Reinsurance Group Of America, Incorporated · NYSE:RGA
Reinsurance Group Of America — Investor Day (March 2012)
123 slides from Reinsurance Group Of America's investor day presentation, Mar 13, 2012
Slide 1: Thriving in Challenging Times
John Hayden Senior Vice President, Controller and Investor Relations Thriving in Challenging Times Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 Exhibit 99.1
Slide 2: Safe Harbor
Safe Harbor Thriving in Challenging Times 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 earnings, revenues, income or loss, future financial performa
Slide 3: Capital Allocation / Non-GAAP Measures
Capital Allocation Effective in 1Q 2006, the Company changed its capital allocation methodology from a regulatory-based approach to an economic-based approach. To enhance comparability, all prior period segment results in this presentation have been adjusted to reflect the new methodology. This chan
Slide 4: Agenda
20-Minute Break Global Acquisitions Scott Cochran, Executive Vice President, Global Acquisitions and Financial Solutions Investments David Fischer, Senior Vice President and Chief Investment Officer Financial Overview Jack Lay, Senior Executive Vice President and Chief Financial Officer Closing Rema
Slide 5: Greig Woodring, President and CEO
A. Greig Woodring President and Chief Executive Officer Thriving in Challenging Times RGA 2012 Investor Day Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 6: Strategic Overview
Signature Strengths Compelling Competitive Position Opportunity Strategic Overview Thriving in Challenging Times • Deep technical expertise • Organizational focus on establishing and maintaining strong, multilayered, long- term customer relationships • Collaborative organization that leverages knowl
Slide 7: RGA: an opportunity to diversify within the insurance space
RGA: an opportunity to diversify within the insurance space RGA is Different than Most Insurance Investment Opportunities Different risk profile, focus and approach Lower asset leverage Lower equity and interest rate sensitivity Mortality focus – more predictable Higher ROE Built-in, long-term, high
Slide 8: RGA Canada – Financial Results and Projections
RGA Canada – Financial Results and Projections *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Thriving in Challenging Times ($ Millions)
Slide 9: Life cession rates expected to decline
Life cession rates expected to decline Canada Individual Life Market Source: Munich American / Society of Actuaries Reinsurance Surveys Thriving in Challenging Times
Slide 10: RGA Canada – NMG Study
Thriving in Challenging Times RGA Canada – NMG Study Source: NMG Consulting Business Capability Index – Momentum – (All Respondents)
Slide 11: RGA Canada – NMG Study
RGA Canada – NMG Study Value Competitiveness – Likelihood to Recommend (All Respondents) Thriving in Challenging Times Value Competitiveness – Promoters/Detractors Source: NMG Consulting
Slide 12: RGA Canada Strengths and Opportunities
Strengths Opportunities RGA Canada • In force has substantial embedded value • Facultative underwriting expertise • Strong client relationships at all levels • Service all companies • Quality and experience of staff across all product lines • Expected growth rates of 8-9% premium; bottom-line 10-12%
Slide 13: Proven ability to thrive in challenging times
Proven ability to thrive in challenging times RGA 2012 Investor Day Key Messages • Leading global presence • High levels of expertise and collaboration • Challenging environment that is creating opportunities • Principal focus on client relationships Thriving in Challenging Times
Slide 14: Anna Manning, U.S. Traditional
Anna Manning Executive Vice President and Head of U.S. Markets U.S. Traditional Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 15: Long-term focus on clients enables stable results
Long-term focus on clients enables stable results U.S. Traditional Strong Client Focus Key to Stability and Growth Consistent approach to market Pricing discipline Leader in client satisfaction Innovation and continuous improvement leading to differentiated products and services valued by clients Co
Slide 16: Product line diversification
Product line diversification 88% 88% Product Line Distribution U.S. Traditional *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 4% 8% Net Premiums Traditional Full Year 2011 Individual Life LTC Group U.S. 7% 5% Pre Tax Operating Income* U.S. Traditional Full
