Reinsurance Group of America - Earnings Call - Q3 2020

Transcript

Speaker 0

Good day and welcome to the Reinsurance Group of America Third Quarter twenty twenty Results Conference Call. Today's call is being recorded. At this time, I would like to introduce Mr. Todd Larson, Senior Executive Vice President and Chief Financial Officer and Ms. Anna Manning, President and Chief Executive Officer.

Please go ahead, Mr. Larson.

Speaker 1

Thank you. Good morning, and welcome to RGA's Third Quarter twenty twenty Conference Call. With me this morning on the call is Anna Manning, RGA's President and Chief Executive Officer Elaine Neehme, Chief Operating Officer Leslie Barbee, Chief Investment Officer Jonathan Porter, Global Chief Risk Officer and Jeff Hopson, Head of Investor Relations. We will discuss the third quarter results after a quick reminder about forward looking information and non GAAP financial measures. Following our prepared remarks, we'll be happy to take your questions.

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, information we provide may include non GAAP financial measures. Please see our earnings release, earnings presentation, quarterly financial supplement and website for discussion of these terms and reconciliation to GAAP measures.

And now I'll turn the call over to Anna for her comments.

Speaker 2

Thank you, Todd. Good morning, everyone, and thank you for joining our call today. I hope you are all remaining safe and staying healthy. Let me begin by saying that I am extremely proud of the perseverance and commitment that our employees have demonstrated throughout this crisis. Their well-being remains our top priority.

Because of their efforts, our global business operations have continued to run smoothly, and we have continued to provide the superior level of support and thought leadership that our clients have come to expect and rely upon. An important part of our purpose is to help support the needs of families throughout the world who are suffering due to an unexpected illness or death of a loved one. Everyone at RGA is extremely proud of the role we play in helping families when they need it most. Turning to the third quarter results. Last night, we reported adjusted operating EPS of 3.51 which is a very strong performance, especially in the context of this global pandemic.

This quarter further demonstrated the resilience and strategic value of our global platform. We have an earnings engine that is well diversified by risk and geography that continues to deliver substantial value as we saw this quarter with favorable performance for many of our key segments and businesses, including EMEA, Asia, U. S. Asset Intensive and a modest profit in Australia. Included in our consolidated results for the quarter were total global COVID-nineteen related claim costs estimated at a $140,000,000, which is at the low end of our model's expected range and approximately 30,000,000 of favorable longevity experience.

Of the 140,000,000 claim costs, dollars 100,000,000 were in The U. S. Individual mortality business with the remaining $40,000,000 spread amongst our other global businesses. Mortality performance in our U. S.

Individual business, excluding COVID nineteen, was better than our expectations this quarter due to very favorable large claims experience. And outside The US, overall performance of our traditional business was better than expected even after including the impact of the pandemic. We will provide additional information on the pandemic later in the call. We completed several capital motivated transactions in the quarter, which, while not requiring a significant amount of capital, will contribute to our future fee based earnings. The transaction pipelines are active overall and include opportunities in many of our regions, including North America, Europe and Asia.

We remain active and at work on transaction opportunities. Our approach to capital deployed during this crisis remains prudent, disciplined and balanced. In summary, we are very pleased with the overall performance this quarter and with the continuing strength and resilience of our global business. As we look forward, COVID-nineteen remains both a global health and global economic crisis, and there may be more challenges to come as we move through the winter months. But there are also reasons for some optimism regarding improving treatments and eventually vaccines.

At RGA, we remain focused on protecting our employees, serving our clients, and supporting the industry and society. Our strong balance sheet and earnings engine give us confidence that we can manage through the next phase of the pandemic and emerge well positioned to take advantage of future opportunities. We are intent on doing what is necessary to continue to build on our strong track record of financial performance and in creating substantial long term shareholder value. Thank you for your interest in RGA, and I hope you all continue to remain safe and well. Let me now turn it over to Todd to go over the detailed financial results.

Speaker 1

Thanks, Anna. I will review the financial results, investments and RGA's capital and liquidity position. Beginning with consolidated premiums, we reported premium growth of approximately 1% as we continue to see some temporary slowdown as a result of the impact of the pandemic around the world as well as a significant anticipated premium reduction in Australia. The effective tax rate on pretax adjusted operating income was 20.4% for the quarter, below the expected range of 23% to 24% due to the release of valuation allowances, basis differences in foreign jurisdictions, and favorable adjustments from tax returns filed. Turning to the segment results listed on Slide six and seven of the earnings presentation.

