Reinsurance Group Of America, Incorporated · NYSE:RGA
Reinsurance Group Of America — Q1 2020 Earnings Presentation
29 slides from Reinsurance Group Of America's earnings presentation, May 6, 2020
Slide 1: 1Q20 Earnings Presentation
The security of experience. The power of innovation. 1Q20 Earnings Presentation Reinsurance Group of America, Incorporated May 5, 2020
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, among others, statements relating to projections of the future operations, strategies, earnings, revenues, income or loss, ratios, financial perform
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures RGA uses a non-GAAP financial measure called adjusted operating income as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that adju
Slide 4: Key Messages
Key Messages § RGA’s operations are running smoothly. Our top priority is the health and well-being of our employees. We are extremely proud of how the RGA team has adapted to these very difficult circumstances to continue to support our clients. § We believe our balance sheet is strong, our investm
Slide 5: RGA's Response to COVID-19
RGA’s Response to COVID-19 Employees Clients Communities § Focused on health and safety of § Committed to delivering exceptional § RGA Foundation has committed employees support and client service $1.5 million in grants to support § Seamless transition to virtual § Establishing appropriate COVID-19
Slide 6: First Quarter Results
First Quarter Results Pre-tax Adjusted Operating Adjusted Operating EPS1 Adjusted Operating ROE1,2 Income1 § Adjusted operating income totaled § Ongoing headwinds from lower § Consolidated results were below $89 million interest rates and foreign expectations § Effective tax rate of 24.7% on pre-tax
Slide 7: Results by Segment
Results by Segment Pre-tax Adjusted Operating Income (Loss)1 1Q20 1Q19 § U.S. & Latin America Traditional results reflected higher frequency of non-large U.S. mortality U.S. & Latin America Traditional $(55) $18 claims and minimal variable investment income § U.S. Asset-Intensive was below expectati
Slide 8: U.S. Individual Mortality
U.S. Individual Mortality § Excess U.S. claims of $54 million § Adverse experience driven by higher claim frequency § Concentrated in ages 70 and above, especially in older issue year eras § It is possible COVID-19 directly or indirectly impacted Q1 results – Difficult to establish due to lags in re
Slide 9: Pre-tax Income (Loss) Reconciliation
Pre-tax Income (Loss) Reconciliation $ in millions 1Q20 1Q19 § RGA experienced a modest amount of investment impairments, primarily in the energy sector and Pre-tax income (loss) $ (96) 217 emerging markets Investment-related § GMXBs1 – net change of liability, hedging, and DAC § The fair value of o
Slide 10: Capital and Liquidity
Capital and Liquidity Capital Leverage Ratios Ample Liquidity Available § Strong balance sheet with a stable § Leverage ratios within our targeted § Cash and cash equivalents of $2.8 capital mix ranges billion as of March 31, 2020, an § Laddering of senior debt and hybrid increase of $1.4 billion fr
Slide 11: Liability Profile
Liability Profile Optionality Profile § Lower liquidity risk due to liability profile No policyholder Locked-in longevity in payout behavior risk Lower Consolidated Reserves Profile Liquidity Risk March 31, 2020 Very low Mortality, Morbidity, Long-Term Care, Bank- policyholder 4% Owned Life Insuranc
Slide 12: Non-Spread Investment Yield
Non-Spread Investment Yield1 Non-Spread Investment Yield1 New Money Rates2 § Investment yield down due to minimal variable § New money rate was 4.20% in 1Q20 investment income (partnership, joint venture § Reflects activity early in the quarter in private income) placements that carry higher yields
Slide 13: Investments
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Slide 14: RGA's Investment Approach
RGA’s Investment Approach § RGA’s investment leadership has experience in managing prior cycles of economic downturn and is prepared to balance defense and offense. Average 29 years of experience across public, private, and real estate investments § Risk Management is a critical, integrated part of
Slide 15: Diversified and High-Quality Portfolio
Diversified and High-Quality Portfolio § Average portfolio credit rating: A § 95.4% Investment Grade § Low subordinated debt, equity $66.7B investment § Underweight Energy § CML average LTV 58% § CLO average credit quality AA $48.6B 1The Rating Agency Designation includes all “+” or “-” at that rati
