Reinsurance Group of America - Q2 2023

Transcript

Operator (participant)

Please 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.

Todd Larson (Senior EVP and CFO)

Thank you. Welcome to RGA's second quarter, 2023 conference call. I'm joined on the call this morning with Anna Manning, RGA's Chief Executive Officer, Tony Cheng, President, Leslie Barbi, Chief Investment Officer, and Jonathan Porter, Chief Risk Officer. As a quick reminder before we get started regarding forward-looking information and non-GAAP financial measures, some of our comments or answers to your questions may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ materially from expected results. Additionally, during the course of this call, the information we provide may include non-GAAP financial measures.

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

Anna Manning (CEO)

Thank you, Todd. Good morning, thank you for joining our call today. Last night, we reported second quarter adjusted operating income of $4.40 per share. This was a strong quarter, with many regions and business lines performing very well. It was also another quarter 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 favorable mortality experience in our U.S. individual business, as well as favorable performance in our U.S. group and individual health businesses. Our Asia traditional business also benefited from favorable claims experience, as well as higher yields.

Our global financial solutions business had another strong quarter, with contributions from both spreads and favorable longevity experience, continuing the trend of excellent performance over a number of years. Investment performance in the quarter was good, as new money rates remained attractive and impairments were minimal. We believe our investment portfolio is well positioned to withstand any ongoing economic uncertainties. Strong new business momentum in our organic business continued through the quarter and notably picked up in Asia. In a few minutes, Tony will expand on the quarter's activities and on our future growth opportunities. We had another very successful quarter on the capital management front, deploying $190 million into in-force and other transactions, bringing the year-to-date total to $384 million of capital put to work.

I am pleased with the start of the year and with the state of our transactions pipelines, which are at very healthy levels, with opportunities across many geographies and risks. In the quarter, we also repurchased $50 million of shares, bringing the year-to-date total to $100 million in share repurchases. We increased our quarterly dividend to $0.85 per share, representing a 6.3% increase to our shareholder dividends. This has been a very busy six months of active capital management. At our recent Investor Day, we highlighted the earnings power in our business and the reasons for the excitement we have about our growth opportunities.

We talked about favorable industry dynamics driving stronger demand for what we do so well, whether that is to help clients find new ways or better ways to reach consumers, or to underwrite products in a more efficient and effective manner. 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 their risk and capital needs. We are very well positioned to benefit from all of those opportunities. We have the breadth and depth of capabilities, technical expertise, and crucially, the risk discipline necessary to thrive in this highly complex industry.

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, which gives me a great deal of confidence in RGA's future and in our ability to continue to deliver growth and attractive returns to our shareholders over many years to come. Thank you for your continued support and interest in RGA. I will now hand it over to Tony to provide additional thoughts on our business momentum.

Tony Cheng (President)

Thank you. As Anna mentioned, we see favorable industry dynamics, we are well positioned to benefit from these many opportunities. During our recent Investor Day, we highlighted four areas with particularly good growth opportunities. These four areas are longevity and PRT, Asia traditional, Asia Asset Intensive, and our U.S. traditional business. We are seeing strong success across all four in 2023. Our longevity business is experiencing strong volumes in Europe, and we are delighted with the announcement earlier this week of the GBP 5 billion longevity swap transaction. 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 of our prospects in this sizable and growing market. In Asia, there is a strong recovery in economic activity, 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 in South Korea. During Investor Day, we spoke of a new product we launched in China in late 2022. 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. Our Hong Kong business has the additional tailwind of the rebound of mainland Chinese visitors to closer to pre-pandemic level. These visitors are a material source of business for the Hong Kong insurance market. These new product initiatives are very much examples of how we grow by partnering with clients to help grow the underlying insurance market. For the Asia asset-intensive business, we are partnering with multiple clients to optimize their risk and capital management. This is best exhibited by another important transaction this quarter in Japan with a new client.

A number of our previous coinsurance transactions were with the international companies with Japanese operations. This new transaction was sizable in nature and with one of the larger 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. As Asia regulators adopt new capital standards, our teams are providing first to market capital solutions that lead to exclusive transactions around the region. Finally, in our U.S. traditional business, we continue to see strong demand for our broad range of underwriting programs. These programs not only directly generate reinsurance business, but also strengthen our value proposition. Combining this value proposition with our relentless client focus, has led to RGA being chosen for significant shares in many major reinsurance pools over the past 12 months.