Slide 17: U.S. Traditional Financial Results and Projections
Steady financial performance Projection Actual *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. U.S. Traditional Financial Results and Projections $2,647 $2,868 $3,093 $3,314 $3,776 $3,979 $4,246 $4,415 $4,622 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $50
Slide 18: U.S. Individual Mortality
Difference between Total Claims and Linear Trend U.S. Individual Mortality Monthly Weekly Quarterly Annually U.S. Traditional
Slide 19: Life cession rates continue to decline
Life cession rates continue to decline 59% 57% 48% 41% 37% 36% 60% 35% 31% 62% U.S. Individual Life Market Source: Munich American / Society of Actuaries Reinsurance Surveys U.S. Traditional $ Billions 12% 11% 16% 15% 22% 23% 24% 20% 22% 26% 0% 5% 10% 15% 20% 25% 30% $0 $200 $400 $600 $800 $1,000 $1
Slide 20: Leading market share
Leading market share Source: Munich American / Society of Actuaries Reinsurance Surveys U.S. Individual Life Reinsurance Market Share 3% 3% 3% 4% 7% 6% 5% 7% 9% 11% 13% 12% 15% 16% 16% 13% 26% 25% 22% 18% 12% 14% 19% 19% 14% 22% 11% 4% 57% 9% 6% 56% 8% 12% 52% 9% 11% 38% 10% 7% 40% 12% 10% 34% 12% 1
Slide 21: U.S. Traditional – Consistent Approach to Market
We Deliver Fair and Consistent Pricing Client Focus Value -added Services Technical Risk Expertise Leading to long-term client partnerships Industry-leading facultative services Data-driven analytic insights Leading industry research Innovative thinking Leading client satisfaction U.S. Traditional –
Slide 22: Leading Client Satisfaction – Flaspöhler Results
RGA #1 in client perception Factor Ordinal Rank Leading Client Satisfaction – Flaspöhler Results Source: Flaspöhler Cedent Survey (Life -- North America) Medical Underwriting Capabilities #1 Financial Value #1 Financial Security #3 Strong Client Orientation #1 Leading Expertise & Market Knowledge #1
Slide 23: Leading Client Satisfaction – Net Promoter Score
A strong indicator of future growth Leading Client Satisfaction – Flaspöhler Net Promoter Score Measures How Likely Client is to Recommend Reinsurer Source: Flaspöhler Cedent Survey (Life -- North America) U.S. Traditional
Slide 24: Mortality – Facultative Leadership
Key differentiator providing competitive advantage Client Support Expertise Consistency Technology Mortality – Facultative Leadership U.S. Traditional • Facultative call desk • Year-end and high-volume resource support • Impaired risk expertise • Client education programs • Webcasts • Consistency of
Slide 25: Data-Driven Research at RGA
Leader in research External Research Competitive Advantage Internal Data Data-Driven Research at RGA U.S. Traditional • • Analytical expertise • Life insurance business knowledge • Reinsurance pricing • Facultative underwriting • Underwriting rules development • Product development • Client educatio
Slide 26: Innovation at RGA – Recent Recognition
Innovation at RGA – Recent Recognition A.M. Best Innovators Showcase, January 2012 U.S. Traditional
Slide 27: Leader in U.S. group reinsurance market
Leader in U.S. group reinsurance market 20% 18% 8% U.S. Group Reinsurance Market Sources: LIMRA, CDC, NMG, Internal Adjustments and Estimates $ Millions U.S. Traditional Estimated Premiums and Market Share $ Millions
Slide 28: U.S. Group Reinsurance
Focus on employee benefit market RGA Premium by Risk RGA Premium by Distribution Method RGA U.S. Group Reinsurance U.S. Traditional Healthcare Reinsurance Morbidity risk transfer products Life, Accident and Disability Reinsurance Mortality risk transfer products Ancillary A&H products Long-term and
Slide 29: U.S. Group Reinsurance – Approach to Market
Portfolio of services provides differentiation and competitive advantage Financial Monitoring Fair and Consistent Pricing Value Added Services We Deliver Market Research Claims Advisory Services Actuarial and Risk Management Underwriting and Product Development Market leadership in value added servi
Slide 30: U.S. Long Term Care Overview
Established in 2007 to focus on individual living benefit-style products Primary focus has been on new business opportunities, not in-force blocks Limited competition No drag from low or unprofitable legacy business Overview U.S. Long Term Care U.S. Traditional
Slide 31: U.S. Long Term Care – Approach to Market
