Tom Gallagher

Tom Gallagher of Evercore ISI questioned the discrepancy between Brooke Re's $4.2 billion net MRB asset and its $1.7 billion equity, asking for clarification on other accounting adjustments. He also requested an update on the current value of hard assets within Brooke Re and expressed concern about potential future capital contributions to Brooke Re if high lapse rates and near-breakeven hedging persist, given past actuarial review charges.

Answer

Don Cummings, CFO of Jackson Financial, clarified that MRB is one component of Brooke Re's balance sheet, which includes other assets and liabilities, and highlighted the impact of recent reinsurance transactions. He declined to provide an exact figure for hard assets but stated the initial $700 million had grown significantly. Mr. Cummings and Linn Sun, Chief Actuary, addressed the actuarial review, explaining that updated lapse and benefit utilization assumptions should lead to improved actual-to-expected policyholder behavior, reducing future negative impacts. Ms. Sun noted elevated lapses were primarily for at-the-money GLWBs.

Tom Gallagher of Evercore ISI questioned the discrepancy between Brook Re's reported equity of $1.7 billion and the net MRB asset of $4.2 billion, asking for clarification on other accounting adjustments and an update on the current value of hard assets held within Brook Re. He also raised concerns about the potential need for capital contributions to Brook Re in the next 2-3 years, given the annual actuarial review charges, persistent high lapse rates on the VA side, and near-breakeven VA hedging results relative to the $1.7 billion equity.

Answer

Don Cummings, CFO, clarified that the net MRB asset is only one component of Brook Re's balance sheet, which also includes other assets and liabilities. He stated that the initial $700 million in hard assets has grown significantly, and the new blocks of business reinsured into Brook Re and Hickory Re are also supported by invested assets, contributing to a strong consolidated balance sheet. Regarding potential capital contributions, Mr. Cummings expressed an expectation that the actual-to-expected policyholder behavior, particularly regarding lapses and benefit utilization, would improve due to the recent assumption updates. He also noted that surrender activity typically slows during volatile or declining equity markets. Lynn Sun, Chief Actuary, detailed that the 2025 assumption update focused on long-term lapse assumptions, especially for GLWBs at or slightly in the money, affirming the robustness of their review process.

Tom Gallagher questioned the 50%+ growth in the stop-loss business, asking if it indicated mispricing or market disruption, and sought more color on the terms and conditions of January renewals. He also asked if Sun Life aimed to restore more than the 2-3 points behind target margin in its repricing strategy, given increased volatility.

Answer

David Garg, EVP, Head of U.S. Business, Sun Life Financial, attributed the growth to a hardening market and Sun Life's strong capabilities, noting they initiated pricing actions earlier than competitors. He confirmed the 17% renewal rate increase reflected expected medical cost and leverage trends. Kevin Strain, CEO, Sun Life Financial, emphasized Sun Life's ability to be selective in risk selection due to its scale and deep knowledge. David Garg added that pricing aimed to reflect expected medical cost trends and claims experience, with ongoing attention to emerging costs.

Tom Gallagher questioned the implications of Sun Life's 50%+ stop-loss growth, asking if it indicated market disruption or mispricing, and sought details on the terms and conditions of January renewals. He also asked if the repricing aimed to restore more than the previously noted 2-3 points behind target margin.

Answer

David Garg, EVP, Head of U.S. Business, Sun Life Financial, confirmed a hardening market affecting less-scaled competitors and stated the 17% renewal rate increase was gross, reflecting risk selection and earlier pricing action than competitors. He clarified that pricing fully reflects expected medical cost trends and claims experience. Kevin Strain, CEO, Sun Life Financial, reiterated that Sun Life's scale and consistency allowed for selective risk-taking.

Tom Gallagher asked for conceptual clarity on Lincoln Financial's long-term cash flow trajectory, post-2027, considering growing subsidiary remittances and reduced holding company interest expenses, and also questioned the rationale behind reallocating net interest income from RILA collateral to non-operating income.

Answer

CFO Chris Neczypor affirmed the conceptual drivers for long-term cash flow growth post-2027 preferred redemption. Regarding NII reallocation, he explained it was a materiality-driven refinement due to RILA's growth, aiming for a cleaner view of annuities operating performance, with no change to underlying economics or free cash flow.

