MET Q2 Deep Dive: Variable Investment Income and Underwriting Pressure Shape Results

Global insurance giant MetLife (NYSE:MET) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 4.1% year on year to $17.92 billion. Its non-GAAP profit of $2.02 per share was 6.3% below analysts’ consensus estimates.

Is now the time to buy MET? Find out in our full research report (it’s free).

StockStory’s Take

MetLife’s second quarter was marked by a 2.9% negative market reaction, reflecting investor concerns over results that fell short of Wall Street expectations. Management cited less favorable underwriting, especially in Group Benefits, and lower variable investment income as primary headwinds. CEO Michel Khalaf described the underwriting experience as “within normal fluctuations,” but acknowledged challenges in both life and non-medical health, while also noting strong momentum in Asia and Latin America. The quarter was further impacted by a handful of large disability claims, which management downplayed as non-recurring.

Looking ahead, management expects sequential improvements in underwriting margins, particularly in non-medical health, citing seasonal patterns and stabilization of claims experienced in July. CEO Michel Khalaf emphasized the company’s focus on driving growth through strategic transactions, technology investments, and new product launches, especially in Asia and international markets. Management remains confident in the trajectory of MetLife’s New Frontier strategy, with CFO John McCallion stating, “We remain confident in delivering all weather performance achieved through a position of strength with a strong balance sheet.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to lower investment margins, underwriting volatility in Group Benefits, and strong international sales momentum, while discussing the impact of recent strategic transactions and expense discipline.

• Group Benefits underwriting volatility: Management noted that less favorable life and non-medical health underwriting drove down Group Benefits earnings versus last year. A small number of large disability claims contributed to the result, but these were deemed within normal quarterly variability and not a long-term trend.
• Variable investment income headwind: Lower variable investment income, especially in private equity returns, was a key drag across multiple business segments. CFO John McCallion explained that Asia holds over 40% of variable investment income assets, amplifying the earnings impact of market fluctuations in that region.
• Asia sales momentum: Management highlighted robust growth in Japan and Korea. Successful new product launches, particularly in foreign currency and single premium annuity products, propelled sales up 29% in Japan and 36% in Korea year over year.
• Strategic transactions: The company advanced its New Frontier strategy through the Chariot Re reinsurance partnership, the acquisition of PineBridge Investments, and a risk transfer deal with Talcott Financial Group. These deals are expected to enhance MetLife’s ability to manage capital and expand its investment management platform.
• Expense discipline and capital return: MetLife reported a direct expense ratio of 11.7%, beating its annual target and underscoring ongoing cost control. The company returned $900 million to shareholders in the quarter through dividends and share repurchases, maintaining a strong liquidity position.

Drivers of Future Performance

MetLife’s outlook is shaped by anticipated improvements in underwriting experience, ongoing growth in international markets, and execution of its New Frontier strategy.

• Underwriting normalization expected: Management projects that non-medical health margins will improve in the coming quarters, supported by seasonal dental trends and stable disability claims. The company does not foresee macroeconomic factors causing further deterioration and expects a 200-basis-point improvement in the non-medical health benefit ratio sequentially.
• International market growth: Continued strong sales in Asia, especially through enhanced product offerings in Japan and Korea, are expected to drive top-line performance. Management anticipates Asia sales to remain at the top end of guidance, with LatAm and EMEA also contributing through diversified distribution channels and digital ecosystem partnerships.
• Strategic initiatives and capital deployment: The closing of PineBridge Investments, further Chariot Re transactions, and the Talcott risk transfer are set to strengthen MetLife’s investment management capabilities and risk profile. Execution of these strategies is expected to support recurring free cash flow and maintain a robust capital position, despite ongoing headwinds from variable investment income.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely track (1) the pace of underwriting margin recovery, especially in Group Benefits and non-medical health, (2) sustained sales momentum and new product launches in Asia and international markets, and (3) the progress and impact of strategic transactions such as PineBridge, Chariot Re, and the Talcott risk transfer. Execution in these areas will be key markers for MetLife’s ability to deliver on its growth strategy.

MetLife currently trades at $75.27, in line with $76.03 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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