Reinsurance Group of America Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2023

There are 14 speakers on the call.

Operator

Note, this event is being recorded. I would now like to turn the conference over to Todd Larson, Senior Executive Vice President and Chief Financial Officer. Please go ahead.

Speaker 1

Thank you. Welcome to RGA's 2nd quarter 2023 Conference Call. I'm joined on the call this morning with Anna Manning, RGA's Chief Executive Officer Vice President Leslie Barbee, Chief Investment Officer and Jonathan Porter, Chief Risk Officer. Vice President, as a quick reminder before we get started regarding forward looking information and non GAAP financial measures.

Speaker 2

Investor Relations.

Speaker 1

Some of our comments or answers to your questions may contain forward looking statements. Actual results could differ materially from expected results. Vice President. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results President and CEO of the Board of Directors. Please Vice President.

Speaker 1

Please see our earnings release, earnings presentation and quarterly financial supplement, Vice President, all of which are posted on our website for further discussion of these terms and reconciliations to GAAP measures. And now I'll turn the call over to Anna for her comments.

Speaker 3

Thank you, Todd. President. Good morning, and thank you for joining our call today. Last night, we reported Q2 adjusted operating earnings of $4.40 per share. Vice President

Speaker 2

and CEO of the Board.

Speaker 3

This was a strong quarter with many regions and business lines performing very well. It was also another Porter demonstrating the power of the underlying earnings engine in our business as well as the ongoing success of our growth Strategy that is adding meaningful long term value to that engine. Let me turn to a few of the highlights in the quarter, which include by Tord Larsen, Senior Executive Vice President of

Speaker 2

the United States. Favorable mortality experience in our U. S. Individual business

Speaker 3

as well as favorable performance in our U. S. Group and individual health businesses. Vice President. Our Asia Traditional business also benefited from favorable claims experience as well as higher yields.

Speaker 3

By our Global Financial Solutions business had another strong quarter with contributions from both spreads and favorable longevity experience by continuing the trend of excellent performance over a number of years. Investment performance in the quarter was good as new money rates remained attractive President and Impairments were minimal. We believe our investment portfolio is well positioned to withstand any ongoing economic uncertainties. Vice President and CEO of the Company. And strong new business momentum in our organic business continued through the quarter and notably picked up in Asia.

Speaker 3

President. In a few minutes, Tony will expand on the quarter's activities and on our future growth opportunities.

Speaker 2

Vice President.

Speaker 3

We had another very successful quarter on the capital management front, deploying $190,000,000 into in force and other transactions, President, bringing the year to date total to $384,000,000 of capital put to work. I am pleased with the start of the year Vice President and CEO of Operations and with the state of our transactions pipelines, which are at very healthy levels with opportunities across many geographies and risks. Vice President. In the quarter, we also repurchased $50,000,000 of shares, bringing the year to date total to $100,000,000 in share repurchases. Vice President and CEO of Operations.

Speaker 3

And we increased our quarterly dividend to $0.85 per share, representing a 6.3% increase to our shareholder dividends. Vice President of Investor Relations. At our recent Investor Day, President. We highlighted the earnings power in our business and the reasons for the excitement we have about our growth opportunities. Vice President.

Speaker 3

We talked about favorable industry dynamics driving stronger demand for what we do so well, whether that is to help Vice President. We also see strong demand for new products to better meet the changing needs of consumers and increasing demand to help our clients better manage by Citi, Senior Executive Vice President of Investor Relations and Capital Needs. We are very well positioned to benefit from all of those opportunities. Vice President. We have the breadth and depth of capabilities, technical expertise and crucially the risk discipline necessary to by Citi.

Speaker 3

We have a collaborative culture, strong client partnerships, Global Scale and a proven and successful strategy that is delivering substantial long term value to our clients and for our shareholders, Vice President, which gives me a great deal of confidence in RGA's future and in our ability to continue to deliver growth and attractive returns Vice President and CEO of RGA. I will now hand it over to Tony to provide additional thoughts on our business momentum.

Speaker 4

Thank you. President. As Anna mentioned, we see favorable industry dynamics and we are well positioned to benefit from these many opportunities.

