Q3 2019 Earnings Call
Please standby.
Good day and welcome to the reinsurance group of America's third quarter 2019 results Conference call today's call is being recorded.
At this time I would like to introduce Mr., Todd Mr., Todd Larson Senior Executive Vice President and Chief Financial Officer, Ms., Anna Manning, President and Chief Executive Officer. Please go ahead Mr. Larson.
[laughter]. Thank you.
Good morning, everyone and welcome to RG <unk> third quarter 2019 conference calls.
With me this morning in Saint Louis is Anna Manning, RG, <unk>, Vice President and Chief Executive Officer.
And then I will discuss the third quarter results. After a quick reminder, about forward looking information and non-GAAP financial measures <unk>.
Following our prepared remarks, we'll be happy to take your questions.
To help you better understand RJ business will make certain statements and discuss certain subjects. During this call that will contain forward looking information, including among other things investment performance.
Statements relating to projections of revenues premiums were earnings and future financial performance and growth potential of RG <unk> and its subsidiaries keep in mind that actual results could differ materially from expected results. A list of important factors that could cause actual results to differ.
Materially from expected results is included in the earnings release, we issued yesterday.
In addition, during the course of this call will make comments on pretax and after tax adjusted operating income.
Which is considered a non-GAAP financial measure under FCC regulations. We believe this measure better reflects the ongoing profitability and underlying trends of our business.
Please refer to tables in the press release in quarterly financial supplement for more information on this measure and reconciliations of net income to adjusted.
Operating income for various business segments.
These documents and additional information.
Maybe found on our Investor website at RG A.R.E. Dot com.
And now I'll turn the call over to Anna for her comments.
Thank you Todd and good morning.
As indicated in our press release last evening, we reported adjusted operating S. A $4.02 for the quarter compared to $4 in three cents a year ago.
This was a very good quarter in many respects as the bottom line was above expectations organic growth remained strong and we had another successful quarter four transactions.
They are very favorable performance by certain key business units more than offset shortfalls and others, resulting in strong consolidated results, which continues to demonstrate the benefits of earnings diversification arising from our global platform.
Further we were able to deliver these results in the face of ongoing macroeconomic headwinds, including low interest rates and weaker foreign currencies.
Let me touch on a few highlights and points of interest in the quarter.
Topline momentum continued in the quarter as both reported premiums and organic growth were strong.
Our strategy is providing broad based solutions to our clients through our risk expertise and capital solutions expertise continues to deliver.
Bottom line results were above expectations with contributions from many of our businesses.
The Canadian business had another strong quarter, reflecting favorable mortality. This is the fourth quarter in a row, a favorable large case mortality.
Our global financial solutions business continues to perform very well with strong bottom line results and continuing success in the in force transactions business.
We deployed approximately 150 million into enforced transactions in the quarter, bringing the year to date deployment to 385 million.
This quarter's deployment included deals in every region, including asset intensive deals in the U.S. UK and Asia.
The successful deployment of considerable capital since 2018, the incremental earnings contribution from these transactions is becoming more meaningful.
The pipeline is robust we remain active and we hope to close 2019 on a strong note.
The U.S. traditional segment performed well in the quarter as we had good performance from our U.S. group business and we also had favorable variable investment income.
The combination of these helped offset some of the unfavorable experience an individual mortality.
In AMEA, both the traditional and financial solutions businesses had very good quarters as we saw favorable mortality in the traditional business and favorable longevity in the financial solutions business.
Again, we were also active on the transaction spreads in EMEA on both longevity and asset intensive opportunities.
Asia continues to be a success story for us as our topline growth remained strong given our solid overall franchise and leadership position in product development.
When we combined our capabilities in product development and financial solutions, we're able to deliver broad based solutions to our clients and with lower interest rates and their impact to local statutory capital levels. We are seeing increasing demand in this region for those solutions.
Longevity experience overall was very good across the organization in AMEA, Canada, and the U.S. and we completed several new transactions in EMEA.
We remain optimistic about the potential in this market and believes that we are well positioned to take advantage of the many opportunities on a global basis.
