Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reinsurance Group of America Inc (RGA, Financial) reported adjusted operating earnings of $5.48 per share, continuing a trend of strong bottom-line results.
- The company achieved an adjusted operating return on equity of 15.3% for the past 12 months, exceeding intermediate-term targets.
- RGA has experienced five straight quarters of positive underwriting results, indicating consistent performance.
- The company deployed $307 million into in-force transactions, demonstrating effective capital redeployment.
- RGA's new business embedded value exceeded goals for both the quarter and year-to-date, driven by a high number of transactions and expected returns.
Negative Points
- The effective tax rate for the quarter was 25.5%, above the expected range, primarily due to income earned in foreign jurisdictions.
- The US Financial Solutions segment underperformed due to the timing of recent new business not yet at a full earnings rate and some one-time items.
- Canada's traditional results reflected modestly unfavorable mortality experience.
- The Europe, Middle East, and Africa segment experienced unfavorable results in the traditional business, primarily in the UK.
- The Corporate and Other segment reported a pretax adjusted operating loss of $44 million, slightly worse than the expected quarterly average run rate due to higher incentive compensation accruals.
Q & A Highlights
Q: What was the earnings benefit from in-force management actions this quarter? Has there been an increase in these actions, or is this a one-off?
A: The in-force management is an ongoing part of our daily activities. On a consolidated basis, the impact of the in-force actions was a positive of about $100 million. (Todd Larson, CFO)
Q: What's driving the continued favorable experience in the Asia Pacific Financial Solutions business? Is this trend sustainable?
A: The business continues to ramp up with strong momentum due to successful new treaties and business. Our clients are reacting well to the solutions we provide, which generally have nice margins. (Todd Larson, CFO)
Q: Can you clarify the $100 million in-force action benefit? Is that a pretax number?
A: Yes, that's a pretax number and it's net of some client reporting adjustments and other items. (Todd Larson, CFO)
Q: How did the retrocession to Ruby Re impact the income statement for the US Financial Solutions segment this quarter?
A: We did not have a specific retrocession in the second quarter, but we will have some as we go forward. (Todd Larson, CFO)
Q: Should we expect the earnings impact from new business in Financial Solutions to correct itself next quarter or is it a longer-term issue?
A: Generally, new business takes about a year to 18 months to ramp up to full earnings rate. (Todd Larson, CFO)
Q: When will you start seeding ongoing business into Ruby Re?
A: We are in the process of retroceding some business and expect to see some retrocessions to Ruby Re throughout the remainder of this year. (Todd Larson, CFO)
Q: How do you think about target debt to capital, including hybrids, for additional transactions?
A: We generally target around 20% senior debt to equity and 35% all-in combined with hybrids. We also consider alternative forms of capital like Ruby Re and strategic retrocessions. (Todd Larson, CFO)
Q: Can you comment on your confidence in your reserve assumptions given the challenges faced by a main competitor?
A: We have a rigorous approach to pricing and risk management. Our underlying biometric experience has been favorable for the last five quarters. (Jonathan Porter, Chief Risk Officer)
Q: Should we expect more capital deployment in the second half of the year?
A: Our pipelines are full, and we have plenty of capital to execute on transactions. We do not see any reason to slow down in Q3 and Q4. (Tony Cheng, CEO)
Q: How is the market for asset-intensive reinsurance in Japan evolving?
A: The market is fully embracing it. We have been there since 1998 and have built strong relationships and trust with clients and regulators. This has led to repeat transactions and a growing pipeline. (Tony Cheng, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
