Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Third Quarter 2024 Earnings 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, all. We appreciate you joining MetLife's third-quarter 2024 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. Other members of senior management are also available to participate. We released our supplemental slides last night and they are available on our website. John McCallion will speak to them in his prepared remarks. An appendix to the slides features disclosures, GAAP reconciliations, and other information for your review. Q&A will follow prepared remarks and will end just before the top of the hour. As a reminder, please limit yourself to one question and one follow-up. On to Michel.

Thank you, John, and good morning, everyone. Last night, MetLife reported third quarter results, which, while absorbing pressure on variable investment income, affirmed the financial attractiveness of our businesses. Taking a wider view, year-to-date adjusted earnings per share excluding notable items are up 12%, pointing to our broader base momentum and a favorable underlying environment for our global set of market-leading businesses. In the U.S., unemployment remains at historically low levels, inflation appears to be under control, and the yield curve has started to see a positive slope beyond two years. These are conditions that favor both our Group Benefits and our Retirement and Income Solutions businesses. Outside the U.S., we are seeing a promising backdrop for many of our key markets. For instance, in Japan, the combination of modest inflation, the 10-year JGB near 1%, and government incentives to save has the potential to put money in motion moving from the sidelines and into the investment and insurance products MetLife offers. Elsewhere around the world, in Mexico, near-shoring activities can put more people to work and at higher wages, which is good for the Mexican economy as well as for our business there. While in Brazil, the rapid adoption of digital distribution channels for financial products is democratizing financial services and bringing them to a wider audience of customers. Still, the geopolitical conditions that persist in many regions remain challenging, and we have an election here in the U.S. next week. Yet throughout its 156-year history, MetLife has successfully managed risk and found opportunity in uncertain times. Our purpose always with you, building a more confident future resonates at times like these, and I have every confidence that MetLife will continue to create value for our customers, shareholders, and other stakeholders going forward. Turning to the quarter, we reported adjusted earnings of $1.4 billion or $1.95 per share. After reflecting net positive notable items from our annual actuarial assumption review and other insurance adjustments, adjusted earnings per share totaled $1.93 per share. Recurring interest margins, underwriting, and foreign currency exchange rates were all less favorable than a year ago, partially offset by volume growth and higher equity markets. As we had previously indicated, private equity returns came in below expectations, leading variable investment income, or VII, to dip under the prior year period results. At the same time, real estate and other fund returns improved sequentially, extending the trend we've seen develop through the year. In the quarter, our key performance metrics reflect the power of our business. MetLife posted a 14.6% adjusted return on equity, and we are on track to exceed our 13% to 15% target range for the full year. This further demonstrates our focus on deploying capital to generate responsible growth and high returns. Our efficiency mindset was evident in MetLife's third quarter direct expense ratio of 11.7%, an improvement year-over-year and below our 12.3% annual target. Shifting to business segment results, our Group Benefits business reported adjusted earnings of $431 million excluding notable items, down from a strong underwriting quarter a year ago. On a year-to-date basis, also excluding notable items, adjusted earnings are up 7%. Our scale and broad product range have long been points of competitive differentiation for our Group Benefits business, contributing to our adjusted premiums, fees, and other revenue growth. In the quarter, adjusted PFOs, excluding the policies, rose 5.3%. For the year-to-date period, adjusted PFOs on the same basis similarly grew 5.5%. With employee benefits enrollment season again upon us, this year, more than 1 million U.S. employees will be able to make their enrollment experiences easier by using MetLife's Upwise, a newly developed tool to help them choose and use their benefits. Upwise simplifies benefits selection by making custom recommendations based on an employee's individual needs and preferences. And Upwise