As you can see, we are pleased with the volume and the breadth of our business wins. What is just as pleasing is how we are winning a large part of this new business. We communicated previously that RGA's business model is to provide risk and capital solutions to address the complex business needs of our clients. The examples I have just cited show the power of our underwriting, product development, and capital management expertise. When they are all combined with proactive business development, we increase the chance of winning exclusive business. We are particularly pleased with the positive results from exclusive transactions this year and are confident this can continue going forward. These transactions generate greater value for RGA and our partners, and ultimately benefit the i- insurance industry and consumers through innovation. In addition, we can replicate these successes in other markets through our strong teams worldwide.

Thank you for your interest in RGA. I will now turn it over to Todd to discuss the financial results.

Todd Larson (Senior EVP and CFO)

Thanks, Tony. By turning to the quarter's results, RGA reported pretax adjusted operating income of $376 million for the quarter and adjusted operating income per share of $4.40, which includes a foreign currency headwind of $0.07 per share. The trailing 12 months adjusted operating return on equity was 10.9%. Excluding the 2022 assumption changes, referred to as notable items, the trailing 12 months adjusted operating return on equity was 13%. We are pleased with the strong quarterly results, as well as new business production, capital deployment into in-force and other transactions, and investment results. Reported premiums were up 3.3% for the quarter.

After adjusting for adverse foreign currency impacts, premiums were up 4.7% in the quarter and 7.7% year-to-date, both on a constant currency basis. As Tony and Anna mentioned, we have strong momentum in the business activity, we expect this to continue to contribute to premium growth over time. Turning to the quarterly segment results on slide six in our earnings presentation that can be found on RGA's Investor Relations website. The U.S. and Latin America Traditional Segment reflected favorable mortality experience in our individual mortality business. Good results in group and individual health, partially offset by some one-time items of approximately $12 million. The favorable individual mortality experience is widespread and driven by lower large claims and better than expected older age mortality. This experience occurred in both our capped and uncapped cohorts.

As we've previously discussed, under LDTI, 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. That is what we saw in this quarter, where favorable mortality results were spread into the future periods. The one-time items reflect certain actions that together had an adverse impact in the second quarter, but are expected to be favorable to long-term future cash flows. The U.S. Asset Intensive business results were strong, reflecting improved investment spreads, including higher yields on floating rate securities. Our U.S. Capital Solutions business continues to perform in line with our expectations. Canada traditional results reflected slightly favorable mortality experience, and the Financial Solutions business reflected favorable longevity experience.

In the Europe, Middle East, and Africa segment, the traditional business results reflected moderately unfavorable mortality experience in the U.K., consistent with excess mortality general population trends. EMEA's Financial Solutions business results reflected favorable longevity experience. Turning to our Asia Pacific traditional business, results reflected favorable claims experience, most of which came through in the second quarter due to the LDTI cohorts impacted. The Asia Pacific Financial Solutions business performed well, reflecting favorable investment spreads and claims experience. The corporate and other segment reported pretax adjusted operating loss of $55 million, more than the expected quarterly range, primarily due to higher financing costs and the timing of some general expenses. Year-to-date results are in line with the expected run rate. Moving on to investments on slides eight through 11.

The non-spread portfolio yield for the quarter was 4.42%, reflecting a lower contribution from variable investment income, primarily in limited partnerships. For non-spread business, our new money rate rose to 6.09%, reflecting higher available market yields with select opportunities in structured securities and private assets. Credit impairments were minimal, and we believe the portfolio is well positioned as we move through any ongoing economic uncertainties. Moving on to capital management. As shown on slides 12 and 13, our capital and liquidity position remains strong, and we ended the quarter with excess capital of approximately $1.2 billion. In the quarter, we deployed $190 million of capital into in-force and other transactions, bringing the year-to-date total to $384 million.

