Reinsurance Group of America Inc Q3 2024 Earnings Call Transcript

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

Question: John Barnidge - Piper Sandler Companies - Analyst : 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? Thank you.

Question: John Barnidge - Piper Sandler Companies - Analyst : Thank you. And my follow-up question. The growth opportunity in Asia sounds really exciting, arguably the demographic trends around aging population, maybe more advanced there than here right now, but we'll get there eventually. Can you maybe talk about how you can take that

Question: Suneet Kamath - Jefferies - Analyst : Yeah. 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 2:00PM, RGA.N - Q3 2024 Reinsurance Group of America Inc Earnings Call

Question: Suneet Kamath - Jefferies - Analyst : Okay. Thanks, Tony. And then I guess relatedly, how should we think about the capital that should be backing this business? Is that $700 million of excess capital sort of already pro forma for the capital that this -- that you'll need to back this business? And are you looking at other sizable recapture opportunities? Or should we think about this as mostly kind of a big step and then maybe not as much of this kind of going forward? Thanks.

Question: Elyse Greenspan - Wells Fargo - Analyst : Hi. Thanks. I want to stick on capital as well. You guys said that you're evaluating right this quarter, how you view excess capital. I guess appreciating that that's ongoing. But can you just give us a sense of some things that you're going to consider as you go through kind of this methodology change during the fourth quarter relative to your excess capital position?

Question: Elyse Greenspan - Wells Fargo - Analyst : Thanks. And then my second question, can you just update us just on the -- your LTC exposure just in terms of the US and international exposure and how the experience has been there? And I know across -- as we've gone through earnings, we've heard some companies have said that like in terms of potential transactions for that business that we've seen kind of the bid ask narrow. What are you seeing just in terms of on the LTC side? And would you guys consider doing additional things there?

Question: Joel Hurwitz - Dowling & Partners Securities, LLC - Analyst : Hey. Good morning. So you noted as part of the assumption update, there was a favorable mortality updates in the US. Can you just provide some more color on the changes there? And any way to help us think about what you've baked into assumptions for excess mortality over the next few years at this point?

Question: Joel Hurwitz - Dowling & Partners Securities, LLC - Analyst : Okay. Helpful. And then just one on the recapture. Can you help me understand what exactly drove the $136 million impact? Is that accounting noise? Or is that some upfront capital cost?

Question: Tom Gallagher - EVERCORE ISI - Analyst : Good morning. First question, Axel. I just wanted to come back to the capital question and how you're reevaluating the model for defining [excess]. So the covariance benefit and the value of the in-force, it sounds like those are the two changes. I guess I'm not so interested in how that's going to change your definition of excess. But to me, the biggest overhang on your stock has been the fear that, at some point, you may have to raise common equity to fund your what's been exceptional growth. So I guess my main question is, would you -- given the model changes that you're contemplating, would you -- do you think you'll be able to organically finance your organic growth plans with those changes? Or do you think you'd still need to look at additional either sidecar capital or even common equity to fund your future growth plans?

Question: Tom Gallagher - EVERCORE ISI - Analyst : Okay. Thanks for that. And then my second question is, when I look at the biometric table, and I see how the experience has looked versus the cap versus the uncapped cohort and think about how this has been playing out on underlying capital generation. I guess I just have two questions related to that. One is, I know it gets smooth for GAAP because all of -- most of your favorability is coming from the part that gets deferred. But how does that work on a statutory basis? Is that -- does that get recognized immediately. And then I guess my related question is, I know under the new GAAP reserve assumptions were reset to embed some conservatism. So I guess I'm left wondering if the statutory and cash flow is getting recognized immediately for the uncapped versus capped cohorts. But then the -- I don't know, maybe there's less conservatism in them because I don't think you reset statutory reserves like you did under GAAP. So anyway, I know it's a long-winded question, but just curious, like what all of this means for underlying cash flows that you've been seeing? Thanks.

Question: Ryan Krueger - Keefe, Bruyette & Woods North America - Analyst : Hey. Thanks. Good morning. My first question was on balance sheet optimization. You've clearly done a number of things so far, but I wanted -- I was hoping to get a sense of kind of how far through the different options are you at this point, whether it be further in-force actions or investment portfolio repositioning or other things. But do you still have a fair amount left to do? Or have you -- have you done a lot of what you're aiming to do at this point?

Question: Ryan Krueger - Keefe, Bruyette & Woods North America - Analyst : Great. Thanks. And then just one quick one on the mortality assumptions. The comment on four to five years of kind of endemic mortality, is that four to five years from where we are today or from -- I guess, from when we would have considered the pandemic to have ended?

Question: Ryan Krueger - Keefe, Bruyette & Woods North America - Analyst : Okay. Great. Thank you.

Question: Alex Scott - Barclays - Analyst : Hey, good morning. Now that Ruby Re is starting to put more meaningful amount of capital to work. I was hoping maybe you could give us a sense of how the economics work and what we should expect in terms of where and how it impacts your P&L?

Question: Alex Scott - Barclays - Analyst : Got it. Second question I had for you is on Japan and the regulatory environment there. One of the primaries in the past week commented on just how disruptive this new ESR regime is for longer duration life products. And I was interested in how big could that opportunity be? I mean is it REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 2:00PM, RGA.N - Q3 2024 Reinsurance Group of America Inc Earnings Call truly disruptive enough that a large portion of the bigger life underwriters in Japan have to look at these deals. And how big do you expect to go on that opportunity?

Question: Alex Scott - Barclays - Analyst : Yes, correct. Yeah, reinsuring to help them take care of regulatory change that would impact --

Question: Wes Carmichael - Autonomous Research - Analyst : Hey, thanks. Good morning. First question on US financial solutions. I think you mentioned that there was a lower contribution from new business, but I think there was a $600 million PRT deal in the period. Can you maybe just elaborate on what drove a little bit of weakness in that segment this quarter?

Question: Wes Carmichael - Autonomous Research - Analyst : Yeah, understood. That's very helpful. Thank you. My second question was on the retrocession recapture. Can you maybe just talk about how much of that business is within capped and uncapped cohorts for LDTI? And what I'm really curious about is, as you think about taking the business on, like how much potential volatility are you kind of adding to the income statement if we get kind of quarterly mortality experience fluctuation?

Question: Jimmy Bhullar - JPMorgan - Analyst : Hey, good morning. I had a couple of questions. First, if you could just discuss the financial implications of the reinsurance recapture. Should we assume higher earnings volatility given the increase in single life retention or do you think it will just get absorbed in your results given the growth in the business over the last several years and the smoothing mechanism of the LDTI accounting changes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 2:00PM, RGA.N - Q3 2024 Reinsurance Group of America Inc Earnings Call

Question: Jimmy Bhullar - JPMorgan - Analyst : Okay. And then secondly, on your excess capital, you gave out a fairly high number, and I think you're implying that the actual level might even be higher than that as you do your additional analysis. So just wondering to what extent are these numbers wedded by third parties or rating agencies? Because if I think about your ratings, your BBB overall, which is good, but it's lower than many of your peers, who are single A, despite the fact that your liability profile is actually probably more conservative than many of the other guys. And on the -- then it would sort of come down to capital. So just wondering, like, do you have any external affirmation of your excess capital numbers and whether you've got aspirations to be higher rated? Or are you comfortable being rated at these levels and then you'd put the excess capital to work elsewhere?