Speaker 5

Vice President.

Speaker 4

During our recent Investor Day, we highlighted 4 areas with particularly good growth opportunities. These 4 areas are longevity and PRT, by Asia Traditional, Asia Asset Intensive and our U. S. Traditional business. We are seeing strong success across President of the United States of America.

Speaker 4

Our Longevity business is experiencing strong volumes in Europe, President and CEO of the U. K. And we are delighted with the announcement earlier this week of the U. K. Pound longevity swap transaction.

Speaker 4

Vice President. We continue to see a strong pipeline of business in the region. Our U. S. PRT business continues to gain momentum and we are increasingly confident Vice President of our prospects in this sizable and growing market.

Speaker 4

In Asia, there is a strong recovery in economic activity CFO, driving the demand for new products we have launched with our partners. We see strong momentum in all our businesses with particular success this quarter by T Mobile

Speaker 2

in South Korea.

Speaker 4

During Investor Day, we spoke of a new product we launched in China in late 2022. Vice President. We are pleased with the reception of this product in the market and are actively working with other market leading insurers on similar product ideas. Vice President and CEO of Hong Kong business has the additional tailwind of the rebound of Mainland Chinese visitors to closer to pre pandemic level. By These visitors are a material source of business for the Hong Kong insurance market.

Speaker 4

These new product initiatives by Citi, are very much examples of how we grow by partnering with clients to help grow the underlying insurance market. Vice President. For the Asia Asset Intensive business, we are partnering with multiple clients to optimize their risk and capital management. Vice President. This is best exhibited by another important transaction this quarter in Japan with a new client.

Speaker 4

By A number of our previous coinsurance transactions were with the international companies with Japanese operation. Vice President. This new transaction was sizable in nature and was one of the largest domestic companies. It's an example of how we grow by expanding the use of reinsurance within a market, which is an important element of our strategy as we expressed during Investor Day. Vice President.

Speaker 4

As Asia regulators adopt new capital standards, our teams are providing first to market capital solutions that lead to exclusive transactions by CFO and CFO around the region. Finally, in our U. S. Traditional business, we continue to see strong demand for our broad range of underwriting programs. Vice President.

Speaker 4

These programs not only directly generate reinsurance business, but also strengthen our value proposition. By Combining this value proposition with our relentless client focus has led to RJ being chosen for significant shares Vice President of Investor Relations in many major reinsurance pools over the past 12 months. As you can see, we are pleased with the volume and the breadth Vice President of our business wins. What is just as pleasing is how we are winning a large part of this new business. Vice President.

Speaker 4

We communicated previously that RGA's business model is to provide risk and capital solutions to address the complex business needs of our clients. Vice President. The examples I have just cited show the power of our underwriting, product development and capital management expertise. Vice President. When they are all combined with proactive business development, we increase the chance of winning exclusive business.

Speaker 4

Vice President. We are particularly pleased with the positive results from exclusive transactions this year and are confident this can continue going forward. By These transactions generate greater value for RJ and our partners and ultimately benefit the insurance industry and consumers by Citi. In addition, we can replicate these successes in other markets through our strong teams worldwide. Thank you for your interest in RJ.

Speaker 4

I will now turn it over to Todd to discuss the financial results.

Speaker 1

Vice President. Thanks, Tony. Turning to the quarter's results. RGA reported pretax Vice President. Adjusted operating income of $376,000,000 for the quarter and adjusted operating earnings per share of $4.40 Vice President, which includes a foreign currency headwind of $0.07 per share.

Speaker 1

The trailing 12 months adjusted operating return on equity was 10.9%. Vice President. Excluding the 2022 assumption changes referred to as notable items, the trailing 12 months Vice President of Finance and Investor Relations. Adjusted operating return on equity was 13%. We are pleased with the strong quarterly results as well as new business production, by Capital deployment into in force and other transactions and investment results.

Speaker 1

President and CEO. Reported premiums were up 3.3 percent for the quarter. After adjusting for adverse foreign currency impacts, Vice President of Finance. Premiums were up 4.7% in the quarter and 7.7% year to date, both on a constant currency basis. Vice President.

