Earnings Call Transcript
METLIFE INC (MET)
Earnings Call Transcript - MET Q1 2025
Operator, Operator
Welcome to the MetLife First Quarter 2025 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. Please go ahead.
John Hall, Global Head of Investor Relations
Thank you, operator. Good morning, everyone. We appreciate you joining us for MetLife's first quarter 2025 earnings call. 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 and Head of MetLife Investment Management. Also participating in the discussion are other members of senior management. Last night, we released a set of supplemental slides, which address the quarter as well as the risk transfer transaction we also announced yesterday. They are available on our website. John McCallion will speak to those supplemental slides in his prepared remarks. An appendix to the slides features additional disclosures, GAAP reconciliations and other information, which you should also review. After prepared remarks, we will have a Q&A session, which will end promptly at the top of the hour. As a reminder, please limit yourself to one question and one follow-up. With that, over to Michel.
Michel Khalaf, President and CEO
Thank you, John, and good morning, everyone. A few months ago, we rolled out our New Frontier strategy to guide MetLife over the course of the next five years. As you will recall, a keystone of our New Frontier strategy is the all-weather nature of our market-leading set of businesses. And once again, after powering through the supply and mortality challenges of COVID, and then bank liquidity concerns, we find our strategic diversification put to the test. As we move through 2025 with the odds of a recession on the rise, we are seeing unprecedented volatility in the daily trading of the U.S. equity markets. We are also seeing interest rates rise on the long end of the curve, fall in the middle, but Fed funds still remain high at the short end. Meanwhile, after a historic run of strengthening, the U.S. dollar has started to weaken against many currencies around the world. Although MetLife is not immune to the impacts presented by this uncertain backdrop, we are confident we have the right businesses and the right strategy to meet the moment. At our core, MetLife is a recurring revenue business model. In any given year, the vast majority of the revenues and earnings we generate are a function of renewal premium or investment income from assets and liabilities that are already on our books. While the slowing economy can dampen growth for our group benefits business, we've not yet seen cracks in the job market. Further, the primary profit driver mortality for our largest group product line, Group Life, is largely uncorrelated to the economy. For our Retirement and Income Solutions business and our Investment Management business, higher long-term interest rates are helpful on the demand side. The underlying growth of our international businesses, which has been partly masked by the strong dollar could start to emerge as a tailwind. And standing behind it all, our investment portfolio has been risk-off for several years and is well situated to absorb recessionary stress. Our positive track record on this front is well established. Over the course of our 157-year history, we have seen challenging times before and have succeeded in driving long-term value for our shareholders and other stakeholders, and we are well positioned to do so again. Let me now turn to our first quarter results, which we reported last night. I believe they reflect the resilience of our business model and underscore many of the points I just made. We reported adjusted earnings of $1.3 billion or $1.96 per share, up 7% from the same period a year ago. We saw favorable underwriting, good volume growth and better variable investment income in the quarter which were partially offset by unfavorable foreign currency exchange and recurring interest margins. Variable investment income was aided by the performance of our real estate funds, which continued their steady recovery. Private equity funds gained 1.6% in the quarter, which is below our implied quarterly outlook return. Our adjusted return on equity in the first quarter was 14.4% and our 12% direct expense ratio is evidence of our efficiency mindset at work. Shifting to business segment results. Our Group Benefits business reported adjusted earnings of $367 million, up 29% from the prior year period on favorable life underwriting margins due to lower mortality. We continue to see favorable mortality for the working age population, which is consistent with CDC data. Moving to Retirement and Income Solutions, or RIS, adjusted earnings totaled $401 million in the quarter. Sales of synthetic GICs and UK longevity reinsurance were strong in the quarter and inflows associated with pension risk transfers totaled $1.8 billion, an outstanding start for the year. Our liability exposures are up 8% from a year ago. Looking to Asia, adjusted earnings were $374 million, down 12% over the same period a year ago on lower underwriting margins and higher taxes. Sales for the region were up 10% on strong volume growth in Korea and China. Sales in Japan have started to turn the corner, and we are seeing very good energy around a new U.S. dollar-denominated product that we introduced in the banca channel at the end of the first quarter. Turning to Latin America. Adjusted earnings were $218 million, down 6% from the year-ago period, though foreign exchange rates played a role. On a constant currency basis, our adjusted earnings were up 7% compared to the prior year period. Adjusted PFOs in the region tell a similar story, up 1% on a reported basis but up 14% on a constant currency basis. Overall, we continue to see strong momentum across our leading markets in Latin America. Since launching our New Frontier strategy in December, we have been laser-focused executing on its key pillars and we are already making meaningful progress. I'd like to expand by providing two related proof points. We were pleased to announce last night another significant risk transfer deal, particularly given the current economic landscape. We have entered