Earnings Call Transcript
METLIFE INC (MET)
Earnings Call Transcript - MET Q1 2024
Operator, Operator
Ladies and gentlemen, thank you for standing by. Welcome to the MetLife First Quarter 2024 Earnings Conference Call. 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.
John Hall, Global Head of Investor Relations
Thank you, operator. Good morning, everyone. We appreciate your participation on MetLife's First Quarter 2024 Earnings Call. In addition to our earnings release, we issued a press release last night announcing a $3 billion increase to our share repurchase authorization. Before we begin, I'd 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. Also participating in the discussions are other members of senior management. As usual, last night, we released our standard set of supplemental slides, which are available on our website. John McCallion will speak to them in his prepared remarks if you wish to follow along. An appendix to the slides features disclosures GAAP reconciliations and other information, which you should similarly review. After prepared remarks, we will have a Q&A session. Given the busy morning, Q&A will end promptly just before the top of the hour. In fairness to everyone, please limit yourself to one question and one follow-up. With that, over to Michel.
Michel Khalaf, President and CEO
Thank you, John, and good morning, everyone. As you can see from last night's report, MetLife is getting off to a good start for the year. We delivered another solid quarter of financial results, reflecting strong top line growth, consistent execution, and sustained momentum across our market-leading portfolio of businesses. We achieved this mindful that change and uncertainty remain constant in the current environment. Our resilience and consistency are made possible by the unwavering commitment of our associates, our unyielding confidence in our all-weather Next Horizon strategy, and our steadfast focus on controlling those factors we can control to drive value for our shareholders and other stakeholders. With change as a persistent backdrop, MetLife's 156-year track record of risk management is stable stakes for our customers and shareholders. As I addressed in my shareholder letter, central to this notion is protecting our balance sheet so we can meet the promises we've made to our policyholders and shareholders regardless of economic or geopolitical conditions. Risk management extends across virtually everything we do, the way we invest and manage our capital and liquidity to the way we price, underwrite, and reserve for the products we sell. Another element of risk management at MetLife lies in our diversification. We operate across a range of products and geographies, many that have offsetting risk characteristics such as mortality versus longevity among others. Even within our business segments, we have diversification. Our Group Benefits business serves employers across a wide range of business sizes and industries and has customers in every state. A similar theme runs through Retirement and Income Solutions and can be seen in the multiple liability streams we are able to originate, including capital markets, pension risk transfers, structured settlements, stable value, corporate-owned life insurance, and longevity reinsurance, among others. Our diversification is at the core of who we are and further differentiates MetLife. It is not coincidental, but by design. We have constructed a platform to deliver for the long term and believe our diversification promotes both sustainable and responsible growth. Turning to the quarter, we reported adjusted earnings of $1.3 billion or $1.83 per share, up 20% per share from the prior year period. This was aided by a partial rebound in variable investment income led by private equity gains, which delivered a positive return of 2.1%. In the aggregate, net income for the first quarter was $800 million, well above $14 million from the prior year period. Top line growth was strong across our market-leading set of businesses, with adjusted premium fees and other revenues, or PFOs, totaling $12 billion, up 4% compared to the first quarter of 2023. On a constant currency basis, PFOs were up 5%. Our unrelenting focus on execution continues to drive positive results across important key metrics. MetLife posted a 13.8% adjusted return on equity in the quarter, still within the 13% to 15% target range despite variable investment income not yet hitting a more normal quarterly run rate. Our direct expense ratio of 11.9% improved from a year ago and was lower than our 12.3% annual target. The positive leverage captured by this ratio illustrates our ability to control costs as well as grow revenues at a faster rate than expenses. Shifting to MetLife's business performance in the quarter, Group Benefits generated $6.3 billion of adjusted PFOs, up 5% or up 6% adjusting for participating policies from the prior year period, driven by solid growth across most products, including further expansion in voluntary benefits. Our premier national accounts franchise continues to demonstrate its differentiation and deliver value to customers through its comprehensive range of products