is important because our research shows that more informed benefit selection decisions lead to a more engaged and productive workforce, a win for employees and employers. Moving to Retirement and Income Solutions, or RIS. Adjusted earnings, excluding notable items, totaled $368 million in the quarter, reflecting the impact of interest rate caps maturing. Sales of stable value and U.K. longevity reinsurance remain strong, and we maintain our leadership position in the competitive jumbo pension risk transfer space. With a strong start to the fourth quarter, we've now closed $5.6 billion of PRT sales so far in 2024. We published our annual pension risk transfer poll last month, which continues to point to a robust pension risk transfer pipeline. The 2024 poll found that among companies with defined benefit pension de-risking goals, a full 93% intend to completely divest their plans, up from 89% in the 2023 poll. Moreover, about half of these companies plan to divest in the next two to five years. Turning to Asia, adjusted earnings, excluding notable items, were $347 million, down 6% from the year-ago quarter on market-related items, partially offset by favorable underwriting margins. On a year-to-date basis, adjusted earnings grew 16%. Asia's general account assets under management, a key measure for this region, grew 6% year-over-year on a constant currency basis. Looking to Latin America, we saw strong bottom-line results with adjusted earnings excluding notable items of $217 million, rising 9% from a year ago. On a constant currency basis, sales and adjusted PFOs both grew double digits. Our momentum in Latin America has been building for some time. This can be seen in Brazil, where we have seized upon the growing adoption of digital distribution of financial sales to partner with some of the leading players in that market. To capture this opportunity, we have deployed an integrated technology solution called Accelerator, which allows us to meet customers where they are. MetLife Accelerator helps leading banks, retailers, and other companies offer insurance to our customers with a simple, frictionless, and fully digital insurance experience. Starting in Brazil, we branched out to bring this innovative technology to other core markets in Latin America, including Mexico and Chile, with more than 4 million in-force customers in the region since launching a year ago. For some time now, we have spoken to the importance of value of new business as a critical management tool. Our focus and the intensity of our execution across this metric is impressive. For 2023, we generated a 19% internal rate of return on $3.6 billion of capital deployed, creating VNB of $2.6 billion with a payback period of roughly five years. It is even more impressive when you consider the substantial progress we've made over the course of the Next Horizon timeframe, a 400 basis point increase in IRR and a two-year decrease in payback period, all of which adds up to more cash sooner. As you can see from our VNB numbers, MetLife prioritizes organic growth with attractive payback periods and internal rates of return. We also favor strategic inorganic growth with similar financial characteristics. When appropriate organic and inorganic opportunities are not available, we will return capital to shareholders via share repurchase while also generating attractive IRRs. Our track record proves this out. In the third quarter, we were again active in capital management and returned close to $1.2 billion to shareholders via common stock dividends and share repurchase. We distributed common stock dividends of roughly $400 million and bought back approximately $800 million of our common shares. This brings total common stock repurchase through the third quarter to about $2.8 billion. We still have more than $2 billion remaining on our Board authorization. Finally, at the end of the third quarter, we had $4.5 billion of cash and liquid assets at our holding companies, which is above our target cash buffer of $3 billion to $4 billion. To wrap up, we are moving closer to our December 12 Investor Day, where we are excited to roll out our next five-year strategy, New Frontier. As I have mentioned, New Frontier is not a radical change in direction for MetLife. Rather, it takes us to places where we have the right to win. It is a growth platform that builds on the success of Next Horizon and provides a pathway to lead MetLife to even stronger performance in the future. We are in a much different position than we were five years ago, more front-footed and oriented towards offense versus defense. I look forward to expanding on the precepts of New Frontier, which are anchored on accelerating growth, boosting returns, and fostering greater consistency. Now, I'll turn it over to John to cover our quarterly performance in more detail.