into an agreement with Talcott Resolution Life insurance company to reinsure approximately $10 billion of U.S. retail variable annuity and rider reserves. Consistent with our long-term objectives, the planned transaction will accelerate the runoff of MetLife's legacy business, positively reduce the company's enterprise risk and substantially lower the company's retail variable annuity tail risk. For its part, MetLife Investment Management is on an aspirational path to $1 trillion in total assets under management. We have integrated the teams from Mesirow that we acquired in the quarter, and we are working at pace to close our roughly $100 billion AUM acquisition of PineBridge, a substantial down payment towards achieving our aspiration for men. Turning to capital and cash. In the first quarter, we accelerated our capital management activity returning around $1.8 billion to shareholders through common stock dividends and share repurchases. We paid common stock dividends of roughly $400 million and repurchased approximately $1.4 billion of our common shares. The above-average buyback pace was a function of fewer repurchases in the fourth quarter as we were locked out of the market due to pending announcements. We expect subsequent quarters this year to be at a more measured pace. Following our new $3 billion repurchase authorization that was announced last night, our total Board authorization is now about $3.4 billion. In recognition of our financial strength and flexibility, our Board of Directors increased our common dividend per share by 4.1% last week. And further adding to our financial flexibility, we were active in the debt capital markets in the first quarter, issuing $1.25 billion of pre-capitalized trust securities as well as $1 billion of subordinated debt. We ended the quarter with $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. Shifting to governance. We announced in February that Christian Mumenthaler will be joining our Board of Directors effective May 1. Prior to joining our Board, Christian had a distinguished career at Swiss Re culminating in an eight-year term as Group Chief Executive Officer. We are glad to have someone with his skill set and experience on our board as we drive our new Frontier strategy forward. In closing, the underlying fundamentals of our portfolio of businesses remain strong, as evidenced by our solid first quarter performance. While the operating environment may present challenges, we have emerged stronger from prior periods of turmoil. We've done this by following a playbook that focuses on the levers we control like discretionary expenses without sacrificing investments in strategic growth initiatives. When we set our new frontier goals, we were under no delusion that it would be easy. One of the things that gives me confidence in our ability to succeed is the team here at MetLife. For the third year in a row, we are proud to have been named among the 100 best companies to work for by Fortune. Our team is energized and engaged. That leaves me convinced that our people are up to the task at hand, driven and motivated to deliver MetLife's superior value proposition of responsible growth, attractive returns and lower risk. Now I'll turn it over to John to cover our quarterly performance in more detail.
John McCallion, CFO
Thank you, Michel, and good morning, everyone. I'll refer to the 1Q '25 supplemental slides, which cover highlights of our financial performance and an update on our liquidity and capital position. We have also included a few slides summarizing our variable annuity reinsurance transaction announced yesterday. Starting on Page 3, we provide a comparison of net income to adjusted earnings in the first quarter. We had net derivative gains, primarily due to the strengthening of the Japanese yen and the Chilean peso versus the U.S. dollar as well as unfavorable equity markets. That said, derivative gains were mostly offset by market risk benefit or MRB remeasurement losses due to lower interest rates and weaker markets in 1Q of '25. In addition, net investment losses were largely the result of normal trading activity on the portfolio and credit remained stable. On Page 4, you can see the first quarter year-over-year comparison of adjusted earnings by segment and Corporate and Other. Adjusted earnings were $1.3 billion, up 1% and up 5% on a constant currency basis, while foreign currencies strengthened against the U.S. dollar in the current quarter, most major currencies weakened year-over-year. The positive year-over-year drivers were favorable life underwriting, higher variable investment income and solid volume growth across most business segments. These were partially offset by lower recurring interest margins. Adjusted earnings per share were $1.96, up 7% and up 11% on a constant currency basis aided by strong free cash flow and robust capital management over the prior four quarters. Moving to the businesses. Group Benefits adjusted earnings were $367 million, up 29% from the prior year quarter. The key driver was favorable life underwriting margins due to working-age mortality improvement compared to the prior year period. The Group Life mortality ratio was 84.8% for the quarter which is at the bottom end of our 2025 target range of 84% to 89% and better than the winter flu season expectations. We continue to see post-COVID favorable mortality trends in the working-age population, consistent with CDC data. The non-medical health interest-adjusted benefit ratio was 74.1%, slightly above our target range of 69% to 74%. Dental utilization is seasonally highest in the first quarter, and we expect the ratio to be toward the middle of the target range in Q2. Turning to the top line. Group Benefits adjusted PFOs were up 2% year-over-year. While mortality improvement was favorable to Group Benefits bottom line, it masks top line growth due to the impact on premiums for participating life contracts, which can fluctuate with claims experience but has a limited impact to earnings for those contracts. RIS adjusted earnings were $401 million, up 1% year-over-year. The primary drivers were higher variable investment income and favorable