Speaker 1

As Tony and Anna mentioned, we have strong momentum in the business activity and we expect this to continue to contribute to premium growth over time. Vice President. Turning to the quarterly segment results on Slide 6 in our earnings presentation President, that can be found on RGA's Investor Relations website. The U. S.

Speaker 1

And Latin America Traditional segment reflected favorable mortality experience

Speaker 6

by CFO in our individual mortality business.

Speaker 1

Good results in group and individual health, partially offset by some one time items of approximately $12,000,000 Vice President and CEO of the Board of Directors. The favorable individual mortality experience is widespread and driven by lower large claims and better than expected older age mortality. Vice President. This experience occurred in both our capped and uncapped cohorts. As we've previously discussed under LDTI, by Current period mortality experience has a modest impact on the bottom line on the uncapped cohorts as part of the results are spread into the future.

Speaker 1

Consumer Financial Officer. And that is what we

Speaker 2

saw in this quarter,

Speaker 1

where favorable mortality results were spread into the future periods. Vice President. The one time items reflect certain actions that together had an adverse impact in the Q2, but are expected to be favorable to long term future cash flows. The U. S.

Speaker 1

Asset Intensive business results were strong, President and CEO of the Financial Services, reflecting improved investment spreads, including higher yields on floating rate securities. And our U. S. Capital Solutions business continues to perform in line with our expectations. Canada traditional results reflected slightly favorable mortality experience Vice President and CEO.

Speaker 1

Financial Solutions business reflected favorable longevity experience. In the Europe, Middle East and Africa segment, by T Mobile. The traditional business results reflected moderately unfavorable mortality experience in the UK, consistent with excess mortality general population trends. By EMEA's Financial Solutions business results reflected favorable longevity experience. President.

Speaker 1

Turning to our Asia Pacific Traditional business. Results reflected favorable claims experience, most of which came through in the Q2 due to the LDTI by the Company's Coors Impacted. The Asia Pacific Financial Solutions business performed well, reflecting favorable investment spreads and claims experience. Vice President. The Corporate and Other segment reported pretax adjusted operating loss of $55,000,000 more than the expected by Quarterly range primarily due to higher financing costs and the timing of some general expenses.

Speaker 1

Year to date results are in line with the expected run rate. Vice President. Moving on to investments on Slides 8 through 11. The non spread portfolio yield for the quarter was 4.42%, President, reflecting a lower contribution from variable investment income, primarily in limited partnerships. Vice President of Finance.

Speaker 1

For non spread business, our new money rate rose to 6.09%, reflecting higher available market yields by CFO with select opportunities in structured securities and private assets. Credit impairments were minimal and we believe the President and CEO of the Board of Directors. Moving on to Capital Management. Vice President. As shown on Slides 1213, our capital liquidity position remains strong and we ended the quarter with Vice President of Capital of approximately $1,200,000,000 In the quarter, we deployed $190,000,000 of capital into in force and other transactions, Vice President, bringing the year to date total to $384,000,000 We also returned a total of $104,000,000 of capital to shareholders Vice President, through $50,000,000 of share repurchases and $54,000,000 in dividends.

Speaker 1

We expect to remain active in deploying by Capital into in force and other transactions and returning excess capital to shareholders through dividends and share repurchases. Vice President. As shown on Slide 14, we have a long track record of increasing book value per share over many periods, President, including at a compounded annual growth rate of 10.5% since the beginning of 2021. To summarize, we are very pleased with our Q2 performance, which follows the strong Q1. Vice President of Finance.

Speaker 1

Our business is resilient with substantial underlying earnings power. Momentum is strong and we see good opportunities across our geographies by Finance and Business Lines. Looking forward, we are well positioned for the future and expected to deliver attractive returns to shareholders over time. This concludes our prepared remarks. We would now like to open it up for questions.

Operator

Vice President and CEO.

Speaker 2

Vice

Operator

President. By Vice President and CEO. Our first question comes from Jimmy Bhullar with JPMorgan. Please go ahead.

