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RGA(RGA) - 2024 Q3 - Earnings Call Transcript
RGARGA(RGA)2024-11-01 18:00
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Financial Data and Key Metrics - Adjusted operating earnings excluding notable items were 613pershare,arecordquarterforthecompany[6]−Adjustedoperatingreturnonequity(ROE)excludingnotableitemswas1556 13 per share, a record quarter for the company [6] - Adjusted operating return on equity (ROE) excluding notable items was 15 5% over the past year, exceeding intermediate-term targets [6] - Pretax adjusted operating income was 314 million for the quarter, or 362pershareaftertax,whileexcludingnotableitems,itwas3 62 per share after tax, while excluding notable items, it was 508 million or 613pershareaftertax[25]−Thevalueofin−forcebusinessmarginsincreasedby6 13 per share after tax [25] - The value of in-force business margins increased by 4 6 billion or 13 9% over the first nine months of 2024, reaching 376billion[27][43]−Premiumsgrewby3237 6 billion [27][43] - Premiums grew by 3 2% for the quarter, with traditional business premiums up 8 5% for the quarter and 7 9% year-to-date on a constant currency basis [28][29] Business Line Performance - In Asia, the company saw favorable conditions, particularly in Korea, Mainland China, and Hong Kong, with exclusive transactions driving significant growth [9][10][11][12] - The U S Traditional business had a strong quarter, with over 20 new business wins, including a significant transaction with American National [15] - The Pension Risk Transfer (PRT) and longevity market in the U S and UK showed strong performance, with a robust pipeline and record new business in the UK [16] - The Asia asset-intensive business expanded in Korea, completing two coinsurance transactions, including one with a market leader for an asset size equivalent to approximately 500 million [17] Market Performance - In Asia, the company linked strategies, capabilities, and data across the region, tailoring and innovating for each market [14] - The U S market presented increasingly attractive opportunities, with strong premium growth of 6 7% for the quarter [29] - The UK market continued to perform well, with a market-leading digital underwriting system driving exclusive business wins [16] Strategic Direction and Industry Competition - The company focused on long-term shareholder value through optimizing new business activities and balance sheet management [7] - Exclusive and higher-value business, termed "creation business," has been the majority of new business embedded value for the past one to two years [8] - The company is actively exploring alternative capital sources, including the imminent completion of a capital raise for Ruby Re [21] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum, strategy, and execution, with a focus on sustaining future growth and diversifying capital sources [23] - The company expects to continue seeing attractive opportunities across geographies and business lines, with a strong pipeline for future growth [45] Other Important Information - The company initiated a transaction to recapture retroceded business, expected to generate 15billioninlong−termvalueandbeaccretivetoROEandPTAOIin2025andbeyond[19]−Theeffectivetaxrateforthequarterwas231 5 billion in long-term value and be accretive to ROE and PTAOI in 2025 and beyond [19] - The effective tax rate for the quarter was 23%, below the expected range, primarily due to income earned in non-U S jurisdictions [29] - The company completed the annual actuarial assumption review, resulting in a 58 million unfavorable impact to current period pretax adjusted operating income but a positive 100 million contribution to the value of in-force business margins [30] Q&A Session Summary Question: Excess Capital Redefinition - The company primarily uses capital for business growth, including potential opportunities on the asset side, such as private asset origination [47] Question: Growth Opportunity in Asia - The company leverages its strong local teams and biometric capabilities to adapt and create new products, which can be exported to other global markets [49][50] Question: Recapture Decision - The decision to recapture the in-force block was entirely the company's, driven by raising the retention limit and the block's profitability over the past 10 years [52] Question: Capital Backing for Recaptured Business - The recapture increases mortality exposure by 1% to 2%, with the excess capital figure already including the slight increase in risk capital [54] Question: Long-Term Care (LTC) Exposure - The company has modest LTC exposure, with 4 billion of reserves on the books, and will consider transactions if the risk aligns with its thresholds [59][60] Question: Mortality Assumptions - The company expects excess mortality to continue for four to five years, with modest reserve releases consistent with recent experience [62] Question: Balance Sheet Optimization - The company is in the early stages of portfolio optimization and in-force management actions, with significant opportunities remaining [74] Question: Ruby Re Economics - Ruby Re generates fee streams from origination, admin, and asset management, contributing to the company's earnings [78] Question: Japan Regulatory Environment - The company sees early-stage opportunities in Japan due to regulatory changes, with clients spreading transactions over several years [82][83] Question: U S Financial Solutions Performance - The U S Financial Solutions segment saw lower contributions from new business, but the PRT side performed well [85] Question: Recapture Volatility - The recapture adds minimal volatility, with 90% of the business in uncapped cohorts and low double-digit millions of volatility expected annually [88][89] Question: Excess Capital and Ratings - The company's excess capital view incorporates internal, regulatory, and rating agency perspectives, with third-party validation of the value of in-force business [95][96]