We also returned a total of $104 million of capital to shareholders, through $50 million of share repurchases and $54 million in dividends. We expect to remain active in deploying capital into in-force and other transactions and returning excess capital to shareholders through dividends and share repurchases. As shown on slide 14, we have a long track record of increasing book value per share over many periods, including at a compounded annual growth rate of 10.5% since the beginning of 2021. To summarize, we are very pleased with our second quarter performance, which follows the strong first quarter. Our business is resilient, with substantial underlying earnings power. Momentum is strong, we see good opportunities across our geographies 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 (participant)

We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourselves to one question and one follow-up, and you may queue for more follow-up questions. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jimmy Bhullar with JPMorgan. Please go ahead.

Jimmy Bhullar (Equity Research Analyst)

Hey, good morning. I had a couple of questions. First, on, on your new money yield, it went up a lot faster than it's gone up in the past several quarters, at slightly over 50 basis points and, and by a greater magnitude than I think what the rise in interest rates would suggest. Just wondering if you think that, this is a normal level to think about as you, 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? Then I-

Leslie Barbi (CIO)

Jimmy, it's... Oh, sorry, go ahead.

Jimmy Bhullar (Equity Research Analyst)

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

Leslie Barbi (CIO)

I don't have to remember both. Okay. Yeah, thanks for the question, Jimmy. It's Leslie Barbi. Yeah, 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. We did have some mix shift because we had some very attractive opportunities in select private assets and structured securities. There's a sum of both, but I think that, that, you know, 6% ballpark is not a bad expectation. It, it'll come off a little bit, but it's, you know, going back to the normal mix won't send it down tremendously.

Jimmy Bhullar (Equity Research Analyst)

... Okay. Just on the tax rate, it was a, it was lower than it normally has been and what we had expected. Were there any one-timers there? What's your expectation for the tax rate going forward?

Todd Larson (Senior EVP and CFO)

No, you know, no, the tax rate will, you know, move around a little bit, you know, quarter to quarter. You know, what we saw, this quarter was one where the mix of earnings emanated from, from around the world and how that translated in, the taxes. Also, this is the time of year when we have filed, various tax returns, and we true up, you know, provisions to the tax return, no filings, and that resulted in a, in a, in a positive to the- or a reduction to the tax rate, I should say.

Jimmy Bhullar (Equity Research Analyst)

Okay, thank you.

Operator (participant)

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

John Barnidge (Managing Director and Senior Research Analyst)

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

Leslie Barbi (CIO)

Sure. Thanks. This is Leslie again. On the portfolio yields, you're right, it came off a little bit XVII, and that was really due to some expense timing in the quarter. That tends to vary. All things equal, we expect the portfolio yield to continue to rise. You know, versus things that are rolling off, we're probably picking up about 150 basis points right now. The new money rates will continue to be additive to the portfolio yield.

John Barnidge (Managing Director and Senior Research Analyst)

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

Jonathan Porter (EVP and Chief Risk Officer)

Yeah. Hi, John. It's Jonathan here. Yeah, certainly we are reflecting our current expectations for the heightened mortality environment in the U.K. and our pricing. I think we have taken appropriate action there from a new business perspective. You know, just a reminder that we do have a, you know, very sizable longevity book of business as well in the U.K. The higher general population mortality, although it's providing a headwind to the mortality business, which we've accounted for, it's also providing a tailwind to the longevity business, and we saw that come through our results in the current period, too, where our longevity gains and our financial solutions line actually a little bit more than offset the mortality drag in the traditional business.

John Barnidge (Managing Director and Senior Research Analyst)

Thanks for the answer.

Operator (participant)

The next question comes from Wes Carmichael with Wells Fargo. Please go ahead.

Wes Carmichael (Executive Director)

Hey, good morning. just hoping you guys could provide some color on the pipeline and the outlook for, pension risk transfer transactions in the U.S. I, I just kind of wondering, what's, what's kind of your sweet spot in terms of size and, and, you know, maybe timing of, of the rest of 2023, what that's looking like? Thank you.

Tony Cheng (President)

Thanks. 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 market. We're actively quoting, and there is a very strong pipeline of opportunity. You know, we strategically know that, you know, we are the natural home for longevity, given our very, very sizable block of mortality. We've got the expertise now in the U.S. that we've exported from other parts of the world. In terms of size, we tend to focus on the upper end of the market in partnership, because we feel there is less competition in that area.