underwriting performance partially offset by unfavorable recurring interest margins. RIS total investment spreads were 114 basis points, up two basis points sequentially due to higher VII. RIS continues to achieve strong business momentum. Adjusted PFOs were $2.4 billion, primarily driven by strong U.S. PRT sales in the quarter, which resulted in new inflows of $1.8 billion in Q1 of '25. Excluding PRTs, RIS adjusted PFOs were up 14%, primarily driven by continued growth in U.K. longevity reinsurance as demonstrated by one jumbo case sold in the quarter with a contract value of $1 billion. In addition, total liability exposure grew 8% versus the prior year period, most notably up 7% in general account liabilities. Moving to Asia. Adjusted earnings were $374 million, down 12% and down 9% on a constant currency basis, primarily due to less favorable underwriting margins and an adjustment of a deferred tax asset to reflect an increase in Japan's effective tax rate. This reduced Asia's adjusted earnings by approximately $15 million in the quarter. This was partially offset by higher VII year-over-year. Asia's key growth metrics remain healthy. General account assets under management at amortized cost was up 5% year-over-year on a constant currency basis, and sales were up 10% on a constant currency basis. While Japan sales were down 8% as foreign currency products remain under pressure given ongoing yen volatility. Other Asia sales were up 41% on a constant currency basis, most notably with strong growth in Korea and China. Latin America adjusted earnings were $218 million, down 6%, but up 7% on a constant currency basis primarily due to higher volume growth across the region and favorable tax items in the quarter. This was partially offset by less favorable underwriting margins as well as lower Chilean encaje returns compared to a strong Q1 '24. Latin America's top line continues to perform well, although reported growth rates are being masked by currency headwinds, most notably due to the weakness in the Mexican peso year-over-year. Adjusted PFOs were up 1%, but up 14% on a constant currency basis, driven by strong growth and solid persistency across the region. EMEA adjusted earnings were $83 million, up 8% and up 14% on a constant currency basis, primarily driven by solid volume growth, partially offset by less favorable expense margins year-over-year. EMEA adjusted PFOs were up 8% and up 12% on a constant currency basis, reflecting strong sales across the region. MetLife Holdings adjusted earnings were $154 million, down 3% due to the runoff of the business. And we continue to look for opportunities to optimize this legacy block of business through risk transfers. As announced yesterday, we have entered into an agreement with Talcott Resolution Life Insurance Company to reinsure approximately $10 billion of U.S. retail variable annuity and rider statutory reserves. I will provide more details on that transaction shortly. Corporate and other adjusted loss was $248 million versus an adjusted loss of $241 million in the prior year. Lower net investment income was partially offset by lower expenses year-over-year. The company's effective tax rate on adjusted earnings in the quarter was 23.2%, modestly below our 2025 guidance range of 24% to 26%. On Page 5, this chart reflects our pre-tax variable investment income for the four quarters of 2024 and first quarter of '25, which was $327 million. This result was up sequentially but below our implied quarterly run rate of $425 million. Private equity returns were 1.6% in the quarter, and our real estate and other funds yielded an average return of roughly 2% in the quarter. As a reminder, PE and real estate and other funds are reported on a one-quarter lag and accounted for on a mark-to-market basis. Looking ahead to the second quarter, we plan to disclose preliminary information regarding our expectations for the variable investment income in the early part of July. We are doing this for the second quarter given the current environment. On Page 6, we provide VII post-tax by Segment and corporate and other for the four quarters of 2024 and first quarter of '25. As reflected in the chart, RIS, Asia and MetLife Holdings continue to hold the largest proportion of VII assets given their long-dated liability profiles. However, as a reminder, each business has its own discrete portfolio aligned and matched to its liabilities. Moving to expenses on Page 7. This chart shows a comparison of direct expense ratio for the full year 2024 of 12.1%, Q1 of '24 of 11.9% and Q1 of '25 of 12%. 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. That said, we believe our results in Q1 position us well to achieve our full year direct expense ratio target of 12.1%, demonstrating our ongoing expense discipline and a sustained efficiency mindset. I will now discuss our cash and capital position on Page 8. Overall, MetLife is well capitalized with more than ample liquidity. We opportunistically repurchased about $1.4 billion of our shares in the first quarter and have repurchased approximately $150 million of our shares in April. And as we announced yesterday, our Board has authorized a new $3 billion share repurchase program reflecting the collective confidence in our New Frontier strategy and the strength of our balance sheet as well as management's commitment to return excess capital to our shareholders. Cash and liquid assets at the holding companies were $4.5 billion at March 31, which is above our target cash buffer of $3 billion to $4 billion. Beyond repurchases. Cash at the holding companies reflects the net effects of subsidiary dividends, payment of our common stock dividend and holding company expenses and other cash flows. In addition, we had a $1 billion subordinated debt issuance and redeemed $500 million of maturities in the quarter. Regarding our statutory capital, for our U.S. companies, our 2024 combined NAIC RBC ratio was 388%, which is above our target ratio of 360%. For our U.S. companies, preliminary first quarter 2025 statutory operating earnings were approximately $600 million, while net income was approximately $500 million. We estimate that