The U. S. And Latin America traditional segment earned $22,000,000 pretax, which we consider to be a very good result in light of the pandemic. Our individual mortality experience, excluding COVID nineteen, was favorable. Excess individual mortality claims totaled $60,000,000 including COVID nineteen claims.

Let me provide a little more detail. Approximately, a 100,000,000 of claims are attributed to COVID nineteen. The approach used to attribute COVID nineteen claims is consistent with that used in the second quarter. We had very favorable large claim experience of approximately eighty five million, which helped to offset COVID nineteen related claims. As we have discussed with you in the past, volatility is an inherent part of our business and part of the value proposition of reinsurance, and this volatility goes in both directions.

We also saw an elevated frequency of non large claims in the quarter. This is consistent with CDC reporting of significant levels of excess deaths in the general population above specifically identified COVID nineteen deaths. We believe a portion of which is likely related to COVID nineteen. Jonathan will provide an update on the pandemic shortly. Also in The U.

S. Traditional segment, our individual health and group businesses in total were slightly ahead of our expectations. Our US asset intensive business reported a very good result, benefiting from favorable investment spreads and equity markets. US Capital Solutions reported an increase in adjusted operating income resulting from new business growth. Moving to Canada, the traditional segment results reflected modestly unfavorable claims experience, primarily due to the impact from COVID-nineteen.

Our Financial Solutions segment performed well, reflecting favorable longevity experience in the quarter. In the Europe, Middle East And Africa segment, our traditional business results reflected unfavorable mortality experience, primarily driven by COVID nineteen claims in South Africa and The UK. EMEA's financial solutions business had a very good quarter, reflecting favorable longevity experience, the majority of which we believe is related to COVID nineteen. For our Asia Pacific traditional business, Asia had a very favorable experience overall in most regions in most regions. COVID nineteen related impacts were immaterial, reflecting some moderate benefit to our morbidity experience, offset by a moderate negative impact from our mortality experience.

Australia had a modest profit as both individual lump sum and disability income claims experience was better than corrected. Our Asia Pacific Financial Solutions had another good quarter, benefiting from the growth of business in Asia. The Corporate and Other segment reported pretax adjusted operating loss of $37,000,000 more than the average run rate, primarily from lower variable investment income and increased interest expense due to the June 2020 senior debt issuance. Moving on to investments. The non spread portfolio yield ended the quarter at 3.66%.

Variable investment income was below the average run rate as realizations of alternative investment sales continue to be slower than in previous periods. Our increased cash levels put some downward pressure on yields as did lower new money rates. We believe our portfolio was defensively positioned coming into the crisis. Credit performance continues to benefit from diligent security selection as well as economic reopenings, policy responses and open markets. Our portfolio average quality of A was maintained and credit impairments were modest in the quarter.

As shown on Slide 10 of our presentation materials, our excess capital position at the end of the quarter increased to $1,500,000,000 a robust level providing flexibility as we move through the winter months. Our strong business performance in the quarter absorbed the impact of COVID-nineteen, funded our organic growth, covered the dividend and added to our net excess capital position. RGA's leverage ratios remain at comfortable levels following the second quarter senior debt issuance, and our liquidity remains strong with cash and cash equivalents at $3,300,000,000. Looking forward, we expect to see some level of ongoing COVID nineteen impacts that will negatively affect our earnings until this crisis is resolved. However, we continue to view this as manageable and believe that our strong balance sheet, the power of our earnings engine, and the benefits of our global diversified franchise positions us to emerge from the pandemic in good shape to continue to produce attractive returns to our shareholders over time.

I will now turn the call over to Jonathan Porter, our Global Chief Risk Officer, who will provide some thoughts and updates on COVID nineteen.

Speaker 3

Thanks, Todd. I'll be reviewing three topics today, our q three COVID nineteen model, how our q two COVID nineteen impacts are tracking relative to updated cause of death reporting, and our longevity results relative to our model expectations. Starting first with the prior quarter, recall that our Q2 COVID-nineteen claim cost estimates were based on specifically reported COVID-nineteen claims adjusted to account for incomplete cause of death reporting as well as incurred but not reported claims. As Q2 cause of death information has continued to complete in Q3, results are tracking very nicely with this method. We've used the same methodology to arrive at the previously mentioned Q3 estimate of $140,000,000 of pretax COVID-nineteen claim costs.

