Reinsurance Group of America Inc Q4 2024 Earnings Call Transcript

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

Question: Wilma Burdis - Raymond James) - Analyst : Could you talk about the difference between the economic and financial impacts of the biometric experience. And over what time frame do you think the $167 million of favorable biometric claims experience from '24 to flow through earnings?

Question: Wilma Burdis - Raymond James) - Analyst : Okay. And then could you just talk a little bit about some potential run rate improvements as you guys reposition a lot of the assets that you've recently acquired in the Financial Solutions business. Just on a quarter-to-quarter basis, so it would be very helpful.

Question: John Barnidge - Piper Sandler Companies - Analyst : I'd like to spend some time being educated on the value of in-force. Can you talk a bit about how we should think that rolling through the durable earnings power. It is not yet well understood by the market. So I'd love to hear more about that.

Question: John Barnidge - Piper Sandler Companies - Analyst : And my follow-up question on PACT Capital. You talked about 12 to 18 months as a period of time, I think, to reach full run rate earnings. What's the capacity there? And does that increase your confidence and the ability to reposition transactions at that expected pace?

Question: Wes Carmichael - Autonomous Research - Analyst : I just wanted to ask a broader one on capital deployment and looking forward, I guess. So you obviously the LTC in structured settlement deal continue to deploy capital at a pretty rapid pace. But as you look forward, Tony, where do you see maybe the best deployment opportunities for 2025?

Question: Wes Carmichael - Autonomous Research - Analyst : That's helpful. And my follow-up, I guess, was on pension risk transfer. And I think you mentioned this in your prepared remarks as a good growth opportunity. But I wanted to touch on this. There's been recent lawsuits against plan sponsors that transacted in the market and more recently against one that transacted with you and Prudential. So can you talk about the potential impacts of litigation on the market maybe longer term? And how are you seeing that in the pipeline? I guess I imagine at the very least plan sponsors have to think about factoring in potential litigation into pricing, but curious if you have a different view there.

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : My first question, on the 2025, like the earnings guide that you guys provided, what are you assuming for FX? And also, are you assuming any additional in-force actions in the guide?

Question: Elyse Greenspan - Wells Fargo Securities, LLC - Analyst : And then my second question is on deployable capital, I guess a follow-up there, right? You guys have been pretty active over the past year, right? So using capital for transactions, right, and not buying back stock. As you launch this new definition, do you think the deal flow is enough to utilize the deployable capital? Or would you expect, as you think out at the 12-month figure, that there'll be some level of buyback in '25?

Question: Jimmy Bhullar - JPMorgan - Analyst : First, just a question for Tony. If we look at your biometric experience, it's been generally favorable, fairly consistently over the past several quarters. Do you think that just normal aberration and volatility in mortality, and morbidity that's going in the right direction? Or are there any underlying dynamics that might be driving the consistently favorable experience.

Question: Jimmy Bhullar - JPMorgan - Analyst : Okay. And then just on growth potential. There's a lot of debate over the deal pipeline and supply/demand and competition. But just wondering, if you could talk about your appetite for long-term care, you did do one deal. And that's one of the markets where there's arguably a lot more supply of potential business than there's been demand in the past. What's your interest in LTC either as a stand-alone risk or packaged with other types of business?

Question: Tom Gallagher - Evercore ISI - Analyst : I wanted to come back to a question, Ryan, asked just on the $1.7 billion of capital deployed in 2024. Did the updated run rate ranges in your guide assume that you deploy $1 billion -- $1.7 billion again in 2025? Or if not, what is that number? Because that -- I think that's a huge swing factor in terms of what are you trying to convey in these run rates?

Question: Tom Gallagher - Evercore ISI - Analyst : Got you. That's helpful color. And then my follow-up is just the big reduction in US Financial Solutions. I heard the commentary there about the runoff of some, I guess, profitable annuity business. And then it sounds like there's a bit of a timing disconnect here where you had old profitable business that ran off. You put a lot of PRT and other business that is not yet fully earned in. So if that's the right way to think about this, are you still only going to grow that segment, 4% to 7%? Or will we have a -- we have a bigger ramp-up than that 4% to 7% implies. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 3:00PM, RGA.N - Q4 2024 Reinsurance Group of America Inc Earnings Call

Question: Alex Scott - Barclays - Analyst : I had a follow-up to Tom's follow-up on Ryan's question. So when you talk about your run rates assume deployment of, call it, between $1.5 billion and $2 billion. Does that assume drawing down some of that $1.7 billion of deployable capital. And the reason I ask, I think you guys earn, call it, plus or minus $1.5 billion. So if it's in excess of that, we were assuming -- it assumes some drawdown of that. And I just -- as we analyze that deployable capital and think about accretion associated with this deployment, I just want to make sure I'm not giving double credit or something.

Question: Alex Scott - Barclays - Analyst : Got it. That's really helpful. Second question I have for you is on just $1.7 billion. And as you think about deploying it, you look at these deals, I mean, it seems like your capital model gives more credit for diversification now. So to the extent you're looking at longevity-based deals, would that significantly change at all the amount of required capital that goes into those deals. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 3:00PM, RGA.N - Q4 2024 Reinsurance Group of America Inc Earnings Call I mean, we have our rules of thumb as we think of like 5%, 6%, 7% of liabilities and assets in terms of like the capital that's go behind these deals. But could that amount actually be lower just based on this model, maybe diversification benefit and being overweight mortality risk?

Question: Suneet Kamath - Jefferies - Analyst : I wanted to come back to the deployable capital, just so I can understand this a little bit better. So I was hoping to try to bridge to the $700 million of excess capital that you gave us last quarter. And so is the right way to think about it? You had the $700 million deployed, $250 million, I guess, in this quarter, so that would get you down to $450 million. And then the difference between the $450 million and the $1.7 billion is the capital that you expect you'll generate plus the flexibility in these securitizations and Ruby Re and all the rest of that stuff. Is that the right way to think about it?

Question: Suneet Kamath - Jefferies - Analyst : Okay. And then as we just think about the deployment opportunities, I mean, one of them that a lot of folks have talked about is the ESR change in Japan and just how that's going to create this windfall of deals. Just curious, like where are we in that opportunity? Is it happening now? Or is it over the next year or so? Or are we thinking about maybe even longer than that? Just want to get a sense of how big a deployment opportunity that is for you?