Detailed risk analysis and product modeling Cost-effective risk management programs Underwriting and claims expertise Disciplined pricing We Deliver Alignment of Interests with Our Clients Experienced Staff Financial Monitoring Technical Risk Expertise Disciplined and measured approach U.S. Long Ter
Slide 32: U.S. Traditional Summary
Competitive advantages from key differentiators Leading market share Deep technical expertise Strong, long-term client relationships Large, stable, high-quality earnings engine Quality and experience of staff U.S. Traditional Summary U.S. Traditional
Slide 33: John Laughlin, Global Financial Solutions
John Laughlin Executive Vice President Global Financial Solutions Global Financial Solutions Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 34: Global capital and risk solutions
Global capital and risk solutions Lines of Business Objectives Global Financial Solutions • Financial Reinsurance • Asset Intensive Reinsurance • Longevity Reinsurance • Provide tailored capital and risk solutions to clients • Generate high-return business • Provide diversified income streams • Leve
Slide 35: Global Financial Solutions Environment, Trend, Opportunity
Environment Trend Opportunity Volatile economic conditions Increased regulation Increased capital requirements Accounting changes Demographic changes Increased demand for efficient capital and risk management Increased management of interest rate, distintermediation, default risks Consumer demand fo
Slide 36: Keys to Success
• Consistent growth in profits • High-return business • Industry credibility with clients, regulators • Longest client relationships • Financial Reinsurance – 19 years • Asset Intensive – 15 years We Deliver Strong RGA history, rating, capital Risk Management Strong analytical and structuring expert
Slide 37: Financial Reinsurance
Strengths Results Actual Projection Superior strengths lead to outstanding results Financial Reinsurance *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • Steady growth in Operating Income • Successful expansion into international markets ($ Millions) Pre-tax
Slide 38: Financial Reinsurance – Summary
Current State Strategies Expected Results Financial Reinsurance – Summary Global Financial Solutions • Health & Group • XXX/AXXX • Established expertise • Leading presence in U.S., Japan • Pressure on efficient capital management • Expand strategic accounts in developed markets: U.S., Japan, Canada
Slide 39: Asset Intensive Reinsurance
Optimally positioned to deliver profitable growth Asset Intensive Reinsurance Global Financial Solutions Characteristics Doesn’t require distribution force or substantial fixed administration expenses Complements large mortality base Defined appetite for amount of business allows selective participa
Slide 40: Asset Intensive Reinsurance
Strengths Actual Projection Actual Projection Asset Intensive Reinsurance ($ Millions) ($ Billions) *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • Strong RGA brand; history, rating, capital • Client contacts and relationships • Analytical and Risk Manageme
Slide 41: Manageable interest rate and equity sensitivities
Manageable interest rate and equity sensitivities Asset Intensive Reinsurance Estimated Interest Rate and Equity Impacts on Pre-tax Operating Income Global Financial Solutions -50bps +50bps +10% -10% 7.6 -7.9 0.6 -0.9 -10 -8 -6 -4 -2 Interest Rates Fixed Indexed Annuity Variable Annuity Fixed Annuit
Slide 42: Asset Intensive Reinsurance – Summary
Current State Strategies Expected Results Asset Intensive Reinsurance – Summary Global Financial Solutions • Established business in U.S. • Strong pricing and risk management skills • Ability to review and support all investment products • Reinsure products in favorable environments • Target well-de
Slide 43: Longevity
Strengths Results Actual Projection Longevity ($ Millions) Pre-tax Operating Income* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • Effective hedge to large mortality position • Analytical and Risk Management expertise • Strong client contacts • Demand for
Slide 44: Longevity – Summary
Current State Strategies Expected Results Longevity – Summary Global Financial Solutions • Solid expertise • Strong current and projected demand • Organic profits on in- force business • Expansion into targeted markets: U.S., Netherlands • Continued production, profits in established markets • Combi
Slide 45: Allan O’Bryant, International Markets and Operations
