REINSURANCE GROUP OF AMERICA INC (RGA)·Q1 2025 Earnings Summary

Executive Summary

• Adjusted operating EPS of $5.66 beat Wall Street consensus of $5.34*, while total revenues of $5.26B missed the $5.69B* consensus; EPS strength came from favorable biometric claims and solid Traditional segment performance, while lower variable investment income and weaker spread-based contributions weighed on revenue .
• Biometric claims were favorable across regions: $196M economic benefit with a $58M current-period financial impact; management emphasized ongoing underwriting strength and disciplined risk management .
• Capital deployment remained robust with $418M into in‑force transactions; estimated excess capital was ~$1.9B (pre‑Equitable), and deployable capital ~$1.3B, supporting an attractive pipeline of organic and in‑force deals .
• Management reiterated the Equitable transaction should add ~$70M pretax in 2025 and $160–$170M in 2026; tax rate guidance maintained at 23–24% for the rest of the year .
• Intermediate-term narrative is supported by Creation Re initiatives in Asia, U.K. longevity, and U.S. Traditional, with asset repositioning and value-of-in-force recognition enhancing long-term earnings power .

What Went Well and What Went Wrong

What Went Well

• Favorable biometric claims across all segments drove results: “economic” benefit of $196M and a $58M favorable current-period impact; claims were particularly strong in the U.S. due to fewer large claims .
• Traditional segments performed well broadly: U.S. & LatAm Traditional AOI before tax rose YoY (Q1 2025: $140M vs $128M), with EMEA and APAC Traditional supported by timing and favorable experience .
• Capital deployment and balance sheet strength: $418M deployed into in‑force deals, estimated excess capital ~$1.9B (pre‑Equitable), deployable ~$1.3B, enabling continued pipeline execution .

“Last night, we reported adjusted operating earnings of $5.66 per share… The most significant driver of the results was the favorable claims experience…” — Tony Cheng, CEO .
“Our nonspread portfolio yield, excluding variable investment income, was 4.9%… Variable investment income was below our expectation by approximately $30 million…” — Axel André, CFO .

What Went Wrong

• Consolidated net premiums decreased 25% YoY to $4.019B due to much lower single premium PRT contributions ($85M vs ~$1.9B prior year), despite underlying premium growth ex‑FX and PRT .
• Variable investment income (VII) was below expectations (~$30M shortfall); VII weakness affected U.S. Financial Solutions and Corporate segments .
• Canada Traditional saw unfavorable lapse experience and adverse FX; APAC Financial Solutions had lower VII; Corporate & Other loss was worse than average quarterly run rate due to lower VII and one‑time items .

Financial Results

Revenue, EPS, and margin trajectory vs prior quarters and estimates

Values with an asterisk (*) were retrieved from S&P Global.

Segment adjusted operating income before taxes (AOI) – quarterly progression

KPIs and operating drivers

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our Traditional business performed particularly well as our biometric claims experience was favorable in all geographic segments… We deployed $418 million into in‑force transactions…” — Tony Cheng, CEO .
• “Our nonspread portfolio yield, excluding VII, was 4.9%… VII was below our expectation by approximately $30 million… We are still expecting a tax rate of 23% to 24% for the remainder of the year.” — Axel André, CFO .
• “Assuming a midyear close, we expect pretax operating income contributions of approximately $70 million in 2025 and $160 million to $170 million in 2026” — Axel André, CFO (Equitable transaction) .
• “Claims experience was particularly strong in the U.S., primarily due to lower‑than‑expected large claims.” — Axel André, CFO .

Q&A Highlights

• U.S. mortality experience: Large positive experience driven by lower large claims; management performed extra due diligence; the widely discussed $200M industry claim was reflected in Q1 results .
• Equitable block returns: Repricing, capital and expense synergies, and asset platform drive ROE; incrementally ~5% mortality exposure; volatility expected to be modest .
• Deployable capital: $1.7B (Q4) framework integrates regulatory, rating agencies, and internal capital; VIF recognized with third‑party validation; pipeline supports ongoing deployment .
• PRT litigation concern: Management sees claims as baseless and notes no pipeline impact; RGA remains a strong regulated counterparty with AA‑ financial strength .
• Asset origination/private assets: Broad platform and strategic partnerships (e.g., PACT) broaden opportunity set; focus on timely repositioning to target allocation .

Estimates Context

• Q1 2025 adjusted operating EPS of $5.66 vs consensus $5.34* (beat); total revenue $5.26B vs consensus $5.69B* (miss) .
• Consensus depth: 9 EPS estimates and 4 revenue estimates for Q1 2025*.
  Values retrieved from S&P Global.

Key Takeaways for Investors

• EPS beat despite revenue miss underscores resilient underwriting and favorable biometric claims; near‑term spread/VII headwinds are manageable with strong new money rates and portfolio repositioning .
• Capital deployment remains a core value driver (Q1 $418M) with ample capacity (excess ~$1.9B, deployable ~$1.3B pre‑Equitable) to fund accretive deals across U.S., EMEA, and APAC .
• Equitable block is expected to be accretive and within RGA’s wheelhouse, with modest earnings volatility and multi‑year earnings ramp (2025 ~$70M, 2026 $160–$170M pretax) .
• Creation Re strategy in Asia and UK longevity/retail annuity reinforces exclusive deal flow and long-duration value creation; VIF growth and recognition by agencies bolster financing flexibility .
• Tax rate guidance maintained at 23–24% for FY25 (rest of year); dividend held at $0.89 quarterly, supporting balanced capital return while prioritizing growth .
• Short-term trading: Watch VII prints and asset‑intensive origination as portfolio repositioning progresses; medium-term thesis: sustained AOI growth from Traditional, longevity, and Equitable contributions, supported by robust deployable capital .

Notes: 
- All financial and strategic claims are sourced to company filings and earnings calls as cited.
- Consensus estimate values marked with an asterisk (*) were retrieved from S&P Global.