and a customer experience enhanced by innovative technology platforms. In the quarter, Group Benefits' adjusted earnings of $284 million were impacted by seasonally high life mortality and seasonally elevated non-medical health utilization returning to a historical trend more recently masked by the pandemic. Showing the continued vitality of this flagship business, sales were up 25% from the prior year, propelled by our sustained efforts to drive enrollment, which pushed growth across core and voluntary products. Last month, MetLife launched our 2024 employee benefit front study in its 22nd year, the survey tracks evolving employer and employee dynamics and the impact that macro environment and other trends have on the workplace and the employee benefits ecosystem. Through the years, we've enjoyed tremendous engagement with our customers as a result of the survey demonstrated thought leadership, and this year's survey with its focus on employee care was no different. The business case for employee care is clear. Our research and other studies showed that when organizations offer a range of benefits, employees are healthier overall and business performance is stronger. As the largest group benefits provider, this ties directly into our strategy to offer the widest array of products, which gives MetLife more opportunities to serve our customers and more avenues to drive growth. Our leading Retirement and Income Solutions business reported adjusted earnings of $399 million, essentially flat with last year. Higher interest rates continue to increase the attractiveness of many of the products we offer within RIS. Overall, quarterly sales in RIS were $2.7 billion, up 49% from the prior year, led by structured settlements and corporate-owned life insurance production. Our business in Asia posted a 51% increase in adjusted earnings on better variable investment income and favorable underwriting, particularly in Japan. Sales, while robust, were down relative to a strong quarter a year ago. Yet illustrating the strength of recent quarters, assets under management in Asia are up 6% year-over-year on a constant currency basis. In Latin America, our momentum continues across the region, particularly in our two largest markets of Mexico and Chile. The segment generated another record quarter of adjusted earnings with $233 million, rising 8% and 5% on a constant currency basis. Moving to capital and cash. Our operative philosophy on capital deployment relies on a balance across investing in organic and inorganic growth and returning capital to shareholders via common dividends and share repurchase. During the first quarter, MetLife linked into capital management. We paid $377 million to shareholders via common stock dividends, and we repurchased almost $1.2 billion of our common stock. After the quarter, we have repurchased about another $300 million of common stock in April. Also in April, we boosted our common dividend per share by 4.8%. Year-to-date through April, we have repurchased about $1.5 billion of our common shares. Along with reporting our first quarter results, you saw that we also announced the addition of $3 billion to our repurchase authorization. Our total share repurchase authorization now stands at approximately $3.6 billion, which allows us to proceed with repurchase at a more measured pace for the balance of the year. Shifting to governance, we announced during the quarter that Laura Hay joined our Board of Directors effective in February. Most recently, she was the Global Head of KPMG's insurance practice. We are excited to have Laura bring her broad set of actuarial and financial skills and her business experience to our board. In closing, as we near the conclusion of our five-year Next Horizon framework, we are engaged in a thoughtful process to chart the next course of our strategic journey, building on a strong well-established foundation. I do not anticipate an abrupt departure from what has successfully delivered on our purpose, which is always being with you in building a more confident future, but rather a further evolution. As we sought to raise the bar during Next Horizon, asking more of ourselves and delivering more than our stated goals, we've already started advancing towards the next phase of our strategy. The core principles of Next Horizon anchor our future actions, and we remain embedded in our strategic thinking as we move ahead. We are building on our strong foundation with a growth mindset and a range of opportunities that would not have been possible just a few years ago. We are well positioned to further differentiate ourselves and deliver additional value to customers, fueling higher levels of growth. We have a tremendous opportunity to leverage our scale and harness emerging technologies to drive margin expansion, all the while achieving greater overall operating consistency. Taken together, we believe these powerful factors will result in greater returns for our shareholders. To that end, I look forward to discussing our refreshed strategy at an Investor Day here in New York on December 12 of this year. Now I'll turn it over to John to cover our first quarter performance in greater detail.