Investment performance was good due to strong performance of our alternative investments in large part from games in our real estate joint ventures and private partnerships.
We made a strategic decision to expand our investments in these alternatives categories, a number of years ago, and we are benefiting from that decision.
These are cash gains money in our pocket and we expect to continue to generate good returns going forward, although the quarterly amounts will fluctuate.
There are many highlights in the quarter and year to date and reasons for optimism about our business going forward.
That's not to say that we don't have challenges in Australia, we had a larger loss than we'd experienced in recent quarters. The industry remains under scrutiny by the public and regulators and the overall industry dynamics continue to be challenging.
We have a strong local team with the support of global expertise throughout our G focused on actions to remediate this business.
In summary, we view this as a very good quarter with many highlights looking forward.
RJ is well positioned we have a proven strategy our business is in good shape and we remain optimistic about the future and our business prospects ours is a long term business and can best be Josh Bae results over longer periods of time.
We can point to a track record a long track record of successful execution, a long track record of delivering strong financial results and we expect to continue to deliver attractive financial results into the future.
With that I'll hand, it back to Todd to provide more detail on our results.
Thank you Ana.
I'll touch on a few financial metrics and provide some highlights of our segment results.
Our adjusted operating return on equity for the trailing 12 months was 10.7%.
Which is within our guidance range of 10% to 12%.
Or excess capital position that the ended the quarter was approximately $1 billion.
Well, considering the and his comments on the active pipeline. This has us in a good position to continue to execute on opportunities.
Foreign currency fluctuations had an adverse effect of.
Two cents per diluted share on earnings as compared with the prior year.
The effective tax rate on pretax adjusted operating income was 23.5% for the quarter at the high end of our expected range of 21% to 24%.
On a year to date basis, the effective tax rate on pretax adjusted operating income was 22.2% well within our expected range.
[noise] the average investment yield excluding our spread business was 4.83% up 26 basis points from a year ago.
Primarily due to higher variable income this quarter.
Our new money rate was 3.82% down from 4.02% and the second quarter.
We continue to maintain a high quality investment portfolio and have been selective with new money investments and the current environment.
We're also like to add some context to and his previous comments around alternative investments and the expectation that they will continue to add incremental returns over time.
Although subject to variability in the short term.
As these investments season, we expect embedded gains to be realized overtime.
The point is that we expect to continue to generate higher returns from this source into the future and we view them as recurring in nature, but certainly will be some volatility from quarter to quarter.
Turning to our business segments.
The U.S. in Latin America traditional business reported pretax adjusted operating income of 122.1 million.
Compared to 116.4 million a year ago.
There were a number of items that affected results. This quarter group experience was favorable and we had strong variable investment income these were offset by unfavorable individual mortality experience as we experienced volatility from large claims this quarter.
Our asset intensive business reported pretax adjusted operating income of 65.6 million this quarter.
About the expected range benefiting from addition of new business and favorable longevity experience on a block of payout annuities.
Our financial reinsurance line reported pretax adjusted operating income of 19.2 million this period inline with our expectations.
Moving to Canada. The traditional segment had another strong quarter with pre tax adjusted operating income of 44.3 million.
This reflects continued favorable individual mortality experience the fourth quarter in a row.
Premiums were up 11% on reported basis and 13% on a constant currency basis, primarily due to enforce transactions we entered into in 2018.
Canada Financial solutions reported pretax adjusted operating income of 3.1 million compared to 1.6 million in the year ago quarter.
With the current quarter current your quarter, reflecting favorable longevity experience.
And the Europe Middle East Africa segment, our traditional business reported pre tax adjusted operating income of 25.5 million, reflecting favorable underwriting experience across the region.
Currency negatively influenced the bottom line by approximately $1 million.
Reported premium totaled 359.4 million up 6% on a reported basis versus a year ago and up 11% on a constant currency basis.
Let me give financial solutions business, which includes asset intensive longevity and fee based transactions reported pre tax adjusted operating income of $59 million compared to last year's 56.4 million.