Allan O’Bryant Executive Vice President Head of International Markets and Operations International Markets and Operations Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 46: International Growth
International Growth 34% of net premiums derived from outside North America International Markets and Operations Serve clients in 70+ countries from 25 countries around the world
Slide 47: International Presence – Individual Business
28% 27% 26% 27% 29% International Presence Overview of RGA’s Individual Business International Markets and Operations Individual premiums expected to increase ($ Millions) 1,000 2,000 3,000 4,000 5,000 6,000 7,000 US Canada International
Slide 48: International Presence – Group Business
International Presence Overview of RGA’s Group Business International Markets and Operations Continued opportunities for growth ($ Millions)
Slide 49: Asia Pacific Operations Overview
Overview Actual Projection ($ Millions) International Markets and Operations Asia Pacific Operations *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 1,001 1,139 1,304 1,380 1,550 1,730 - 1,000 1,200 1,400 1,600 1,800 2,000 Asia Pacific Operations Net Premiums
Slide 50: Asia Pacific Operations by Market
Market 2011 Net Premiums ($ Millions) 2010/2011 Annual Premium Growth 5-year CAGR 2010/2011 Fee Income Growth Asia Pacific Operations International Markets and Operations Australia/New Zealand 746.2 26% 19% - Japan 183.5 -12% 11% 19% South Korea 177.1 6% 1% -100% Hong Kong & Southeast Asia 125.5 18%
Slide 51: Asia Pacific Operations – Emerging Opportunities
Asia Pacific Operations - Emerging Opportunities International Markets and Operations Risk products are being increasingly featured Financial reinsurance demand is high Generally more favorable tax, capital and regulatory regimes encourage growth Economics and demographics support growth Growth of m
Slide 52: Europe & South Africa Operations
Actual Projection ($ Millions) *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. International Markets and Operations Europe & South Africa Operations
Slide 53: Europe & South Africa Operations by Market
Market 2011 Net Premiums ($ millions) 2010/2011 Annual Premium Growth 5-year CAGR 2010/2011 Fee Income Growth Europe & South Africa Operations International Markets and Operations U.K. 755.5 20% 33% 100% South Africa 112.1 37% 33% 80% Italy 87.4 290% 372% - Spain 59.7 17% 35% 50% India 55.2 55% 43%
Slide 54: Europe & South Africa – Emerging Opportunities
Europe & South Africa Operations - Emerging Opportunities International Markets and Operations Solvency II forcing companies to reassess their risks and consider capital-efficient transactions Increased focus on risk management encourages life assurers to specialize in key products Financial and ban
Slide 55: International Operations Overview
Overview Actual Projection International Markets and Operations International Operations - Asia Pacific, Europe & South Africa *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • International operations play a substantial and growing role in RGA’s worldwide bu
Slide 56: Market Size – Individual Business
Country Market Size (in $ millions) Currency RGA Market Share (%) Country Market Size (in $ millions) Currency RGA Market Share (%) Market Size Individual Business Estimated to December 31, 2011 Estimated Source: NMG Consulting, Life & Health Reinsurance Segment Update *NMG Life & Health Reinsurance
Slide 57: Market Size – Group Business
Market Market Size (in $ millions) Currency RGA Market Share (%) Market Market Size (in $ millions) Currency RGA Market Share (%) Market Size Group Business Estimated to December 31, 2011 Australia/New Zealand 1,049 USD 36% CEE EURO 12% China n/a France/Belgium EURO 8% Germany/Austria EURO 0% Hong K
Slide 58: Looking Forward: Growth Factors for Success
Looking Forward Growth Factors for Success International Markets and Operations RGA Framework Technical expertise tailored to clients’ needs Deep, long-term multinational client relationships Teams of experts to leverage expertise worldwide Proprietary data collection and analysis Long-term Growth
Slide 59: Underwriting Excellence
Underwriting Excellence Global Underwriting Learning Framework (GULF) AURA ® e-Underwriting Solutions • Over 150,000 facultative cases reviewed in 2011 • Global Underwriting Manual (GUM) ranked most preferred manual in 2011 • Client seminars and process reviews • Longer Life Foundation partnership •
Slide 60: Deep, Long-Term Multinational Client Relationships