Unfortunately, we haven't closed the transaction this quarter, but we've closed the transaction earlier this year, and we're eagerly anticipating future transactions in the future.

Wes Carmichael (Executive Director)

Thanks, Tony. Just wondering, did you have any impact in the quarter from enforced pricing actions? I think, I think there was a little bit of maybe benefit in the, the first quarter results. Just wondering if there was any of that, that came through in the second quarter results.

Todd Larson (Senior EVP and CFO)

This, this is Todd. As far as actual repricing activity, not really anything in, in this quarter. You know, we had talked about what we -- the activity in the first quarter, but nothing this quarter.

Wes Carmichael (Executive Director)

Thank you.

Operator (participant)

The next question comes from Tracy Benguigui with Barclays. Please go ahead.

Tracy Benguigui (Director and Senior Equity Research Analyst)

Thank you. I realize that you've seen favorable mortality. I'm wondering, on the margin, are you seeing any adverse for VUL, any, pull forward? At least that's a comment made by the ceding, who gathered that information from the insurer.

Jonathan Porter (EVP and Chief Risk Officer)

Yeah. Hi, Tracy, it's Jonathan. You know, I, I won't comment specifically at the product level. Like, once you start to really drill down and parse the in-force book of business, the credibility, you know, you know, falls, falls quite a bit. In total, as was mentioned sort of in our prepared remarks, we have seen favorable experience this quarter for sure. It's mostly driven by fewer large claims in the current period, and it is concentrated more in the older ages where it's been more favorable for us.

Tracy Benguigui (Director and Senior Equity Research Analyst)

Okay.

Jonathan Porter (EVP and Chief Risk Officer)

Most of our business, just again, a reminder for VUL, specifically, we reinsure the mortality risk on that book of business. Again, just to, as a reminder.

Tracy Benguigui (Director and Senior Equity Research Analyst)

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

Tony Cheng (President)

Yeah, Todd, do you want to take that?

Todd Larson (Senior EVP and CFO)

Yeah. Hi, Tracy, it's Todd. Yeah, no, we, we did do some repricing activity in the first quarter, but as, as I mentioned a little while ago, and during the second quarter, there was not any specific new repricing activity.

Tracy Benguigui (Director and Senior Equity Research Analyst)

Thank you.

Operator (participant)

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

Erik Bass (Lead U.S. Life Insurance Analyst and U.S. Director of Research)

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

Todd Larson (Senior EVP and CFO)

Oh, hi, Erik, it's Todd. Yeah, you know, we've provided the, you know, updated, you know, financial targets and run rates back at Investor Day mid-June. We're not updating any of that at this point. You know, it's great to see the results that we've seen, you know, in that, in the segment, especially in the second quarter, a lot of that was, you know, favorable experience that came through in the current quarter.

Erik Bass (Lead U.S. Life Insurance Analyst and U.S. Director of Research)

Got it. then maybe could-.

Todd Larson (Senior EVP and CFO)

I-

Erik Bass (Lead U.S. Life Insurance Analyst and U.S. Director of Research)

Could you provide some more color on the... Oh, sorry.

Tony Cheng (President)

Oh, I was gonna just add, I mean, you know, just strategically in, in Asia, we're obviously very bullish about both the traditional and the asset-intensive business. The pipelines are very, very full, and, as I mentioned earlier, it's not just the volume of business we're seeing, but just the breadth across the region, and, to be honest, across the globe, as well as the number of exclusives. They're all very good signs that our strategy is working in many, many places, and that obviously makes us more, more and more positive about the future.

Erik Bass (Lead U.S. Life Insurance Analyst and U.S. Director of Research)

Thank you. Maybe just to 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?

Tony Cheng (President)

I'd say our, our focus, I mean, the, you know, the best measure for growth in, when we look at growth in Asia, and, and, you know, it's really the traditional business or the, the, the organic business, when we look at premium growth that we focus more on. You know, 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, the driver of the premium, we focus on is, is mainly on the organic side or the traditional business.

Erik Bass (Lead U.S. Life Insurance Analyst and U.S. Director of Research)

Got it. Thank you.