Our COVID-nineteen estimates only include claim costs that we think will ultimately be reported with the COVID-nineteen cause of death. Turning to the current quarter, we continue to refine our model assumptions and projections based on data from both our own reinsurance book as well as external sources. Our update this quarter resulted in some underlying pluses and minuses, but on balance, there's no change to our claim cost rules of thumb for our major markets. As Anna mentioned, our Q3 COVID-nineteen excess claim costs were at the lower end of our range this quarter. As a reminder, I will repeat the caveat provided in prior quarters.

Our model is based on a number of underlying assumptions reflecting our analysis of internal and external data as well as the application of expert judgment, and therefore, our estimates are subject to a range of uncertainty. I also wanted to provide some insight into our longevity experience this quarter relative to our model expectations. We've previously discussed our estimate of the potential offsetting impact from our longevity of about ten percent of our mortality claims, but with longer reporting delays. Our longevity results in Q3 were approximately 30,000,000 pretax better than expected, which is in line with our model expectations. While cause of death information is not reported on our longevity business, we believe most of this experience is COVID nineteen related.

It is also important to keep in mind that our mortality business and longevity business do not have the same geographic concentration, and therefore, this offset relationship may change depending on country specific COVID experience. Let me now hand it back to Todd.

Speaker 1

Yep. Thank you, Jonathan. We'd now like to open it up for your questions.

Speaker 0

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please press star followed by the digit one.

Speaker 3

Hey. Good morning. So, you know, it it seems like we've we've seen a real heat up of these effectively reinsurance of of annuity blocks, whether they're fixed annuities, indexed annuities, variable annuities. And I'm curious as to how RGA might play into that environment. Is that an area of interest to you, or would it be something for Langhorne Re?

And, yeah, that's the question.

Speaker 2

Good morning, Andrew. Yes. We have been participating in those block transactions for a very long time. Our asset intensive business includes, both fixed annuities and asset intensive longevity annuities, and we've also been active in the longevity swap markets around the globe. This isn't new for us.

We we've been we've won our fair share of those transactions, those blocks that come to market. Perhaps I'll ask Alain to comment on what we're seeing in some of the underlying product lines and perhaps in some of the markets. Alain?

Speaker 4

Sure, Andrew. Generally, I'd say a healthy pipeline across all of our lines of business, whether it be longevity, financial solutions or asset intensive, as Ann alluded to. I think in terms of whether RGA or Langhorne Re, both are equipped to do those types of transactions. We typically have a size criteria in which we separate whether we'll go into RGA or Langhorne. But but those are both are

Speaker 1

able to respond to those needs.

Speaker 3

Got it. So so so do do you think that, you know, something something sizable could be imminent? Is is your appetite a little a little bigger now?

Speaker 4

I think imminent is is always a difficult word. You know, these transactions tend to be lumpy in and of themselves. Certainly, in this environment, there's potentially a little bit more lumpiness. But, we're certainly active, with both RGA and Langhorne. Clearly, we haven't, you know, closed the transaction yet in Langhorne, but it's not for lack of trying, it's not for lack of opportunity.

Speaker 3

Got it. And then just to follow-up. How many

Speaker 1

what what what's that?

Speaker 2

Sorry. Andrew, may maybe I could just add a a a comment as well. I think we're well positioned in those markets because, for a couple of reasons. Because we can support almost all the risks that are sitting on the client's balance sheet. So as as mentioned earlier, fixed annuities, longevity, mortality, because we take both insurance risks and market risks.

We're comfortable doing both, and I think that gives us a lot of flexibility. And then, I think we're also well positioned because of our differentiators. We're a strong, well rated counterparty. We have a very good reputation for execution certainty. When we say that we're going to do something, we deliver to our clients.

And we have very deep client relationships. That's all helped us win business in the past. We've been at this for a number of decades, and I expect, it'll continue to help us win our fair share of these block transactions going forward. Sorry. I didn't mean to cut you off.

I think you had a follow-up question. Yeah.

Speaker 3

Just quickly on on and thank you

Speaker 5

for that

Speaker 3

follow-up. APAC, the mortality was very favorable there. Maybe a little color around that and whether you feel that Australia can can finally at least remain break breakeven for the foreseeable future.