Both periods were above our expectations, reflecting favorable asset intensive add longevity experience currency had a negative impact of approximately $3 million.
Now to our Asia Pacific business.
Or on the traditional side, our pretax adjusted operating income totaled 21.5 billion compared to 62 million in a year ago period.
This quarter reflects results in Asia that were modestly unfavorable and the loss in Australia business of approximately $24 million.
The Australian results included onetime claims catch up of about $6 million from one of our clients.
Both the group and the individual business in Australia underperformed this quarter.
As the run off of.
Closed trees continues to be more extended the unfavorable than what we had expected.
Some of our open freebies underperformed this quarter and we plan to continue to take rate actions remediate. These remaining open treaties.
The year ago period had favorable underwriting experience in Asia, and a smaller loss and loss in Australia.
We reported eight reported Asia Pacific traditional premiums were up 19%, reflecting 29% growth in Asia offset by a decline in Australia.
Our Asia Pacific Financial solutions business reported pretax adjusted operating income of 4.6 million.
Up from 1.3 million in the year ago quarter, reflecting the addition of several new treaties. This year and I mentioned, how we are combining our capabilities and product development and financial solutions to help our clients.
This is producing some nice growth opportunities in Asia.
These broad based solutions have resulted a new treaties this year generating 30 million a premium in the current quarter.
The corporate segment reported a pretax adjusted operating loss of 29.9 million higher than they expected run rate, primarily due to costs related to higher incentive based compensation accruals.
And our strategic initiatives and service businesses.
In conclusion, we view this as a very good quarter with many positives to highlight.
We have continued to deliver strong organic growth.
Successfully executed on enforce transactions.
Our bottom line continues to benefit from a diversity of earning sources by both do you geography and product.
And I mentioned the financial impact of recent transactions has become more meaningful and thus we are seeing higher earnings run rates in the U.S. asset intensive and EMEA segment.
Based on the strong business fundamentals, despite some ongoing headwinds and challenges we expect to continue to deliver attractive financial results over time into the future.
We thank you and appreciate your support and interest in RJ.
And now we'll open the call for questions.
Thank you if you'd like to ask your question. Please signal by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to your signal to reach our equipment and the interest of time. Please ask one question and one follow up and then re queue again press star one to ask a question. We'll go first to Jimmy Bhullar.
With JP Morgan.
Hi, good morning, So other question.
Yes business.
So any insight into or other into what drove the results on the individual life log and then on the group.
Business, you've had sort of a volatile margins and it's been a business that I think you were in the process of repricing. So the improvement this quarter, obviously better than normal but to what extent as the result of.
Repricing actions, taking effect and flowing through results versus just maybe a positive evolution in terms of claims.
Yes, yes overall.
The U.S. traditional segment.
Had a good quarter compared to our.
Expectations.
And maybe it'd be good for me to break it down a little bit to the major.
He says.
You're right on the on the group the group side, which we have been in the process of a repricing over the course over the last several quarters and that's.
Basically done at this point, so and that business has produced some good results throughout 2019.
Now as far as the results of the repricing efforts that will continue to emerge over time as those underwriting years develop.
And then taken a step back for the overall U.S. traditional segment.
The U.S. mortality markets business did have.
Negative underwriting experience of $45 million, which was.
Related primarily to large claims in the quarter and we did end up having.
Really a handful of fully retained claims in the in the.
In this and this quarter on that that line.
Now you know offsetting that was the strong variable investment income that we mentioned in our prepared comments and I would sort of measure that about 23 million above our normal run rate for that segment.
And then overall for the group and health line.
I would say there overall underwriting experience was about 15 million a favorable.
And then we had as we always do some over across the segments a model.
Refinements and some client reporting catch ups that went to the good are favorable for us for the quarter of about 15 million.
And then in Australia.
And then I think it was individual disability that caused the issues.
Some of these issues ongoing versus maybe just continue into this quarter.
Yes, well on the.
On the individual side, we have continued to see some poor experience there.
There you know for the open treaties that we have we will continue to pursue repricing efforts to remediate.
The experience on that business.
