providing capital in the retail space through a reinsurance arrangement. So being a capital provider, not necessarily adding distribution directly, but being a capital provider to those, those direct issuers of annuities.

So broad diversified way of going to market. And then, but as I said in Japan, there’s a retail annuity story there. It’s a country that is going through change as we speak. For the first time in quite some time, you’ve started to see inflation there. You know, 50% of their assets are in cash, So that will no longer be a good place to hold money.

It’s also from a regulatory and pull, country perspective, they’re changing the mindset around investing. So more and more of the younger generation is starting to think this way versus maybe older generations. So we see kind of a strong inertia for that cash to shift towards other investment type products, which we believe will be a participant in. So strong trends, there. And then you mentioned Chariot Reed.

As a result of these strong trends across the board, you know, we generate capital every year that we can put to work. And up to now, our view is we’ve had sufficient capital to meet the demands of the external environment. But with higher interest rates, we believe and some of the other things I just mentioned, the demand for these products is growing. Chariot Re gives us a vehicle to go and add third party capital to augment our own capital to drive growth. So to meet the exit the higher demand in these products, and ultimately that also ends up being a asset management mandate for our our asset management business.

Wilma, Conference Call Host: Okay. Excellent. Thank you. And could you discuss, your strategies for penetration and growth in international markets such as Mexico, Brazil, China, and India?

John McCallion, CFO, MetLife: Yeah. And so there’s four trends. We talked about employee benefits, retirement trend, convergence of asset management, and our ability to drive growth there in our business mix. And then the fourth one we talked about was high growth, international markets and we highlighted four Mexico, Brazil, India and China. Mexico, we are the number one life insurer in Latin America, and that includes Mexico.

That is our primary anchor within Latin America in terms of size, brand, etcetera. And what we’ve seen there is awareness of insurance, insurance type products, and I’d say increased awareness of our brand. Given that we’re the largest life insurance company, we paid out the most claims in Latin America. And that has resulted in kind of I’d say increasing shift in our brand. The total segment of Latin America has more than doubled over the last five years in terms of earnings.

It’s close to being it’s on its way to being a billion dollar segment. It’s about 900. It was call it, you know, a little over 400 pre COVID. So that’s that’s a high growth market for us anchored by Mexico and then I’d say supported by high growth in Chile and Brazil. And particularly in Brazil, what we’ve seen in the trend there is the there’s been a shift to the digital banks there.

So there’s been a high growth trajectory in those banks over the last few years. We have built a technology that seamlessly integrates with those digital banks. So we’re riding that digital bank wave there. And I think over the last four years, we’ve been the fastest growing life insurance company in the market. Relative to traditional banks that have been growing in the call it high single digits, these have had a over 100% CAGR over the last few years.

If I shift then to India, over the last five years, we’ve grown our ownership percentage from high 20s to just close to 50% just under that. We are in partnership with Punjab National Bank has about 10,000 branches over 100,000 customers that we have access to and we have a lot of opportunity to drive penetration within that partnership. So we’re in the JV with them And it’s been a tremendous relationship. Also the environment has become so much more constructive over the last five plus years. So we’re very excited about what that has to bring, in you know ahead of us.

And then lastly is China, you mentioned. Obviously, China has gone through a number of different things. We have a JV there with, you know, partner in, fiftyfifty JV partner in China, who’s been a great partner for us. It’s been a entity that actually, despite all of the challenges that they’ve gone through as a country, COVID and things like that, we have over the last almost for almost a decade have gotten a dividend every year from them. So it’s a self supported growth from a growth perspective.

It has a sufficient capital and it pays us a dividend. So again, we look at that more as a long term option, for us as we go forward given just the size of that market, what it could be, but obviously it’s going through its different challenges today.

Wilma, Conference Call Host: Great. And could you talk a little bit about cost savings? MetLife appears to be managing expenses well despite the inflationary environment. Could you just talk about how you plan to decrease the direct expense ratio over the next several years?

John McCallion, CFO, MetLife: Yes. And that’s been an important metric for us, really been a cultural shift for us from what we call it efficiency mindset, where we all take responsibility thinking about how we operate this firm. It’s like I said, starting in 2015, our expense ratio was probably 14.3. We brought that down over the last ten years to 200 basis points and we think and we have another 100 basis points that’s projected as part of new frontier the next five years. It’s you know, we think of it as a growth metric because what we’re trying to do is we want to grow revenues faster than expenses.

We also want to free up capacity over the last five years, while we’ve been able to maintain our expense ratio, we’ve grown our discretionary spend. So shift from call it ongoing cost to more discretionary cost that we can reinvest in the business to drive growth. And it’s been a real powerful tool for us, particularly as you think about our group benefits business and what’s needed there. That’s a business that’s very capital light in the sense of insurance capital, but investment heavy in terms of what’s required from a technology investment perspective. And we’ve been able to reinvest over the last five years to position us where now the environment for that has changed a lot.

So again, just that efficiency mindset has enabled us to just drive that discretionary spend, build investment in technology that can help engage our customer in a different way. And we’re seeing those things become more and more important

Wilma, Conference Call Host: over the

John McCallion, CFO, MetLife: last several years.

Wilma, Conference Call Host: Great. And another new piece of guidance you launched at the Investor Day was distributable cash flow of $25,000,000,000 in $24,000,000,000 to 2029. Could you just talk about the factors that allow you to generate such high levels of distributable cash flow?