Speaker 2

Yeah. I'd love to say that we're gonna call this a win in Australia. I still think it's too early. I'll ask Glenn maybe to to provide some comment on what we're seeing there.

Speaker 4

Sure. Thanks, Anna. And maybe I will call it a win in Australia. Just from the perspective, the industry obviously still has work to do to get through its issues. So you're still reading and hearing about some issues in Australia.

Certainly, we've been very focused on managing our bottom line, sometimes at the expense of our top line. And so you'll see that we have seen premium come down in Australia. We've been certainly very active on portfolio and claims management, and I think we're seeing results from that. It's probably too early to claim that we're going to see this type pattern continue and continue to improve. But we're still gonna stay the course and continue to actively manage that bottom line.

So I'm certainly very pleased with what we've seen so far, and we're gonna remain hard at work. In terms of Asia, good quarter there as well. We've, I think, talked in the past about treaty reporting in Asia being a little bit lumpy. And so we have had good mortality and morbidity experience, but we've also probably been helped a little bit by of the lumpiness in the reporting on the bottom line.

Speaker 3

Thank you.

Speaker 0

Next we'll move to Humphrey Lee with Dowling and Partners.

Speaker 6

Good morning, and thank you for taking my questions. Just about the non COVID deaths in The US, I was wondering if you can provide some any additional color in terms of the the frequency portion versus the the the large case portion. Anything specific that you saw in the quarter?

Speaker 2

Sure. Good morning. In respect of the large claim experience, this was a quarter where we saw both the number of large claims, was down and the average size of the large claims was down. So both worked in the same direction this quarter. As Todd mentioned, in his prepared remarks, you know, short term volatility, inherent part it's a part of our business.

It goes in both directions, plus and minus. It's good to see it in as a plus direction in this quarter. It does tend to smooth out over time, but it is an important part of the value of reinsurance. And in respect of the part of your question about nonlarge claim or nonlarge claims on the frequency side, maybe I'll, hand it over to Jonathan to talk about what we're seeing out in, the CDC reporting and our business.

Speaker 3

Yes. Thanks, Anna. Yes, we did this quarter, we looked at our claims experience on our smaller sized policies, and the increased frequency. And, you know, we do believe that it's consistent with what's being observed in the CDC data that Anna mentioned. So, you know, so far this year, the CDC has reported about eighty thousand excess deaths that are not tagged as COVID nineteen, more than half of those really coming in q three.

So, you know, when we line up those excess deaths and look at a few different metrics of our book of business, the experience we saw come through this quarter is pretty consistent with that. But as Anna mentioned, we'll see volatility in that number as well. So, you know, just keep that in mind too.

Speaker 6

Okay. Got it. And then as we think about the in general for kind of the the morbidity results in the quarter, Asia definitely has some favorable experience there. Like and then in The US, believe individual health and group was kind of favorable as well. As we think about the different economies being reopened and then at the same time, some of them kind of shutting down again, how should we think about the utilization for some of these kind of health related products in the fourth quarter?

Speaker 2

Yes. Yes. So so you you make a very good point. Year to date, we've had favorable aggregate experience in our global morbidity business. Some of that is likely the result of the the slowdown through the shutdowns, the slowdowns in people going to get diagnostic testing and, you know, having medical visits.

In fact, we saw something similar during the SARS pandemic. People were staying away from hospitals and other medical visits, and our morbidity experience was favorable through that period. So short term, the impact, of this pandemic, of COVID on morbidity has been favorable. I I will point out though that longer term, it it's possible that we may see some negative health implications from these COVID survivors, these long haulers. Difficult at this point to estimate and somewhat premature because even the medical experts can't say with any certainty whether the health conditions they're seeing will in fact be permanent.

Obviously, we'll continue to closely track it. But bear in mind though, that any negative long term morbidity impacts are likely going to be less material than our mortality impacts just given the profile of our business, the footprint of our business.

Speaker 6

Yes. I appreciate the color. Thank you.

Speaker 0

Next, we'll move to Eric Bass with Autonomous Research.

Speaker 7

Hi. Thank you. A couple of quick follow ups. Just with your excess capital at 1,500,000,000 it sounds like from your comments, feel like you're in

Speaker 1

a position to put some

Speaker 7

of that to work if attractive opportunities emerge, particularly for block deals.