our total U.S. statutory adjusted capital was approximately $16.4 billion as of March 31, 2025, down 6% from year-end 2024, primarily due to dividends paid, 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, let me comment on the risk transfer transaction that we announced yesterday, highlights shown on Page 9. As we have discussed in the past, MetLife Holdings is a well-seasoned and well-diversified legacy block. We continue to focus on our primary objectives to meet customer obligations, look for efficiencies in how we operate and seek opportunities to further optimize the business. As we have noted, we have continued to take a third-party perspective which helps us better manage the business internally, while also providing us optionality to appropriately accelerate the release of reserves and capital at the right value with the right strategic partner. This transaction with Talcott Resolution Life Insurance Company covers approximately $10 billion of current U.S. retail variable annuity and rider statutory reserves via funds withheld for the general account reserves and modified coinsurance for the separate account liabilities. This risk transfer significantly lowers our exposure to retail variable annuity tail risk by reducing account values by approximately 40%, which in turn would positively reduce our enterprise risk associated with capital markets and its related volatility. It is expected to deliver approximately $250 million in statutory value, consisting of a ceding commission and release of capital over time. Also, we expect the transaction will result in foregone adjusted earnings in MetLife Holdings of approximately $100 million annually. However, this will be offset by an annual hedge cost savings to the enterprise of roughly $45 million associated with this block of business. In addition, we have secured investment management mandates for MetLife Investment Management to manage roughly $6 billion of assets with Talcott, which supports our strategy to expand third-party fee income. Turning to Page 10. You can see how our VA balances have declined over time, consistent with our strategy. At our 2024 Investor Day in December, we highlighted the left side of the chart, showing the 26% drop in VA balances over the five-year period, from 2019 through 2024. And as shown on the right side of the chart, we expect total VA balances will further decline to $24.5 billion as of March 31, 2025, reflecting the reinsurance transaction with Talcott. Overall, this represents a more than 50% decline in VA balances since 2019, a positive development for MetLife's risk profile. In addition to lower balances, it is also important to note the remaining product mix which will include a significant portion of traditional group retirement variable annuities of roughly $9 billion. These include 403(b) and 457(b) annuities for retirement plans, which have limited guarantees. Let me conclude by saying that MetLife delivered a solid quarter, reflecting the strong underlying fundamentals across our portfolio of businesses. While the environment remains uncertain, we remain confident in delivering all weather performance achieved through a position of strength of a strong balance sheet, recurring free cash flow generation and a diversified set of market-leading businesses. As we embark on the new frontier, our strategic priorities allow us to accelerate responsible growth and generate attractive returns with lower risk. Our variable annuity reinsurance transaction with Talcott is another proof point of how MetLife has both the tools and commitment to generate long-term value for our stakeholders. And with that, I'll turn the call back to the operator for your questions.
Operator, Operator
Thank you. We will now begin the question-and-answer session. Your first question comes from the line of Jimmy Bhullar with JPMorgan. Please go ahead.
Jimmy Bhullar, Analyst
Hi, good morning. I had a question first on your spreads in the RIS business. If you look at the base yield, it was down, I think, around 11 basis points sequentially, around 13 bps year-over-year and spreads were down ex-VII, almost a similar amount so not sure if that's mix or I know you had interest rate gaps that you might not be benefiting from. But what's driving that? And should we assume a further decline or stabilization in spreads from these levels?
John McCallion, CFO
Jimmy, it's John. To answer your question, we need to look at RIS from a broader perspective. To summarize, we did see a decline in spreads sequentially, driven by rates and curve offsetting growth. Now, I'll let Ramy share some insights on growth that exceeded expectations, and then I will return to discuss spreads.
Ramy Tadros, Analyst
Hey, Jimmy. Thank you, John. Just to give you a sense of the growth momentum this quarter, you can see it in our balances year-over-year and sequentially. But we've got a number of notable wins in the quarter. We've got a very strong Q1 for PRTs with $1.8 billion of inflows. I would note Jimmy that all of these transactions were with sponsors who are Fortune 500 companies, which is really encouraging for us. We talked back in December about the very first U.K. funded re-deal that we did with a well-established U.K. insurer. We continue to see really good momentum for us in that market. Also in the U.K. market, we have a very robust pipeline in the U.K. longevity space, and that's coming off the back of the jumbo transaction that we executed in the quarter. And then last but not least, stable value. We are a leader in that market, and this has been a very strong quarter for us, and we capitalized on some of the market disruption. You put all of these together, we're seeing really strong momentum from an earnings perspective. It's coming from investment spreads, but it's also coming from underwriting and fees over time and you see that in the 8% growth in the liability balances. And for the full year, we expect to be at the upper end of that 3% to 5% balance growth that we guided you back in February. So this is a bit of a growth from a liability balances perspective? And maybe, John, I'll hand it back to you to talk about the spreads.
