Q2 2021 Reinsurance Group of America Inc Earnings Call
[music].
Good day and welcome to the reinsurance group of America second quarter of 2021 results conference call.
Today's call is being recorded.
At this time I would like to introduce Mr. Todd Larson Senior Executive Vice President and Chief Financial Officer and Mrs.
Anna money, President and Chief Executive Officer. Please go ahead Mr. Larson.
Thank you good morning, and welcome to Rga's second quarter 2021 conference call.
With me this morning on the call is Anna Manning, Rga's, President and Chief Executive Officer.
Alain <unk>, Chief operating Officer, Leslie Barbie, our Chief Investment Officer, Jonathan Porter, Chief Risk Officer, and Jeff Hopson head of Investor Relations.
We will discuss the second quarter results. After a quick reminder, about forward looking information and non-GAAP financial measures.
Following our prepared remarks, we'll be happy to take your questions.
Some of our comments or answers to your questions may contain forward looking statements.
Actual results could differ materially from expected results.
Please refer to the earnings release, we issued yesterday for.
For a list of important factors that could cause actual results to differ materially from expected results.
Additionally, during the course of this call information we provide may include non-GAAP financial measures.
Please see our earnings release.
The earnings presentation.
Quarterly financial supplement.
And website for discussion of these terms and reconciliations to GAAP measures.
And now I'll turn the call over to Anna for her comments.
Thank you Todd.
Good morning, everyone and thank you for joining our call today.
Last night, we reported adjusted operating earnings per share of $4 I'm very pleased with these results as we delivered an excellent quarter, even in the face of continuing COVID-19 claims.
The COVID-19 impact in the quarter was material, although at much reduced levels than in the first quarter and notably the performance of the rest of our business was more of an end up so.
Absorb these costs and delivered a strong quarter we had.
This quarter once again provide evidence of the strength of our underlying earnings power the value of our diversified business and the resilience of our global platform.
I am also very proud of the way that the RJ team has responded during the pandemic.
Our client centric solution oriented approach combined with disciplined execution has proven itself over time and serves us well.
This strategy helps us compete and win.
In the quarter, we were very active and successful on new business opportunities in both our organic business and on and of course block transactions.
Turning to some of the highlights of the quarter.
Our GFS business performed extremely well across all our regions of lines of business.
In the quarter, we deployed $200 million into in force transactions, including the modern Woodman transaction that we publicly announced.
The transaction pipeline remains there.
Opportunities in all our regions.
Our traditional business also performed well overall as COVID-19 claims were significantly reduced and non COVID-19 experience was at or better than our expectations across all our segments.
The U S individual mortality business had a good quarter as the COVID-19 impact was lower than expected.
Non COVID-19 experience was in line with our expectations.
So the U S group and individual health businesses, both performed above our expectations.
Overall investment performance was very good and our new money rate increased slightly despite lower market yields.
Impairments were minimal and we realized some nice gains in our limited partnerships and real estate joint ventures.
Australia reported a modest profit in the quarter, which is a continuation of the more favorable trend over the last 6 quarters.
Reported premium growth was very good organic growth was solid and new business momentum has picked up and that was encouraging.
And we increased the quarterly dividend and have lifted the previous suspension of share repurchases is good.
Good indications of the health and future prospects for our business.
Looking forward, we expect of COVID-19 claims to continue over the near term, but it's manageable and decreasing levels.
Vaccinations continued to provide very good protection against severe illness, hospitalization and death, which should mitigate the impact of future waves.
Given the vaccine levels and all of our key markets of the U S. The U K and Canada.
We expect COVID-19 claims to decline in the second half of the year.
In India, and South Africa, we will likely see some continuation in COVID-19 claims through the remainder of the year.
Manageable levels.
Jonathan will provide more specific more specific thoughts on this shortly.
In closing I am very pleased with the quarter, we are well positioned with a strong balance sheet and capital levels and with positive business fundamentals, we see encouraging signs and increasing momentum on new business.
Capital deployment into transactions of $300 million true the first half.
It's an excellent start to the quarter, so an excellent start of the year.
We believe there's reasons for optimism as we look ahead and as such we expect to resume our balanced and effective capital management strategy in the coming quarters.
Look forward to continuing to deliver attractive financial results and to building on our long term track record of performance.
Thank you for your interest in RGA.
Hope you all remain safe and stay well let.
Let me now turn it over to Todd to go over the detail financial results.
Thanks Anna.
RGA reported $361 million of pre tax adjusted operating income for the quarter and adjusted operating earnings per share of $4, which includes a negative COVID-19 impact of a dollar of 44 per share.
Our trailing 12 months adjusted operating return on equity of 5.7%.
Which was net of COVID-19 impacts of 6.9%.
These results are evidence of the strength of our underlying earnings power and.
In Brazil, the resilience of our global platform is Anna highlighted in her remarks.
Consolidated premiums increased 11% in the quarter and 7% on a constant currency basis.
In the U S. The underlying growth in premiums was solid in this segment also benefited from a modification of the treaty renewal.
