• Adjusted Operating Earnings: $6.13 per share, excluding notable items.
• Adjusted Operating Return on Equity: 15.5%, excluding notable items.
• Capital Deployment: $1.4 billion deployed into transactions in 2024, over 50% higher than 2023.
• Pretax Adjusted Operating Income: $314 million for the quarter, or $3.62 per share after tax.
• Pretax Adjusted Operating Income (Excluding Notable Items): $508 million for the quarter, or $6.13 per share after tax.
• Premium Growth: 3.2% increase for the quarter; traditional business premium growth of 8.5% for the quarter.
• Effective Tax Rate: 23% for the quarter, expected to be at the lower end of 24% to 25% range for the full year.
• Value of In-Force Business Margins: Increased by $4.6 billion or 13.9% in the first nine months of 2024.
• Book Value Per Share: $151.79, representing a compounded annual growth rate of 10.4% since the beginning of 2021.
• Excess Capital: Approximately $700 million at the end of the quarter.

• Warning! GuruFocus has detected 7 Warning Signs with RGA.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Reinsurance Group of America Inc (NYSE:RGA) reported record adjusted operating earnings of $6.13 per share, exceeding intermediate-term targets.
• The company achieved a 15.5% adjusted operating return on equity, surpassing expectations.
• RGA deployed $1.4 billion of capital into transactions in 2024, marking a 50% increase from 2023.
• Strong business momentum was demonstrated through exclusive transactions and significant wins in Asia, the US, and the UK.
• The company successfully initiated a transaction to recapture retroceded business, expected to generate $1.5 billion in long-term value.

Negative Points

• The completion of the annual actuarial assumption review resulted in an unfavorable $58 million impact on current period pretax adjusted operating income.
• The decision to recapture retroceded business led to a $136 million unfavorable impact on pretax adjusted operating income for the third quarter.
• US financial solutions segment results were below expectations due to lower contributions from new business.
• Canada's financial solutions segment experienced a negative impact from a modest one-time item.
• The effective tax rate for the quarter was 23%, which was below the expected range, primarily due to income earned in non-US jurisdictions.

Q & A Highlights

Q: Could you talk about the utilization of excess capital for purposes other than in-force organic growth? Could it involve optimizing the investment portfolio through stakes in asset managers? A: Axel Andre, CFO: Our primary use of capital is towards business growth, including transactions. We also have a history of paying dividends and buying back stock. Currently, we're excited about redeploying capital into opportunities, which could include asset side opportunities that give us access to private asset origination.

Q: How can RGA leverage its success in Asia to other global markets, considering demographic trends like aging populations? A: Tony Cheng, CEO: We are already exporting successful strategies across Asia, leveraging strong local teams and biometric capabilities. For example, simplified underwriting strategies from Korea have been applied in China. We adapt and create new products based on local market needs and can export these innovations globally.

Q: Can you confirm that the decision to recapture the block was entirely RGA's decision and not due to issues with counterparties? A: Tony Cheng, CEO: Yes, the decision was entirely ours. We raised our retention limit, and the block has been highly profitable over the years. We executed the recapture as soon as treaty conditions allowed.

Q: How should we think about the capital backing the recaptured business? Is the $700 million of excess capital already accounting for this? A: Axel Andre, CFO: The recapture increases mortality exposure by 1% to 2%, which is marginal. The excess capital figure already includes this slight increase in risk capital for mortality.

Q: Can you update us on your long-term care (LTC) exposure and any potential transactions in that business? A: Tony Cheng, CEO: Our LTC liabilities are modest, as we entered the market only when the risk-return trade-off was favorable. We consider transactions that align with our risk thresholds and return profiles. Axel Andre, CFO: We currently have about $4 billion of reserves on the books and are pleased with the performance of this block.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.