Thank you, Michel, and good morning. I'll start with the 3Q '24 supplemental slides, which provide highlights of our financial performance, including details of our annual global actuarial assumption review. In addition, I'll provide updates on our value of new business metrics and our liquidity and capital position. Starting on Page 3, we provide a comparison of net income to adjusted earnings in the third quarter. Net income was $1.3 billion, $100 million lower than adjusted earnings. We had net derivative gains primarily due to the strengthening of the yen versus the U.S. dollar and the decline in interest rates in the third quarter. That said, derivative gains were partially offset by market risk benefit, or MRB, remeasurement losses due to lower interest rates. Net investment losses were modest, reflecting normal trading activity and a continuation of a stable credit environment. Overall, the investment portfolio remains high quality and resilient, and our hedging program performed as expected. The table on Page 4 provides highlights of our annual actuarial assumption review and other insurance adjustments with the breakdown of the adjusted earnings and net income impact by segment. Overall, the impact to adjusted earnings and net income was modest. In Group Benefits, we had an unfavorable impact due to a liability refinement related to an annuity payout feature on a small subset of our Group Life portfolio. There is no ongoing impact due to this refinement. In Retirement and Income Solutions, or RIS, while we have maintained our long-term mortality trend assumption consistent with pre-COVID. This reflects the impact of higher mortality over the last few years, which resulted in a positive impact to adjusted earnings. And in Asia, the net unfavorable impact was primarily due to three factors: unfavorable changes to lapsed assumptions across life and accident health products in Japan; lower expected fund returns for variable life products in Korea; and these were partially offset by a positive impact from improved morbidity for accident and health products in Japan and Korea. On Page 5, you can see the third quarter year-over-year comparison of adjusted earnings by segment, excluding notable items. Adjusted earnings were $1.4 billion, down 8% and 6% on a constant currency basis primarily due to lower recurring interest margins, partially offset by solid volume growth year-over-year. Adjusted earnings per share were $1.93, down 1% on a reported basis but up 1% on a constant currency basis. Moving to the businesses, Group Benefits adjusted earnings were $431 million, down 11% year-over-year, primarily due to less favorable non-medical health underwriting margins versus a strong comparison in Q3 of '23. The Group Life mortality ratio was 85.6% and 82.4% when excluding the notable items discussed earlier. This was below our annual target of 84% to 89%. Our mortality results remain seasonally strong, albeit following record-low life claims in 2Q of '24. Year-to-date, our Group Life mortality ratio remained at the low end of our annual target range, although we would expect the ratio to be toward the middle of the range in the fourth quarter. Regarding non-medical health, the interest-adjusted benefit ratio was 72.4% in the quarter, within our annual target range of 69% to 70% but higher than the prior year quarter of 69% or 70.4% excluding a favorable notable item related to disability in 3Q of '23. Turning to the top line, Group Benefits adjusted PFOs were up 5% year-over-year and at the midpoint of our 2024 target growth range of 4% to 6%. Group Benefits year-to-date sales were up 9% driven by strong growth in national accounts. RIS adjusted earnings were $368 million, down 10% versus the prior year. Lower recurring interest margins were partially offset by strong volume growth and favorable underwriting margins. RIS total investment spreads were 106 basis points, down 15 basis points sequentially mainly due to the continued expiration of interest rate caps and lower variable investment income. As we highlighted in the Q2 earnings call, the continued roll-off of the interest rate caps drove the majority of the sequential decline. Given the vast majority of interest caps have expired and based on the current forward interest rate curve, we expect fourth quarter spreads, excluding variable investment income, to now stabilize and be flat to up 1 to 2 basis points. RIS adjusted PFOs, excluding pension risk transfers, were up 3% year-over-year primarily driven by strong sales in U.K. longevity reinsurance. With regards to PRT, we continue to see an active market. We had premiums of approximately $500 million in the third quarter, and we have already seen a strong start to Q4 with over $1.5 billion in PRT wins in the past month alone. Moving to Asia, adjusted earnings were $347 million, down 6% and 5% on a constant currency basis primarily due to market-related items in the quarter, partially offset by favorable underwriting margins. For Asia's growth metrics, general account assets under management on an amortized cost basis were up 6% year-over-year on a constant currency basis. Asia sales were down 1% on a constant currency basis. Lower Japan sales were mostly offset by other Asian markets, which were up 10%, most notably due to strong growth in India and China. In Japan, sales were down 7% year-over-year primarily due to the impact of yen volatility on foreign currency products. However, we continue to see a favorable outlook given higher interest rates and positive macro changes in Japan. For example, our refreshed yen-denominated variable life and cancer products introduced earlier this year have performed well. Latin America adjusted earnings were $217 million, up 9% and 21% on a constant currency basis primarily driven by strong Chilean encaje returns in the quarter and volume growth in our key markets. Latin America's top line also continues to perform well as adjusted PFOs were up 1% and 11% on a constant currency basis driven by strong sales and solid persistency across the region. Turning to EMEA, adjusted earnings were $75 million, up 7% on a reported basis and 9% on a constant currency basis, primarily driven by strong volume growth year-over-year. EMEA adjusted PFOs were up 11% and 14% on a constant currency basis, driven by growth across the region, and sales were up 32% on a constant currency basis primarily from Turkey and Egypt. MetLife Holdings adjusted earnings were $170 million, down 17% versus the prior year quarter. The primary driver was the foregone