REINSURANCE GROUP OF AMERICA INC (RGA)·Q4 2024 Earnings Summary

Executive Summary

• Q4 delivered solid operating performance: adjusted operating EPS of $4.99 and net premiums of $4.16B, with consolidated pre-tax adjusted operating income of $431M; trailing 12‑month adjusted operating ROE ex‑AOCI was 13.8% (15.4% ex notable items) .
• Mix drivers: U.S. & LatAm Traditional benefited from in‑force management actions; EMEA Financial Solutions saw strong longevity and margin contributions; Asia Traditional faced unfavorable claims in floored cohorts; U.S. Financial Solutions remained below expectations amid annuity runoff and slower earnings emergence from new deals .
• Strategic updates and guidance: management raised its intermediate-term adjusted operating ROE target to 13–15% and reiterated 8–10% growth on a higher earnings run-rate; deployable capital stood at ~$1.7B to fund transactions over the next 12 months .
• Stock narrative catalysts: increased ROE target, robust pipeline and deployable capital, plus continued “Creation Re” wins and balance sheet optimization (including retro recapture economics) should underpin estimate revisions and sentiment in 2025 despite near-term variability in claims cohorting and variable investment income .

What Went Well and What Went Wrong

• What Went Well

  • In‑force actions and balance sheet optimization boosted earnings and reduced future risk; management quantified ~$84M positive Q4 impact from U.S. in‑force actions and highlighted record full‑year capital deployment into in‑force transactions ($1.676B) .
  • EMEA Financial Solutions outperformed on strong recent new business, favorable longevity experience, and higher investment margins .
  • Strategic momentum: “Creation Re” exclusive transactions drove record new business value, with notable wins across Asia (China, Japan) and UK longevity swaps; management raised ROE target to 13–15% on sustained fundamentals .

• What Went Wrong

  • Asia Traditional experienced unfavorable claims (with economic claims favorable but floored cohorts depressing current period reported results) .
  • U.S. Financial Solutions below range due to runoff of older annuity blocks and slower earnings emergence from new transactions; segment run‑rate reset lower to reflect rate environment and mix changes .
  • Variable investment income was moderately below plan; company also recorded a $42M incentive compensation accrual true‑up in Q4, and biometric experience was a $58M accounting negative despite underlying positives .

Financial Results

Quarterly snapshot (sequential)

Q4 year-over-year snapshot and estimates

Note: Wall Street consensus from S&P Global was unavailable at time of writing; we were unable to retrieve EPS and revenue consensus due to provider limits.

Segment performance – Adjusted Operating Income before tax

Key Performance Indicators

Drivers:

• Premium growth YoY (+1.2%) included ~$150M PRT single premium vs ~$500M prior year; excluding spread-based businesses, investment income rose, with new money yields above portfolio, though VII and expenses weighed on Q4 yield .
• Favorable AOI tax rate (22.5%) reflected valuation allowance releases outside the U.S.; GAAP ETR elevated on non‑cash restructuring .

Guidance Changes

Dividend: Board declared $0.89 quarterly dividend payable March 4, 2025 (record Feb 18) .

Earnings Call Themes & Trends

Management Commentary

• Strategic posture: “We delivered record operating earnings… continued strong momentum in organic business activity… in‑force transactions were solid” (CEO) .
• Capital and targets: “We have increased our intermediate term financial targets, including raising our adjusted operating ROE target to 13% to 15%” (CEO) .
• Balance sheet actions and run‑rate: “Positive impact [from in‑force actions] in the quarter was approximately $84 million… we have raised our targets for earnings run rate and reaffirm our 8% to 10% intermediate‑term growth target” (CFO) .
• Deployable capital: “Deployable capital… stands at $1.7 billion… represents capital available for deployment into transactions or to return to shareholders over the next 12 months” (CFO) .
• Segment color: “U.S. Financial Solutions below expected range due to continued runoff of existing annuity business and the earnings emergence from new transactions” (press release) .
• Asia/EMEA: “EMEA Financial Solutions reflected strong new business… favorable longevity experience… higher investment margins” (press release) ; “APAC Traditional results reflected unfavorable claims… economic claims experience was favorable” (press release) .

Q&A Highlights

• Deployable capital and funding: Management expects robust deal flow to utilize ~$1.7B deployable capital with minimal buybacks; tools include Ruby Re, VIF monetization, and hybrids/senior debt before common equity .
• Run‑rate framing: To deliver 8–10% growth from the 2025 run‑rate requires ~$1.5–$2.0B capital deployment; portfolio repositioning generally takes 12–18 months to reach full earnings .
• PRT litigation: Not named in suits; sees claims as baseless; pipeline unaffected, with recent wins post‑news .
• Japan ESR opportunity: Still early innings; clients transact in tranches over many years, sustaining pipeline .
• LTC appetite: Selective, aligned with existing in‑force vintages and typically as part of strategic packages; current in‑force LTC reserves ~$4B .

Estimates Context

• We were unable to retrieve S&P Global consensus for Q4 2024 EPS and revenue due to provider access limits at time of writing (hence, “vs. estimates” fields are N/A). Where estimates are not shown, please note that S&P Global consensus was unavailable.

Key Takeaways for Investors

• Raised ROE target and higher run‑rate underpin medium‑term return profile; expect 8–10% growth from a larger base as recent deployments season .
• Earnings quality: In‑force actions and retro recapture add long‑duration value and reduce risk; quarterly AOI can still be noisy due to cohorting and VII .
• Capital capacity: ~$1.7B deployable capital and third‑party vehicles (Ruby Re) support continued transaction flow without near‑term common equity needs .
• Segment mix: U.S. & LatAm Traditional and EMEA FS are near‑term supports; U.S. Financial Solutions earnings should improve as portfolios are repositioned and alternatives ramp .
• Structural growth: Asia and UK longevity pipelines, plus technology‑enabled underwriting/admin platforms (e.g., MedScreen+, Aspire) enhance competitive differentiation and deal exclusivity .
• Watch items: Variable investment income variability, unfavorable claims within floored cohorts, and timing of AOI tax rates can influence quarterly prints .
• 2025 catalysts: Deployable capital conversion into deals, evidence of run‑rate lift, and continued VIF growth likely to drive narrative and estimate revisions .

Appendix – Additional Context from Q4 Press Releases

• Manulife coinsurance: ~$4.1B liabilities (LTC and structured settlements), funded with internal capital, expected accretive to 2025 earnings .
• Aspire launch (UAE): New health insurance administration platform/TPA to digitize medical insurance workflows; expands tech-enabled services in EMEA .
• Ruby Re funding: Reached $480M total capital with second round; enhances asset‑intensive capacity for retrocessions .

All figures and statements are sourced from the company’s Q4 2024 8‑K/press release, quarterly supplement, and earnings call unless otherwise noted, with citations as follows: ; call transcript excerpts –, –, –; Q3/Q2 historical context –, –, –.