You know going forward.
And we're very focused on managing.
The in force blocked out we have there both on the individual side and on the and the group side and on the individual side, we're really not and have not been quoting much in the way for new business.
Jimmy I would add that.
We feel that some of the performance in this quarter is volatility related.
But there is that ongoing.
Persisting.
Underperformance that as Todd just mentioned we are addressing through.
Rate actions and also a really keen focus on claims management.
Well now take our next question from Andrew clear men with credit Suisse.
Hey, good morning.
Just looking at your invested assets to equity.
It gets roughly seven times.
In terms of that leverage figure.
Question is.
How high would you be willing to let that leverage ratio go.
I think the average for life companies, rather fast times.
You want to be maybe a little color on that.
Yeah Andrew.
Not say, we have a targets where we want to be.
As far as that metric, but it's certainly something that we pay.
Close attention to the throughout our entire risk management process and approach and also you need to look at it by the underlying types of liabilities as well you know for the most parties. We look at our traditional mortality side now there's not a lot of no liquidity concerns on that.
That business as premiums come in and we pay the claims.
Outflows.
And then on the it on the asset intensive side.
In the financial solutions business most of those blocks, we brought on on our in force basis. So we can do a very good job with asset liability management, you know sort of right off the bat and minimize some of the.
So that any mismatch we might have there and this is not a lot of situations, even if when you drill down into those underlying liabilities that there's a lot of sort of liquidity or for selling events.
Where we'd be forced to sell those investments in a in a bad environment. So I guess, it's a long winded way of saying that you know the market value of the assets can go up and down and we definitely need to be considered around the overall asset leverage that we have in the enterprise, but the way the scenario.
As we look at there's not a lot that would end up with us having to liquidate in a in a bad environment.
Andrew.
Yes.
Sorry, I, just I'd like to add one thought and that's.
Having langhorne is going to be helpful. In this respect as well.
And just to kind of wrap that question.
So you would be comfortable growing the asset intensive business, if that pushed the invested asset to equity ratio up a little bit that would be something okay. Given your comfort with your asset liability matching.
No. We certainly would are interested and we'll pursue asset intensive related deals that we like.
We're we're fairly opportunistic and.
Go hard after the underlying liability profiles that we're comfortable with and certainly stay away from.
Maybe underlying annuity type products or asset intensive products that might be a little bit more liquids. Like for example that were sold through a brokerage chain on that type of thing.
And once again, if you'd like to ask your question. Please press Star One we'll take our next question from Ryan Krueger with KBW.
Hi, Thanks, good morning on the variable investment income 23 million above normal does the.
Expectation.
Right.
Your comments that you expect kind of better.
Earnings to emerge from from this portfolio over time or would that be on top of kind of what you view at this point as a more normal level.
I'm not sure I.
Right exactly understand your question, maybe I'll start respond in this way and then maybe you can.
No follow up.
That portfolio of no alternative investments that you those made up of no real estate equity.
Insurers as well as some private partnerships and we began investing in that several years ago and now it's gotten to a size and.
The underlying.
Investments are getting to a little bit more of a mature stage story, we are seeing.
Our ability to generates some income from those.
Increase overtime and be a little bit more predictable all although I'll say, it's still hard to predict quarter to quarter how much.
We might might see in those but no we do expect below the alternative assets again the.
The real estate equity in the private partnerships to produced double digit returns over time.
Albeit it's going to be lumpy.
Got it yet my question was just you said it was 23 million above your normal expectation, but then you also said.
I'd like your expectation is rising so I wasn't sure if the.
Yeah that already incorporated your rising expectation or are you think they could just perform above kind of normal overtime now.
Yes, you're right that our expectation is.
Has increased over time and again as those investments have gotten more seasoned and ready to harvest some of those underlying lying gains.
Got it and then just on on Australia.
As you continue to have some some volatility there I just wanted to.
Yes confirm that.
Viewing this as as more of an earnings issue and you still feel okay about the reserves.