Speaker 2

Yes. As I mentioned in my prepared remarks, you know, our capital management through this crisis is really one of being prudent and cautious, but we are active at looking transactions and, you know, the the attractive opportunities, are something that we continue to, pursue.

Speaker 7

Thanks. And then on the excess mortality in the CDC data, it sounds like some of this is certainly COVID related. But

Speaker 1

I guess do

Speaker 7

you have any more sense of what's driving this? And is it all related to the pandemic? Or is some of it kind of the trend that we've seen of worsening kind of population more tractability and something that could continue post the pandemic?

Speaker 2

I'll I'll I'll maybe provide some brief comments, and then I'll ask Jonathan to weigh in. It's very hard to separate out the cause of all of those non COVID specific excess deaths that are being reported in the population. I don't think it's unreasonable to assume that some of them might be unreported COVID claims. There's a lot of inconsistency in the state level reporting and the local level reporting. Some may be indirect to indirectly linked to COVID.

So think about people who are delaying, you know, visiting their doctor or delaying going to hospitals. So although they're being reported as excess non COVID related, I, you know, I would be cautious in interpreting that. Jonathan, is there is there anything else that you'd like to add?

Speaker 3

Yeah. Yeah. Maybe we'll just talk about, you know, what what we might expect to see. So, yeah, I mean, I agree. It's hard to determine, you know, what level of excess deaths will continue in the future.

You know, there definitely seems to be, and you can see this on the graph, I think, that we provided from CDC, you know, correlation between the level of COVID denoted deaths and the excess deaths, which I think could lead you to the conclusion that some of these are definitely related to COVID. I think as Anna said, it's likely in the short term that we would continue to see, therefore, some excess deaths, in The US. But, you know, we are looking at data, in other countries too. So we've seen, you know, specifically, as an example, The UK, excess deaths have reversed, you know, post the the large spikes in COVID mortality. So, you know, it it's not clear, I guess, to what extent these may or may not continue in the future.

But, you know, based on other countries' information, the things have turned around.

Speaker 7

Thanks. Todd, just quickly, do you have an estimate of how much ongoing impact there'll be on the top line from the higher level of mortality claims? I would assume that does have some impact on premiums.

Speaker 2

Sorry. Todd?

Speaker 1

Yeah. Yeah. I think, you know, in the near term, we'll see some impact on the on the top line, as we, you know, go through this. I don't have a specific estimate of how much, you know, that could be sort of hard to to estimate.

Speaker 6

Okay. Thanks.

Speaker 0

And next, we'll go to Ryan Krueger with KBW.

Speaker 8

Hi. Good morning. When, in the COVID sensitivity that you provided, did that include anything for COVID related but not reported, I guess, excess mortality that you're seeing right now, or is that just very specific to COVID deaths?

Speaker 2

As Jonathan mentioned in his prepared remarks, it is specific to deaths that are coded as COVID, and we estimate will eventually be coded as COVID as the cause of death complete. It does not include any of the excess frequency of the of what's being reported as non COVID deaths. Jonathan, have I have I accurately described what we've included in our in our estimates?

Speaker 3

Yeah. Yeah. That's exactly right, Anna. So as an example of a hundred million that we've attributed to COVID in The US, we'll just be looking at COVID reporting as opposed to including an amount for the excess deaths as well.

Speaker 8

Thanks. Mean, is another way to think about it that, I guess, so far, COVID deaths seem to be trending towards the the low end of the sensitivity. We're getting these additional deaths that are not coded as COVID. And but maybe when you add those two together, it's still still somewhere in the range that you you've given.

Speaker 3

Yeah. Yeah. I mean, I think it depends what you use as the denominator, right, in that calculation, and well, sorry, the denominator and the numerator. So if you include, what we think excess claims must be coming in because of these excess deaths, then I think we still would be at the low end of the range. But if you, you know, only take the the higher claims but use only the COVID reported, deaths, then, yeah, you might be higher in the range but still within it.

Speaker 8

Okay. Thanks. And then just just one last one. Excess capital increased 300,000,000 in the quarter. You had good earnings, obviously, but that seemed like a pretty big increase.

Do have any more, color on what drove that?

Speaker 1

Yeah. Brian, it actually increased by by by a $100,000,000 from 1.4 to 1,500,000,000.0. It was primarily, you know, the earnings generation in the quarter, the net earnings in the quarter less from deployment in the organic business growth and then, you know, the the amount of dividends we paid out.