Tom Gallagher inquired about the long-term trajectory of holding company cash flow, expecting growing remittances and lower interest expenses post-debt/preferred redemption, and the rationale behind reallocating Net Interest Income (NII) related to RILA collateral from operating to non-operating income.

Answer

Chris Neczypor, Chief Financial Officer, affirmed the conceptual long-term drivers of growing remittances and reduced holding company expenses post-2027 preferred redemption. He explained the NII reallocation is due to the increasing materiality of RILA collateral balances, aiming for a clearer view of annuities operating performance, and noted it would definitionally improve free cash flow conversion.

Tom Gallagher asked Mark Costantini to elaborate on Corebridge Financial's competitive moat in distribution, contrasting it with the perception of commodity products in a crowded market. He also inquired about the $500 million preferred raised in Q4, its cost, and its implications for Bermuda funding and future cash flow/capital generation.

Answer

Mark Costantini (President and CEO) emphasized winning with customers by being the easiest company to do business with and leveraging their strong distribution network. He also highlighted their differentiated value proposition through liability-driven and asset-driven expertise. Elias Habayeb (CFO) explained that the preferred was not considered expensive given attractive IRRs on new business, and it supports Bermuda funding for 2026. He expects insurance company dividends to grow 5%-10% in 2026 (after re-baselining 2025) and organic free cash flow conversion to remain 60%-65%.

Tom Gallagher asked Marc Costantini about Corebridge Financial's competitive moat in distribution, contrasting it with the investor perception of selling a commodity product in a crowded field, and inquired about the implications of the Q4 preferred stock issuance for Bermuda and future capital generation.

Answer

Marc Costantini, President and Chief Executive Officer, asserted that Corebridge Financial counters competitive forces by striving to be the easiest company to do business with, leveraging its distribution powerhouse, and possessing differentiated liability-driven and asset-driven expertise. Elias Habayeb, Chief Financial Officer, explained that the preferred issuance supports attractive IRRs for new business in Bermuda, noting that insurance company dividends grew 6% in 2025 (rebaselined for the VA transaction) and are anticipated to grow 5%-10% in 2026, with organic free cash flow conversion expected to remain at 60%-65%.

Tom Gallagher requested specific numbers for paid family leave, including its percentage of the total disability business and its growth rate.

Answer

Chris Pyne, EVP of Group Benefits, indicated that it's best absorbed into the very large disability business, flowing through the numbers, and managed as part of the overall business flow without providing specific separate figures.

Tom Gallagher inquired about the Paid Family Leave (PFML) as a business opportunity for Unum, its potential size, and growth rate, especially with new states implementing programs.

Answer

Chris Pyne, EVP of Group Benefits, described PFML as an important topic that expands the number of events covered within Unum's expertise in leave and short-term disability. He highlighted opportunities in states like Minnesota and Delaware that allow private insurance options, enabling Unum to offer bundles and attract new customers. He noted that while there has been opportunity in about 10-12 states, future opportunities will vary by state, with not every state offering the same robust additions. He stated that PFML is absorbed into the normal business flow and managed like other insurance products.

Tom Gallagher from Evercore ISI asked if the $500 million in actuarially justified rate increases were primarily driven by the removal of morbidity and mortality improvement assumptions and changes in group life contracts. He also probed the rationale behind the long-term assumption changes, questioning if they were based on observed experience, future uncertainty, prudence, or alignment with industry peers, and how regulators might perceive these changes.

Answer

CFO Steve Zabel confirmed that all assumption changes, particularly the magnitude of adjustments, influence the rate increase program. He clarified that basic morbidity and mortality assumption updates reflect several years of observed experience, including higher incidence post-COVID and increased mortality in parts of the block. The decision to remove the morbidity improvement assumption was driven by its failure to re-emerge post-pandemic and increased modeling uncertainty, which Zabel believes is supportable to regulators.

Tom Gallagher inquired if the $500 million in actuarially justified rate increases were directly linked to the removal of morbidity and mortality improvement assumptions and changes in group life contracts. He also asked what was driving these long-term assumption changes, whether it was experience, future uncertainty, prudence, or alignment with peers, and if regulators would approve such changes if perceived as solely prudence-driven.

