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REINSURANCE GROUP OF AMERICA INC (RGA)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 came in below expectations: adjusted operating EPS $4.72 vs Wall Street consensus $5.55 (miss), and total revenues $5.60B vs $5.74B consensus (miss), driven by large-claim volatility in U.S. Individual Life and unfavorable healthcare excess claims in U.S. Group . EPS/Revenue consensus values marked with asterisks are from S&P Global estimates.*
  • Strength elsewhere: APAC and EMEA delivered strong traditional results; Financial Solutions was above expectations on variable investment income and investment margins; deployable capital rose to ~$3.4B and excess capital to ~$3.8B (pro forma $2.3B post-Equitable) .
  • Strategic milestone: RGA closed the Equitable life block reinsurance (effective Apr 1), expected to contribute ~$70M pre-tax in 2025, ~$160–$170M in 2026, and $200M in 2027; Q2 earnings on the block ($30M) will be deferred and amortized starting H2 2025 .
  • Capital returns: dividend increased 4.5% to $0.93; management intends to be opportunistic on buybacks with long-term 20–30% of after-tax operating earnings returned via dividends and repurchases, a shift from no buybacks over the past six quarters .

What Went Well and What Went Wrong

What Went Well

  • APAC Traditional favorable claims and Asia Financial Solutions strength, with robust deal activity; EMEA Financial Solutions above expectations on longevity and higher investment margins .
  • Investment performance: non-spread portfolio yield rose to 5.31% and new money rates to 6.53%; variable investment income strong on realizations from LPs/RE JVs .
  • Balance sheet optimization: excess capital expanded to ~$3.8B and deployable capital to ~$3.4B, supported by rating-agency recognition of value of in-force capital credit; pro forma excess capital ~$2.3B post-Equitable .

Quote (CEO): “Our APAC and EMEA segments delivered strong results, and U.S. Financial Solutions performed well.”

What Went Wrong

  • U.S. Individual Life experienced elevated large claims severity; quarterly volatility from capped cohorts created significant current-period financial impact despite economic claims broadly in line year-to-date .
  • U.S. Group healthcare excess line unfavorable, consistent with broader industry trends; majority of the block will be repriced by January 2026, with expectation for improvement through 2026 .
  • Effective tax rate above plan: 25.2% on adjusted operating income (vs 23–24% expected) due to valuation allowances on foreign tax credits; GAAP effective rate was 47% on pre-tax income owing to restructuring/tax effects .

Financial Results

Headline metrics vs prior quarter and year

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$4.878 $5.260 $5.599
Net Premiums ($USD Billions)$3.920 $4.019 $4.151
Diluted EPS ($USD)$3.03 $4.27 $2.70
Adjusted Operating EPS ($USD)$5.48 $5.66 $4.72
Adjusted Operating Income ($USD Millions)$365 $378 $315

Estimates vs actuals (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD Billions)$5.74*$5.60 Miss
Primary EPS ($USD)$5.55*$4.72 Miss
EPS - # of Estimates10*——
Revenue - # of Estimates4*——

Values marked with asterisks (*) retrieved from S&P Global.

Margins and capital efficiency

MetricQ2 2024Q1 2025Q2 2025
Adjusted Operating ROE (Ex-AOCI, trailing 12M)15.3% 13.4% 12.7%
Book Value/Share Ex-AOCI & B36 ($)$149.01 $154.60 $156.63
Annualized Investment Yield (non-spread)4.65% 4.64% 5.31%

Segment breakdown (Adjusted operating income before taxes)

Segment ($USD Millions)Q2 2024Q1 2025Q2 2025
U.S. & LatAm Traditional$167 $140 $4
U.S. & LatAm Financial Solutions$80 $67 $97
Canada Traditional$26 $32 $28
Canada Financial Solutions$7 $11 $9
EMEA Traditional$(1) $50 $18
EMEA Financial Solutions$86 $90 $116
APAC Traditional$99 $106 $104
APAC Financial Solutions$71 $59 $77
Corporate & Other$(44) $(70) $(32)

Additional KPIs

KPIQ2 2024Q1 2025Q2 2025
Deployable Capital ($USD Billions)—~$1.3 ~$3.4
Excess Capital ($USD Billions)—~$1.9 ~$3.8; pro forma $2.3
Dividend/Share ($)$0.89 (Q1 level) $0.89 $0.93