earnings due to the reinsurance transaction that closed in November of 2023. Corporate & Other adjusted loss was $249 million versus an adjusted loss of $262 million in the prior year. The Company's effective tax rate on adjusted earnings in the quarter was approximately 24% and within our 2024 guidance range of 24% to 26%. On Page 6, this chart reflects our pretax variable investment income for the prior five quarters, including $162 million in Q3 of '24. This was down $17 million versus Q3 of '23. The private equity portfolio, which had over $14 billion in VII assets as of September 30, had a positive 0.6% return in the quarter. This compared to a 1.4% return in Q3 of '23. While PE returns were below recent trends, our real estate-related and other funds of roughly $4.5 billion continued to improve with a 1.1% return in the quarter. As a reminder, PE, real estate-related and other funds are reported on a one-quarter lag and accounted for on a mark-to-market basis. On Page 7, we provide VII post-tax by segment for the last four quarters and the third quarter of '24. As you can see in the chart, RIS, Asia, and MetLife Holdings continue to hold the largest proportion of VII assets given their long-dated liability profile. Now turning to Page 8. The chart on the left of the page illustrates the split of our adjusted net investment income between recurring and VII for the last three years, including the third quarter of 2023 and '24. Adjusted net investment income in Q3 of '24 was essentially flat versus the prior year. While recurring investment income has benefited from asset growth and higher interest rates, it has been offset by the roll-off of interest rate caps. Turning your attention to the right side of the page. This shows our new money rate versus roll-off yield since the third quarter of '21. Over the last 10 quarters, new money yields have outpaced roll-off yields, consistent with higher interest rates. In Q3 of '24, our global new money rate achieved a yield of 6%, 22 basis points higher than the roll-off rate. The narrowing of the spread between new money rates and roll-off yields in Q3 was primarily due to a roughly 70 basis point decline in U.S. interest rates and elevated paydowns in the quarter of recently purchased higher-yield securities. That said, the proceeds from these paydowns in Q3 have been reinvested in high relative value public and private assets with similar yields. I would also note that the new money rate-related purchases in Q3 of roughly $14 billion were more than twice that of the invested assets rolling off. So, while the difference between our new money rates and roll-off yields shown here is an indicative metric for future investment margin impact, it's only directional in nature and not a perfect depiction of spread impacts. At these levels, we continue to see a positive impact of higher yields on our in-force and new business growth. Now moving to expenses on Page 9. This chart shows a comparison of our direct expense ratio for the full year of 2023 of 12.2% and the first three quarters to '24 all below 12%, including 11.7% in Q3 of '24. As we have highlighted previously, we believe our full-year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results. Our Q3 direct expense ratio benefited from solid top-line growth and ongoing expense discipline. Looking ahead, we would expect our direct expense ratio to be higher in the fourth quarter, consistent with the seasonal nature of our business. That said, our performance year-to-date positions us to beat our full-year 2024 direct expense ratio target of 12.3%, demonstrating our consistent execution and a sustained efficiency mindset. Now let's turn to Page 10. This chart reflects new business value metrics for MetLife's major segments for the past five years, including an update for 2023. MetLife invested $3.6 billion of capital in 2023 to support new business. This was deployed at an average unlevered IRR of approximately 19% with a payback period of five years, generating roughly $2.6 billion in value. I will now discuss our cash and capital position on Page 11. Cash and liquid assets at the holding companies were $4.5 billion at September 30, which is above our target cash buffer of $3 billion to $4 billion. Cash at the holding companies reflects the net effects of subsidiary dividends, payment of our common stock dividend, and share repurchases of roughly $800 million in the third quarter, as well as holding company expenses and other cash flows. In addition, we have repurchased shares totaling approximately $130 million in October. For our U.S. companies, preliminary third quarter year-to-date 2024 statutory operating earnings were approximately $2.8 billion, essentially flat year-over-year, while net income was approximately $2 billion. We estimate that our total U.S. statutory adjusted capital was approximately $17.6 billion as of September 30, 2024, down 2% from June 30, 2024, primarily due to dividends paid and derivative losses, partially offset by operating earnings. Finally, we expect the Japan solvency margin ratio to be approximately 745% as of September 30, which will be based on statutory statements that will be filed in the next few weeks. Before I wrap up, I would just like to highlight that we have an updated commercial mortgage loan slide as of September 30 in the appendix. Overall, the CML portfolio continues to perform as expected with attractive loan-to-value and debt service coverage ratios as well as the expectation of modest losses. In summary, while adjusted earnings were below our expectations primarily due to lower VII, the underlying strength of our business fundamentals was evident with strong top line growth, disciplined underwriting, and prudent expense management. In addition, our strong value of new business metrics demonstrates our disciplined approach to deploying capital to its highest and best use, consistent with our all-weather strategy. MetLife remains in a position of strength given our balance sheet, free cash flow generation, and diversification of our market-leading businesses, and we are committed to deploying capital to achieve responsible growth and building sustainable value for our customers and our shareholders. Finally, let me close by saying that we look forward to seeing many of you on December 12 at our Investor Day, which will focus on the introduction of our New Frontier strategy. As we have in the past several years, we will be offering our near-term outlook in early February as part of our fourth quarter 2024 earnings call.