EMEA segment premium growth reflects good new business wins.
And in Asia, we have started to see new business activity pick up.
Australia premiums declined from a combination of actions on underperforming treaties and remaining selective on new business opportunities.
The effective tax rate on pretax adjusted operating income was 24% for the quarter in line with our expected range of 23 to 24 per start.
Turning to the segment slides.
Turning to the segment results listed on slides 7 and 8 of our earnings presentation.
Starting with the U S segment.
The U S and Latin America traditional segment had a very good quarter absorbing COVID-19 claims cost of approximately $57 million.
Let me provide a little more detail on the results.
For U S individual mortality.
Approximately $45 billion of claim costs were attributed to COVID-19.
Which was below the range per our rules of thumb based on the number of general population deaths.
This was primarily due to a lower average size of the COVID-19 claims.
Non COVID-19 claims were in line with expectations.
And it was a fairly straightforward quarter in terms of large claims experience.
The U S group and individual health businesses, both performed better than our expectations.
Favorable experience in the disability and health care of excess lines.
Variable investment income was strong in the quarter as both limited partnership performance and real estate joint venture realizations were favorable.
The U S asset intensive business reported very strong results there.
<unk> had favorable overall experience, including some transaction and other fees.
Favorable longevity experience in equity markets and higher variable investment income from commercial loan prepayments.
We are very happy with the results from the quarter.
We still believe that of normal run rate of 60 to 65 million.
As some of the variable items in the quarter are not expected to repeat on a regular basis.
Moving to the Canadian segment.
The Canada traditional segments.
<unk> reflected COVID-19 claim cost of approximately $21 million.
Higher than our expected range based on the number of general population deaths.
Non COVID-19 experience was favorable.
The Canadian Canada of financial Solutions segment was in line with our expert expectations for the quarter.
In the Europe Middle East and Africa segment, the traditional the traditional business results reflected COVID-19 claim cost of approximately $35 million in total.
Of which $19 million was in the U K and.
And 12 million in South Africa.
Non COVID-19 experience was favorable.
Emea's financial solutions had a strong quarter as business results reflected favorable longevity experience in the quarter.
Turning to our Asia Pacific traditional business.
Asia results reflect COVID-19 claim costs of approximately $55 million.
Of which approximately $51 million was in India.
Non COVID-19 experience was favorable across the segment.
Australia reported a modest profit for the quarter.
We are pleased with the ongoing progress in Australia and.
And remain focused on actions to improve results. We're also taking a disciplined approach to new business.
The Asia Pacific Financial solutions business continued to produce good results in the second quarter.
Reflecting favorable experience on existing treaties and contributions from recent transactions.
The corporate and other segment reported pretax adjusted operating loss of $39 million from.
Loss was higher than our quarterly average run rate, primarily due to lower investment income.
We expect some volatility quarter to quarter in this segment and continue to believe on average of quarterly estimate of 25 million loss as appropriate.
Moving to investments the non spread portfolio yield for the quarter was 464%.
Reflecting strong variable investment income primarily due to realizations from limited partnerships and real estate joint ventures.
While hard to predict from a timing perspective.
They are a core part of our investment earnings.
The investment credit impairments were nominal for the quarter and we continue to see results below the low end of our stress scenarios.
Our new money rate of 3.5% was higher than the first quarter rate of 3.35%, reflecting stronger private asset production.
Related to capital management as shown on slide 11 of our presentation materials, our excess capital position at the end of the quarter remained unchanged at approximately $1.2 billion.
Our strong net income funded transaction deployment of $200 million of capital and solid organic growth.
We have maintained a prudent capital management approach throughout the pandemic.
Recognizing our strong underlying business fundamentals.
Our excess capital position.
And the expectation of reducing levels of COVID-19 costs going forward.
We have increased the quarterly dividend by 4% from 70 per quarter to 73 cents per quarter.
And lifted the suspension of the share buybacks.
I will now turn the call over to Jonathan Porter, Our Chief risk Officer, who will provide additional comments on our COVID-19 related experience.
Okay.
Thanks Todd.
As shown on slide 5 COVID-19 claim cost us $168 million decreased significantly in the quarter as vaccination Rollouts continued and general population deaths in our major markets were down materially from their Q1 peak levels.
The U S U K and Canada accounted for just over 50% of COVID-19 claim costs. This quarter. This is a lower proportion of the total than in prior quarters, but was expected given the relative levels of vaccinations in these markets the balance of our global COVID-19 claim costs were driven by higher general population deaths in India and South Africa.
As the impact of vaccination is becoming better understood.
James data continues to develop we are updating our estimated rules of thumb for future claim costs in the U S. We have updated their models to reflect the relative progress of vaccination programs as well as consideration of our claims experience. This has resulted in a lowering of our U S range for future claim costs of 10 million to $20 million for every 10000 Gen.
Population deaths.
We're also widening of our estimated range is to $10 million of $20 million for Canada, and formulate the $8 million for the U K. These adjustments reflect emerging claims experience.