John McCallion, CFO
Yes, I wanted to start by addressing the sequential decline we've observed. As you noted, there was a 7 basis point drop in our core spread. Back in February, we anticipated this decline due to the roll-off of interest rate caps, which we expected would drag by five or six points. We planned to counteract this with certain management actions during the quarter. However, the interest rates and their trajectory ended up being different than expected, with lower rates and a flatter curve making it challenging to reposition the portfolio and utilize tools to mitigate the impact of the cap roll-off. Additionally, we experienced higher than anticipated paydowns in some structured securities and loans during the quarter. When these funds were redeployed, it was at lower spreads, particularly in the early part of the quarter. Both of these factors affected our ability to counterbalance the effects of the cap roll-off. Nevertheless, as Ramy mentioned, while our growth has likely exceeded expectations, the cap-related impacts were slightly lower, and we should stabilize moving into the second quarter, resulting in a relatively flat outlook concerning earnings expectations. I hope this clarifies the situation regarding these two items.
Jimmy Bhullar, Analyst
Okay. And then on your CRE portfolio, the main metrics are pretty similar with how they've been recently with loan to values and coverage ratios and it seems like things were starting to stabilize, but are you seeing indications that with all this uncertainty that the recovery is going to stall? Or what are you seeing in the crucial mortgage loan book?
John McCallion, CFO
Yes, that’s a good question. As you mentioned, real estate activity and office leasing has continued to show progress late in the year and into the first quarter. Our data indicates that office leasing activity in the first quarter was the strongest since mid-2019. Year-over-year, investment activity has increased about 10%. Overall, there has been positive momentum; however, we need to keep an eye on the uncertainty that exists, which may slow this momentum a bit. We believe the sector has reached a low point in values, as indicated by our loan-to-value ratios and debt service coverage ratio. I mentioned last quarter that this year and likely next year will see resolutions for many issues for which we’ve set aside reserves over the years. This is typically when resolutions occur, but it tends to be at the trough. We still think we are at that point. While conditions may improve, we will have to wait and see how long uncertainty lasts. In the last quarter, our real estate-related funds returned roughly 2%, showing some signs of improvement.
Jimmy Bhullar, Analyst
Thank you.
Operator, Operator
Your next question comes from the line of Tom Gallagher with Evercore ISI. Please go ahead.
Tom Gallagher, Analyst
Good morning. First question is on the risk transfer deal. I guess on its face, the pricing maybe it doesn't look so great in terms of, we'll call it, the earnings multiple of what you're giving up. But as we all know, this is kind of a pretty volatile higher tail risk. So I think that should be considered. But can you talk a bit about the way you approached it valuation-wise, I guess you're giving up 50 million roughly of net income. How much cash flow do you end up losing and then talk a little bit about how you view the tail risk and overall why this deal made economic sense for you? Thanks.
Ramy Tadros, Analyst
Sure. So Tom, it's Ramy here. Let me just maybe give you a sense of we got to the deal and then we'll tackle some of the specific questions you had. You should definitely look at this in the context of the new Frontier strategy that we talked about, in particular in the lower-risk pillar of that strategy. We have taken a very disciplined approach here as we looked at potential transactions, especially in the context of having a well-seasoned and well-managed book. But for us, the goal here is to create value for our shareholders and all our other stakeholders. So the reinsurance partner matters, the structure really matters, but so does the price and we do look at the price from a number of lenses including an economic lens when we think about the valuation of the book, and we definitely have a view of that, which the price was very much in line with and we also look at it in terms of the impact, if you will, from a loss of GAAP earnings perspective versus the seeding commission but you should look at that also in the context of the cost of hedging that we're also now are no longer incurring. So net-net-net, when you put that together, the value that we received was very much in line with our expectations. And it also removes a lot of the tail risk, which, as you know, the capital requirements for this business could be significantly higher should we see a downturn in the equity and the interest rate environment. So all of these things were part of our consideration. Maybe I'll let John talk about the cash flow pieces of this.
John McCallion, CFO
Yes. I believe your question summarized it well, Tom. We consider cash flow as the net result of the two factors. You could think of it almost as a change in technology, making it a good proxy for our situation. However, as Ramy pointed out, it's about what you sacrifice in a stable environment. If the environment shifts, the economics may also change. Equity markets have been on an upward trend for several years now, and we have higher interest rates. This was an opportunistic moment for us to secure the exit value and partner with someone we feel good about working with through this transaction.
Tom Gallagher, Analyst
Got you. Thanks. And then just my follow-up, can you comment on what your underwriting experience was like in MetLife Holdings this quarter between let's say, on the mortality side, for life insurance and then also on long-term care? Thanks.
Ramy Tadros, Analyst
It was very much in line this quarter across both the LTC book as well as the retail life book. So nothing to note here in terms of underwriting across MLH.
Operator, Operator
Your next question comes from the line of Ryan Krueger with KBW. Please go ahead.