Speaker 9

Got it.

Speaker 8

Got the number on it. Thanks.

Speaker 0

And next, we'll move to John Barnidge with Piper Sandler.

Speaker 10

Thank you very much. Now that you're a couple quarters into this pandemic, how do you think about growth in the lens of are you seeing any signs that there's a secular tailwind emerging for demand of life products? And then on the flip side, primary life insurers wanting to utilize more reinsurance to have less exposure. Thank you.

Speaker 3

Yes.

Speaker 2

So so sure. Sorry, hello? Hello?

Speaker 1

Yes, go ahead, Anna. Oh,

Speaker 2

thank you. I think I'll turn that over to Len to provide some comments on what we're seeing in the various markets around the globe.

Speaker 4

Sure. Thanks, Anna. Certainly, I think that you're seeing direct companies talk about higher sales. And I think that's natural to think or to see, given the slowdown that we've seen through COVID. I think the big question is, how much of that will persist once we get through what I'll call the catch up?

I think there's certainly a hope and a belief in the industry that as digital takes hold, we'll see more sales in that underserved middle market. People will wake up and realize that they need insurance. So I'd like to think that that will persist, but I think it's probably a little too early to tell. In terms of the use of more reinsurance or less, I don't think we're seeing any particular change yet. There's nothing significant that's happened in terms of any of our reinsurance pools or anything like that over the course of the last few months.

And I wouldn't anticipate that anything material would happen. Certainly seeing quite a bit of activity on the transactional side as companies look and try to manage their own balance sheets, as we talked about earlier, but there's an element of lumpiness to that.

Speaker 8

Great. Thank you very much.

Speaker 2

If I could ask just one other thought. One other thought as, as economies recover, would expect to see growth in some of the credit based products that that would naturally follow. And those are very popular products in many parts of Europe and The UK and would add maybe as travel mobility comes back in Asia, would expect sales of protection products in markets like Hong Kong to benefit. And and finally, I see, you know, the potential for opportunities, for growth opportunities on the organic side around designing consumer products that are better suited for this low and likely low and long interest rate environment, product opportunities for simple and affordable products for the consumer that better align, with their needs and with their resources. So I think product innovation will accelerate as a result of the virus, and and product innovation is something we're we're already doing and we're very good at.

Speaker 0

Next, we'll move to Dan Bergman with Citi.

Speaker 9

Thanks. Good morning. I guess, first, could you provide a little more color on the unfavorable variable investment income in the quarter? Just kind of what were the key drivers and how much impacted corporate versus the other segments? And just given remarks have been pretty volatile lately, just any updated thoughts on how that portion of investment income might trend into the fourth quarter and ahead.

Speaker 2

Right. Why I ask Todd to address the first part of your question, which is with our experience in the first in the fourth third quarter, sorry, and then ask Leslie to provide some thoughts on the go forward environment.

Speaker 1

Yeah, Dan. If you look at the third quarter and look at a sort of a historical, you know, run rate, you know, for the variable investment income, which, you know, it does bounce around a little bit, we were probably approximately 14,000,000 off pretax of that, you know, historical, more recent run rate. That helps put it a little bit in context for you. And that was primarily in, the traditional segment and some in corporate.

Speaker 0

Hey, Dan. This is Leslie. Oh, sorry, Anna. Go ahead. There.

As I

Speaker 11

often am. So, Dan, thank you for that. And so the looking at the go forward, what's important to know, I think, is that our underlying asset base that creates a variable investment income is still there, and it is still expected to reach produce the type of returns that we have over time at that run rate, it's harder to predict in shorter periods of time. But given that our activity in those markets has picked up again overall, I think we'll start to see a trend back towards our run rate and hopefully in the fourth quarter.

Speaker 1

And, Dan, maybe I'll just add one more point. You know, we feel most of the, you know, value is still there. It's more timing. You know, we we we account for most of these alternative investments on a cost basis, so we only realized recognize the income, and we actually realized the sale of the underlying, you know, venture or property, versus marketing the market each quarter. We feel most of the value, so they're going to be more of a timing issue.

