RZC

Management Statement and Operational Highlights

• Financial Results: Last night, RGA reported Q4 operating EPS of $7.75 per share, second consecutive record quarter. Adjusted operating return on equity for trailing 12 months was 15.7%, exceeding intermediate-term target range. Full year 2025 results included record operating EPS, 15.7% ROE, and 18% increase in in-force business margins.
• Capital Deployment: Deployed $2.5 billion into in-force transactions, reinstated share buybacks, and maintained $2.7 billion excess capital.
• Regional Performance: U.S. favorable due to management actions and variable investment income; EMEA with strong volume growth; APAC with growth momentum.
• Investments: Strong results boosted by favorable variable investment income from alternative portfolio; portfolio repositioning efforts ongoing.
• In-Force Management: Core strategy with various actions, $95 million favorable impact in Q4, ongoing activity but timing unpredictable.

Guidance

• EPS Growth: Intermediate-term target of 8% to 10% annual EPS growth.
• ROE: Intermediate-term target 13% to 15%, currently running at or above high end.
• 2026 Expectations: Variable investment income expected at 7%, in-force management actions projected to have more limited financial impact, capital deployed into in-force transactions around $1.5 billion, and $400 million excess capital to reduce financial leverage.

Segment Performance

• U.S. and Latin America Traditional: Favorable from in-force management actions and strong variable investment income, partially offset by unfavorable group claims experience.
• U.S. Financial Solutions: Benefited from the Equitable transaction, with earnings consistent with $60 million to $70 million guidance for the second half of 2025 and expected $160 million to $170 million in 2026.
• Canada Traditional: Favorable from group and Individual Life businesses; Financial Solutions in line with expectations.
• EMEA Traditional: Largely in line with expectations, with favorable other experience offset by modestly unfavorable claims; Financial Solutions had favorable longevity experience and strong growth.
• Asia Pacific Traditional: Good quarter with favorable underwriting margin and growth; Financial Solutions in line with expectations.
• Corporate and Other: Reported adjusted operating loss before tax, impacted by higher financing costs and general expenses.

Risks

• Biometric Claims Experience: Unfavorable economic claims experience in Q4, particularly in U.S. group business, with half of the result from that segment.
• Regulatory and Market Risks: Impact of regulatory changes, competition, and macroeconomic factors like interest rates and FX in regions like Japan.

Question and Answer

Q: Wes Carmichael on capital allocation and partnerships A: Axel Andre stated they're taking a balanced approach to capital deployment, targeting 20% to 30% total payout ratio, and Leslie Barbi mentioned they've been using external partners for decades and are open to continuing if it adds value.

Q: Joel Hurwitz on Group Health A: Axel Andre said they raised rates by 40% on average for U.S. health care excess book, and following a strategic review, they'll exit group health care lines of business; the business has ~$400 million annual premium and ~$25 million pretax run rate earnings.

Q: Jimmy Bhullar on Equitable block A: Axel Andre explained the Equitable transaction's benefits include repricing, higher asset yields, lower expenses, and capital efficiency, and the share of the business is not 75% of Equitable's entirety but a portion.

Q: Suneet Kamath on capital deployment earnings power A: Axel Andre said they view the 8% to 10% EPS growth target as an intermediate-term target, with capital deployment, traditional flow growth, and share repurchases contributing, and recent deployments like Equitable are ramping up earnings.

Q: Thomas Gallagher on LTC A: Jonathan Porter said they're happy with LTC business performance, focus on aligning with risk appetite and return expectations, and don't break down performance externally.

Q: John Barnidge on investment portfolio and AI A: Leslie Barbi said software lending exposure in investment portfolio is modest, less than 30 basis points, and they actively manage the portfolio considering AI trends.

Q: Alex Scott on European regulatory regime A: Tony Cheng and Axel Andre noted they're aware of regulatory changes but not seeing increased competition from multiline reinsurers affecting pricing yet.

Q: Michael Ward on attractive regions/product lines A: Tony Cheng said Asia has strong pipeline in product development and financial solutions, U.K. longevity market is strong, and U.S. benefits from industry realignment and biometric/underwriting strength.

Q: Thomas Gallagher on 2026 EPS expectations A: Axel Andre explained $24.75 run rate EPS for 2025, reiterating 8% to 10% EPS growth target, with assumptions including improved U.S. group experience, smaller in-force management impact, and 7% variable investment income.

Q: Taylor Scott on Japan macro volatility A: Tony Cheng and Jonathan Porter said Japan has strong tailwinds from regulatory changes, higher interest rates are good for earnings, and exposure to disintermediation risk in Japanese asset-intensive business is modest.