John McCallion, Chief Financial Officer
Thank you, Michel, and good morning. I will start with the 1Q '24 supplemental slides, which provide highlights of our financial performance and an update on our liquidity and capital position. Starting on Page 3, we provide a comparison of net income to adjusted earnings in the first quarter. We had net derivative losses, primarily due to the strengthening of the U.S. dollar versus the yen and Chilean peso as well as favorable equity markets and higher interest rates. That said, derivative losses were mostly offset by market risk benefit or MRB remeasurement gains due to the higher interest rates and stronger equity markets. Net investment losses were mainly the result of normal trading activity for fixed maturity securities in a rising rate environment. Overall, the investment portfolio remains well positioned. Credit losses continued to be modest and our hedging program performed as expected. On Page 4, you can see the first quarter year-over-year comparison of adjusted earnings by segment, which do not have any notable items in either period. Adjusted earnings were $1.3 billion, up 13% on a reported and constant currency basis. Higher variable investment income due to a rebound in private equity returns drove the year-over-year increase. Adjusted earnings per share were $1.83, up 20% and up 21% on a constant currency basis. Moving to the businesses. Group Benefits adjusted earnings were $284 million, down 7% year-over-year, primarily due to less favorable underwriting margins. The Group Life mortality ratio was 90.2%, a slight improvement versus Q1 of '23 of 90.5% and above the top end of our annual target range of 84% to 89% as Group Life's mortality ratio tends to be seasonally highest in the first quarter. Regarding non-medical health, the interest adjusted benefit ratio was 73.9% in the quarter, at the top end of its annual target range of 69% to 74%, in line with our expectation of higher seasonal dental utilization in the first quarter. Turning to the top line, Group Benefits adjusted PFOs were up 5% year-over-year. Taking participating contracts into account, which dampened growth by roughly 100 basis points, the underlying PFOs were up approximately 6% year-over-year and at the top end of our 2024 target growth range of 4% to 6%. In addition, Group Benefits sales were up 25%, driven by strong growth across core and voluntary products. RIS adjusted earnings were $399 million, essentially flat versus Q1 of '23. Higher variable investment income was offset by lower recurring interest margins as well as less favorable underwriting margins. RIS investment spreads were 127 basis points at the midpoint of our annual target range of 115 to 140 basis points. This incorporates both the impact of the roll-off of our interest rate caps and the offsetting benefit of variable investment income reemerging. RIS adjusted PFOs were up 25% year-over-year, primarily driven by strong sales of structured settlement products as well as growth in U.K. longevity reinsurance. With regards to pension risk transfers, while we did not complete any transactions in the first quarter, we continue to see an active market. Moving to Asia. Adjusted earnings were $423 million, up 51% and 57% on a constant currency basis, primarily due to higher variable investment income, favorable underwriting margins, and favorable tax benefits in Q1 of '24. For Asia's key growth metrics, general account assets under management on an amortized cost basis were up 6% year-over-year on a constant currency basis. Sales were down 8% on a constant currency basis versus a strong prior year quarter. Latin America adjusted earnings were $233 million, up 8% and 5% on a constant currency basis, primarily due to volume growth and favorable underwriting margins. In addition, solid Chilean encaje returns of 4.8% in Q1 of '24 compared to a negative 0.9% in Q1 of the prior year. Latin America's top line continues to perform well as adjusted PFOs were up 9% and 8% on a constant currency basis, driven by growth across the region. EMEA adjusted earnings were $77 million, up 28% and 35% on a constant currency basis, driven by favorable underwriting, volume growth, and higher recurring interest margins. This was partially offset by less favorable expense margins year-over-year. While EMEA adjusted earnings were above trend this quarter, we still view the run rate to be $60 million to $65 million per quarter for the remainder of the year. EMEA adjusted PFOs were up 7% and 9% on a constant currency basis, and sales were up 16% on a constant currency basis, reflecting strong growth in Turkey and the U.K. MetLife Holdings adjusted earnings were $159 million versus $158 million in the prior year quarter. Higher private equity returns were offset by roughly $50 million in foregone earnings as a result of the reinsurance transaction that closed in November, in line with expectations. Adjusted earnings in the quarter were also pressured by a true-up associated with the reinsurance transaction. Corporate and other adjusted loss was $241 million versus an adjusted loss of $236 million in the prior year. The company's effective tax rate on adjusted earnings in the quarter was approximately 23%, below our 2024 guidance range of 24% to 26% due to several favorable tax items in the quarter. On Page 5, this chart reflects our pretax variable investment income for the prior 5 quarters, including $260 million in Q1 of '24. The private equity portfolio, which makes up the majority of the variable investment income asset balance, had a positive 2.1% return in the quarter, while real estate equity funds had a negative 5.8% return in Q1 of '24. Both are reported on a one-quarter lag. In addition, as we've seen signs of improvement in private equity secondary markets, we have opportunistically divested