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Adjusted Operating Earnings Per Share: $6.02
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Adjusted Operating Return on Equity: 14.8% for the past 12 months
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Pretax Adjusted Operating Income: $516 million for the quarter
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Reported Premiums: Increased by 58.8% for the quarter
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Effective Tax Rate: 22.4% on pretax adjusted operating income
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Book Value Per Share: Increased to $146.96
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Capital Deployment: Record $737 million into in-force transactions
Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Reinsurance Group of America Inc reported its highest ever quarterly adjusted operating earnings of $6.02 per share.
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The company achieved a 14.8% adjusted operating return on equity for the past 12 months, surpassing intermediate targets.
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All four geographic regions and both the Traditional and GFS businesses met or exceeded their run rates, with particularly strong performance in the U.S. Traditional segment.
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Record capital deployment into in-force transactions amounted to $737 million, indicating strong new business activity and strategic capital redeployment.
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Reinsurance Group of America Inc was rated #1 for the 13th consecutive year on NMG Consulting's Global all respondents Business Capability Index, highlighting strong external recognition and operational excellence.
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The U.S. Financial Solutions results were slightly below expectations due to lower variable investment income.
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The Corporate and Other segment reported a pretax adjusted operating loss of $38 million, aligning with expected quarterly average run rates but still a loss.
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Under LDTI, certain upfront losses in net income are expected due to accounting standards, particularly noticeable in PRT transactions.
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While the company has a strong pipeline, there is an inherent risk in relying on the closure and success of these deals for future performance.
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Competitive pressures are intensifying, especially in markets like Japan, where more competitors are validating the business model that Reinsurance Group of America Inc has pioneered.
Q: In your comments, you talked about transactions not considered and talked about exclusive transactions. Can you maybe expound on that a little bit? How much of growth is coming from exclusive? And with others talking about a more competitive environment for certain parts of the institutional market, should exclusive continue to grow as I know you like creation REIT? A: Tony Cheng - President, CEO & Director: Exclusives have been part of our DNA really since the start of the organization. We've set higher goals on the exclusive proportion of business relative to last year and were definitely -- there are internal metrics that we're definitely performing extremely well against. Exclusives can -- RGA is quite uniquely positioned because we take both the asset and the biometric risk. A lot of reinsurers and competitors focus on the asset side, some focus on the biometric. Us being really the only U.S.-based global life and health reinsurer allows us to take both the asset and the biometric side. And that's what we call our sweet spot.
Q: My follow-up question, I know there was record deployment of capital into in-force, and I think you said $150 million improvement in excess capital as that ceded. But how should we be thinking about buybacks within the framework of the capital allocation? Is it more of a timing with that ceding? Or can you talk about that a little bit? A: Todd Cory Larson - Senior EVP & CFO: John, it's Todd. Yes. No, we -- as you know, we manage capital over time. And as Tony mentioned, we do like to deploy capital back into the business where we like the transaction, the risk return profile. We've maintained a pretty steady dividend over time. And we've always balanced it out with share repurchases when we didn't see an active pipeline.
Q: First is on your B36 derivative, and actually, not -- so first one is really just the difference between net income and operating income, just to broadly think about the below the line overall. I understand that a lot of that came from central risk transfer deals this quarter because of the onetime impact. But as you think about future PRT deals, as you think about becoming more optimistic in that area, are there ways to further minimize the impact of the below the line from that particular line or no? A: Todd Cory Larson - Senior EVP & CFO: Yes. So specific to the PRT, it's -- that upfront loss, if you want to call it that, is -- it's really as a result of LDTI adoption and accounting because we have to discount the liabilities at a lower rate than what the investment yield is just the way the accounting standard is written.
Q: Second one is really on your biometrics. Obviously, definitely a lot of tailwind and even potentially more tailwind coming up from biometrics. But can you maybe give us a little bit more details in terms of how you think about the potentials of the biometrics going forward and other potential risks there as well, either a specific geography where you think you can take more advantage of the biometrics? Or are there any regulatory risks that we should be aware of going forward? A: Tony Cheng - President, CEO & Director: Yes. Maybe I'll start, and then I'll hand it over to Jonathan to get into more specifics. I mentioned in my comments the many tailwinds we have. And I'll sort of just share with you at a company level, just some of them. One is the interest rates that are higher than historic. One is some of the changing capital regulations that are creating opportunities around the world.
Q: So first, just a question for Jonathan. If we look at industry or population that's -- it seems like based on CDC data that they're still fairly elevated -- improved from COVID times, but still elevated versus pre-COVID, but it seems like your results have actually been pretty good. So what is it that you're seeing in your business that's different than the general population trends? A: Jonathan William Porter - Executive VP & Global Chief Risk Officer: Yes. Thanks for the question, Jimmy. And you're right. I mean, what we see in the CDC data is that excess mortality is still elevated. I think it's a single -- mid-single-digit percentages in 2023 when you look at the actual experience in the population. I mean, as the excess mortality starts to come down, which is the trend definitely over the last couple of years, it starts to get more difficult to map that directly to between population and an insured book of business, so the differences are the absolute level of excess mortality is lower.
Q: And then maybe for Tony. If there are improvements in life expectancy and mortality, you obviously would be a big beneficiary given that you've got a lot more exposure to mortality versus longevity. But it doesn't seem like companies are pricing the longevity business and pension business based on expected improvements in mortality. And obviously, they're not -- it's not a given that, that would happen as well. But how are you pricing your longevity business? Are you baking in the cushion for potential better life expectancy because if you were, then you'd have a hard time being competitive in the market? Or are you okay pricing based on the actual data given that you've got more exposure to mortality anyway? A: Tony Cheng - President, CEO & Director: Thank you, Jimmy, very much for the question. Look, first key point is the way we set our mortality and longevity assumptions are very consistent, right? I mean at the end of the day, they're two sides of the same coin. They both form a mortality. So whatever we do on the mortality side, we'll do on the longevity side.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