Answer

Chief Financial Officer Steve Zabel confirmed that all assumption changes flow through to the justification for rate increases, noting the magnitude of the adjustments. He explained that initial adjustments to cash flow assumptions for morbidity and mortality were based on several years of experience, including higher incidence post-COVID and higher mortality in parts of the block. The full removal of the morbidity improvement assumption was due to heightened modeling uncertainty post-pandemic, as the trend hadn't fully re-emerged. Mr. Zabel expressed confidence that all assumption changes are based on supportable experience and would be approved by regulators.

Questioned the risk of long-term care (LTC) incidence trends being permanently revised higher in the next actuarial review and challenged the sustainability of the low 62% disability loss ratio, which is significantly better than pre-pandemic levels and peers.

Answer

Management declined to preview the LTC review results but emphasized the large statutory reserve buffer. For disability, they expressed confidence in the sustainability of the low loss ratio, attributing it to their best-in-class claims management operations and a sales approach focused on integrated solutions rather than just price, which supports fair returns.

Tom Gallagher followed up on mortality exposure, asking for details on embedded earnings in the corporate loss related to life insurance and the potential for further reducing mortality exposure, such as RGA buying out the remaining 25%.

Answer

Robin Raju, CFO of Equitable Holdings, explained that Q4 saw $25 million in adverse mortality due to a mix of large and smaller claims with less reinsurance coverage before the RGA transaction benefits. For 2026, an increased GAAP guidance of $50 million for mortality is included in the corporate and other loss projection of $350 million-$400 million, which is conservative but closer to recent experience. He noted that the remaining 25% exposure is much smaller and manageable, but the company will always explore solutions to drive shareholder value.

Tom Gallagher asked about the significant valuation gap between Equitable Holdings' stake in AllianceBernstein and its own stock, inquiring if there are structural corporate strategies to close this gap or if it's a theoretical gap to be managed over time. He also followed up on mortality exposure, asking for details on embedded earnings in the corporate loss related to life insurance and the possibility of further reducing mortality exposure, such as RGA acquiring the remaining 25%.

Answer

Mark Pearson, CEO and President of Equitable Holdings, acknowledged the perplexing valuation gap, attributing AB's strong performance partly to the integrated 'flywheel' model. He highlighted Equitable Holdings' position in attractive, growing markets (U.S. retirement, asset management, wealth management), record AUM, strong execution, and its current valuation at 6x future earnings, stating management is focused on growing the business, optimizing the flywheel, expense discipline, and increasing cash generation to close the gap. Robin Raju, CFO of Equitable Holdings, detailed $25 million in adverse mortality in Q4, leading to an increased GAAP guidance of $50 million for 2026 in corporate and other, which he described as prudent. He stated that the remaining 25% mortality exposure is smaller and manageable, but they would always consider solutions to drive shareholder value.

Tom Gallagher inquired about the baseline for Voya Financial's Stop Loss margin expansion in 2026 (84% full year vs. 91% January 2025 cohort) and asked for clarification on the implied loss-cost trend and the company's confidence in managing the situation without adverse selection.

Answer

Mike Katz (CFO, Voya Financial) stated that margin improvement is expected from both the 84% full-year reported loss ratio and the 91% January 2025 cohort, emphasizing the prudence of reserving at the higher end of the best estimate range due to wider outcome ranges. Heather Lavallee (CEO, Voya Financial) highlighted the improvement from a 95% loss ratio a year ago to the current 90-91% range for the 2025 book. Mike Katz confirmed confidence in managing the situation, noting improvements in risk selection and a trend in the high teens to 20% range.

Tom Gallagher asked about the outlook for Advice & Wealth Management (AWM) margins in 2026, specifically whether Ameriprise expects to maintain the 29%-30% range. He also inquired about the company's confidence in retaining existing advisors and sought clarification on whether the elevated mortality in Retirement & Protection Solutions (RPS) during the quarter was due to large claim volatility or a higher frequency of claims.

Answer

CFO Walter Berman expressed confidence in maintaining AWM margins within the 29%-30% range, citing strong core margins and minimized interest rate impact due to investment strategy, barring unforeseen external factors. Chairman and CEO Jim Cracchiolo stated overall confidence in advisor retention, acknowledging competitive pressures but emphasizing Ameriprise's value proposition and support for advisor growth. Regarding RPS mortality, Jim Cracchiolo and Walter Berman clarified it was a balance of both higher frequency and large claims, but nothing exceptional or outside the expected range, not impacting longer-term trends.