Operator (participant)

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

Suneet Kamath (Senior Research Analyst)

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

Tony Cheng (President)

Yeah. Let me, let me take a stab at that. I mean, yeah, absolutely. This was a very important transaction, as I mentioned in the prepared remarks. You know, Japan, as, as many markets, once you, you sort of get a breakthrough of sorts, then others follow. This one is, I can't go into too much details, but is, is, is important because it was with a domestic, and we would anticipate other domestics are, are watching very carefully and, and hopefully following suit. ESR is a very big driver of the opportunities we're seeing in Japan. Absolutely on the capital management side, you know, companies, even though it's, it's out to 2025, companies are obviously very much preparing for it.

You know, just listening to some of the other calls that you, you all have been part of, in the last few days, you can see the intersection, let's say, of new products and the growth in Japan, but maybe ESR potentially having an adverse effect on the capital side of that. We're perfectly positioned to solve both problems, which is obviously new product development and combining that with capital solutions, that's absolutely why we, we are very focused on that intersection of those two strong capabilities that we have.

Suneet Kamath (Senior Research Analyst)

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

Todd Larson (Senior EVP and CFO)

Hi. No, you know, we'll continue to manage capital, you know, over time. I think as we've talked about, you know, we sort of have the three levers. One is we like deploying the capital back into the business and the transactions where we get a good return for the risk that we're taking. You know, maintaining our dividend, and then we, you know, over time, we balance it out with, you know, share repurchases. So I think you'll see us continue to be, you know, active in managing, you know, the capital levels. We like our current position because I think we're, we're in a position to capitalize-...

on opportunities that we see in a very healthy pipeline. If those don't develop, then we'll, you know, certainly, you know, continue to, you know, manage with the other levers. I, I think, you know, we don't have an actual, you know, stated, a stated program for share repurchase in place, but I think you'll see us continue to use that as a, you know, one of the levers of how we effectively, you know, manage the capital level.

Suneet Kamath (Senior Research Analyst)

Okay, thanks.

Operator (participant)

The next question comes from Ryan Krueger with KBW. Please go ahead.

Ryan Krueger (Managing Director and Equity Research of Life Insurance Sector)

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

Todd Larson (Senior EVP and CFO)

Hey. Hi, Ryan, it's Todd. Yeah, LDTI is, I guess it has made it a little bit more difficult to see the actual underlying experience. You know, as a reminder, you know, for the capped and floored contracts under LDTI, the experience, you know, flows through in the current quarter, and for uncapped cohorts, some comes through currently, and some is spread out into the into the future. Specifically, you know, for U.S. mortality in the quarter, and a good way to think of it is that the underlying experience was favorable by around $25 million, you know, based on our expectation, and about $5 million of that came through in the second quarter, and then the remaining $20 million will be, you know, spread going for into future periods.

Ryan Krueger (Managing Director and Equity Research of Life Insurance Sector)

Great, thanks. That's, that's very helpful. Then on the large, European longevity transaction, can you give a rough sense of how much capital that will deploy in the quarter?

Todd Larson (Senior EVP and CFO)

We normally don't provide, you know, specific transaction, capital numbers.

Ryan Krueger (Managing Director and Equity Research of Life Insurance Sector)

Okay, got it. Thank you.

Operator (participant)

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

Tom Gallagher (Senior Managing Director and Senior Equity Analyst)

Good morning. Can you square the $24 million remeasurement loss in the quarter for U.S. traditional with the comments of favorable mortality? What, what drove the remeasurement loss?

Todd Larson (Senior EVP and CFO)

Oh, hi, this is Todd again. The numbers I provided were, you know, related to claims experience. In the remeasurement gain or loss, that includes more than just claims activity. It can be, you know, adjusted, adjustments to expected premium. It could be, you know, anything that impacts, you know, future cash flows. Usually, a lot of the impact that comes through in that remeasurement gain or loss relates to loss and, you know, floored contract, it mainly relates to the impact of any changes in experience or cash flows, you know, premiums, that type of thing, from the transition date or the treaty inception date to the current period.

It's, it's not including sort of all the future, you know, impacts that, that you, you would take into account.