Ryan Krueger, Analyst
Yes, thank you. Good morning. My first question is more general. I would like to hear your thoughts on the current environment and how it might be affecting your management of the company. For instance, do you expect any adjustments to your capital management or expense strategies due to the uncertainties? Or do you see things mostly continuing as they are right now?
Michel Khalaf, President and CEO
Yes, good morning, Ryan. Thank you for your question. It's Michel. We are certainly aware of the environment in which we operate. It's fair to say that the likelihood of a recession has increased. That said, our strategy, which we refer to as "all weather," does not rely on an overly optimistic outlook nor does it assume a severe recession. We remain very focused on executing our strategic pillars without any changes. Our capital management actions also reflect this stability, evidenced by the $3 billion authorization and a 4.1% increase in income and dividends per share. This demonstrates the confidence that our Board and we have in our financial position. Given the current environment, we are concentrating on the factors we can control, such as managing expenses. We aim to continue investing in strategic growth initiatives while carefully managing discretionary spending. Overall, I prefer not to use the term "business as usual," but we are firmly committed to our strategy and are encouraged by the underlying momentum we see across our businesses.
Ryan Krueger, Analyst
Thank you. And then in group benefits, PFO growth, I think ex participating policies was towards the lower end of your target. Can you give a little bit more color on what you're seeing and also how you think that may progress as the year goes along?
Ramy Tadros, Analyst
Thank you, Ryan, and good morning. Regarding our reported 2% growth, there are two main factors contributing to this figure. The first and most significant factor is the favorable mortality experience we observed from our participating contracts, as John mentioned. When we compare our life underwriting ratios year-over-year, we noted more than a 5-point decrease in mortality this quarter compared to the first quarter of 2024, which is a strong result from an underwriting perspective, particularly during a period typically characterized by higher mortality. It’s important to note that Q1 usually faces heavier mortality rates. This favorable mortality impacts our participating contracts by leading to lower death claims, which in turn results in reduced premiums. Excluding this factor, the underlying growth in PFO was about 4%, indicating that approximately 200 basis points of growth is hidden within our headline figure. The other factor influencing the quarter pertains to the rate adjustments we implemented on our dental block. As we have discussed several times in the past six months, we experienced a faster-than-anticipated increase in dental utilization. Our underwriting discipline compels us to act swiftly when we notice changes in market utilization. One is the most significant renewal date for our dental business. These actions have affected our persistency in the dental block; however, we maintained discipline in the market and achieved the necessary rate increases while also walking away from business that did not align with our target margins. Looking ahead, the dental rate adjustments are mostly behind us at this stage, and we are beginning to see the positive earnings effects reflected in our dental earnings. Considering the full year, we anticipate that both the impacts from participating contracts and dental adjustments will moderate. Therefore, we expect our full-year reported results to align with our guidance of 4% to 7%. Moreover, if you look at the underlying numbers excluding the participating contracts, there would be an additional 100 basis points or so. Lastly, given our strong results this quarter, we do not foresee any changes to our full-year earnings outlook for the group business.
Ryan Krueger, Analyst
Okay. Thank you.
Operator, Operator
Your next question comes from the line of Suneet Kamath with Jefferies. Please go ahead.
Suneet Kamath, Analyst
Thanks, good morning. Just wanted to ask on the buyback. It was obviously very strong in the first quarter. And in April, it was pretty modest. And I get your comment about kind of catching up to back activity in the fourth quarter. But was there anything in the month of April that was sort of precluding you from maybe leaning in a little bit? I don't know if this VA deal was big enough where you were blacked out. But anything going on with the timing there?
Michel Khalaf, President and CEO
Yes. Hi, Suneet, Michel here. I think April was in line with our expectations; we accomplished what we aimed to do without any impact from pending announcements. In the first quarter, we were somewhat limited in what we could do due to some pending announcements in the fourth quarter. However, moving forward, you can expect a more measured pace. Please don't consider the $1.4 billion from this quarter as a regular run rate. We will continue to be both opportunistic and deliberate in our activities. I want to emphasize that our approach to capital remains unchanged. Our top priority is funding appealing organic growth. Next, we'll seek strategic inorganic opportunities that meet our risk-adjusted hurdle rates, and PineBridge is a good example of that. Lastly, if we have surplus capital, we will return it thoughtfully over time, as we have consistently done.
Suneet Kamath, Analyst
Okay. That's fine. That makes sense. And then, I guess, for Ramy. Obviously, the PRT sales in the first quarter were pretty strong. But in markets like this where interest rates are moving around and equity markets are swinging around and maybe the funding status of pension plans or swinging around as well. Does that do anything to kind of activity in the market one way or the other? Just want to get a sense of how we should think about if this environment persists, what PRT could look like as we move through the year? Thanks.
