Reinsurance Group of America, Incorporated Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strong Quarter: Reported record operating EPS, excluding notable items, of $6.37 per share. Results were above expectations with good performance in Asia Traditional, EMEA, and U.S. Financial Solutions.
• Equitable Transaction: Positive contribution from the Equitable transaction closed in the quarter.
• New Business Momentum: Strong new business momentum with $2.4 billion of capital deployed year-to-date, including $1.5 billion into the Equitable transaction and $900 million into other transactions.
• Share Repurchases: Repurchased $75 million of common shares and will continue to balance capital investment and shareholder returns.
• Regional Highlights: North America exceeded new business targets, Asia Pacific performed well with favorable claims experience, and EMEA was a market leader with multiple successful transactions.
• In-Force Business: Value of in-force business margins increased by 16% over the past 3 quarters, indicating success in creating long-term value.

Segment Performance

• U.S. and Latin America Traditional: Modestly unfavorable claims experience, partially offset by favorable impact from in-force management actions.
• U.S. Financial Solutions: Reflected contribution from the Equitable transaction, partially offset by lower variable investment income.
• Canada Traditional: Unfavorable group experience, partially offset by favorable individual life claims experience.
• EMEA Traditional: Favorable underwriting margins.
• EMEA Financial Solutions: Favorable longevity experience and continued growth.
• Asia Pacific Traditional: Another good quarter with favorable claims experience and ongoing growth.
• Asia Pacific Financial Solutions: In line with expectations with a modest unfavorable impact from lower variable investment income.
• Corporate and Other: Reported an adjusted operating loss before tax due to lower variable investment income and higher general expenses.

Guidance

• Tax Rate: Expected tax rate for the full year remains 23% to 24%.
• Share Repurchases: Intention to be opportunistic with share repurchases based on capital position, transaction pipeline, and valuation metrics.
• Shareholder Return: Expect total shareholder return of capital through dividends and share repurchases to range between 20% to 30% of after-tax operating earnings on average.
• Equitable Transaction: Equitable transaction expected to contribute around $70 million pretax income in 2025, increasing to $160 million to $170 million in 2026 and approximately $200 million per year by 2027.

Risks

• Claims Experience Volatility: Favorable and unfavorable claims experience in different regions, including modestly unfavorable U.S. Traditional claims and favorable APAC/Canada claims.
• Regulatory Changes: Impact on capital and underwriting due to regulatory frameworks.
• Competitive Pressures: Concerns about RGA being perceived as more aggressive, but no change in risk tolerance; focus on exclusive, high-quality business aligns with long-term strategy.

Question and Answer

• Q: On U.S. claims activity in Traditional, unpack current experience.

A: Modestly unfavorable, primarily normal volatility, well below standard deviation.

• Q: Swiss Re report on mortality reduction from GLP-1 drugs.

A: Analysis aligned with central estimate, no material change to assumptions yet, numbers consistent with Swiss Re's central estimate.

• Q: Ruby Re structure and liabilities.

A: Focus on U.S. asset-intensive transactions, pipeline to be fully deployed by mid-2026, with a pipeline of existing transactions being seeded into the vehicle.

• Q: In-force actions update.

A: $45 million year-to-date, ongoing globally, part of ongoing business with no impact on new business relationships, rather strengthening them.

• Q: U.K. mortality assumption review impact.

A: Increased expectation, net economic effect neutral due to balanced book of business.

• Q: Equitable block accounting smoothing.

A: Roughly 50% of the Equitable block benefits from accounting smoothing of results over time.

• Q: Group headwind and repricing.

A: Short-term group business, all repriced by Jan 2026, expected profitability for all segments thereafter.

• Q: Competitive commentary on RGA being more aggressive.

A: No change in risk tolerance, focus on exclusive, high-quality business that plays to strengths, not pursuing tendered business outside sweet spot.

• Q: LDTI impact on earnings.

A: Capped cohorts cause some volatility, but LDTI still a benefit over time, with annual run rates increasing gradually to $25 million by 2040.

• Q: Japan economic solvency opportunity.

A: Driver of opportunity, selective on blocks with biometric and asset risk, leveraging long-standing client relationships.

• Q: Earnings power adjustment.

A: One quarter strong, year-to-date strong, better gauge over 3 quarters for sustainable earnings power, excited about growth trajectory from here.

• Q: Partnerships with alternative managers.

A: Use external relationships where scale or capabilities not feasible, but focus on biometric risk as sweet spot, not pure asset transactions.