Thank you. Our first question comes from Suneet Kamath from Jefferies. Your line is open.

I wanted to start with Group Benefits, if I could. I know your adjusted loss ratios are within your guide, but maybe a little bit higher than they've been tracking recently. So, can you just talk a little bit about how you're thinking about pricing in that business, particularly in dental, where I think you've seen some pressure? And maybe some comments on the competitive environment as well?

Suneet, maybe I'll start with the competitive environment. I would reiterate we're not really seeing any change in the competitive environment in group. The market has been competitive and remains competitive. But with that said, we always did note that the pricing perspective is not an irrational market, and the short-term nature of the products that we sell, in particular, also dental, means that any aggressive pricing will show fairly quickly in earnings, which acts as a kind of a natural check on any irrational pricing. So, the headline for you here, yes, it's competitive but not irrational. And we do see a competitive environment that also extends beyond price, as we've also talked about before in terms of capabilities, digital experiences, breadth of product, and so on. From a ratio perspective, I'll start with life. We're particularly pleased with the life ratio this quarter. It is still below our lower end of our guidance range once you factor that notable piece out. We're benefiting from favorable incidents in the population and you continue to see that in the CDC population data for the working-age population. If you look at that life ratio year-to-date, we're at 83.9%. Even if you were to factor in a seasonally higher Q4 on the life side, we would still be close to the bottom end of the range for life. Finally, moving on to the non-medical health ratio. We're also within the range, as you pointed out. We did have a number of smaller items in the non-medical health ratio, which were unfavorable to the ratio. Those were worth about a point. So if you take those out, it would bring us right back in the middle of that range. Then with respect to dental in particular, I did talk about the competitive environment. We also discussed in the past about a market that's trending back to pre-pandemic seasonality and utilization levels. We have seen these dynamics play out, and we have been taking actions in terms of pricing. So, think of that as really part and parcel of how we manage our dental block through cycles. The critical point I would make here is going forward, it's really about the ability to reprice and maintain persistency. We can reprice about 80% of that business in any given year. So while this quarter was higher than our seasonal expectations, our pricing for 1/1 reflects these dynamics. We feel really good about returning to our target margins for the block in 2025.

Got it. That's helpful. For either Michel or John, can you discuss what's driving the improvement in the IRR and the reduction in the payback period on the VNB slide? Have you back-tested these IRRs? I assume they are pricing IRRs. When you evaluate how these blocks have developed, are they close to your pricing assumptions? Can you provide some insights on that?

Sure, thanks, Suneet. I'll start, and then John can add some insights as well. I'm really pleased with our progress, particularly regarding one of our main focuses for Next Horizon, which is ensuring we allocate capital to its most effective uses. This is evident in how we support the organic growth of new businesses. If we look at our trajectory, businesses like Group Benefits and Latin America, which yield higher returns, are showing very strong growth. While we aren't achieving 19% growth across all our segments, the fact that we have some higher-return businesses growing at a faster rate than others is definitely a contributing factor to the value of new business, as reflected in our slide.

Yes, Suneet, that's a great question regarding back-testing. As you've mentioned, these are internal rates of return on new business that we've estimated based on our best assumptions. There are a few factors to consider. The current environment has been favorable, with a generally stable credit atmosphere, consistent underwriting across our activities, and advantageous interest rates. While it's challenging to be completely precise about these elements, we have asked ourselves similar questions due to the positive momentum we're experiencing. As Michel noted, the mix of business is definitely a key driver of our new initiatives. Additionally, the management tool we utilize has prompted continued refinements in pricing, capital optimization, and reinsurance strategies. We've also benefited from some regulatory changes, such as in Korea, where a shift to an economic framework has worked in our favor since we operate under a similar model. This change has resulted in increased excess capital that will eventually be allocated back to the holding company. Furthermore, we are seeing unit cost improvements. All these elements explain the migration you've observed. The primary factor, as Michel highlighted, is the mix of business, particularly the rapid growth in certain sectors like Group Benefits and Latin America, which offer high rates of return with lower capital requirements. I hope this clarifies things.