We do we view it as a earnings headwind one we don't like but one that we feel is manageable and as you look at our overall no operations with the within the RJ enterprise, we make no pre tax well over $1 billion. So this is not a material amounts over.
Paul to our earnings although clearly we don't like the experience that we're seeing.
And yet at this time, we see no material causes to increase reserve. So we're still comfortable that the balance sheet.
Our next question will come from Dan Bergman with Citi.
Thanks, Good morning, I guess the start in terms of EMEA I think the latest guidance you'd given for the region.
55 million quarterly run rate in terms of earnings.
With results generally strong.
Business and some of the reason topline growth I just wanted to see if that's still a reasonable range or.
Expectation it a little bit higher.
Nor our expectation a little bit higher we have been growing that business you know very nicely.
And I would look at sort of a run rate going forward for the entire EMEA segment in the 55.
No the $60 million range.
Got it thanks.
And then maybe just moving a follow up on Australia, just in terms of the repricing actions in the run off of some treaties.
How soon should we expect some of those actions to have an effect on the earnings trajectory you know.
That business returned to profitability near medium term or will any improvement likely take longer really just any thoughts around.
The earnings trajectory and pizza improvement would be helpful.
No.
You know repricing treaties as they come up for renewal on the group side and also as we can on the individual side, it's going to be.
Improvement more you know overtime versus an immediate or short term increased likely see in the U.S. group business now this will take a little bit more more time.
Our next question will come from Humphrey Lee with Gelling and partners.
Good morning, and think of taking my questions are just wonderful stuck on US group you talked about this quarter was roughly $15 million favorable relative to your expectation, but at the same time, you're going through the repricing. So I guess from this quarter's perspective do you feel like would be comparable to a.
A normal quarter earnings power for the group or.
That is still be room to grow as you kind of continue to go through they do.
Pricing due to emerge.
Yes.
One maybe a slight clarification, the 15 million related to group and our health line, albeit the majority of that number relates to other group business I'm not this quarter was a good quarter for the U.S. group line, where it's good to see it back to some solid profitability.
After we experienced the underperformance last year in 2018, and well you know as long as our efforts continue to play out as we expect them to we'll expect the earnings of that the U.S. group line to be in the range of call it $35 million to $40 million as I think I mentioned last quarter once.
It gets back to full profitability.
And all the rate increases have kicked in.
So for this quarter are you.
Hold on all over Europe above that.
For the quarter for the U.S. group line, they performed a little bit better than what we were better than what we expect.
But it's hard to note that's just for.
For the quarter Humphrey I'm not sure exactly what.
Yes.
The question is trying to get too.
No I was just wanted to try to get a sense of fulfil the performance this quarter relative to I guess, a full earnings power of that business line, but I think you got it.
Sure. It was after that so far it's sort of quite yet for the quarter is probably towards the high end, but again you know for like all of our business is just looking at one quarter, it's hard to draw all run rate conclusions again, we'd like to look at it over longer period is time so.
The group line is performing well better than it has last year and.
Immediate mediation efforts I'm seem to be going into right direction.
And our next question will come from Erik bass with Autonomous research.
Hi, Thank you Big picture, just given the volume of in forest transactions over the past two years can you just help us think about the incremental earnings contribution you expect where we should see this come through and the timing of the earnings emerging.
Well I think you have on the capital deployments side, though we're happy with what were.
Seen as far as the opportunities and the actual deployments.
Most of the larger activities and opportunities were seen.
Our had been on the U.S. asset intensive side, where we closed a couple of nice transactions.
This year and also over in EMEA, primarily in the in the UK.
And you know we price for sort of lower double digit returns 12, 13% range and you know the way U.S. GAAP works it takes a little bit a time for.
The new treaties are new blocks to get up to that level, but overall I think that's a good way to look at it.
Got it I guess, maybe asking us up different way when you've given run rates for asset intensive for the U.S. and I think it's 55 to 60 million per quarter and EMEA you were talking about something similar range. So that does that contemplate the contribution from recently closed blocks or could move.
It was ranges higher as they start to fully earned and.
Okay sure, yes, it does although I would say since we have been successful as some of those.
