Net income in the second quarter was $3.4 billion, up from $68 million a year ago.
Strong net income drove book value per share, excluding AOCI, other than FCTA growth, of 8%.
Adjusted earnings in the second quarter were $2.1 billion or $2.37 per share, up 186% from $0.83 per share a year ago.
We reported private equity gains of 9.7% in the second quarter compared with a negative 8.2% a year ago.
Our decision to sell most of our $2.5 billion hedge fund portfolio and increase the allocation to private equity has provided a better match for our long-dated liabilities, while creating significant value for our shareholders.
In the quarter, the Group Life mortality ratio was 94.3%, below the 106.3% from last quarter but still above the top end of our guidance range.
In Latin America, we had $66 million of COVID losses, again, below the $150 million of COVID losses from Q1, but still above normal.
In the U.S. Group business, sales through the first half of 2021 are 39% higher than they were in the first half of 2020 and if current trends hold, 2021 will be a record sales year.
In Latin America, sales are up 55% year-over-year.
On a year-over-year basis, Asia sales are up 42%, while EMEA sales are up 20%.
Versant has now been part of our results for two quarters and in Q2, it contributed 6 points of year-over-year growth in U.S. Group premiums, fees and other revenues, consistent with our expectations.
Year-over-year request for vision care proposals are up more than 20% among our national account customers.
More than 500 employers now offer MetLife pet insurance as a voluntary benefit to their employees and we believe our best-in-class product will continue to make gains in this highly attractive and underpenetrated market.
In early April, we also closed on the sale of our Auto and Home Business to Farmers Insurance for $3.94 billion in cash.
The 10-year strategic partnership we forged allows each company to focus on its core strengths: Farmers' 90 years of P&C underwriting and service excellence and MetLife's unrivaled distribution reach in the U.S. Group Benefits space.
In the quarter, we delivered a direct expense ratio of 11.4% and we now expect to beat our 12.3% target ratio, not only for all of 2021, but for 2022 as well.
What we have instead is a publicly disclosed direct expense ratio target that we have brought down by 200 basis points over the past five years and promise to keep there.
Our strategic decision to sell Auto and Home contributed to a $6.5 billion cash buffer as of June 30, well above our target range.
We repurchased $1.1 billion of common shares in the second quarter and another $248 million of common shares so far in the third.
And yesterday, our Board approved a new $3 billion share repurchase authorization.
This is on top of the $475 million we have remaining on our December 2020 authorization.
As we did over 100 years ago with our visiting nurses program, MetLife has mobilized to make a positive contribution to advance public health.
In Nagasaki, Japan, we've opened 6,500 square feet of our headquarters as a free vaccination site.
MetLife Foundation has committed $500,000 to delivering vaccines to underserved communities across the U.S. and our medically trained staff are volunteering to administer doses at vaccine sites.
At our 2019 Investor Day, we said our Next Horizon Strategy would generate tangible benefits for shareholders: a 12% to 14% adjusted ROE; $20 billion of distributable cash over five years; and an additional $1 billion of operating leverage to self-fund growth.
Please note, in the appendix, we have also provided an updated 25 basis points sensitivity for our U.S. long-term interest rate assumption.
Starting on Page 3.
Net income in the quarter was $3.4 billion or approximately $1.3 billion higher than adjusted earnings.
This variance was primarily due to the net investment gains of $1.3 billion, of which $1.1 billion relates to the sale of our Property & Casualty business to Farmers Insurance.
Additionally, adjusted earnings include one notable item of $66 million related to a legal reserve release.
On Page 4 you can see the year-over-year comparison of adjusted earnings by segment excluding notable items.
As I previously noted, there was one notable item of $66 million in 2Q of '21 and no notable items for the prior year period.
Adjusted earnings per share, excluding the notable item, was $2.30, benefiting from strong returns in our private equity portfolio but show most of the year-over-year variance.
Regarding non-medical health, the interest adjusted benefit ratio was 73.8% in 2Q of '21, within its annual target range of 70% to 75%, but higher than the prior year quarter of 58.5%, which benefited from extremely low dental utilization and favorable disability incidence.
Group Benefits sales were up 39% year-to-date, primarily due to higher jumbo case activity and remain on track to deliver a record sales year in 2021.
Adjusted PFOs were $5.6 billion, up 29% year-over-year.
Several factors contributed to the strong year-over-year growth, including a $500 million impact relating to dental premium credits and the establishment of a dental unearned premium reserve, both reducing premiums in the second quarter of 2020, which collectively contributed 13 percentage points to the year-over-year growth rate.
In addition, 4 percentage points were related to higher premiums in the current quarter from participating contracts, which can fluctuate with claim experience.
After considering these factors, underlying PFO growth for Group Benefits was roughly 12%, driven by solid volume growth across most products, including continued strong momentum in voluntary and the addition of Versant Health.
Retirement and Income Solutions or RIS adjusted earnings were $654 million, up $462 million year-over-year.
RIS investment spreads were 224 basis points, up 199 basis points year-over-year, primarily due to higher variable investment income.
Spreads, excluding VII, were 98 basis points, up 13 basis points year-over-year due, in part, to sustained paydowns in our portfolios of residential mortgage loans and residential mortgage-backed securities, a partial recovery in real estate equities and lower LIBOR rates.