Speaker 6

Good morning. I had a couple of questions. First on your new money yield, it went up a lot faster than it's by It's gone up in the past several quarters that's slightly over 50 basis points and by a greater magnitude that I think what the rise in interest rates would suggest. So Just wondering if you think that, it's this is a normal level to think about as we think about your investment income or was it mostly Allocations into certain securities that lifted it beyond what it would have normally been this quarter. Vice President.

Speaker 6

And then I'm sorry, go ahead. Why don't you go ahead and then I'll ask the other question later, sure.

Speaker 7

Then I don't have to remember both. Okay. Vice President. Yes. Thanks for the question, Jimmy.

Speaker 7

It's Leslie Barbee. Yes. So the new money rate did go up quite a bit. As you know, market yields went up. I think the Investment Grade Index is up 31 basis points.

Speaker 7

We did have some mix shift because we had some very attractive opportunities in select by Private Assets and Structured Securities. So there's a sum of both, but I think that, that Vice

Speaker 3

President of Operations.

Speaker 7

6% ballpark is not a bad expectation. So it'll come off a little bit, but it's going back to the normal mix

Speaker 2

Vice President.

Speaker 6

Okay. And then just on the tax rate, It was lower than it normally has been and what we had expected. Were there any one timers there and what's your expectation for by The tax rate going forward.

Speaker 1

No, the tax rate will move around a little bit quarter to quarter. But

Speaker 2

Vice President. What we saw this quarter

Speaker 1

was, one, where the mix of earnings emanated from around the world and how that translated in by the taxes. And also this is the time of the year when we have filed various tax returns and we true up by provisions to the tax return filings and that resulted in a positive to the reduction to the tax rate, I should say.

Speaker 6

Okay. Thank you.

Operator

Vice President. The next question comes from John Barnidge with Piper Sandler. Please go ahead.

Speaker 2

Vice President.

Speaker 1

Good morning and thanks for the opportunity. Can you talk about the investment yield ex VII? I know it's a gross figure, so there may be some expenses, but Maybe talk about the roll off to portfolio yield GAAP a little bit.

Speaker 7

Vice President. Sure. Thanks. This is Leslie again. So on the portfolio yields, you're right.

Speaker 7

The it came off a little bit ex by and that was really due to some expense timing in the quarter that tends to vary. So all things equal, we expect by The portfolio yield to continue to rise and versus things that are rolling off, Vice President. We're probably picking up about 150 basis points right now. So, the new money rates will continue to be additive to the portfolio yield.

Speaker 1

Thank you very much. And my follow-up question, EMEA by Mortality has had a bit of an unfavorable tail. I know the NHS is challenged in that country. Is that a re Pricing opportunity or is that something that needs some structural addressing to improve profitability? Thank you.

Speaker 5

Yes. Hi, John. It's Jonathan here. Yes, certainly, we are reflecting our current expectations for the by heightened mortality environment in the U. K.

Speaker 5

And our pricing. So I think we have taken appropriate action there from a new business perspective. Vice President. Just a reminder that we do have a very sizable longevity book of business as well in the UK. By So the higher general population mortality, although it's providing a headwind to the mortality business, which is accounted for, it's also providing a tailwind by Citi.

Speaker 5

And we saw that come through our results in the current period too where our longevity gains in our Financial Solutions line actually a little bit more than offset the mortality drag in the traditional business.

Operator

Vice President. The next question comes from Wes Carmichael with Wells Fargo. Please go ahead. Hey, good morning.

Speaker 8

Just hoping you guys could and CEO of TD Securities. I just kind of wondering what's kind of your sweet spot

Speaker 1

in terms of size Vice

Speaker 8

President and maybe timing of the rest of 2023, what that's looking like. Thank you.

Speaker 4

Thanks, Wes. This is Tony. As we've shared previously, look, we're very pleased with the progress that we're making in the PRT by And we're actively quoting and there is a very strong pipeline of opportunity. Vice President. We strategically know that we are the natural home for longevity given our very, very sizable block of mortality.