Blocks more recently, we expect to be towards the higher end of those ranges and hopefully overtime exceed them.
Our next question will come from Alex Scott with Goldman Sachs.
Hey, Good morning first question I had was on U.S. trip.
That's what I go through some of those building blocks.
There were outlined before it gets me up somewhere like the 125 going 30 range I think is what I was getting too.
So I'd just be interested in understanding I bet I guess as a percentage of the sort of 350 that you've communicated in the past as a run rate is that a good way to think about like how much of the earnings is concentrated in Threeq you.
And it seems like.
Thats become more concentrated over time and just any color you can give around as sort of the seasonality increases as the policy orders are aging how how that'll change things in 2020 2021.
Yeah, So maybe to start out the you quoted the 350 million run rate for the no traditional segment I think that's still you know a good run rate a benchmark off of yet this quarter, we were about the all in them.
But what run 120 is 22 million for the quarter for that segment, which you know, there's some seasonality there quarter to quarter, which generally the third quarter has been if fairly good quarter.
Alex I would add.
We would expect and I think we've we've spoken about this in prior quarters, we would expect that as the mortality business ages that we would see more seasonality and when we think a seasonality really we think about you know first and second quarters tend to be lighter and then third and fourth quarters.
Tend to be heavier in respect of earnings now the only the only additional elements that I would add is as we continue to be successful on organic business new organic business.
And in force blocks and here its mortality blocks I'm referencing not the asset intensive that can put a little bit of pressure in the other direction, but given the scale of our business.
I would expect seasonality to increase a steadily as we go forward.
That's helpful. Thank you.
Then.
Maybe just a follow up on on Langhorne and the deal pipeline for the kind of deals you'd be targeting in there.
Yeah.
Does the interest rate environment, just make it too difficult to achieve the kind of returns that you all on a hit here or is it still pretty active.
On.
The way I would describe our langhorne pipeline is it's a promising pipeline and a it has transactions in it that are U.S. based transactions and European based transactions.
UK, Netherlands those types countries. It's a really it's a very highly competitive market. As you can appreciate for those deals we're talking about very large deal sizes.
I'm pleased with the progress and the process. We've been following we're not chasing deals were not relaxing our risk disciplines to chase deals.
We're being responsible and although it's taking time.
We remain I remain optimistic I think interest rates are a factor.
But they're not the only factor and as I said, we think this pipeline is promising.
Once again it is star one to ask a question. We'll go next to John needle if youve, yes.
Hey, good morning.
So we've seen where weve I guess, we've heard from some companies now over the last couple of quarters.
And most specifically just before your call on the Lincoln call.
Some adjustments for the primary underwriters.
To reflect higher reinsurance costs.
And I have have.
I think in the past you've indicated that.
Got it really has not.
Raised prices.
In any material way on enforced treaties, but but can you just sort of update us on the.
Yep Yep.
We do not have a broad based free pricing strategy. We are we're not following that approach as others in the market have followed because you know we think this is a long term business. We have long term relationships, what we do and have been doing is we take a look at the balance of.
Our relationship with declined across all their business across all countries.
And if we see that that balance of relationship is tilted to two extreme then we will sit down and we will work with clients to come up with ways for us to rebalance that.
Now, we'll also look at things like are there systemic issues with the client. For example, you know has there been really poor underwriting practices and then those instances. If there has been that type of activity, we do take action, but again, it's through working with our clients.
To realign those relationships.
RJ.
Our strategy is really we're in it for the long and we're in it in a partnership with our clients for the long haul.
Got you. That's that's helpful. Thank you and then.
I know, there's an awful lot of moving parts.
To earnings growth, whether its capital deployment organically or inorganically.
[noise] seasoning of various blocks et cetera, but just focusing in on how much.
Long term interest rates have declined here.
And just wanted to get a sense, if we thought about your intermediate terms, 5% to 8% annual operating EPS growth.
And we isolated on interest rates is are we low enough on rates that all else equal that 5% to 8% growth objective is.
No pressure to the downside.