Dedicated Teams Deep, Multilayered, Long-term Relationships Comprehensive Understanding Deep, Long-Term Multinational Client Relationships International Markets and Operations Enhance working relationships at global and regional level Complement strong local relationships Ensures RGA associates unde
Slide 61: Teams of Experts Leverage Expertise Worldwide
Annuities Group Financial Reinsurance Product Development Research and Development Underwriting/ Medical Pricing Claims Teams of Experts Leverage Expertise Worldwide International Support Successes Annuities Group Financial Reinsurance Product Development Research and Development Operational Leaders
Slide 62: Proprietary Data Collection and Analysis
Strategic and Technical Expertise Market and Industry Research and Analysis Services Provided Proprietary Data Collection and Analysis International Markets and Operations RGA’s research and development teams work with local experts Provide support to clients Market and industry research and analysi
Slide 63: Thriving in Challenging Times
Thriving in Challenging Times RGA 2012 Investor Day Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 64: Scott Cochran, Global Acquisitions
Scott Cochran Executive Vice President Global Acquisitions and Financial Solutions Global Acquisitions Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 65: Expanding a capability to better serve clients and shareholders
Expanding a capability to better serve clients and shareholders RGA Global Acquisitions Global Acquisitions
Slide 66: Global Acquisitions Overview
Another approach to better serve RGA clients and shareholders Launched in 2011, with objective to deploy capital in attractive, closed-block opportunities Significant opportunities exist in numerous markets that RGA already serves Natural extension of RGA’s strengths and capabilities Considerable va
Slide 67: Building on a Strong Existing Platform
Evolving Capabilities Existing Strengths Building on a Strong Existing Platform Building acquisition-oriented team and focus Adding direct policy administration solutions Extending brand to include acquisitions Global Acquisitions + Solid global brand Strong customer relationships Underwriting and a
Slide 68: Acquisition Approaches
Block Re Block Acquisition Partnered Acquisitions Solution Description Reinsure in-force block Block Re, with transfer of direct policy administration Supporting an acquirer in their M&A pursuits Customized solutions that transition insurance risks to RGA Client Benefits Monetize future profits Risk
Slide 69: Market Outlook
Outlook is favorable due in large part to market disruptions Favorable Trends Neutral Trends Unfavorable Trends Market Outlook Global Acquisitions Strategic refocus European uncertainties Regulatory changes such as Solvency II and Basel III Accounting changes High primary growth rates in Asia, low i
Slide 70: RGA Differentiators
Competitive positioning varies by market and opportunity Customer relationships, both at local and global levels Entrepreneurial culture Global perspective with local skills Capital management Brand / reputation Pricing discipline Reinsurance structuring options Deep insurance risk expertise Existin
Slide 71: Acquisition Goals
Building a sustainable value-adding capability Continually deploying capital via in-force acquisitions Transactions priced to be accretive Expect to achieve ultimate run rate within 2-3 years, with material near-term financial contributions Transactions irregular in size and frequency…challenging to
Slide 72: Investments – David Fischer
Investments David Fischer Senior Vice President and Chief Investment Officer Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 73: RGA Investments: Mission
RGA Investments: Mission Investments
Slide 74: Create Optimal Portfolios Balance Different Needs
Create Optimal Portfolios Balance Different Needs RGA Investments: Mission Investments Growing investment income Achieving total return objectives Ensuring balance sheet safety Designed for liability matching and return goals Tailored for the market environment Meeting all constraints
Slide 75: Risk Management Principles
Investment Policies Culture Risk Management Principles Investments Risk budgets Diversification requirements and limits Interest rate and currency matching Four “Cs” of credit: capital, cash flow, collateral, character Monitor portfolio on total return basis Is there “Margin of Safety”?