It does. If I could just throw in one quick follow-up. These IRRs, I mean, I'm assuming this would give us a directional indication of where your ROE is headed given that they're unlevered returns?

Yes. I mean, I think that should give a good indication in terms of direction of traffic here, especially if you consider that besides what we just mentioned, the fact that MetLife Holdings, which is a low-ROE business, is running off. So, all of these factors combined would point to a ROE trending upwards.

Our next question comes from the line of Jimmy Bhullar from JPMorgan. Your line is open.

I had a couple of questions. One was just on Japan sales. Should we assume that with the yen-dollar exchange rate moving around that Japan sales, especially dollar-denominated products, will stay weak in the near term? Or are there other products that you're thinking about that should help mitigate the impact? And then secondly, on the portfolio, most of the metrics on your commercial real estate portfolio seem fairly stable with where they've been. But what are you seeing overall in the market? And do you think office and non-office, are they close to bottoming? And then there's been renewed concerns, I think, recently with the single asset, single borrower-type loans back in CMBS. And if you could just give some numbers on your exposure to those.

Great. Jimmy, it's Lyndon here. Let me take the Japan question. So, let's start with Japan sales, and I'll give you some color on overall Asia. Look, Japan is an attractive market. We're seeing increasing interest rates as well as positive macro trends there. What we are seeing is an overall environment for FX products that has become more competitive. If you look at Japan sales, they were lower year-over-year in single premium FX products. A few reasons: We face a tough comparative against last year, and sales in '23 for the full year were up 14% year-over-year. As you said, while the yen has strengthened in the quarter, we do see continued volatility in FX markets, and that has impacted sales of foreign currency products. Essentially, what we're seeing are more customers staying on the sideline during these periods of FX volatility. Japan sales for the third quarter sequentially were in line with where they were for the second quarter. We do have a diversified portfolio. We have both U.S. dollar and yen products in Japan. We continue to evolve this product portfolio to maintain competitiveness. We've introduced several new products. We've launched a refreshed yen-denominated variable life product. We launched a cancer product earlier this year. Both products have performed very well. We've also launched a refreshed A&H medical product this month, and we're planning to launch a new U.S. dollar life product early next year. For the rest of Asia, our sales have gone up 9% year-over-year, primarily driven by China and India. Solid performance in China, especially as we look across both our channels, bancassurance as well as agency. In India, we've seen sales increase sharply there with strong growth across all our channels. As far as an outlook goes, year-to-date sales have been in line with the prior year, and we expect full year sales for Asia to be close to flat year-over-year.

Jimmy, I'll take your commercial mortgage comment or question. As you pointed out, I think despite the recent pressure, we've kind of commented on a few factors. There's been continued economic growth, which has been good news for fundamentals of real estate. There's some modest trend towards in-office or even office has some kind of backdrop momentum here. Overall, I think as you point out, we feel outside of office we've probably hit the trough, and we've probably seen a positive outlook. There are healthy fundamentals overall now for the economy. You have at least some expectation of declining interest rates. Even steepening of the curve, I think, would be a positive here. You're starting to see increasing transaction activity. Even we in this quarter, I think we had five sales of real estate properties for a gain, about $120 million to $150 million gain in the quarter. We think overall, there is a positive backdrop that's starting to emerge. I don't think we're out of it. We're not going to see a V-shape recovery per se, but it certainly is setting up for a more positive 2025 environment. You asked about single borrower. I don't have the exact number on CMBS, but it's relatively small. I think I'd just give you a few statistics. We have about $10 billion of CMBS, and of that, over 80% or about 80% of that is rated AAA or AA. But the single borrower exposure is relatively small.

Our next question comes from the line of Tom Gallagher from Evercore. Your line is open.

First, I wanted to follow up on Group Benefits. Ramy, you mentioned that certain non-medical health products were elevated this quarter. Can you specify what those are, excluding dental? Are they related to disability or something different? Do you anticipate a quick recovery for those, or will there be a lasting impact that keeps them elevated? Additionally, regarding dental, how do you expect that to develop? Does it take a year for the repricing to influence the margin, or is it a quicker process?