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax Rate (Adjusted Operating)FY 202523–24% 23–24% (25.2% in Q2 due to foreign tax credit valuation allowance) Maintained
U.S. Group (Healthcare Excess) EarningsH2 2025$20–$30M for remainder of year ~Breakeven for remainder of year Lowered
Equitable Transaction Pre-tax Operating IncomeFY 2025~70M (discussed previously) ~70M in 2025; ~$160–$170M in 2026; ~$200M in 2027 Reiterated/clarified timing and amounts
DividendQ3 2025$0.89 $0.93 Raised
Capital Return PolicyLong-termNo repurchases past six quarters Target 20–30% of after-tax operating earnings via dividends and buybacks, opportunistic quarter by quarter Policy update (more active stance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Claims volatility (U.S. Individual Life)Q1: Favorable large-claim volatility; YOY AOI stable Elevated large-claim severity; capped cohorts drove current-period impact; YTD broadly in line Variable; normalization expected
U.S. Group healthcare excessNot highlighted in Q1 Unfavorable claims; repricing majority by Jan 2026 Negative now, improving in 2026
Capital & value of in-force recognitionQ1: excess capital ~$1.9B; deployable ~$1.3B Excess capital ~$3.8B; deployable ~$3.4B; rating-agency VIF credit recognized Positive step-up
Equitable life block transactionAnnounced Feb; closing mid-2025 expected Closed; effective Apr 1; earnings guidance detailed Progressing to contribution
Investment yields & VIIQ1: lower VII; yield ~4.64% Yield 5.31%; new money 6.53%; VII strong Improving
Capital returnsNo buybacks (past 6 qtrs) Plan opportunistic buybacks; 20–30% payout long-term More flexible

Management Commentary

  • CEO tone: “Operating results were below expectations, primarily reflecting claims volatility in our U.S. Individual Life business… Our APAC and EMEA segments delivered strong results, and U.S. Financial Solutions performed well.”
  • Strategy: Creation RE driving exclusive, higher-return deals globally; selective participation avoided lower-fit U.S. brokered blocks; asset management platform breadth/depth supporting earned rates .
  • CFO detail: “Pre-tax adjusted operating income of $421M… effective tax rate 25.2% on adjusted operating income… deployable capital increased to ~$3.4B… we intend to be active but opportunistic on buybacks.” .

Q&A Highlights

  • Value of in-force credit: Recognized via rigorous rating-agency process without securitization/borrowing; partial VIF credit with further block opportunities; binding constraints across economic, regulatory, rating-agency capital now more comparable .
  • Healthcare excess line: Higher costs (specialty drugs, transplants, premature births, cancer therapies); materially repriced through Jan 2026; reserves established appropriately; expect margins to improve entering 2026 .
  • Capital return stance: After six quarters without buybacks, management will consider buybacks opportunistically; long-term 20–30% of after-tax operating earnings returned via dividends and repurchases .
  • PRT pipeline: U.K. longevity active; U.S. jumbo PRT “green shoots” in H2; asset-intensive deals prioritized where biometric risk enables exclusivity and returns .

Estimates Context

  • Q2 2025 results missed consensus: primary EPS $4.72 vs $5.55* and revenues $5.60B vs $5.74B*, with 10* EPS estimates and 4* revenue estimates contributing to consensus .
  • Estimate revisions likely: Lower near-term U.S. Group contribution and higher Q2 tax rate may depress FY EPS estimates; offset by Equitable contribution ramp (H2 2025 deferred recognition, larger in 2026–2027) and stronger investment yields .

Values marked with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term earnings headwinds stem from U.S. Individual Life large-claim volatility and healthcare excess; expect remediation via repricing by Jan 2026 and normalization of volatility year-to-date .
  • Structural positives: Expanded excess/deployable capital, rating-agency VIF credit, and closed Equitable transaction support multi-year EPS/ROE growth trajectory .
  • Investment tailwind: Higher new money rates and strong VII lift portfolio yield, supporting margin resilience against claims volatility .
  • Capital returns: Dividend raised to $0.93; watch for opportunistic buybacks beginning near term, targeting 20–30% payout over time .
  • Segment positioning: APAC/EMEA Traditional and Financial Solutions are delivering; U.S. Financial Solutions strong; monitor U.S. Traditional quarter-to-quarter variability .
  • Trading implications (short-term): Result miss and elevated tax rate may cap shares until visibility improves; look for H2 updates on healthcare repricing progress, buyback activity, and Equitable earnings amortization ramp .
  • Thesis (medium-term): Diversified global platform, Creation RE exclusivity, and balance sheet optimization underpin sustained ROE in 13–15% range and multi-year EPS growth as Equitable contributions scale .

Citations: Press release and 8-K: . Q1 2025 materials for trend: . Earnings call transcript (Q2 2025): .