Slide 76: RGA Asset Liability Management
ALM starts with a clearly defined investment mandate for each portfolio, i.e., duration, convexity and gross yield targets Rely on expanded metrics for asset intensive deals such as key rate durations, as well as credit and asset class splits Short-term and long-term profitability analysis prepared
Slide 77: Portfolio Overview
Portfolio Overview Investments
Slide 78: Allocation by Asset Class
Asset Class December 31, 2011 Market Value ($ Millions) % Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Allocation by Asset Class Investments U.S. Government Bonds $439,215 1.9% Foreign Government Bonds 769,213 3.3% Agency, Provincial & Othe
Slide 79: Allocation by Rating
Ratings December 31, 2011 Market Value ($ Millions) % AAA-AA $10,242,710 43.9% A 5,872,729 25.1% BBB 4,778,075 20.5% < BBB 981,033 4.2% Not Rated* 357,022 1.5% Equities & CML** 1,126,191 4.8% Total $23,357,760 100% * Includes Derivatives & Mutual Funds ** Excludes Credit Tenant Loans, as most are ra
Slide 80: Asset Allocation by Currency
Currency December 31, 2011 Market Value ($ Millions) % CAD 19.9% USD 69.5% Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Asset Allocation by Currency (in U.S. $ equivalents) Investments USD $16,235,100 69.5% CAD 4,654,554 19.9% AUD 1,056,065
Slide 81: Current Heightened Focus
Current Heightened Focus Investments
Slide 82: RGA Earned Yield History & Projections
RGA Earned Yield History & Projections Assumes $525 million of net new premiums; cash coupon is equal to the beginning of period book yield and 19% turnover (maturities, calls, paydowns and sales). New money (maturities, calls and paydowns) is assumed to be invested at 4.1%. Securities sold are assu
Slide 83: RGA After-tax EPS Impact of Low Investment Yields
RGA After-tax EPS Impact of Low Investment Yields Investments 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 After-tax EPS Impact
Slide 84: Exposure to Europe and Periphery
Market Value ($ Millions) Total Greece Italy Ireland Portugal Spain Market Value Book Value Market Value ($ Millions) Total GIIPS U.K. France Germany Other Europe Market Value Book Value Exposure to Europe and Periphery Country Definition: Issue Country (without Funds Withheld) Investments Financial
Slide 85: Commercial Real Estate – Direct Commercial Loan Portfolio
LTV Debt Service Coverage Ratios Total >1.2x 1.0-1.2x <1.0x $1.004 billion balance outstanding, as of December 31, 2011 218 loans, $4.6 million average loan size 5.74% average coupon Average DSCR* 1.71x Average LTV 59% +90 Delinquent 145bp * Debt Service Coverage Ratio Excludes Asset-Intensive Funds
Slide 86: Commercial Real Estate – CMBS
Vintage Year Market Value ($ Millions) Total AAA AA A BBB BIG Market Value Book Value Commercial Real Estate - CMBS Investments 2005 & Prior $98,213 $143,609 $31,187 $24,295 $40,753 $338,057 $332,894 227,959 59,727 55,074 26,563 43,559 462,882 447,653 214,510 18,700 122,945 108,047 77,718 541,920 55
Slide 87: Market Outlook
Market Outlook Investments
Slide 88: U.S. Outlook
U.S. Outlook Most likely: “Slow Grow Out” U.S. economy stronger than Europe Same as last year: Fed still at 0% Fed still trying to avert Japan-like U.S. future Apparently, will risk an “Inflation Surprise” Source: Data Insight, Bianco Research L.L.C.