Tom, thank you for the question. The one-time items were about one point in total, which translates to roughly $20 million post-tax. I would mostly describe them as one-timers. We had a minor item related to the reinsurance adjustment and another regarding the timing of rate approvals, so consider them a collection of issues that negatively impacted us during the quarter. On the disability side, it is performing well, and we are noticing incidents aligning with our expectations. Additionally, we are experiencing strong recoveries in that area. This provides some further context on those smaller items. Overall, I would say to view them as mostly one-time occurrences. In dental, we have been implementing rate increases since the start of the year. As we approach business renewals, these rate hikes will take effect. While we don't have complete insight into January first, our visibility is quite strong at this stage. Based on what we are observing so far, we expect to return to our margin for the full year 2025. This is not a long-term issue; we are nearing the end of this cycle, and January first should bring us back to our target margin.

Got you. And then just a question on risk transfer. A peer of yours recently said they looked into long-term care risk transfer, decided the pricing was too adverse, and they're moving on. They're not going to pursue anything beyond that. Curious if you've looked into that market and if you have, your view of it, do you share that view that the pricing is too onerous? Or is that something you might want to pursue?

Tom, it's Ramy again here. While I can't comment on the specifics of any peer, we continue to see activity in that market, I would say, increased activity, particularly over the last 12 months. I would say the bid-ask spreads are somewhat narrowing, which is, I think, encouraging as we think about our book and some of the bid-ask spreads that are out there. As we've always said, our book is well capitalized, it's well managed, and it continues to perform in line with expectations. We continue to assess risk transfer options. Clearly, any deal needs to create long-term shareholder value. So, price matters, and structure matters here. But in general, I would say active discussions and somewhat narrowing of bid-ask spreads there in terms of what we see.

Our next question comes from the line of Ryan Krueger from KBW. Your line is open.

I had a question on RIS spreads. John, does your comment on the spreads stabilizing in the fourth quarter also translate into stable spreads in '25 as well based on the forward curve?

Ryan, good morning. To recap, we experienced a slightly greater decline this quarter compared to the 8 to 10 basis points we had projected for core spreads in the second quarter, as we came in at around 11 basis points. It's worth noting that we had initially anticipated the same 8 to 10 range in the second quarter, and we ended up performing better than that. The fluctuations in both quarters are largely influenced by the changes in rates during that time. This quarter, we saw lower rates, although there has been a recent uptick which leads us to be cautiously optimistic about maintaining flat to slightly positive spreads in the fourth quarter. We will share more details during our outlook call in February. I believe we have reached a more stable spread, but the shape of the yield curve is an important factor in our outlook. I'm hesitant to make definitive statements right now, and we will assess where the curve stands since sensitivities can vary. Overall, we are observing more stability at this time, which seems like a reasonable assumption moving forward.

And then do you have any early insight into fourth quarter variable investment income at this point?

I wish I could provide a definitive answer, but I don't have strong insights at this moment. We do have a perspective on it. The reality is that our portfolio in the private equity sector is still adjusting to higher interest rates, increased market volatility, and limited exit options. Nevertheless, we achieved positive returns this quarter. We also noted a rebound in real estate and related funds during the quarter, which aligns with some earlier comments I made about the current state of real estate. Another point I highlighted, possibly at your conference, is that we experienced $600 million in distributions, contributing to strong cash flow. Performance has been relatively good, landing in the top half, possibly even the second quartile. Upon closer examination this quarter, we identified some unique circumstances in certain funds where specific assets had to be marked individually rather than applying broad marks across the board. We believe these are isolated events. If we adjust for them and consider that as an indicator for the fourth quarter, it might suggest that total VII will be better than our current position, though it may not return to Q2 levels. So, taking an average of those two figures could be a reasonable estimate for the fourth quarter at this point.

Our next question comes from the line of Alex Scott from Barclays. Your line is open.

I just wanted to come back to some of the comments on RIS and maybe even more broadly across the firm. Could you talk about your sensitivity to interest rates? Maybe help us think through what kind of floating rate allocation you have and maybe net of floating rate liabilities and so forth? And would be interested in RIS specifically. The shape of the yield curve changing the way it has, is that a net positive or negative? I just want to get a better feel for rate exposure.