John McCallion, CFO, MetLife: Yeah. We think, as we think about our superior value proposition around strong growth, attractive returns and all weather. And when we think of all weather, we want to be able to perform well in a variety of economic environments. And we believe that we have not only strong, but we have good strong free cash flow along with that growth. It’s been a function of us shifting our business mix.

It’s been a function of us with our efficiency mindset and driving down unit costs. And going back to my earlier comment, this really is a recurring revenue model. It’s a recurring cash flow model. It’s a resilient model that allows for sustainable free cash flow growth, and that’s a function of us growing our earnings over time. We have that confidence in our growth rates, and we believe cash flow will follow.

Wilma, Conference Call Host: And is MetLife interested in completing a more transformative M and A deal? I’m just going to put a number on that, maybe $1,000,000,000 plus of capital. The holding company liquid assets of 5,100,000,000 are pretty strong versus the target buffer of $3,000,000,000 to $4,000,000,000 so maybe just talk about that as a possibility?

John McCallion, CFO, MetLife: Yes. Look, we from an inorganic perspective, we think we have differentiated capabilities there. It’s part of our business development to be out. We see a lot of things come our way, right. We get asked a lot when there are processes underway.

Where we think about when we’re outward facing and we’re kind of on the business development side, the two areas we spend the most time on is group benefits. Given our just unique leadership position there, are there any capabilities that we can add? They’ll probably be much smaller in size just given our size is so big right now. And then, as I mentioned before, our asset management business, those are two the two businesses that where we would spend the most time out from a business development perspective. Look, I think our philosophy has been pretty consistent you know, for quite some time, right?

This needs to be strategically, you know, fit well within our current strategy, cultural fit and financially accretive. So we wouldn’t rule anything out, but I think we’re going to be very disciplined in our way of operating. We think of this as being complementary to our organic growth. We don’t need inorganic, but we will look for opportunities to leverage inorganic to complement you know, the organic growth opportunities and continue to drive a differentiated value proposition.

Wilma, Conference Call Host: Are there any updates regarding possible de risking solutions for MetLife Holdings? What can we expect to see that may help build capital or reduce risk? Could reinsurance be a factor there?

John McCallion, CFO, MetLife: Right. So we have a large, runoff segment. We call it MetLife Holdings. And as I said earlier, it’s one of the areas that would continue to run down naturally. We’ve used a 4% to 6% type guide as to how that would run off.

And it’s you know, what’s in there today is about we have about $40,000,000,000 of, I’ll call it, traditional life, very profitable, simple life products that you would all probably wreck about half of that has what they call living benefit riders and half is pretty plain vanilla. And then the third is we have a long term care runoff block. And, you know, this has been something that has been occurring in this industry for the last, you know, over five years, maybe ten years now, where there’s been this concept of new entrants identifying blocks of business that are in runoff and looking to acquire them, consider that their core business and the seller being those being non core to their strategy. So that’s been a healthy thing for the industry and it’s been taking some time, but it’s been occurring. We’ve seen some activity of late.

As I said earlier, this business is probably a high single digit ROE business for us today. So we are an excellent operator of this business. We have we don’t feel any burning platform to have to transact, but we want to be opportunistic and it really requires an engagement concept, you know, constantly talking with third parties. Typically they occur like you said in a reinsurance form. So you don’t really sell the business, you just reinsure and move the risk to another provider and that enters into a new contract.

So you need this to be a win win. It becomes a long lasting partnership. So you need time to make sure that you customize this to what’s your needs and what the acquiring entities needs are as well. And I’d say activity continues. We’ve seen in long term care, there’s been a number of transactions of late that have been positively received.

So we saw another transaction maybe last week between Equitable and RGA, again positively received. So again, and both sides are finding win win propositions. So I think that the market remains healthy. We would transact if it is finance I’d say valuation accretive is the way I put it in our view. That could be from a price perspective, it could be from a risk perspective, it could be from a variety of different ways, but we’re going to be really disciplined on how we think about that.

We did a transaction about two years ago where we reinsured $19,000,000,000 of liabilities and received a very strong price for that. And I believe the acquirer of seed, you know, we’re able to leverage that in a great way for themselves as well. That took probably two years of discussions in different forms and fashions to get to the right answer. So these things take time. It’s important for us to be engaging with our third parties out there, but we’re in no there’s no there’s no burning platform that we have to do anything.

But even if we don’t do anything, we find that it makes us even better internal operators for that business.

Wilma, Conference Call Host: You’ve been very patient and thoughtful about the de risking and that will most likely work to your advantage. Last question for you. What are you most excited about into ’twenty five and beyond?

John McCallion, CFO, MetLife: Yes. I think, as I said, probably just to summarize some of the things I’ve already said is the there’s great set of trends that are supportive of all of our key businesses. We have a diversified set of market leading businesses in large profit pools and we have competitive advantages there. And we’ve taken a lot of time and this is a business that takes time to shift. It’s like a battleship, right, because sales any new sales is just a component of prior sales, right, and it takes a long time for that.

That’s the challenge. The good news is that drives a recurring revenue model. But you have to be really disciplined on how you do that. And I think we’ve seen not only us, but the industry for that matter has done a great job in kind of their new approach to the businesses that they’re writing, and we see a bright future ahead of us. So very excited.

Wilma, Conference Call Host: Thank you very much, John, and to MetLife, and we’ll see you all, in the breakout hopefully. Alright. Thank you.

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