Tom Gallagher (Senior Managing Director and Senior Equity Analyst)

Okay. How was the underlying within the US traditional business, how, how was long-term care performing? I think some peers had, had experienced some elevated claims. Did you see the same?

Todd Larson (Senior EVP and CFO)

Sure. This is, this is, Todd again. Yep, just maybe taking a step back, and as a reminder, our long-term care block is a relatively recent, you know, block. It was not in the era that's, I guess, considered some of the legacy blocks. A lot of ours was issued, like, 2009 onwards, so it's the underlying product terms, I think are much more fair, the way I always describe it, fair between the policyholder and the insurance company, versus some of the older type long-term care, where you might hear a little bit more about the, you know, elevated claims or reserve strengthening and that type of thing. But we're seeing continued performance within our expectations on our block.

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

Tom Gallagher (Senior Managing Director and Senior Equity Analyst)

Gotcha. Then just final one: the $12 million 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? What were those, and why, why is it gonna improve future cash flows or earnings?

Todd Larson (Senior EVP and CFO)

Sure, sure. Yeah, we had some recaptures of some retrocessions on, that we, where we had retroceded business. We added some recaptures, and then we had a recapture on the, from the, our client perspective. When we recaptured the retro treaties, we had to reestablish some reserves on that business. That primarily, you know, created the, the loss of the adverse impact in the current quarter. We would expect that to produce, to produce positive impacts- going forward, and I would size it about, you know, positive impact of around, you know, $4 million on an annual basis, you know, amortizing down, you know, over time. Economically, you know, it was a good decision to make.

You know, like everything, we're constantly, you know, managing our overall, you know, in-force book, and this was, what we viewed as a good decision to make, from an overall economic perspective.

Tom Gallagher (Senior Managing Director and Senior Equity Analyst)

Gotcha. That, that $4 million should be additive, I presume, to the segment's guidance when we think about, I mean, it's small, but it's, it, you know, modest upward adjustment. Is that fair?

Todd Larson (Senior EVP and CFO)

That's fair. You know, there's always things that go both ways, but yeah, it should be a, to a positive over time.

Tom Gallagher (Senior Managing Director and Senior Equity Analyst)

Thank you.

Operator (participant)

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

Alex Scott (Equity Research Analyst)

Hi, yeah, I guess a lot of my questions have been answered, but I, I thought I'd ask about the, you know, transaction volume we've seen in the US year to date and just what your take is on the competitive environment. We, you know, we didn't see RGA participate, you know, in some of those bigger deals that were announced. You know, some of the, some of the counterparties involved, you know, not, not quite as well-known as RGA. What was your perspective on that, and, and how do you see that pipeline through the end of the year?

Tony Cheng (President)

Yeah. No, thanks, Alex. You know, we, we absolutely, are still very active in this market, and, you know, we pick our, our spots, in the transactions that we feel we can add the most value to. That pipeline, that's probably the area of our company that, gains the most attention with regard to the competition. We, we are, you know, very confident we've got all the capabilities to assess the blocks, in an appropriate manner and then, you know, be ready to pounce when, when the opportunity arises. You know, there are meaningful opportunities, in the, in the pipeline in that area. You know, we're, we're optimistic of, of closing, transactions.

I, I wanna say, you know, when these big transactions get announced, we do participate at times around the edges that are still very meaningful. At times it could be a YRT mortality transaction, at times it could be a capital financing part of a transaction, and they are very meaningful transactions for us. I, I just want to share that color also.

Alex Scott (Equity Research Analyst)

Got it. Very helpful. Then maybe just going back to net investment income. I mean, can you talk at all about how much you all have benefited from, you know, the floating rate portfolio you do have? I guess I'm just thinking through, you know, the lift in NII yield that, that's probably, you know, been had there, but that may slow down as, you know, rates potentially are not raised as much at the Fed Funds level anyway.

Leslie Barbi (CIO)

Hey, Alex, it's Leslie. Yeah, on the benefit to NII, you know, the benefit we had in the quarter was really a combination of things, you know, extension trades and other relative value transactions, and there has still been a little bit of boost from cash and floating. When you look at the non-spreading total of the assets that are net of floating liabilities, we've actually hedged some of that risk out from floating to fixed, so there's really not much impact left there. There's still a little bit more in the spread business. We, we keep an eye on that, whether it's, you know, if we thought rates were gonna fall more than, than the forwards, we may hedge some more.