RIS liability exposures, including U.K. longevity reinsurance, grew 8% year-over-year due to strong volume growth across the product portfolio, as well as separate account investment performance.
Adjusted earnings were up 103% and 91% on a constant currency basis, primarily due to higher variable investment income.
Asia's solid volume growth also contributed to the strong performance driven by higher general account assets under management on an amortized cost basis, which were up 7% and 6% on a constant currency basis.
Additionally, while against a weak 2Q of '20, Asia sales were up 42% year-over-year on a constant currency basis, demonstrating the resiliency in the business.
Latin America adjusted earnings were down 27% and 38% on a constant currency basis, primarily driven by unfavorable underwriting and unfavorable equity markets related to the Chilean encaje, which had a negative 1.5% return in the quarter versus a positive 14% in 2Q of '20.
The impact on Latin America's second quarter adjusted earnings was approximately $66 million after tax.
Latin America adjusted PFOs were up 12% year-over-year on a constant currency basis and sales were up 55% driven by solid growth in all markets.
EMEA adjusted earnings were down 19% and 23% on a constant currency basis, primarily driven by higher COVID-19-related claims in the current period compared to low utilization in the prior year period.
The current quarter has also benefited from a favorable refinement to an unearned premium reserve positively impacting adjusted PFOs and adjusted earnings by approximately $15 million after tax.
In addition, Poland increase contributed roughly 10% to run rate earnings that will be reported in divested businesses beginning in the third quarter.
EMEA adjusted PFOs were up 8% on a constant currency basis and sales were up 20% on a constant currency basis, primarily due to higher credit life sales in Turkey and solid growth in U.K. employee benefits.
MetLife Holdings adjusted earnings were up $515 million year-over-year.
The life interest adjusted benefit ratio was 47.1%, lower than the prior year quarter of 59.1% and below our annual target range of 50% to 55%.
Corporate and Other adjusted loss, excluding the favorable notable item of $66 million related to a legal reserve release, was $126 million.
This result compared favorably to the adjusted loss of $289 million in 2Q of '20 due to higher net investment income, lower expenses and lower preferred stock dividends.
The company's effective tax rate on adjusted earnings in the quarter was 21.6% and within our 2021 guidance range of 20% to 22%.
Now, I will provide more detail on Group Benefits mortality results on Page 5.
The Group Life mortality ratio was 94.3% in the second quarter of 2021, which is above our annual target range of 85% to 90%.
COVID reported claims in 2Q of '21 were roughly 4.5 percentage points, which reduced Group Benefits adjusted earnings by approximately $75 million after tax.
Additionally, the quarter included a higher level of life claims above $2.5 million and an additional level of excess mortality that appears to be COVID-related.
These, collectively, impacted the ratio by an additional 2.7 percentage points or $40 million after tax.
There were approximately 50,000 COVID-19-related deaths in the U.S. in the second quarter of '21.
Now let's turn to Page 6.
This chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.2 billion in the second quarter of 2021.
This very strong result was mostly attributable to the private equity portfolio, which had a 9.7% return in the quarter.
While all private equity asset classes performed well in the quarter, our venture capital funds, which accounted for roughly 22% of our PE account balance of $11.3 billion with the strongest performer across subsectors with a roughly 19% quarterly return.
On Page 7, second quarter VII of $950 million post-tax is shown by segment.
As we have previously noted, RIS, MetLife Holdings and Asia generally account for approximately 90% or more of the total VII and are split roughly one-third each, although it can vary from quarter-to-quarter.
Turning to Page 8.
This chart shows our direct expense ratio over the prior five quarters and full year 2020, including 11.4% in the second quarter of '21.
But as Michel noted, we expect full year '21 and '22 direct expense ratio to be our 12.3% guidance.
Now I will discuss our cash and capital position on Page 9.
Cash and liquid assets at the holding companies were approximately $6.5 billion at June 30, which is up from $3.8 billion at March 31 and well above our target cash buffer of $3 billion to $4 billion.
The sequential increase in cash at the holding companies was primarily due to the proceeds received from our P&C sale to Farmers Insurance of $3.9 billion.
In addition, HoldCo cash includes the net effects of subsidiary dividends, payment of our common stock dividend, a $500 million redemption of preferred stock, share repurchases of $1.1 billion, as well as holding company expenses and other cash flows.
For our U.S. companies preliminary second quarter year-to-date 2021, statutory operating earnings were approximately $2.8 billion, while net income was approximately $1.6 billion.
Statutory operating earnings increased by approximately $1.2 billion year-over-year, driven by lower variable annuity rider reserves and an increase in investment margin.
Year-to-date 2021, net income decreased by $286 million as compared to the first half of 2020.
We estimate that our total U.S. statutory adjusted capital was approximately $18.5 billion as of June 30, 2021, up 9% compared to December 31, 2020 when excluding our P&C business sold to Farmers.
Finally, the Japan solvency margin ratio was 873% as of March 31, which is the latest public data.
The sequential decline in the Japan SMR from 967% at December 31 reflects seasonal dividends and the rise in U.S. interest rates in the quarter ending March 31.

Summary:
Adjusted earnings in the second quarter were $2.1 billion or $2.37 per share, up 186% from $0.83 per share a year ago.