RGA(RGA) - 2024 Q2 - Quarterly Results

Notes Change in Presentation The company revised its reporting structure for the U.S. and Latin America Financial Solutions segment to align with internal management - The presentation for the U.S. and Latin America Financial Solutions segment was updated in Q1 2024 to combine the "Asset-Intensive" and "Capital Solutions" businesses[4] - This change aligns the segment's financial reporting with internal management practices and the reporting of other Financial Solutions segments[4] - The change in presentation had no effect on any previously or expected future reported results for the U.S. and Latin America Financial Solutions segment[4] Consolidated Financials Financial Highlights RGA reported strong Q2 2024 year-over-year growth in net premiums and adjusted operating income Q2 2024 Key Financial Highlights (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $3,920M | $3,337M | +$583M | | Net Income (available to shareholders) | $203M | $205M | -$2M | | Adjusted Operating Income | $365M | $297M | +$68M | | Diluted EPS (Net Income) | $3.03 | $3.05 | -$0.02 | | Diluted EPS (Adjusted Operating Income) | $5.48 | $4.40 | +$1.08 | | Book Value per Share, excluding AOCI | $148.19 | $138.99 | +$9.20 | - Assumed life reinsurance in force increased to $3,767.7 billion at June 30, 2024, up from $3,479.5 billion at June 30, 2023[5] - Total capital returned to shareholders in Q2 2024 was $56 million in dividends, compared to $104 million (including $50 million in buybacks) in Q2 2023[5] Consolidated GAAP Income Statements Total revenues grew year-over-year, driven by higher premiums and investment income, though net income remained flat Consolidated Income Statement Summary - Three Months Ended June 30 | (USD millions) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $3,920 | $3,337 | +$583 | | Net Investment Income | $1,082 | $857 | +$225 | | Total Revenues | $4,878 | $4,156 | +$722 | | Claims and other policy benefits | $3,712 | $3,013 | +$699 | | Total Benefits and Expenses | $4,609 | $3,891 | +$718 | | Income Before Income Taxes | $269 | $265 | +$4 | | Net Income Available to RGA's Shareholders | $203 | $205 | -$2 | Reconciliation to Adjusted Operating Income - Three Months Ended June 30 | (USD millions) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Income Before Income Taxes | $269 | $265 | +$4 | | Adjusted Operating Income Before Income Taxes | $491 | $376 | +$115 | | Adjusted Operating Income (After-tax) | $365 | $297 | +$68 | Consolidated Balance Sheets Total assets, liabilities, and shareholders' equity all increased significantly compared to the prior year Consolidated Balance Sheet Highlights | (USD millions) | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Investments | $89,620 | $74,290 | | Total Assets | $109,888 | $89,040 | | Future Policy Benefits | $50,779 | $38,239 | | Total Liabilities | $100,063 | $81,145 | | Total RGA, Inc. Shareholders' Equity | $9,735 | $7,805 | | Total RGA, Inc. Shareholders' Equity, excluding AOCI | $9,755 | $9,203 | Segment Summaries U.S. and Latin America Traditional This segment reported a significant increase in profitability driven by a lower loss ratio and higher net premiums U.S. and Latin America Traditional Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $1,827 | $1,750 | +$77 | | Income Before Income Taxes | $174 | $62 | +$112 | | Adjusted Operating Income Before Income Taxes | $167 | $63 | +$104 | - The loss ratio improved, decreasing from 92.3% in Q2 2023 to 88.1% in Q2 2024[12][13] - Assumed life reinsurance in force for this segment grew to $1,716.1 billion from $1,685.3 billion year-over-year[12] U.S. and Latin America Financial Solutions The segment saw a large increase in net premiums and pre-tax income, though adjusted operating income declined U.S. and Latin America Financial Solutions Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $305 | $17 | +$288 | | Income Before Income Taxes | $83 | $68 | +$15 | | Adjusted Operating Income Before Income Taxes | $80 | $109 | -$29 | - Policyholder account balances for fixed annuities (deferred) decreased to $9.68 billion as of June 30, 2024, from $11.36 billion a year prior[18] Canada Traditional This segment's profitability decreased year-over-year due to a higher loss ratio despite growth in net premiums Canada Traditional Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $326 | $307 | +$19 | | Income Before Income Taxes | $27 | $35 | -$8 | | Adjusted Operating Income Before Income Taxes | $26 | $32 | -$6 | - The loss ratio increased from 91.5% in Q2 2023 to 93.6% in Q2 