roughly $750 million of private equity general account assets in Q1 of '24 at a modest discount. The transaction structure will allow MetLife Investment Management to continue managing the assets from the sale. We believe this transaction, which is similar to the roughly $1 billion divestment that we made in 2022, is a thoughtful approach to managing our investment allocation while supporting an important and growing fee-generating business for MetLife. Looking ahead, we continue to expect variable investment income returns to move toward the upper end of our near-term outlook range in the second half of the year, and we remain comfortable with our full-year variable investment income guidance of $1.5 billion. On Page 6, we provide variable investment income post-tax by segment for the fourth quarter of 2023 and Q1 of '24. As you can see in the chart, Retirement and Income Solutions, Asia, and MetLife Holdings continue to hold the largest proportion of variable investment income assets given their long-dated liability profile. Now turning to Page 7, the chart on the left of the page shows the split of our net investment income between recurring and variable investment income for the past 3 years and Q1 of '23 versus Q1 of '24. Adjusted net investment income in Q1 of '24 was up roughly $500 million or 10% year-over-year. While recurring investment income moderated in the quarter due to the roll-off of the interest rate caps, we did see a solid recovery in private equity returns driving the variable investment income improvement year-over-year. Shifting your attention to the right of the page, which shows our new money yield versus roll-off yields since Q1 of '21. New money yields continue to outpace roll-off yields over the past 8 quarters, consistent with the rising rates. In the first quarter of 2024, our global new money rate achieved a yield of 6.6%, 103 basis points higher than the roll-off rate. Keep in mind, the roll-off rate can fluctuate from period to period, as it did in the first quarter due to a greater volume of higher-yielding floating rate assets paying off. We would expect this positive trend of new money yields outpacing roll-off yields to persist given the current level of interest rates. Now let's switch gears to discuss expenses on Page 8. This chart shows a comparison of our direct expense ratio for the full year 2023 of 12.2% and Q1 of '24 of 11.9%. 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 Q1 direct expense ratio benefited from solid top line growth and ongoing expense discipline. We are off to a good start achieving a full-year 2024 direct expense ratio of 12.3% or below, demonstrating our consistent execution and a sustained efficiency mindset. I will now discuss our cash and capital positions on Page 9. Cash and liquid assets at the holding companies were $5.2 billion at March 31, which is above our target cash buffer of $3 billion to $4 billion. This includes approximately $1.4 billion used in April for a debt maturity and a debt redemption. We do not have any further debt maturities for the balance of the year. Beyond this, cash at the holding companies reflects the net effects of subsidiary dividends, payment of our common stock dividend, and share repurchases of roughly $1.2 billion in the first quarter as well as holding company expenses and other cash flows. In addition, we have repurchased shares totaling approximately $330 million in April. Regarding our statutory capital for our U.S. companies, our 2023 combined NAIC RBC ratio was 407%, which is above our target ratio of 360%. For our U.S. companies, preliminary first quarter 2024 statutory operating earnings were approximately $1 billion, essentially flat year-over-year, while net income was approximately $570 million. We estimate that our total U.S. statutory adjusted capital was approximately $18.3 billion as of March 31, 2024, down 6% from year-end 2023, primarily due to dividends paid and surplus notes repaid, partially offset by operating earnings. Finally, we expect the Japan solvency margin ratio to be approximately 725% as of March 31, which will be based on statutory statements that will be filed in the next few weeks. Before I wrap up, I would just highlight that we have an updated commercial mortgage loan slide as of March 31 in the appendix. Overall, the commercial mortgage loan portfolio continues to perform as expected with attractive loan-to-value and debt service coverage ratios as well as the expectation of modest losses. Let me conclude by saying that MetLife delivered another solid quarter to begin the new year. The underlying strength of our business fundamentals was evident with strong top line growth, coupled with disciplined underwriting and expense management. In addition, our core spreads remain robust and sustainable given the higher yield environment. Also, we saw a nice rebound in our private equity returns. While the current environment remains uncertain, we are excited about the outlook and growth prospects of our businesses over the near term and beyond. MetLife continues to move forward from a position of strength with a strong balance sheet and a diversified set of market-leading businesses, which generate solid recurring free cash flow. We are committed to deploying this free cash flow to achieve responsible growth and build long-term sustainable value for our customers and our shareholders. And with that, I'll turn the call back to the operator for your questions.
Operator, Operator
And we have a question from Suneet Kamath with Jefferies.
Suneet Kamath, Analyst
Just wanted to start with variable investment income. John, you had mentioned a real estate loss of 5.8%. Can you just unpack that a little bit? Was that actually losses on sales or appraisals? And how do you see that tracking as we move through the balance of the year?