Slide 89: Eurozone Outlook
Investments Eurozone Outlook Most likely: EMU to stay (largely) intact Back-and-forth politics and “painsharing” enables this outcome Economic growth necessary to avoid the more pessimistic outcomes Long-Term Refinancing Operations (LTRO) is European-style quantitative easing Source: Data Insight, B
Slide 90: Credit Asset Classes Spreads
Credit Asset Classes Spreads Investments Asset Class Outlook Fed imposing “financial repression” (negative real rates) on the market Real rates are negative at least to 10-year risk-free rates Spreads on credit asset classes look attractive for the “Slow Grow Out” view and reasonable for other scena
Slide 91: RGA Commercial Mortgage Lending
Investments RGA Commercial Mortgage Lending Market currently in early-mid recovery Indicates best credit environment for RE lending Market early in the recovery cycle Little new construction Space demand is increasing Underwriting remains conservative Valuations remain low Attractive returns Superio
Slide 92: Asset Allocation 2012 Consolidated Projection
Asset Class December 31, 2011 Book Value ($ Millions) % of Portfolio Projected Net Investment December 31, 2012 Projected Ending Book Value % of Portfolio Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Government bonds includes U.S. Treasurie
Slide 93: Financial Overview – Jack B. Lay
Financial Overview Jack B. Lay Senior Executive Vice President and Chief Financial Officer Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 94: Financial Overview Agenda
Thriving in challenging times Financial Overview I. Where We Have Been II. The RGA Investment Opportunity III. Capital Management IV. Where We Are Going Financial Overview
Slide 95: I. Where We Have Been
I. Where We Have Been Financial Overview
Slide 96: Consolidated Net Premiums
($ Millions) Consolidated Net Premiums Financial Overview - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Slide 97: Operating Income
($ Millions) Operating Income* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview -
Slide 98: Operating Income per Share
Operating Income per Share* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. . Financial Overview $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00
Slide 99: Operating Return on Equity
Operating Return on Equity* *Operating ROE is computed excluding other comprehensive income, using quarterly averages for equity amounts. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview 10-Year Average 13.0% 13.1% 12.9% 12.2% 11.1% 13.2% 14.
Slide 100: Annualized Operating ROE – Quarterly Performance
Annualized Operating ROE* – Quarterly Performance Financial Overview 5-Year Average 13.4% 13.6% 13.7% 14.9% 13.9% 10.6% 15.9% 16.8% 13.3% 8.5% 16.0% 13.5% 14.3% 10.2% 13.0% 13.2% 16.0% 11.5% 12.2% 14.1% 12.7% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4
Slide 101: Book Value per Share
Book Value per Share* 10-Year Trend *Book value excludes other comprehensive income. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview $20.43 $22.63 $27.73 $31.08 $34.06 $38.79 $42.93 $43.58 $48.89 $56.34 $61.53 $0 $10 $20 $30 $40 $50 $60 $70
Slide 102: II. The RGA Investment Opportunity
II. The RGA Investment Opportunity Financial Overview
Slide 103: The RGA Investment Opportunity
The RGA Investment Opportunity Business provides consistent earnings Strong return on equity Comprehensive geographic reach Build-out substantially complete; RGA has operations in virtually all markets in which it intends to operate *Please refer to “Reconciliations of Non-GAAP Measures” at the end
Slide 104: The RGA Investment Opportunity
94% 95% 90% 88% 87% 92% The RGA Investment Opportunity Business based on insurance risks (mortality), less sensitive to capital markets Existing mortality portfolio produces “locked-in” premium and earnings flows for years Stable investment portfolio, moderate asset leverage *Note: Figures include r
Slide 105: Attractive Opportunity
Attractive Opportunity Financial Overview 2-year Average Book Value Multiple (ex AOCI): 0.96x 2-year Average P/E Ratio: 7.2x 10-year Average P/E Ratio: 9.2x* 10-year Average Book Value Multiple (ex AOCI): 1.2x* * Source: Macquarie (USA) Research $0 $10 $20 $30 $40 $50 $60 $70 RGA Stock Price Perform
Slide 106: III. Capital Management
III. Capital Management Financial Overview
Slide 107: Total Capitalization Levels
$2,382 $2,663 $3,165 $3,569 $4,133 $4,514 $307 $527 $519 $897 $898 $1,096 $557 $558 $558 $478 $478 $319 5.4% 18.5% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 Hybrid Capital Debt Shareholder's Equity Timberlake Notes/collateral finance facility not included in figures above. ($ Millions) Tot