Ramy Tadros, Analyst
Thank you, Suneet. I mean excessive market volatility does have an impact, I would say it's more of a timing impact in terms of from a plan sponsor perspective, it can be a distraction in terms of ensuring how they're kind of thinking about their ALM and in the context of highly volatile markets. But having said that, if you think about the space that we play in, in the PRT space, the jumbo space, these are planned sponsors who have been on a de-risking journey for a number of years. And therefore, as part of that de-risking journey, they are far more hedged, if you will, from a liability-driven perspective, both in terms of their interest rate exposure of the assets versus the liabilities and would be largely out of the kind of risky bucket of assets, equities, alternatives well before the point that they're ready to transact. So which that tells you the stability of the segment of PRT plan sponsors who would transact well-hedged and we wouldn't expect to see much change in their funding ratios. And therefore, we think there may be a temporary impact in terms of a distraction if you will, but we don't see that having a real change in terms of the pipeline of the transactions that will come through.
Operator, Operator
Your next question comes from the line of Wes Carmichael with Autonomous Research. Please go ahead.
Wes Carmichael, Analyst
Hi, good morning. First question on variable investment income. I think you have guided for a bit more normal return in 2025 and a pretty decent result in the quarter. But given the market volatility in April and some shelved IPOs in the wake of tariff announcements, are you expecting you can still come in at a more normal level for the year? And if you have any insight into Q2, that would be helpful?
John McCallion, CFO
Hi, Wes good morning, it's John. Yes. So VII in this quarter, I mean, private equity, as we mentioned in our opening remarks had a 1.6% return in the quarter. Just as a side note, we also saw over 600 million of distributions come through so well in excess of actually the earnings we saw in the quarter. Again, I would say, a function of our well-diversified seasoned portfolio in the private equity funds. We also had real estate funds on average come in and real estate-related funds come in around 2%. So lower than kind of the implied run rate from the guidance we gave, but above the fourth quarter, which was in line with the range we gave a quarter ago. And to your point around the outlook, look, while these investments have tended to lag public equity markets, public equity markets did very well last year. We saw, obviously, there's a number of factors why PE returns were lag there. But the current environment creates some challenge and an already difficult to project PE probably more challenging to predict in the current environment. So one of the things I mentioned in my opening remarks is that in light of this uncertainty, we plan to actually provide some preliminary information in early July on the VII and we should have decent insight. So just again, in light of the kind of the, I'd say, the unusual situation that we have, we'll look to do that as opposed to trying to forecast anything for now. So hopefully, that helps.
Wes Carmichael, Analyst
Yes, it does. Thanks, John. And I guess my second question, I know I've asked a couple of times before, but as we're nearing implementation of the ESR in Japan, I think there are a couple of conversations with the industry and the regulator on some treatment of long duration and FX-denominated products. Are you still feeling pretty good about implementation and any thoughts on how that folds into your expected reinsurance strategy?
John McCallion, CFO
Yes. I think you asked it a few times and we'll probably give you the same answer we've provided previously, which is that we're still feeling pretty good. With an effective date of April 1, there are probably three key points to consider. First, operational readiness. We believe we're in a good place. While there are aspects that aren't perfect, overall, we can manage through the collective challenges. We feel we have made significant progress with the new framework. Also, it's important to note that we have always priced under an economic framework in the past. Therefore, moving to this new approach doesn't really change our operations. We have always maintained an economic perspective alongside a statutory framework. This has been part of our strategy to ensure that good asset-liability management aligns with rates and currency in our products. Additionally, as we assess the situation now, there is nothing indicating that it would alter our dividend policy or our strategy in relation to Japan.
Wes Carmichael, Analyst
Great. Thank you.
Operator, Operator
Your next question comes from the line of Wilma Burdis with Raymond James. Please go ahead.
Wilma Burdis, Analyst
Hey, good morning. We just worked on an analysis of portfolio yield. And what we found is that men provides a very attractive risk-adjusted return. Could you just talk about how you market NIM and what the organic growth type look pipeline looks like there? Thanks.
John McCallion, CFO
Hi Wilma, thanks for that. Feel free to share that announcement or analysis; we'd like to see it, too. I believe we share a similar philosophy, especially regarding the clients we aim to serve. The pipeline continues to look strong. While various factors have influenced the past few years, we've seen steady growth in the client segments we cater to, and we expect that to continue. Regarding your point, we believe the quality of our products and solutions is distinct and offers significant long-term value for our clients and partners. Currently, things appear to be active with many opportunities for business development, and we're very optimistic about our five-year strategy. Hopefully, that provides some clarity.
Wilma Burdis, Analyst
Great. And could you just talk about the type of assets that you're managing for Talcott? Thank you.
John McCallion, CFO
Yes, we don't go into too much detail, but generally, there are $6 billion of assets that we obtained through an investment management mandate. Half of this is linked to certain assets involved in the transaction, while the other half is separate. As we developed a relationship with Talcott over time and shared some of our capabilities, we were able to collaborate and secure an additional mandate on top of that. This primarily relates to some public fixed income assets, including some overseas. I hope that provides clarity.
Operator, Operator
Your next question comes from the line of Joel Hurwitz with Dowling. Please go ahead.