Tom Gallagher asked about the outlook for Advice & Wealth Management (AWM) margins in 2026, specifically if Ameriprise expects to maintain the 29%-30% range. Tom Gallagher also inquired about Ameriprise's retention of existing advisors, given the strong pipeline for recruiting new financial advisors in 2026. Tom Gallagher asked for clarification on the elevated mortality in Retirement & Protection Solutions (RPS) during the quarter, specifically whether it was due to large claim volatility or a higher frequency of claims.

Answer

Chairman and CEO Jim Cracchiolo expressed confidence in maintaining strong, consistent core margins. He noted that Ameriprise has minimized interest rate impact through investment strategies, expecting margins to remain in the current range unless external, unmanageable factors like government changes or interest rate shifts occur. Cracchiolo stated that overall advisor retention is very good, acknowledging that some losses may occur due to competitive offers. He emphasized Ameriprise's focus on helping advisors generate long-term value through its excellent platform, capabilities, and leadership, attracting quality recruits who prioritize growth over immediate incentives. Cracchiolo clarified that the elevated mortality was due to both higher claims and frequency, but nothing exceptional or outside the expected range. He stated it was a balanced situation with no issues impacting the longer-term outlook.

Tom Gallagher followed up on the two large advisor teams that left, asking if there would be a continued tail of outflows in subsequent quarters or if wrap flows are expected to rebound closer to $8 billion in Q4. He also asked if Ameriprise has re-examined its payout grid for existing advisors to ensure retention in a competitive market.

Answer

EVP and CFO Walter Berman stated there would be some carryover into Q4 from the two advisor departures, but current attrition patterns are stable. Chairman and CEO Jim Cracchiolo explained that Ameriprise evaluates payout in a balanced equation with advisor support and investments, making periodic adjustments, but is currently in a good position without broad-based changes being discussed.

Tom Gallagher from Evercore asked for details on the improvement in MetLife's non-medical health ratio, specifically the split between dental and disability performance in Q3 2025, and confidence for Q4.

Answer

Ramy Tadros, President of U.S. Business at MetLife, reported a 230 basis point sequential improvement in the non-medical health ratio. He attributed this to favorable seasonal utilization patterns in dental and the ongoing impact of pricing actions. Disability performance was in line with expectations, showing strong recoveries due to prior investments. Tadros expressed confidence in further Q4 improvement due to continued dental seasonality.

Tom Gallagher inquired about the nature of the $12 billion in Q4 PRT wins (large vs. small deals), the competitive dynamics in the market, and the underlying factors contributing to the improvement in non-medical health, specifically the split between dental and disability, and confidence for Q4.

Answer

Ramy Tadros, President of U.S. Business at MetLife, confirmed the $12 billion in Q4 PRT wins were a few large deals, emphasizing MetLife's competitive advantages in the jumbo market (balance sheet, investment capabilities, track record) and a disciplined M&A approach. For non-medical health, he attributed sequential improvement to favorable seasonal dental utilization and pricing actions, with disability performing well and in line with expectations, expressing confidence in further Q4 improvement due to continued dental seasonality.

Tom Gallagher asked about the performance of Principal Financial Group's commercial real estate (CRE) returns, asset management flows, and commercial mortgage loan exposure, seeking insight into a potential market inflection point. He also questioned the company's M&A philosophy, particularly regarding large defined contribution assets.

Answer

CEO Deanna Strable and President Kamal Bhatia noted CRE is in its strongest position in three years, with stability in occupancy and pricing, improving capital flows, and increased transaction volume, positioning Principal's institutional book for outperformance. CEO Deanna Strable reiterated a disciplined M&A philosophy focused on strategic alignment, capabilities, financial targets, and cultural fit, emphasizing organic growth but maintaining capital flexibility for opportunistic, high-bar inorganic growth after recent integrations and divestitures.

Tom Gallagher asked about Principal Financial Group's M&A philosophy, noting a shift from M&A-focused capital deployment to primarily common dividends and buybacks, and whether the company would consider lumpy defined contribution assets coming to market.

Answer

CEO Deanna Strable stated that Principal's disciplined M&A philosophy remains unchanged, prioritizing strategic alignment, increased growth potential, meeting financial targets, and cultural fit. She emphasized the ability to meet financial targets organically but confirmed the company remains inquisitive and has capital flexibility for inorganic opportunities, especially where scale is critical. She noted that after integrating Wells Fargo and divesting other businesses, Principal is now on the 'front foot' for growth opportunities.