Well as John This is Todd as you know Weve generally update comprehensively our guidance in January when we go through year end, but specifically on interest rates. We we have been you know looking at that no. One it's if you look at say.
1% or so you know decrease in rates from where we are you know today you know that would have an impact you know clearly on our earnings power.
Going forward and create a headwind and sort of on our traditional business. You know these aren't exact numbers, but I'd say no 1% decline from here could impact next year earnings by you know in the neighborhood of $20 million a pre tax.
But that being said, we're still going to do our best to overcome you know any of that had went through our business operations and you also currency has an impact too. We you know I can go both ways.
We'll now take questions from Andrew clear women with credit Suisse.
Hey, thanks.
Going back to Australia.
Just hoping for kind of a recap on any geography of the losses I guess most of it was individual disability.
Maybe the mix of group and individual and.
And then where you were you saying that.
What are you thinking for 2020 in terms of these different product areas.
[noise] standards.
For the quarter.
Loss was really across the.
The product lines, both the group and the individual lines experienced.
Poor performance and I think it as we mentioned in <unk> and also mentioned on the group side, we had some volatility related to some no catch catch up on claims from a from one of our our clients. So.
You know going forward, you know projecting out what we expect for 2020.
It's difficult.
Given the experience, but again, we are actively managed that enforced block, but I would say you know for 2020, you know will likely be in a in a loss position, although as I mentioned earlier I think it'll be a manageable loss given.
Our Jays overall, you know operations and just the you know the size of the you know the business in Australia.
Is this a market that you would consider exiting.
It's just you need to work through the issues.
Yeah.
Andrew maybe I'll I'll take that so far.
First.
You know, we're concentrating obviously on managing the in force on rehabilitation that let's take a step back for a minute arm group business has been profitable since 2014, albeit with some ups and downs and the group reinsurance market in Australia as one of a lot.
Just markets in the World now we want to support our global clients and that is part of our strategy part of the strategy that has been successful. This is an industry problem. It's not just a problem isolated to our GA and yeah, it's a well recognized industry problem.
And it's an everyone everyone's best interest to have a viable a sustainable market and it's in everyone's best interest to work together to get us there.
Theres not going to be a quick fix.
And so for US as Todd mentioned, it's a earnings headwind, it's a manageable earnings headwind in the context of the global operations.
And and certainly given the strength and all of our other areas.
But we you know we think that we can continue to remediate this and work with the other participants in the industry to fix the industry. It and then you know we believe we can continue to make money over the long run.
Well now take a question from Alex Scott with Goldman Sachs.
Hi, Thanks for taking the follow up I, just thought I'd ask about expenses.
Just thinking through some of the initiatives that are going on.
The current expense base, which you know maybe as something in there for a little more deployment activity recently, I mean, how should I think about how that'll trend sort of overall for expenses and maybe I guess, specifically the corporate segment.
Oh, yes overall expenses note enterprise wide like everyday and every company I guess would go through a pretty diligent process and no budget expenses and you know compared to.
Our overall budget for the enterprise on operating expenses were not doing fairly well against that benchmark now if you look at year over year, there can be some.
No fluctuations as Weve, you know acquired some businesses that brought in expenses that maybe were 19, but not 18, but compared to our expectation our budget. Overall you know so far through the year. We're doing okay now switching to the corporate segment, there you see a little bit more volatility.
City, and we're running a little bit high compared to the 25 million.
Average loss in the quarter and that's a that's the overall loss for the corporate segment not necessarily targeted directly to just expenses because we have no the operations of.
You know langhorne in there and some of our RJ X and service businesses that go through the the corporate line, but you know as of right now I think through the first three quarters the average corporate loss.
For the segment is about 27 million, so maybe running a little bit higher from that 25, but that 25 million. That's 25 million right now as I think still a fairly good estimate.
Alright, thank you.
And it appears there are no further questions at this time Mr. Larsen I'd like turn the conference back to you for any additional or closing remarks.
Hi, everyone. Thank you for a joining us this morning for the call.
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This concludes today's call. Thank you for your participation you may now disconnect.