Joel Hurwitz, Analyst
Hey good morning. Can you unpack the nonmedical health loss experience in the quarter? I get the seasonality, but was surprised to see it up a bit year-over-year? And I guess how is dental experienced this quarter versus last year's period?
Ramy Tadros, Analyst
Sure. It's Ramy here. So maybe let me start with the dental piece. So the performance of the dental business in this quarter was well in line with our expectations. Recall that Q1 just tends to be a higher utilization quarter as the benefit resets. And then I'll also just point you to what I just mentioned earlier with respect to the disciplined underwriting here in terms of the actions that we've been taking on 1/1, and we're certainly pleased with the outcome of those actions. And that will set us up nicely in combination with the heavy Q1 utilization quarter behind us to see a gradual decline for the nonmedical health ratio. And think of that for the full year being towards the midpoint of our range. The other parts of the ratio, disability continues to perform very much in line with our expectations. STD and LTD incidents came in right on the mark. We continue to see very strong recoveries in terms of the closures. I would say those are coming in slightly ahead of our expectations in the disability block. And the small headwind we did see in disability relates to delays in the social security administration approvals which did have somewhat of an impact this quarter, albeit small. So net-net, I would say, performing in line with our expectations and think of a full year number to be close to the midpoint of our range.
Joel Hurwitz, Analyst
Got it. Very helpful. And then switching gears. Other Asia sales were very strong in the quarter. Can you just unpack what you saw there? And then I guess with the increased geopolitical tensions, what are you seeing in April thus far?
Lyndon Oliver, Analyst
Joel, it's Lyndon here. Yes. So let me give you color on kind of the overall sales in Asia, and we'll cover what happens in Japan as well as what's going on in the rest of Asia. We've had a strong start to the year. First quarter sales were up 10% across the region. And we're on track to grow full year sales in line with our outlook of mid to high single digits. So let's start with Japan. We've had a good strong start. We've got strong market share across all our distribution channels, including the banca channel. And while we've seen some decline in the FX products in recent quarters, we are seeing momentum pick up. If you look at the sequential growth in the first quarter, it was strong. Now looking at April, Michel mentioned, we launched a new single premium life product in the bank channel. This has been very well received and we've got other actions planned during the rest of the year. So we expect this momentum to continue. Now going to the rest of Asia, outstanding quarter. Sales were up 41% from the prior year. And this is driven primarily by China, where we saw the addition of some new bank partners come on board and that really helped with the sales there. And also in Korea, very strong performance in our face-to-face channels both in Korea agency as well as in the independent channels. So I hope that helps.
Joel Hurwitz, Analyst
Thank you.
Operator, Operator
We have time for one more question, and that question comes from Nick Anido with Wells Fargo. Please go ahead.
Nick Anido, Analyst
Hi, good morning. Thanks. Just wanted to touch on Group Life and the expectation for the balance of the year, given it's been coming in pretty strong. Is it something you have confidence in for like a sustained period? Or is it more touch and go for the outer quarters?
Ramy Tadros, Analyst
Thanks for the question. Just maybe to comment on this quarter first. So we did see favorable incidents and really, you can draw almost a straight line between our results and the CDC population data results for the working age population. And that favorability has been manifesting itself for the last kind of couple of quarters and working its way into our ratios. I would say at this point, I can't speculate and I don't want to speculate if the favorability will continue for the rest of the year. It's too early to tell. But what may be useful is just to come back to our outlook guidance ratios. So remember, we guided to be at the midpoint of the lower half of our range. So think of that as kind of an 85.5% number. And that guidance always assumes a heavier Q1 mortality. So with Q1 behind us and Q1 being favorable, just a simple arithmetic here even if we continue not to see any further favorability, the simple arithmetic would have us towards the lower end of our range for the full year. So think about an 84 number for the full year compared to the guidance that we have given you before.
Nick Anido, Analyst
Got it. That's really helpful. And then I guess just on Chariot Re, can you guys give any update there? I think you previously said the expectation would be to do an initial back book deal out of Met, but any update there would be helpful? Thanks.
Michel Khalaf, President and CEO
Yes, hi. Nick, it's Michel. So really pleased with our progress, and we're excited about the growth opportunities that Chariot Re will allow us to capture. We're moving at pace with our cosponsor and Atlantic to fully capitalize and operationalize the company. The intention here, I'll just reiterate as to create a long-term partnership between MetLife and Chariot Re. And as we discussed at Investor Day, Chariot Re would enhance our capital flexibility and efficiency and allow us to generate liability growth beyond our balance sheet capacity if need be. And again, our plans are sort of on track, I would say, in terms of expecting to launch around midyear.
Operator, Operator
And that concludes our question-and-answer session. And I will now turn the conference back over to John Hall for closing remarks.
John Hall, Global Head of Investor Relations
Great. Thank you, operator, and thank you everybody for joining us. Have a great day.
Operator, Operator
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.