Speaker 4

Vice President and CEO of the U. S. And we've got the expertise now in the U. S. That we've exported from other parts of the world.

Speaker 4

In terms of size, we tend to focus on the upper end of the market Vice President in partnership, because we feel there is less competition in that area. So Vice President. Unfortunately, we haven't closed the transaction this quarter with closed the transaction earlier this year, and we're eagerly anticipating

Speaker 8

by Thanks, Tony. And just wondering, did you have any by impacting the quarter from in force pricing actions. I think there was a little bit of maybe benefit in the Q1 results. So just wondering if there was any of that Vice

Speaker 1

President. This is Todd. As far as asphalt repricing activity, Vice President. Not really anything in this quarter. We had talked about what we the activity in the Q1, but nothing this quarter.

Speaker 8

Thank

Operator

you. The next question comes from by Tracy Banghigian with Barclays. Please go ahead.

Speaker 9

Thank you. I realize Vice President of Global Markets. I'm wondering on the margin, are you seeing any adverse for VUL, any by Pull Forward, at least that's a comment made by CEDID, who gathered that information from reinsurance.

Speaker 5

Yes. Hi, Tracy, it's Jonathan. I won't comment specifically at the product level, like once you by We're going to start to really drill down and parse the in force book of business. The credibility falls quite a bit. But in total, as was Vice President of Operations Management.

Speaker 5

We have seen favorable experience this quarter for sure. It's mostly driven by fewer large claims in the current period, by And it is concentrated more in the older ages where it's been more favorable for us.

Speaker 7

And most of our business,

Speaker 5

just again reminder for VUL, Vice President. Specifically, we reinsure the mortality risk on that book of business. Again, just as a reminder.

Speaker 9

Yes, totally get it. I was just asking about the margin. Hey, Vice. Last quarter, you shared that you've done some repricing efforts. Was that done this quarter as well?

Speaker 9

Todd, do you want to take that?

Speaker 1

Yes. Hi, Tracy, it's Todd. Yes. No, We did do some re pricing activity in the Q1. But as I mentioned a little while ago, during the Q2, there was not

Operator

Vice President. The next question comes from Erik Bass with Autonomous Research. Please go ahead.

Speaker 10

Hi, thank you. Relative to the guidance you provided at Investor Day, Asia earnings this quarter came in well above expectations. Vice President of Investor Relations. Was this just favorable experience this quarter? Or has the earnings power improved given the business growth and macro environment you're seeing?

Speaker 1

Hi, Eric. It's Todd. Yes, we provided the updated financial targets and run rates back at Investor Day mid June. President. So we're not updating any of that at this point.

Speaker 1

We're it's great to see, the results that we've seen in that in Vice President of Investor Relations. In the segment, especially in the

Speaker 2

Q2 and a lot of

Speaker 1

that was favorable experience that came through in the current quarter.

Speaker 10

Got it. And then maybe could you provide some more color on the sorry?

Speaker 4

I was going to just add, I mean, Just strategically in Asia, we're obviously very bullish about both the traditional and the asset intensive business. The pipelines are Vice President of Global Management. Very, very forward. And as I mentioned earlier, it's not just the volume of business we're seeing, but just the breadth across by the region and to be honest across the globe, as well as the number of exclusives. So they're all very good signs that our Strategy is working in many, many places and that obviously makes us more and more positive about the future.

Speaker 10

Thank you. And maybe just a follow-up on that. Can you provide a little bit more color on the premium growth drivers in Asia and sort of how much is coming from new business versus block deals?

Speaker 4

I'd say our focus, I mean, the best measure for Growth in when we look at growth in Asia, and it's really the traditional business or by organic business when we look at premium growth that we focus more on. So For block transactions, sometimes premium is not the best indicator. I would say Just in general, we're seeing great growth opportunities across both lines of businesses for different reasons. The driver of the premium we focus on is mainly on the organic side of the traditional business.

Speaker 10

Got it. Thank you.

Operator

Our next question comes from Suneet Kamath with Jefferies. Please go ahead.