John McCallion, Chief Financial Officer
Sure, Suneet. Primarily appraisals and valuation. So we actually saw, if you recall, in the fourth quarter, it was fairly flat. Appraisals tend to lag a bit in terms of just market declines. And so we saw a catch-up of that in the fourth quarter, which obviously gets reported here in the first quarter. Our view is that it will start to moderate. We probably still have some pressure in Q2, but less so and then it moderates through the rest of this year. Then we think you start to see things pick up in a positive way towards the latter part of this year into '25. That's kind of the outlook.
Suneet Kamath, Analyst
Michel, on your comments for future share buybacks. I think you used the word measured pace. Is that measured pace relative to what you did in the first quarter? Or is that relative to what you did in April? And is the plan to exhaust the $3.6 billion authorization in 2024?
Michel Khalaf, President and CEO
Yes. Suneet, thanks for the question. So yes, I did use the word measure, and I was referring to the first quarter. But I think as you've seen in the first quarter and what you've seen from us over time is that we do move expeditiously and deliberately to return capital to shareholders, especially in the absence of other high-value capital deployment opportunities following divestments. We did so following the spin-off of our former retail business following the sale of Auto and Home, and we closed on our risk transfer deal in the fourth quarter. So looking ahead, and without me getting overly prescriptive, I would say that we lead into the first quarter at a pace that is greater than what you might see for the balance of the year.
Operator, Operator
Next, we go to the line of Ryan Krueger with KBW.
Ryan Krueger, Analyst
First, I just wanted to clarify one thing on the variable investment income comment. John, did you say that you expected to be towards the higher end of the range that you had given for the balance of the year?
John McCallion, Chief Financial Officer
Yes. Ryan, it's John. I believe Suneet's question was about real estate. We're trying to provide an outlook on the real estate funds, and we experienced a negative return of 5.8% this quarter. I previously mentioned I expected it to be less negative next quarter, but we anticipate some continued pressure related to appraisals. However, we expect things to start to stabilize and trend upward from there.
Ryan Krueger, Analyst
Okay. Got it. Other question was on the Group Benefits business. Can you talk more about the competitive environment you're seeing at this point as you went through January 1 renewals as well as what you saw with persistency and pricing?
Ramy Tadros, Executive
Sure, Ryan. It's Ramy here. Our perspective on the competitive dynamics within the group business remains consistent. We have always regarded it as a competitive marketplace due to its short-tail nature. Additionally, there are numerous ways to differentiate beyond just price. When you have the scale to invest in the business, you can achieve true differentiation and enhance profitability. While price is important, it is just one of several considerations. Given this context, we are very pleased with our sales growth this year, which saw a 25% increase year-over-year. This momentum was strong across the board, including in life, disability, dental, and our voluntary product offerings. Regarding pricing, we were satisfied with the rate adequacy for new business and the rate increases on renewals that aligned with our targets. Overall, the outlook is solid in terms of growth, persistency, as well as pricing and rate increases.
Operator, Operator
Next, we move on to Wes Carmichael with Autonomous Research.
Wesley Carmichael, Analyst
I had a question on pension risk transfer. I know you guys didn't have any deals in the quarter. But there were some deals that were done that were reasonable size and your peers have plenty of capital to support this marketplace right now. And there's actually another ongoing call right now that one of your peers is saying that PRT is not that good of a business this year; there's not as much spread. So I'm just wondering if pricing is getting more competitive there, if there's any dynamics changing in the marketplace.
Ramy Tadros, Executive
Thank you. It's Ramy here again. Look, we're coming off a very successful 2023 year in terms of PRT; we had five cases totaling more than $5 billion in premium, and that was off the back of a record year in '22, where we wrote more than $12 billion of premiums. This business is lumpy. So I would remind you, we did not win any deals in Q1 of '23 either, and we did not win any deals in Q1 of '24. But having said that, we continue to see a very robust pipeline ahead of us, particularly for the jumbo end of the market, where we focus. This is not surprising. We've got very healthy funding levels of defined benefit plans and the desire for large plan sponsors to derisk. We see this trend continuing for many, many years, and we're well-positioned to win our fair share of the market here. From a pricing perspective, I would just emphasize what we've said before: we look at these jumbo PRT deals with an M&A lens, and you need to do that given the large quantum of capital that any given deal can consume. We're very disciplined to ensure that we deploy that capital to its best and highest use. We will only deploy capital if the risk-adjusted returns are healthy and the ROEs are aligned with our enterprise targets. As you look forward, we still see this as a large profit pool, a big opportunity, and one where we're going to get our fair share.
