REINSURANCE GROUP OF AMERICA INC Q3 FY2024 earnings call

• Record Earnings: Adjusted operating earnings excluding notable items were $6.13 per share, with adjusted operating return on equity excluding notable items for the past year at 15.5%, exceeding intermediate-term targets.
• Business Momentum: Deployed $1.4 billion of capital in 2024, over 50% higher than 2023; new business embedded value for 2024 already exceeds all of 2023.
• Product Development Strategy: Success in Asia with examples in Korea, Mainland China, Hong Kong; U.S. Traditional had strong new business wins including with American National; PRT and longevity market strong in U.S. and UK; Asia asset intensive business expanded in Korea.
• Balance Sheet Optimization: Initiated transaction to recapture retroceded business expected to generate $1.5 billion in long-term value; in-force business margins increased $4.6 billion over past three quarters.
• Capital Management: Closing final capital raise for Ruby Re, excess capital of ~$700 million, active in deploying capital into opportunities.

The U.S. and Latin America Traditional segment had favorable in-force management actions and rate increases, with slightly favorable claims experience but slightly unfavorable financial impact due to LDTI cohort. The U.S. Financial Solutions segment was below expectations due to lower new business contributions, except for a $600 million single premium U.S. PRT transaction. The Canada Traditional segment had modestly unfavorable experience but favorable year-to-date underlying mortality experience. The Canada Financial Solutions segment had a negative impact from a one-time item. The Europe, Middle East and Africa Traditional segment was modestly above expectations with favorable experience in the UK and continent. The EMEA Financial Solutions segment was above expectations due to strong new business. The Asia Pacific Traditional segment was above expectations with some one-time items and favorable claims experience. The Asia Pacific Financial Solutions segment was solid with favorable overall experience partially offset by delayed impact from transactions. The Corporate and Other segment reported a pretax adjusted operating loss of $18 million favorable due to higher investment income.

• 2024 Results: Adjusted operating earnings excluding notable items $6.13 per share, adjusted operating return on equity 15.5%.
• Full-Year Effective Tax Rate: Expected to be at lower end of 24%-25% range.
• Ruby Re: Closing final capital raise, total capital raise in higher end of $400 million to $500 million range.
• Retrocession Recapture: Expected $1.5 billion impact to value of in-force business margins over remaining life of business.

• Mortality Assumptions: Uncertainty around excess mortality over time, though modest impact on volatility.
• Accounting Impact: $136 million unfavorable impact from recapture of retroceded business, accounting for reinsurance recoverable embedded in reserves.

Q: Good morning. Congrats, Axel. Nice to hear your voice again. Question around the excess capital redefinition. Could you talk about utilization of purposes other than in-force organic? Could you see it optimizing the investment portfolio through stakes in asset managers similar to Velocity Partners back in 2022?

A: Hi, John, and thanks for the question. Yes, look, as you know, we – for use of capital, right, obviously, the primary use is towards growth of the business, so going into transactions. We have, of course, also a long-term track record of paying a dividend to shareholders and then, at times, buying back stock. Obviously, in the current environment, we're just so excited by the opportunities in front of us that we're redeploying capital into opportunities. That would include potential opportunities on the asset side that gives us access to private asset origination. Again, we have a long-term track record of doing so and that can absolutely be part of the foreseeable use of capital.

Q: Yes. Thanks. Good morning. I just wanted to start with some quick clarification. I think there might have been some confusion overnight. So just wanted to confirm that the decision to recapture this block was 100% your decision and not because for whatever reason, the counterparties that you had been using had some issues with the business or didn't want it. I just want to clarify that?

A: Yes. Suneet, thank you for the question. If it could be more than 100%, it would be. This was our decision. I make no mistake about it. The precondition for us to recapture the in-force block is us raising the retention and the block being seasoned in a certain amount of time. We've known this block, obviously, it's our business for over 10 years and it's been very, very highly profitable over that period of time. And when the treaty – obviously, treaty conditions allowed, we did kind of wait till COVID was over. We consider the risk elements and absolutely, we executed as quickly as we could.