Speaker 11

Thanks. Tony, you'd mentioned a deal that you did with a traditional Japanese insurance company and sounds like this is the first of by that type of transaction. Just any color in terms of what the motivation was for the ceding there? Vice President. And are you expecting that ESR, I know it's a couple of years away, is that going to create some additional opportunities for you guys?

Speaker 4

Vice President. Yes, let me take a stab at that. I mean, yes, absolutely, this was a very important transaction, as I by mentioned in the prepared remarks. Japan, as many markets, once you sort of get a breakthrough of sorts, then others Vice President. So this one is I can't go into too much detail, but it's important because there was with the domestic and we would anticipate other domestics Vice President of the United States.

Speaker 1

Thanks for watching very

Speaker 4

carefully and hopefully following suit. ESR is a very big driver of the opportunities we're seeing in Japan. So absolutely. On the capital management side, companies, even though it's out to 20 Vice Companies are obviously very much preparing for it. And just listening to some of the other calls that you've been part of Vice President of Investor Relations.

Speaker 2

In the last few days, you

Speaker 4

can see the intersection that say of new products and the growth in Japan, but maybe ESR potentially having by An adverse effect on the capital side of that. So we're perfectly positioned to solve both problems, which is obviously new product development by Capital Solutions. And that's absolutely why we are very Focused on that intersection of those two strong capabilities that we have.

Speaker 11

Got it. Makes sense. And then I guess for Todd, is the by $50,000,000 pace of share repurchases that we saw in the quarter, should we sort of think about that as a run rate going forward or are you expecting that to change?

Speaker 1

Hi. So we'll continue to manage capital over time. I think as we've talked about, Vice President of Finance. We sort of have the 3 levers. 1 is we like deploying the capital back into the business and the transactions where we Vice President of Finance.

Speaker 1

We had a good return for the risk that we're taking, maintaining our dividend and then we over time, we balance it out with by Share repurchases. And so I think you'll see us continue to be active in managing by Capital levels and we like our current position because I think we're in a position to capitalize on opportunities that we see in a very healthy pipeline. And Vice President of Finance. If those don't develop, then we'll certainly continue to manage with the other levers. So I think we don't have an actual stated program for share repurchase in place, but I think you'll see us continue to use that as one of the levers of how we effectively manage the capital level.

Operator

Question comes from Ryan Krueger with ABW. Please go ahead.

Speaker 12

Hey, good morning. Could you provide some more quantification on the favorable U. S. Mortality experience in the quarter, perhaps Vice President or perhaps maybe the actual to expected results because I think under LDTI, it's a little bit more challenging to by Can you quantify how much how favorable mortality is given the smoothing impact?

Speaker 1

Hi, Ryan. It's Todd. Yes. LDTI is I guess it has made it a little bit more difficult to see the actual underlying experience. Vice President.

Speaker 1

As a reminder, for the capped and Ford contracts under LDTI, the experience Some comes through currently and some is spread out into the future. Specifically by for U. S. Mortality in the quarter. And a good way to think of it is that the underlying by Experience was favorable by around $25,000,000 based on our expectation and about $5,000,000 by that came through in the Q2 and then the remaining 20 will be spread going into future periods.

Speaker 12

Great. Thanks. That's very helpful. And then on the large European longevity transaction, Vice President and CEO of Operations. Can you give a rough sense of how much capital that will deploy in the quarter?

Speaker 1

We normally don't provide specific Transaction, Capital Numbers.

Speaker 12

Okay, got it. Thank you. Vice

Operator

President. Our next question comes from Tom Gallagher with Evercore. Please go ahead.

Speaker 13

Good morning. Can you square the $24,000,000 remeasurement loss in the quarter For U. S. Traditional with the comments of favorable mortality, what drove the remeasurement loss?

Speaker 1

Hi, this is Todd again. Yes, so the numbers I provided were related to claims experience. Vice President of

Speaker 2

Finance and Company. In the remeasurement gain or

Speaker 1

loss, that includes more than just claims activity. It can be by Adjustments to expected premium, that could be anything that impacts future cash flows. And usually, a lot of the by impact that comes through in that re measurement gain or loss relates to lost in Ford contract. And it relates and it doesn't Vice President of Finance. It mainly relates to the impact of any changes in experience or cash flows, premiums, that type of thing by From the transition date or the treaty inception date to the current period, it's not including sort of all the future Vice President of Investor Relations.