Slide 16: Investment in BBB
Investment in BBB BBB Corporates Portfolio vs. Index 50% § Total investment in BBB: $16.9 billion 40% - BBB- investments total: $3.8 billion 30% § Pre-crisis strategy 20% - Avoid “over-extended” BBBs (higher leverage) $3.8B 10% - Underweight Energy, Retail, BBB- 0% § In March, portfolio outperformed
Slide 17: Investment in High Yield
Investment in High Yield 2 § Total investments $2.5 billion1 § Defensively positioned within high yield: - 75% in higher rated (BB) high yield - 29% secured (bank loan, structured) $2.5B1 - 10% energy (underweight) - 4% aircraft/leisure/retail (combined) § Diversification with exposure sourced from
Slide 18: Focus Sector - Energy
Focus Sector - Energy § Our long-standing bearish view on the sector resulted in a defensive stance well ahead of the recent turmoil § Underweight the sector, as we avoided adding while our asset base has grown § 87% investment grade § 49% midstream, a more defensive sector § Largest exposures are t
Slide 19: Focus Sector - Aircraft
Focus Sector - Aircraft § 97.1% investment grade § 98.0% secured debt - High quality unsecured - Southwest Airlines § Split 50/50 between EETC2 and aircraft ABS § EETC exposures are defensive, positioned in senior tranches, with high quality collateral § We have immaterial investments in travel and
Slide 20: Commercial Mortgage Loans (CML)
Commercial Mortgage Loans (CML) § Our team has managed through multiple real estate cycles and has built a robust infrastructure to protect value in times of stress (managing a total of $6.0 billion) § Current environment primarily creates short-term cash flow $6.0B issues for borrowers § Our invest
Slide 21: Collateralized Loan Obligations (CLOs)
Collateralized Loan Obligations (CLOs) § Average credit enhancement of 28% § Average portfolio rating of AA – 75% of portfolio is AAA/AA – 95% is A-rated or better § When investing in CLOs, we focus on the combination of manager quality and credit enhancement, investing below AA only when $1.9B1 man
Slide 22: COVID-19 Mortality Exposure
COVID-19 Mortality Exposure
Slide 23: RGA's Mortality Exposure to COVID-19
RGA’s Mortality Exposure to COVID-19 § 83% of RGA’s mortality exposure is in U.S., U.K., RGA Mortality Amount at Risk % by Canada, Australia, and Hong Kong Geography § RGA has significantly less mortality exposure at older U.S. attained ages than the general population 45% U.K. 17% – Emerging data s
Slide 24: The Impact of COVID-19 on Mortality Claims
The Impact of COVID-19 on Mortality Claims § Too early to accurately estimate the ultimate claims impact of the COVID-19 virus due to the high degree of uncertainty § Key items that will impact mortality claims – Country-specific circumstances and public and private actions – Impacts of COVID-19 on
Slide 25: Appendix
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Slide 26: Reconciliations of Non-GAAP Measures
Reconciliations of Non-GAAP Measures Reconciliation of GAAP pre-tax income to pre-tax adjusted operating income In millions 1Q19 1Q20 U.S. & Latin America Traditional GAAP pre-tax income $ 12.0 $ (62.0) Capital (gains) losses, derivatives and other, net - - 1 Change in MV of embedded derivatives 6.0
Slide 27: Reconciliations of Non-GAAP Measures
Reconciliations of Non-GAAP Measures Reconciliation of GAAP pre-tax income to pre-tax adjusted operating income In millions 1Q19 1Q20 Asia Pacific Traditional GAAP pre-tax income $ 37.0 $ 24.0 Pre-tax adjusted operating income $ 37.0 $ 24.0 Asia Pacific Financial Solutions GAAP pre-tax income (loss)
Slide 28: Reconciliations of Non-GAAP Measures
Reconciliations of Non-GAAP Measures Reconciliation of GAAP stockholders' equity to stockholders' equity excluding AOCI In millions 1Q19 1Q20 GAAP stockholders' equity $ 9,670 $ 9,301 Less: Unrealized appreciation of securities 1,964 1,426 Less: Accumulated currency translation adjustments (147) (22
Slide 29: ©2020 RGA. All rights reserved.
©2020 RGA. All rights reserved. No part of this publication may be reproduced in any form without the prior permission of RGA. The information in this publication is for the exclusive, internal use of the recipient and may not be relied upon by any other party other than the recipient and its affili
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