Slide 108: Current Capital Structure
8% 68% 19% 5% Current Capital Structure Financial Overview *Excludes accumulated other comprehensive income. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Shareholders' Equity (ex-AOCI)* Debt Hybrid Capital Excess Capital
Slide 109: Maximizing shareholder value
Maximizing shareholder value Capital Management Current excess capital estimated at $500 million Minimum target capital cushion - $300 million Expect to generate ~ $200 million excess capital annually Leverage Debt is a flexible, yet permanent, component of the capital structure On-going attention t
Slide 110: Potential Deployment of Excess Capital
Potential Deployment of Excess Capital Organic opportunities at target returns Block and M&A opportunities Shareholder dividend increases Other means of returning capital Financial Overview
Slide 111: 2012 Excess Capital Guidance
$200 $400 $530 ($275) ($55) $300 $300 2012 Excess Capital Guidance Financial Overview Target Cushion Target Cushion ($ Millions) 1,000 1,100 Generated Capital Required Capital Shareholder Dividends Projection Excess Capital Roll Forward
Slide 112: IV. Where We Are Going
IV. Where We Are Going Financial Overview
Slide 113: 2012 Operating Earnings Guidance
$7.28* $6.99 $7.00 Midpoint $0.71 *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 2012 Operating Earnings Guidance Financial Overview ($0.29) ($0.55) ($0.15) $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 Favorable Tax Variances Normalized DAC Accounti
Slide 114: 2012-2014 ROE expectations: 12-13%
2012-2014 ROE expectations: 12-13% Actual Projection *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Results and Projections ($ Millions) Financial Overview 4,346 4,909 5,349 5,725 6,660 7,336 7,810 8,440 9,110 - - 1,000 2,000 3,000 4,000 5,000 6,00
Slide 115: Where We Expect to Be in Years
Where We Expect to Be in 5 Years The premier life and health reinsurance company in the world $15 billion in revenue Significantly expanded market capitalization Roughly symmetrical premium distribution between North American and Other International operations Considered to be among the most success
Slide 116: Q&A
Thriving in Challenging Times RGA 2012 Investor Day Q&A Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 117: Key Messages
Proven ability to thrive in challenging times Key Messages RGA 2012 Investor Day Thriving in Challenging Times Principal focus on client relationships Leading global presence High levels of expertise and collaboration Challenging environment that is creating opportunities
Slide 118: Appendix: Reconciliation of Non-GAAP Measures
Appendix Reconciliation of Non-GAAP Measures Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012
Slide 119: Financial Performance
Financial Performance Reconciliation of Pre-Tax Income to Pre-Tax Operating Income ($ in millions) Appendix U.S. TRADITIONAL OPERATIONS GAAP Pre-Tax Income - Cont Ops 287.1 337.6 231.0 255.7 390.0 376.2 Realized Capital (Gains) / Losses 4.1 13.8 71.9 83.9 (24.8) (41.8) Change in MV of Embedded Deriv
Slide 120: Financial Performance
Financial Performance Reconciliation of Pre-Tax Income to Pre-Tax Operating Income ($ in millions) Appendix TOTAL US OPERATIONS SEGMENT GAAP Pre-Tax Income - Cont Ops 322.3 327.9 66.1 308.7 539.4 436.7 Realized Capital (Gains) / Losses net of DAC Offset 11.3 13.0 62.5 71.1 (59.6) (84.0) Change in MV
Slide 121: GAAP / Operating Income and EPS Reconciliations
Financial Performance GAAP / Operating Income and EPS Reconciliations ($ in millions) Appendix RGA CONSOLIDATED GAAP After-Tax Income - Cont Ops 128.4 178.3 245.3 235.6 293.3 308.3 187.8 407.1 574.4 599.6 Realized Capital (Gains) / Losses net of DAC Offset 10.0 (3.7) (21.9) (9.8) 1.7 15.0 77.0 42.6
Slide 122: Stockholders’ Equity Reconciliation
Financial Performance Stockholders’ Equity Reconciliation ($ in millions) GAAP Stockholders' Equity $1,222.5 $1,947.7 $2,279.0 $2,527.5 $2,815.4 $3,189.8 $2,616.8 $3,867.9 $5,040.6 6,137.1 $ FAS 115 Equity Adjustment 102.8 170.6 244.7 361.8 335.6 313.2 (553.4) 104.4 651.4 1,419.3 Foreign Currency Ad
Slide 123: Financial Performance
Financial Performance Appendix RGA CONSOLIDATED 12/31/2011 9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 GAAP After-Tax Income - Cont Ops 158.5 $ 147.4 $ 132.9 $ 160.8 $ 196.7 $ 128.2 $ 127.0 $ 122.4 $ 112.4 $ 118.2 $ 153.2 $ 23.3 $ R
Reinsurance Group of America — Investor Day (March 2012) on 6ix