Speaker 13

Okay. And How was the underlying within the U. S. Traditional business? How is long term care performing?

Speaker 13

I think some peers had experienced some elevated claims. Did you see the same?

Speaker 1

Sure. This is Todd again. Yes, just maybe taking a step back and as a reminder, our long term care by Block. Is it relatively recent? Block, it was not in the era that's, I guess, considered some of the by C Block.

Speaker 1

A lot of ours was issued like 2,009 onwards. So it's the underlying product terms, I think are much more by Fair the way I always describe it, fair between the policyholder and the insurance company versus some of the older type long term care. You might hear a little bit more about the by elevated claims or reserve strengthening and that type of thing. But we're seeing continued performance within our expectations on our block. Vice President.

Speaker 1

I'd say no concerns at this point based on the experience that we've been seeing. So we're happy with our specific block.

Speaker 13

Got you. And then just final one, the 12,000,000 Vice President of one time items in U. S. Trad that you mentioned were negatively affecting earnings this quarter. Can you elaborate a little bit on that?

Speaker 13

What were those and why is it going to improve future

Speaker 1

Vice President of Operations on that we where we had retroced the business, we added some recaptures and then we had a recapture on from the our by client perspective. And so when we recaptured the retro treaties, we had to reestablish some reserves on that business. So that primarily by CFO, created the loss of the adverse impact in the current quarter, but we would expect by on that to produce positive impacts going forward. And I would size it about positive impact of around by $4,000,000 on an annual basis, amortizing down over time. So economically, it was a good Vice President of Bank.

Speaker 1

It looks like everything we're constantly managing our overall in force book and this was what we viewed as a good decision to make From an overall economic perspective.

Speaker 13

Got you. So that $4,000,000 should be additive, I presume to the segment's guidance Vice President. I mean, it's small, but it's modest upward adjustment. Is that fair?

Speaker 1

That's fair. There's always things that go both ways, but yes,

Speaker 2

Vice President.

Operator

Our next question comes from Alex Scott with Goldman Sachs. Please go ahead.

Speaker 10

Hi. Vice President. I guess a lot of my questions have been answered, but I thought I'd ask about the transaction volume we've seen in the U. S. Year to date and just Vice President of Investor Relations.

Speaker 10

What your take is on the competitive environment. So we didn't see RGA participate in some of those bigger deals that were announced. By Some of the counterparties involved, not quite as well known as RGA. What was your perspective on that? Vice President.

Speaker 10

And how do you see that pipeline through the end of the year?

Speaker 4

Yes. Thanks, Alex. Vice President. We absolutely are still very active in this market, and we pick out our spots and the transactions that We feel we can add the most value to. So that pipeline, that's probably the area of our Vice President of the Company that gained the most attention with regards to competition.

Speaker 4

But we are very confident we've got all the capabilities to assess the blocks Vice President of Operations. In an appropriate manner and then be ready to pounce when the opportunity arises. So there are by Meaningful opportunities in the pipeline in that area. And we're optimistic of closing by Transactions. I want to say when these big transactions get announced, we do participate at times around the EDGES that are still very meaningful.

Speaker 4

At times, it could be a YT mortality transaction. At times, it could be a capital financing part of a transaction. And They are very meaningful transactions for us. So I just want to share that color also.

Speaker 10

Got it. Very helpful. And then maybe just going back to net investment income. I mean, can you talk at all about President. How much you all benefited from the floating rate portfolio you do have?

Speaker 10

And I guess I'm just thinking through the lift in NII Yes, it's probably been had there, but that may slow down as Rates potentially, are not raised as much. The Fed funds love anyway.

Speaker 7

Hey, Alex, it's Leslie. Vice President. Yes. So on the benefit to NII, the benefit we had in the quarter was really a combination of things, by extension trades and other relative value transactions. And there has still been a little bit of boost from by cash and floating, but when you look at the non spread in total of the assets that are by Net of floating liabilities, we've actually hedged some of that risk out from floating to fixed.