Certainly the total sensitivity has been coming down as we've done extension trades and some hedging.

Alex Scott (Equity Research Analyst)

Got it. Thank you.

Operator (participant)

Our next question comes from Mike Ward with Citi. Please go ahead.

Mike Ward (VP and Senior Analyst of U.S. Insurance)

Thanks, guys. Good morning. I don't know if you, if you quantified this, but wondering if you could help us kind of size the favorability in Asia, in a similar way as you did for the U.S.?

Todd Larson (Senior EVP and CFO)

Hi, Mike, it's, it's Todd. No, I guess the best way to respond to that right now is that, you know, if you look in the aggregate across, you know, the rest of our business segments, most of the favorable experience in the quarter did come through in the, in the, in the second quarter. You know, very little of it was deferred into the future or spread into the future.

Mike Ward (VP and Senior Analyst of U.S. Insurance)

Okay, I, I think, the U.S. traditional, you mentioned it was, like, $25 million favorable. Do you have that for Asia?

Todd Larson (Senior EVP and CFO)

No. Maybe one way to put it is, you know, if you look at Asia, the entire Asia Pacific, segment, you know, most of the, I would say, say the favorable variance to, you know, the range of run rates, a lot of that was due to, you know, some experience and some other, you know, treaty, treaty true-ups.

Mike Ward (VP and Senior Analyst of U.S. Insurance)

Okay. And then back-- on the recapture activity, just wondering if you can sort of help us understand what's driving that and if we should expect more of that going forward.

Todd Larson (Senior EVP and CFO)

No, it's just that, you know, it's part of our ongoing overall management of our you know, business and where we, you know, see there's, you know, appropriate opportunities to take some actions, you know, we will do that. There's really no way for me to sort of quantify any future, you know, activity.

Mike Ward (VP and Senior Analyst of U.S. Insurance)

Okay. Thanks, guys.

Operator (participant)

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

Wes Carmichael (Executive Director)

Hey, thanks for taking my question. I had one housekeeping item. I think on corporate, you guys mentioned that there might be some expense timing. I just wanted to kind of confirm, like, do you think corporate, the loss there should tick back to kind of that $30 million-$35 million or $35 million-$40 million loss range, from the $55 million in the second quarter?

Todd Larson (Senior EVP and CFO)

Yeah. What we saw in the second quarter was some, you know, some higher financing costs and some timing of some, you know, general expenses. If you look year-to-date for corporate, we're pretty much, you know, on the, on the run rate. What I would probably maybe suggest or point to that as we go forward, we're probably might be towards the higher end of the, 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.

Wes Carmichael (Executive Director)

That's helpful, Todd. Just on, on excess capital, it did tick down a, a bit to $1.2 billion. I, I just wanted to get your view on should we expect you to kind of manage that lower? It seems like, you know, transaction volume has been pretty healthy and seems like it will continue into the, you know, the second half of the year. Just kind of any view on where we should think about excess capital going, going forward?

Todd Larson (Senior EVP and CFO)

Sure, yeah, no, as we mentioned earlier, we, we, we like our position currently because I think we're in a good position to take advantage of, of some of the healthy, you know, pipeline transactions that we're seeing across the various geographies. We're, you know, very comfortable bringing that excess capital, you know, level down, again, through transactional activity or other ways to, you know, return capital to, to shareholders. Yeah, $1.2 billion at the end of the quarter, but, you know, comfortable bringing it down, and look forward to, to deploying it into some good transactions.

Wes Carmichael (Executive Director)

Thank you very much.

Operator (participant)

This concludes our question-and-answer session. I would like to turn the conference back over to Anna Manning for any closing remarks.

Anna Manning (CEO)

Thank you. Thank you for your questions and for your continued interest in RGA. This was another strong quarter, further demonstrating the substantial earnings power in our business. We're a global leader. We're very well positioned to capitalize on the many growth 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. Thank you, everyone, and that concludes our second quarter call.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may all now disconnect.