Reinsurance Group of America Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Suneet Kamath - Jefferies - Analyst : I was hoping you could help us understand the mortality experience, particularly in the US. Obviously, we've seen the flu season data. We know that there was a single large case in the first quarter. We're seeing it at other companies, yet you're showing very strong underwriting experience. And then there's a disconnect there that I'd like to try to understand, if you can comment.

Question: Suneet Kamath - Jefferies - Analyst : Got it. Okay. All right. And then I guess the other question I've been struggling with this since you announced the Equitable deal. For those of us that cover Equitable, we look at that business and I think a fair way to describe it would be challenged. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, RGA.N - Q1 2025 Reinsurance Group of America Inc Earnings Call Then all of a sudden you take it over and you're able to turn it into a 13% to 15% ROE business per your comments about it being in line with your target. So I'm just trying to understand how does that happen? Is there an expense piece or a capital piece or something because the earnings should be the same, I would think, other than what you do on the investment portfolio. So how do you take this challenged business and make it a good return business.

Question: Elyse Greenspan - Wells Fargo - Analyst : My first question, I was hoping that you guys could just talk about just the current pipeline of transactions and where you guys are seeing the most opportunity?

Question: Elyse Greenspan - Wells Fargo - Analyst : And then my follow-up, in your prepared remarks, you were talking about PRT and just there being an impact of some of the market uncertainty there. How do you expect -- do you expect that -- and I know you said it would be temporary. Do you see this as becoming a greater opportunity later this year? Or just how do you see things playing out on the PRT side just given the volatility we're dealing with right now?

Question: John Barnidge - Piper Sandler - Analyst : With portfolio investing ahead for that elevated cash balance, can you talk about how those new money rates maybe have trended so far in the second quarter for you?

Question: John Barnidge - Piper Sandler - Analyst : My follow-up question sticking with the portfolio. You talked about increased private asset sourcing. Has that also continued to be favorable as well. Thanks.

Question: Jimmy Bhullar - JP Morgan - Analyst : So first, I had a question for Tony, just on -- if you could just talk about competition across your various businesses. Many of your competitors are P&C companies, which -- or have P&C reinsurance businesses as well. And it seems like the market is a little softer there. When it was hardening a lot, there were comments from RGA that, that might actually improve things in life reinsurance as well as some of those companies would be focusing more on the P&C side of their business. Are you seeing the reverse of that now and how our competitive conditions across various markets, given that dynamic and also the fact that in some of the product lines, you're seeing a lot more activity by some of the PE-backed companies.

Question: Jimmy Bhullar - JP Morgan - Analyst : Okay. Just wanted to let you know. I think there's some issue with the call because your comments were paused for a few minutes. I don't know. Can you hear me okay?

Question: Jimmy Bhullar - JP Morgan - Analyst : Yeah. So there might be some issue. You could address that later as well. I don't know, but maybe go on with your answer if you're going to --?

Question: Jimmy Bhullar - JP Morgan - Analyst : Just the word now.

Question: Jimmy Bhullar - JP Morgan - Analyst : Sure, go ahead.

Question: Jimmy Bhullar - JP Morgan - Analyst : Okay. And then just another one on the Equitable transaction along the lines of the question previously. They're basically losing around $100 million of income per year. And you've said that you could pick up close to $200 million eventually from that block. And I think a big chunk of that is just you guys repositioning the portfolio. So since Leslie is on the call, what is it actually that you're doing with the portfolio that's different than how they've invested it because I think there's a lot of confusion in the market about how one company is losing a lot less business than the other one is picking up from the same block.

Question: Wes Carmichael - Autonomous Research - Analyst : I wanted to follow up on the point on Equitable in the accounting. I think there's probably a good reason to think that, that might be bit less volatility. Is that because when you reprice the business and it changes hands, I think the way I understand it is with LDTI accounting, the net premium ratio may be reset and then you have less of the cap cohort volatility coming through. Is that basically the dynamic do have that right?