Yes, a steeper curve is better for our portfolio. Higher rates and a steeper curve work in our favor. This helps clarify our direction. When it comes to our floating rate assets compared to liabilities, they are generally well aligned. There are instances where we have some floating rate assets in Corporate & Other. However, a lower short end of the curve is ultimately favorable for us, which is how we usually manage our overall portfolio. The outlook slides we shared in February regarding parallel shifts in the curve are still relevant for understanding the potential impact on our firm. As for the shape of the curve, I can only provide general guidance at this point.

Got it. That's helpful. As we think through the strategies that's on the come here in December and thinking through the comments that should provide further enhancement to returns, will that come more through revenue growth and growing some of the businesses with higher returns? Or are there further levers that you can pull to take down that expense ratio and drive efficiency across the organization?

I would say it's a combination of continuing to grow high-return businesses and maintaining the discipline that has developed into a strong capability within the organization regarding pricing and product launches. Additionally, as John mentioned earlier, our unit costs have also been decreasing, which is another contributing factor. It's a blend of both aspects.

Our next question comes from the line of Wilma Burdis from Raymond James. Your line is open.

Could you walk us through what you see as a more normalized run rate level of earnings for both group and RIS?

I think, Wilma, I just want to make sure we were able to hear that. You just said, could you walk through more normalized earnings for group and RIS?

Yes, yes, sorry.

No problem. I can start at a high level and then Ramy can add. Obviously, RIS has been affected by the roll-off of our interest rate caps. We provided some guidance on that in February, about 8 to 10 basis points each quarter. We pretty much hit that mark, being slightly lower in the second quarter and a bit higher in the third. Overall, we likely ended where we anticipated. We should see some stabilization in those levels for the fourth quarter and beyond. For RIS, it's important to consider VII, which represents a significant difference in our earnings this quarter compared to what we believe our underlying run rate is for the firm. Regarding Group, we need to acknowledge that seasonality plays a big role, and it varies by quarter. As Ramy mentioned in his comments, there were several factors that negatively affected us this quarter. We encountered a few issues that we do not expect to happen again, which contributed to the results going in one direction. That's how we view the quarter at this time. Although you only asked about RIS and Group, I wanted to provide a broader perspective.

Okay. And then just maybe related to an earlier question, could you just talk about the economic environment that would be supportive of VII returning to more normal levels?

Sure. As we were referencing earlier, higher interest rates have caused the sector to have to adjust. The sector has significantly benefited from the lower-for-this environment that no longer is forever. It's taking time, coupled with the fact that the environment needs exit options and that activity has slowed as a result of the broader macro environment. We think with the on-time nature, it's probably one factor that improves the sector. The second is, as rates start to stabilize and set into a stable curve more importantly, that will be a positive aspect to support the sector.

Our next question comes from the line of John Barnidge from Piper Sandler. Your line is open.

My question is on real estate. Given the improved positivity in directionality and given it's more of a cycle asset class than anything else, do you think the recovery could be more extended in what goes into VII on a normalized basis post-real estate recovery actually could end up being larger on the real estate side?

And John, just to make sure I have that, you're asking whether there could be a larger allocation as a result of maybe the outlook? Is that what you mean?

No, not allocation. Just as the contribution to real estate in the third quarter of overall VII was larger than it was in the prior counters. As that cycle turns, should we actually think of that actually being larger possibly on the other side, not allocation.

We've provided some outlook regarding the returns for asset classes, which were based on a specific set of assumptions. Not all of those assumptions have materialized, and that's to be expected. I believe that using relative scaling, even if returns improve, is still a sound concept. Currently, our real estate exposure in VII is primarily in core and core plus, with some opportunistic elements. The expected returns on these types of investments will be lower than what you might anticipate from a private equity or venture capital fund. Yes, I'd just give you a few statistics. We have about $10 billion of CMBS, and of that, over 80% or about 80% of that is rated AAA or AA. But the single borrower exposure is relatively small. I just don't have that at my fingertips.

Due to time constraints, we're going to have to cut the question-and-answer session short. I will now turn the call back over to John Hall for closing remarks.

Great. Thank you, everybody, for joining us today. Have a happy Halloween, and we look forward to seeing you where we can on December 12. Bye.

Thank you. The meeting has now concluded. Thank you for joining, and have a pleasant day.