2024[19][20] - Assumed life reinsurance in force grew to $489.3 billion from $484.6 billion year-over-year[19] Canada Financial Solutions The segment reported stable pre-tax income and a significant increase in net premiums from transactional activity Canada Financial Solutions Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $48 | $23 | +$25 | | Income Before Income Taxes | $6 | $6 | $0 | | Adjusted Operating Income Before Income Taxes | $7 | $6 | +$1 | - This segment's operations consist of longevity and fee-based transactions[22][23] Europe, Middle East and Africa Traditional Segment profitability declined due to a higher loss ratio, despite a strong increase in net premiums EMEA Traditional Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $497 | $429 | +$68 | | Income (Loss) Before Income Taxes | $1 | $4 | -$3 | | Adjusted Operating Income (Loss) Before Income Taxes | ($1) | $4 | -$5 | - The loss ratio increased from 92.1% in Q2 2023 to 94.6% in Q2 2024[24][25] - Assumed life reinsurance in force increased significantly to $976.5 billion from $802.3 billion year-over-year[24] Europe, Middle East and Africa Financial Solutions This segment delivered strong growth in profitability, fueled by a surge in net premiums and investment income EMEA Financial Solutions Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $159 | $90 | +$69 | | Income Before Income Taxes | $72 | $52 | +$20 | | Adjusted Operating Income Before Income Taxes | $86 | $66 | +$20 | - This segment's operations include longevity, asset-intensive, and fee-based transactions[26][27] Asia Pacific Traditional The segment showed improved profitability, benefiting from higher net premiums and a lower loss ratio Asia Pacific Traditional Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $708 | $677 | +$31 | | Income Before Income Taxes | $100 | $89 | +$11 | | Adjusted Operating Income Before Income Taxes | $99 | $89 | +$10 | - The loss ratio improved, decreasing from 83.5% in Q2 2023 to 81.6% in Q2 2024[28][29] - Assumed life reinsurance in force grew to $557.8 billion from $495.4 billion year-over-year[28] Asia Pacific Financial Solutions The segment reported a pre-tax loss due to large investment-related losses, masking positive underlying operating income growth Asia Pacific Financial Solutions Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Premiums | $50 | $44 | +$6 | | Income (Loss) Before Income Taxes | ($58) | $20 | -$78 | | Adjusted Operating Income Before Income Taxes | $71 | $62 | +$9 | - The segment recorded significant investment related losses of $172 million in Q2 2024, compared to losses of $51 million in Q2 2023[30] Corporate and Other The segment's pre-tax loss widened due to investment-related losses, though the adjusted operating loss narrowed Corporate and Other Performance - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Investment Income | $123 | $82 | +$41 | | Investment Related Losses, Net | ($79) | $0 | -$79 | | Loss Before Income Taxes | ($136) | ($71) | -$65 | | Adjusted Operating Loss Before Income Taxes | ($44) | ($55) | +$11 | Summary of Segment GAAP Income Consolidated pre-tax income increased slightly, with strong growth in the U.S. and Latin America offset by other regions GAAP Income Before Income Taxes by Segment - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | U.S. and Latin America | $257 | $130 | +$127 | | Canada | $33 | $41 | -$8 | | Europe, Middle East and Africa | $73 | $56 | +$17 | | Asia Pacific | $42 | $109 | -$67 | | Corporate and Other | ($136) | ($71) | -$65 | | Consolidated Total | $269 | $265 | +$4 | Summary of Segment Adjusted Operating Income Consolidated adjusted operating income grew significantly, with positive contributions from most geographic regions Adjusted Operating Income Before Income Taxes by Segment - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | U.S. and Latin America | $247 | $172 | +$75 | | Canada | $33 | $38 | -$5 | | Europe, Middle East and Africa | $85 | $70 | +$15 | | Asia Pacific | $170 | $151 | +$19 | | Corporate and Other | ($44) | ($55) | +$11 | | Consolidated Total | $491 | $376 | +$115 | Investments Cash and Invested Assets and Investment Income and Yield Summary Total cash and invested assets grew year-over-year, accompanied by an increase in the annualized investment yield Total Cash and Invested Assets | (USD millions) | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Fixed maturity securities | $70,491 | $56,236 | | Mortgage loans | $7,984 | $7,038 | | Cash and cash equivalents | $4,596 | $2,598 | | Total | $94,216 | $76,888 | Annualized Investment Yield (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Investment Yield | 4.65% | 4.42% | +23 bps | | Investment Yield (ex-VII) | 4.76% | 4.43% | +33 bps | Fixed Maturity Securities The fair value of fixed maturity securities increased, with corporate securities remaining the largest portfolio component Fixed Maturity Securities by Type (Fair Value) | (USD millions) | June 30, 2024 | % of Total | Dec 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Corporate | $46,131 | 65.4% | $38,755 | 64.1% | | Canadian government | $4,780 | 6.8% | $3,917 | 6.5% | | Japanese government | $4,463 | 6.3% | $3,131 | 5.2% | | ABS | $5,143 | 7.3% | $4,429 | 7.3% | | Other | $9,974 | 14.2% | $10,235 | 16.9% | | Total | $70,491 | 100.0% | $60,467 | 100.0% | Corporate Fixed Maturity Securities by Industry The corporate fixed maturity portfolio is well-diversified across industries with an average credit rating of BBB+ Corporate Fixed Maturity Securities by Industry (Fair Value, June 30, 2024) | Industry Group | Fair Value (USD millions) | % of Total | | :--- | :--- | :--- | | Financial Institutions | $15,090 | 32.7% | | Industrials | $24,306 | 52.7% | | Utilities | $6,735 | 14.6% | | Total | $46,131 | 100.0% | - The average credit rating for the total corporate portfolio is BBB+[43] Ratings of Fixed Maturity Securities and Structured Fixed Maturity Securities The fixed maturity portfolio maintains high credit quality, with the vast majority of securities rated investment grade Ratings of Fixed Maturity Securities (Fair Value, June 30, 2024) | Rating Agency Designation | % of Total | | :--- | :--- | | AAA/AA/A | 64.9% | | BBB | 29.5% | | Total Investment Grade | 94.4% | | BB and Below | 5.6% | Structured Fixed Maturity Securities (Fair Value, June 30, 2024) | Security Type | % of Total Structured | | :--- | :--- | | CLOs | 31.6% | | ABS, excluding CLOs | 29.1% | | CMBS | 25.0% | | RMBS | 14.3% | Fixed Maturity Securities Below Amortized Cost Gross unrealized losses on fixed maturity securities totaled $6.5 billion, primarily on investment-grade securities Gross Unrealized Losses by Duration (June 30, 2024) | (USD millions) | Less than 12 months | 12 months or more | Total | | :--- | :--- | :--- | :--- | | Investment Grade | | | | | Fair Value | $14,045 | $33,027 | $47,072 | | Gross Unrealized Losses | $449 | $5,919 | $6,368 | | Below Investment Grade | | | | | Fair Value | $361 | $714 | $1,075 | | Gross Unrealized Losses | $9 | $130 | $139 | | Total | | | | | Gross Unrealized Losses | $458 | $6,049 | $6,507 | Consolidated Investment Related Gains and Losses The company reported larger net investment-related losses in Q2 2024, driven by losses on securities and derivatives Investment Related Gains (Losses) - Q2 2024 vs Q2 2023 | (USD millions) | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net losses on fixed maturity securities | ($179) | ($22) | ($157) | | Net losses on total derivatives | ($93) | ($113) | +$20 | | Other | $1 | ($9) | +$10 | | Total Investment Related Losses, Net | ($271) | ($123) | ($148) | Appendix Reconciliations of GAAP to Non-GAAP Measures This section provides detailed reconciliations of non-GAAP financial measures to their comparable U.S. GAAP counterparts - Provides detailed reconciliations of GAAP income to adjusted operating income for each business segment, itemizing adjustments for investment gains/losses, derivative value changes, and other non-operating items[56][58][59] - Includes a reconciliation of RGA, Inc. shareholders' equity to shareholders' equity excluding AOCI, breaking down the components of AOCI such as unrealized appreciation/depreciation of securities and effects of discount rate changes[60] - Shows the calculation of book value per share excluding AOCI and the further adjustment to exclude the effect of B36 (cumulative change in fair value of funds withheld embedded derivatives)[61] Non-GAAP Disclosures This section explains the company's use of non-GAAP measures to evaluate performance and clarify underlying business trends - The company uses non-GAAP measures like 'Adjusted operating income' to better reflect ongoing profitability by excluding volatile items such as net investment gains/losses and changes in fair value of certain derivatives[64] - 'Notable items' are excluded from some non-GAAP measures as they are believed not to be indicative of ongoing operating performance, such as impacts from major assumption reviews[65] - Shareholders' equity and book value per share are presented excluding AOCI because AOCI items can fluctuate significantly and may not reflect underlying business performance[67]