Question: Wes Carmichael - Autonomous Research - Analyst : Okay. And I guess we saw a pretty material long-term care reinsurance transaction since the last call. And I believe our European reinsurer took the morbidity risk with a [knault] back reinsurer taking the assets. Does RGA have appetite for structures like that because LTC is obviously a gigantic liability set for the industry and the potential opportunity. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, RGA.N - Q1 2025 Reinsurance Group of America Inc Earnings Call

Question: Ryan Krueger - KBW - Analyst : In the deployable capital disclosures, it looks like the capital sources increased at least a few hundred million from what you had laid out in the Equitable transaction slides. Can you give some more color on what drove that higher?

Question: Ryan Krueger - KBW - Analyst : And then I think the value of in-force is one thing you've been working to get included with rating agencies for capital sources in the future. Is there a material amount that is currently included for that? Or -- and how has the progress been with talking to -- with the rating agencies?

Question: Tom Gallagher - Evercore - Analyst : Just a couple of quick ones. First on that -- you said you booked part of that industry syndicated contract, the $200 million large claim. How much was your share of that? And then secondly, can you unpack some of the underlying experience in U.S. trade between mortality, long-term care, any other risks like medical stop loss, just a little bit behind the scenes, how things trended.

Question: Tom Gallagher - Evercore - Analyst : Okay. And then -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, RGA.N - Q1 2025 Reinsurance Group of America Inc Earnings Call

Question: Tom Gallagher - Evercore - Analyst : Got you. One other one for you on the equitable transaction. And Axel, you had mentioned the majority of that book is not captured under LDTI and the majority of your business is. So I presume that means on a proportionate basis that's going to increase your earnings volatility somewhat. And I know Equitable had a pretty high level of earnings volatility in that block. How much of a consideration was that for you? Or did you kind of ignore the earnings volatility and just focused more on the economic returns?

Question: Joel Hurwitz - Dowling Partners - Analyst : So first one to touch on variable investment income. And can you just walk through what's sort of embedded in your operating earnings targets? And did the earnings targets outlined last quarter assume 6% returns or your long term 10% to 12%. And then just I think some of your alternative income flows through operating and some flows through in that. Can you just provide some color on what pieces flow to operating versus net income?

Question: Joel Hurwitz - Dowling Partners - Analyst : Okay. Very helpful. And then, Tony, I know you said in your prepared remarks that in-force actions were modest in the quarter, but you sounded pretty positive on a number of initiatives. Could you just elaborate on some of these initiatives and how much of a potential benefit there could be?

Question: Wilma Burdis - Raymond James - Analyst : Could you just give us an update on your outlook for mortality now? It seems like one thing I've been hearing is that it's a little bit better. At younger ages below 9 years so and then at older ages a little bit worse than pre-COVID. And then are you seeing any changes with GLP-1s or others now that we have a little bit more experience.

Question: Wilma Burdis - Raymond James - Analyst : And could you just give a little bit more detail on the ability to price and how that changes the way as you think about --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, RGA.N - Q1 2025 Reinsurance Group of America Inc Earnings Call

Question: Wilma Burdis - Raymond James - Analyst : Yeah, sure. On the Equitable block, could you give us more detail on the ability to reprice and how that changes post acquisition?

Question: Mike Ward - UBS - Analyst : I was just wondering on the new business pipeline that you guys do see. Is there any areas where you see more or less opportunity? And did the -- does the equitable deal sort of like ratchet you up on the US side, so we should expect more deals on the international side? Or is that -- do you not sort of set that framework?

Question: Mike Ward - UBS - Analyst : And then just back to the sources of capital. I'm curious how active is the third-party capital, I guess, pipeline and your ability to establish more Ruby Res. And then just confirming there is a slide deck mentioned potential capital markets issuances, but just wanted to confirm that common equity is low on the totem pole in terms of capital sources.

Question: Bob Huang - Morgan Stanley - Analyst : I know we're out of time, so I'll keep it to one question. Maybe if you can give us a little bit more color on the Japan reinsurance opportunities. I know you touched on it in your prepared remarks. It feels not just like a new opportunity for you, but a broader set of opportunity for the industry and the addressable market seems to be very large. Can you maybe, one, talk about that opportunity, but also to talk about just the competitive environment from that area.