Speaker 9

Got it. Thanks. That's really helpful for both of you. I guess maybe moving to corporate. Just given all the recent moving pieces like the debt issuance and the impact of the pandemic on the expense level, things like that, I just wanted to see if you had any update on how we should be thinking about where that corporate loss might trend over the next couple of quarters.

Speaker 1

Yeah. Yeah. We have been indicating, as you know, the on average, the 25,000,000, loss range, which is still a pretty good place to start, and then maybe, you know, add in. Since we've raised the, you know, proceeds back in June, we haven't fully invested those, you know, longer term. So there's a little bit of a drag here on the from the interest expense, you know, on the debt.

So it's gonna be probably a little bit elevated the next couple of quarters or so, and then we'll provide you with, you know, better, more up to date guidance as we do every year, in the early part of, next year.

Speaker 9

Got it. Thanks so much.

Speaker 0

And next, we'll hear from Brian Meredith with UBS.

Speaker 5

Thanks, guys. This is Mike Ward on for Brian. So I appreciate the commentary about the potential for deploying capital into some block transactions going forward. But I was just curious, you know, with your stock trading at about 20% discount to book value currently, just wondering if there are certain hurdles we need to cross with respect to COVID mortality or even the economy before you might consider resuming some of the repurchases?

Speaker 2

Yes. So as you know, we halted our share buyback program in the second quarter. We'd like to see increased clarity. We'd like to see a reduction in the level of uncertainty on the virus front and on the economic front. Let's get through the next quarter or two through the through the winter months.

We'll remain focused on maintaining our financial strength and flexibility through that period, and we'll address share buybacks as part of our capital management strategy. That's the framework we'll use to make decisions. We'll we'll look at the specific opportunities. We'll look at returns, other potential uses of our capital, including, you know, the the opportunities in the pipeline, dividends, share buybacks. Our framework, I think, over time has resulted in a very good balance between deploying back into the business and then returning it to shareholders through dividends and share buybacks.

And we'll continue to use that strategy and that framework going forward. But as I said, we'd like to see the uncertainty of reduction and a material reduction in the uncertainty and clarity as to an end to this crisis.

Speaker 5

Thanks. That's really helpful. And then just a quick one on operating expenses or consolidated g and a. If I'm if I'm recalling correctly, I think lower expenses last quarter contributed about 50¢ to the quarter. This quarter, maybe it looks like it was a little bit around half of that.

So just wondering if you could comment at all on your expectations, you know, going forward. Have there been opportunities you've taken maybe to keep some of those expense savings ongoing?

Speaker 1

Yeah. What this is Todd. What you saw in the sure. Yeah. Yeah.

What you saw in the in the second in the second quarter was, you know, given, you know, the impact of COVID, etcetera, we did have some material, you know, true ups to incentive comp, both short term and, you know, long term programs. And then I saw some savings on travel and entertainment. What we saw this quarter was more related to travel and entertainment savings and some savings on, you know, bringing on, you know, new employees and some maybe delayed, you know, project activity and that type of thing. And I think it's probably reasonable to assume that as we go through, you know, the next couple of quarters or so that, you know, certainly the travel and entertainment expenses will continue to stay at lower levels given, you know, nobody's really, you know, traveling and etcetera. So I think we'll continue to see some savings, but it won't be as material as what you saw in the second quarter.

And it's probably more similar to what we saw in in this quarter.

Speaker 2

Yeah. And and maybe longer term, I you know, it's it's not unreasonable to expect that some of those travel entertainment costs will become permanent savings. I also think we're learning a lot in this virtual working environment, and and we might see some, you know, improving cost footprint around our real estate. We're we're looking at all elements of our operating model, and I would expect that the what, you know, what we're seeing, some of that will come back, but other parts will remain permanent savings.

Speaker 1

Yeah. And maybe in in this quarter in this quarter too, just the size, I would size the so the savings that at least

Speaker 3

the way we look at

Speaker 1

it was more in, let's say, the 15 to 15 or so million range. I'm I'm not sure what number that you have quoted for the quarter, but I'd size it more around about a 65,000,000 plus or minus.

Speaker 6

Thank you.

Speaker 0

And that will conclude the question and answer session. At this time, I would like to turn the call back over to Mr. Larsen for any additional or closing remarks.

Speaker 1

Okay. Thank you. Well, thank you everyone for your continued support and interest in RGA, and I will conclude the call. Thank you very much.

Speaker 0

And that will conclude today's call. We thank you for your participation.