Speaker 7

So there's really not much impact Vice President of Investor Relations. There's still a little bit more in the spread business. So we keep an eye on that whether it's Vice President. If we thought rates were to fall more than the forwards, we may hedge some more. But certainly, the total sensitivity has been coming down

Operator

Vice President. Your next question comes from Mike Ward with Citi.

Speaker 2

Please go

Speaker 1

ahead. Thanks, guys. Good morning.

Speaker 10

I I don't know if you quantify this, but wondering if you could help us kind of size the favorability in Asia in a similar way as you did Vice

Speaker 1

President of the U. S. Hi, Mike. It's Todd. I guess the best way to respond to that by right now is that, as we look in the aggregate across the rest of our business segments, Vice President.

Speaker 1

Most of the favorable experience in the quarter did come through in the second quarter. Very little of it was by Deferred Into the Future or Spread Into the Future.

Speaker 10

Okay. So, so I think So the U. S. Traditional, you mentioned it was like $25,000,000 favorable. Do you have that for Asia?

Speaker 1

Vice President. No, maybe one way to put it is, if you look at Asia, the entire Asia Pacific segment, Vice President of Operations. Most of the, I would say, see the favorable variance to the range of run rates, a lot of that was due Some experience in some other treaty true ups.

Speaker 10

Okay. And then on the recapture activity, just wondering if you can Vice President

Speaker 1

of Investor Relations. So it's just that it's by part of our ongoing overall management of our business and where we see there's appropriate opportunities to take some by We will do that. So there's really no way for me to sort of quantify any future

Operator

Vice President. Our next question is a follow-up from Wes Carmichael with Wells Fargo. Please go ahead.

Speaker 8

Vice President. I had one housekeeping item. I think on corporate, you guys mentioned that there might be some expense timing. So I just wanted to kind of confirm, like do you think The loss there should tick back to kind of that $30,000,000 to $35,000,000 or $35,000,000 to $40,000,000 loss range from the $55,000,000 in the second quarter.

Speaker 1

Vice President. Yes. So what we saw in the Q2 was some higher financing costs and some timing of some by General Expenses. If you look year to date for corporate, we're pretty much on the run rate. Vice President.

Speaker 1

What I would probably maybe suggest or point to that as we go forward, it probably might be towards the higher end of the run rate for Corporate. Hopefully, we can manage that as tightly as possible, but maybe that's the best guidance or information I can give for that.

Speaker 8

That's helpful, Todd. And just on excess capital, it did tick down a bit to $1,200,000,000 I just wanted to get your view on Vice President. Should we expect you to kind of manage that lower? And it seems like transaction volume has been pretty healthy and seems like it will continue into by the second half of the year. So just kind of any view on where we should think about excess capital going forward?

Speaker 1

Sure. Yes. No, as we mentioned earlier, We like our position currently because I think we're in a good position to take advantage of some of the healthy pipeline transactions that we're seeing across the various by Geographies. And we're very comfortable bringing that excess capital level down, Vice President of Finance and Company. Again, through transactional activity or other ways, return capital to shareholders.

Speaker 1

So yes, 1.2 by at the end of the quarter, but comfortable bringing it down and look forward to deploying it into some good transaction.

Operator

Vice President, I would like to turn the conference back over to Anna Manning for any closing remarks.

Speaker 2

Vice President. Thank you. Thank you for

Speaker 3

your questions and for your continued interest in RGA. This was another strong quarter, Vice President and

Speaker 2

CEO of Operations. Further demonstrating

Speaker 3

the substantial earnings power in our business, we're a global leader. We're very well positioned to capitalize on the many growth by the opportunities ahead and that you've heard about through the course of the last hour, and we are confident in our ability to continue to deliver attractive returns to our investors. President. So thank you everyone and that concludes our Q2 call.

Speaker 2

Vice

Operator

President.

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Earnings Conference Call
Reinsurance Group of America Q2 2023
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