Wesley Carmichael, Analyst
And Michel, I think you talked about higher rates increasing the attractiveness of your products. Just wanted to get a little perspective on capital deployment and how you're thinking about allocating capital towards growth in capital-intensive businesses where you can generate good IRRs versus buying back more stock, which continues to be pretty strong.
Michel Khalaf, President and CEO
Yes, thanks for the question, Wes. Our philosophy is to focus on supporting organic growth, which we have been doing consistently. Our VNB disclosures show that we have achieved high teen returns and paybacks in the mid-single digits. We like to maintain a good balance between supporting organic growth and deploying capital for that purpose. We are also actively considering potential M&A transactions, which we view as a strategic capability. However, we are very disciplined in our approach to M&A on a global scale. Any excess capital, as we mentioned, is for our shareholders. We aim to have an attractive dividend yield, and we recently increased our dividend by 4.8%. Share repurchases also play a role in our strategy. We want to keep a balance and are committed to continuing to deploy capital for organic growth at attractive returns.
Operator, Operator
And next, we move on to Jimmy Bhullar with JPMorgan.
Jamminder Bhullar, Analyst
So first on the question for John on your spreads in RIS. Healthy overall, but we saw a sequential decline in spreads, excluding variable investment income. And I think you attributed that to the expiration of some of the interest rate cap. So I'm wondering if you could give us some idea on the trajectory of that? And should we assume a similar level of impact from caps that are expiring in the next few quarters? And when should we assume that dynamic is going to be over?
John McCallion, Chief Financial Officer
Jimmy, thanks for the question. Yes, I think it's pretty much in line given the roll-off of the interest rate caps. So in terms of variable investment income, that was generally in line. I think variable investment income came in better than we expected. As you recall, we talked about a spread range for the segment. We still think that's the right answer. The way we got there is we have a kind of a quarterly roll-off of these interest rate caps. Remember, we bought these back a while ago when there wasn't a risk of rising rates, but it allows the long end to kind of emerge over time. It's basically worked as planned. They all effectively roll off for the most part throughout this year. So in terms of expectations, we will see another decline between Q4 and Q1. I think 8% to 10% next quarter is not a bad estimate. It will depend on what variable investment income does next quarter. We still think variable investment income has kind of a reemergence to occur. So we had a good quarter this quarter, but that can gradually grow throughout the year, probably with a bigger growth in the second half and probably have one more quarter of 8 to 10 bps occurring and it flattens out between the third and fourth quarter. Basically, it's minimal, if not immaterial roll-off. That’s how to think about the roll-off, and that's how we get to the midpoint of that range when we gave the guidance. Obviously, in the past, we've spent quite a bit of time on variable investment income. We're happy to give that number, but we're really looking at the total spread all in now as you think about the reemergence of variable investment income.
Jamminder Bhullar, Analyst
Okay. And then for Ramy, on margins and Group Benefits. I think group life margin, you had assumed that they'd be weak in Q1 because of seasonality. Dental claims picked up as well. And do you attribute most of that to seasonality as well? Or are you seeing just higher incidents for some reason?
Ramy Tadros, Executive
Jimmy, that's basically a seasonality story. As you know, with dental claims, the benefits reset at the end of the calendar year. So come January, you just get to see more utilization as the claims reset, and therefore, that's a seasonally higher ratio. If you look at our overall non-medical health ratio, this first-quarter seasonality is baked into our guidance ranges. I remind you, these are annual ranges, and our expectations are at this point that we will be well within our range of 69% to 74% for the full year. I would also remind you that we did lower that range by one point earlier this year, so very much a seasonality story and I feel very good about being within that range for the full year.
Operator, Operator
And next, we move to Tom Gallagher with Evercore ISI.
Thomas Gallagher, Analyst
Just a few follow-ups to Jimmy's questions. John, if I followed your math, that would suggest about 20 basis points of lower base spreads for RIS versus Q1 level if I look at towards the end of 2024. Is that directionally right?
John McCallion, Chief Financial Officer
Yes, you selected the higher end of the range, but it is indeed close to 16 to 20.
Thomas Gallagher, Analyst
18 to 20?
John McCallion, Chief Financial Officer
Yes.
Thomas Gallagher, Analyst
Okay. And then for Ramy, for Group Benefits, I just want to make sure I have the right expectation here. If I look at last year, and I look at the last three quarters of the year, I think earnings averaged around $450 million. That's probably $170 million, $180 million above what you did in Q1 this year. So is it fair to say you still expect to grow above the $450 million earnings level for the next three quarters?
Ramy Tadros, Executive
Tom, to calculate our earnings number, you can consider our top line alongside our guidance ratio. From a top line view, we are still within the 4% to 6% range. We experienced a 6% PFO growth this quarter, but it's reasonable to expect that this ratio will align with the midpoint of the range for the full year. Additionally, keep in mind that non-medical health, which includes dental, is expected to moderate throughout the year, trending towards the midpoint of the range. The same applies to the life underwriting ratio. This quarter is heavily influenced by seasonality. As Michel mentioned earlier, the seasonality we've seen in previous years was somewhat obscured by COVID and changes in dental and mortality behaviors, which are now returning to a more typical pattern. I hope this provides clarity on our guidance growth, considering the top line figure I've mentioned and the midpoint of these ratios for the full year.
Thomas Gallagher, Analyst
That does. And if I could just sneak in one other follow-up. So dental utilization, you would fully expect that to be far lower in Q2 than Q1? Or is there going to be some tail on that where you might see some level of higher utilization and lower earnings into Q2 as well, would you say?
Ramy Tadros, Executive
Q3 is typically the slowest quarter, so we anticipate a decline in the second quarter. It will be significantly lighter in Q3. There will definitely be a decrease, but it's difficult to predict if it will drop sharply in Q2 followed by another decline in Q3 or if it will occur in different patterns. However, consider this within the context of a full-year range and aim for the midpoint for the entire year.
John McCallion, Chief Financial Officer
And Tom, maybe I'll just add a follow-up again on your first question. I mean, I think also just you only focused on variable investment income. But as I said, I think what's really important is that we think of the all-in spread here, and that is very much in line with what we gave in the outlook for the midpoint of the range.
Operator, Operator
Next, we move on to Brian Meredith with UBS.
Justin Tucker, Analyst
This is Justin Tucker on for Brian. My first question is about RIS. When looking at the structured settlement results, could you kind of help us understand how much of the demand is driven by the favorable interest rate environment? And then how much of it is driven by the courts opening and social inflation? And then furthermore, just curious about the sensitivity to those factors. If interest rates do decrease, do you think that has a bigger impact on structured settlement demand versus a dampening of social inflation?
Ramy Tadros, Executive
It's Ramy here. I mean, I would say interest rates is the primary driver of this. You have seen coming out of the pandemic, call it pent-up demand with the courts being closed and some of that clearly kind of did cause an increase in volumes earlier on. That's now stabilized, and it's very much an interest rate-driven volume increase. You do have given court settlements have increased. You do have some social inflation component. But I would say interest rates are the primary one. We are a major player in this market. The market has grown substantially over the last few years, and we have maintained a pretty good share in that market. It's a very specialized market in terms of the distribution channel, the underwriting, et cetera. We're extremely pleased both with the volume, but as importantly, with the ROEs and the returns we're able to achieve in this market.
Justin Tucker, Analyst
Great. And then my follow-up question is just on Latin America. Sales were flat year-over-year. I'm just kind of curious about what you're seeing in the overall market for demand and what you expect with sales going forward?
Eric Sacha Clurfain, Executive
Yes, Justin, thank you for the question. This is Eric. Overall, we are quite pleased with our results this quarter. It's a strong start to the year following a record year in 2023. The results for this quarter are mainly driven by favorable underwriting, some of which we don't anticipate will recur, along with strong encaje returns and solid volume growth. In terms of top line performance, all key markets have contributed to high single-digit PFO growth, supported by solid sales and strong persistency. From a sales perspective, this quarter is a challenging comparison, as last year we experienced 36% growth, which included two significant employee benefits and corporate pension sales in Mexico and Brazil. If we exclude those two sales from 2023, our sales have increased by approximately 10% year-over-year. Overall, we are very pleased with the growth trajectory and momentum in the region. We believe the outlook guidance we provided remains a reasonable estimate for the rest of the year.
Operator, Operator
And we have no other questions. I'll be turning the conference back to John Hall for closing comments.
John Hall, Global Head of Investor Relations
Great. Thank you very much, operator, and thank you, everybody, for joining us this morning on a very busy day.
Operator, Operator
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.