Hospitality of more relative quarterly variability as population deaths decrease due to vaccination progress and the weakening of the U S. Dollar since we set rules of thumb last year.
Longevity experience was favorable this quarter with of pretax benefit of $38 million. This was driven primarily by lag reporting in the U K, where our longevity business is concentrated reflecting higher COVID-19 general population deaths from prior quarters given.
Given the success of the U K vaccination program and the expectation of low COVID-19 desk through the rest of the year, we would expect to see more modest longevity benefits in future quarters.
Real World data is consistently demonstrating that vaccines are highly effective at preventing severe outcomes and that's from COVID-19 variance. We believe this will continue to drive lower general population mortality and therefore lower claim costs in the U S U K and Canada because of.
It's been demonstrated with the recent Delta variant surge in the U K, where daily case counts were close to the prior wave peak, but deaths were less than 10 per cent of the prior high point.
In our markets with lower vaccination levels, like India, and South Africa, we would expect to see some continuation of COVID-19 claims, but we believe at manageable levels given the mature or you can start given the nature and size of our business in those countries.
We also expect the impact of future waves will be dampened as vaccination levels continue to rise in these markets.
I'll hand, it back to Todd.
Okay.
Thank you Jonathan.
For opening it up for questions.
I would like to mention that we will hold of virtual investor meeting on December 9th.
And hope to have you join us for that discussion.
With that we'll now open it up for questions.
Thank you if you'd like to ask a question. Please signal of by pressing star 1 on your telephone keypad.
We ask that you please limit yourself to 1 question and 1 follow up question.
We will now take our first question from Jimmy <unk> of J P. Morgan. Please go ahead.
Hi, Good morning, So first I just sort of question on your announcement of of resuming buybacks should we assume buybacks in the third quarter or.
Are you waiting for the pandemic debate further before you start doing it in any sort of color on.
The magnitude of potential buybacks over the next year would be helpful. This low.
Yeah Jeremy.
So we've if you look at our you know of history, we've always sort of follow the.
Prudent and balanced capital management approach over time, we don't try to fine tune and low capital quarter to quarter, we're in a very.
Long term business and that's also of how we view it.
You know, how we manage the company, including our capital I think if you look at our history as well we've done a pretty balanced.
Job in deploying capital into in force transactions, when we like the liabilities and I mean, you can get an appropriate return on the transactions you'll funding of our.
Organic growth of maintaining a nice stream of dividends.
Year after year, and then balancing it out with a.
Share repurchases of.
Yeah, well, we're not out of the pandemic yet we are more confident as Jonathan was mentioning that the vaccines are protecting.
No more against hospitalizations, an ultimate desk, which is a good sign.
We've got a strong earnings power.
Across our various business segments.
So we are comfortable at this time, you know lifting the share repurchase suspension.
And will continue to manage capital over time, Oh edge.
As we view those different.
Alternatives and to consider.
Consider other items.
But youre not willing to comment on whether or not you'll do buyback.
Back to the third quarter.
Or when you'll actually resume.
Activity.
I wouldn't say, we have a definitive time at this point.
Okay, and then on the Jimmy Choo.
Kimi can.
Can I can I just add a couple of those of US. Please.
Yeah, I would just reiterate we feel good about our business.
We're committed to the balanced capital management approach that taught outlined where we're going to look for the best and the most valuable use of our capital and that's going to include share buybacks all the time.
We've demonstrated that if you go back and look at our approach I think we've done a good job and we expect to do that going forward.
Yeah, I would because of the reason is you did raise equity and in addition to having that GAAP build you've been profitable throughout the pandemic.
On not every quarter, but overall.
And I doubt that there's any new business opportunity that has the type of lottery or return of that your buybacks would that you'd get from buybacks at the current stock price.
But the other reason I was asking is you have resumed resumed I would assume means that you're gonna or lifting day suspension would mean that you're going to start buying back as opposed to just starting to evaluate potential buyback. So wasn't sure they're used to the endeavour study.
Yeah.
Well, but the other question I had.
Good God.
No no. Please you other questions. Okay. Yeah, I was just going to ask on on India. You had I think $51 million you mentioned in claims should we assume that there's a fairly high component in their cars or is it just the actual claims that were submitted to you and the reason for asking that.
Is that should your losses in India follow what's going on in the market in terms of mortality or is there a lag.
We are even if mortality begin once mortality begins to a group you will show an improvement later I'm just given the reporting lag.
Yeah, Hi, Jamie this is Jonathan so that 51 million of includes IV in our it's about 60% or so of that.
51 billion as I began our so we have not full claims reporting yet so the as you mentioned the idea of what the IV hours, we accrue up to claims that we think we've.
Kurt had been reported to shed as at the end of the quarter. So we're trying to sync that up with what's happening in the general population.
Got it thank you.
Yeah.
We'll take our next question from Humphrey Lee of Dowling <unk> partners. Please go ahead.
Good morning, and think of taking my questions. My first question is related to U S and Latin America traditional.
If we were to add back the Covid related impact earnings would have been $190 million.
Clearly a meaningful portion of the favorable VII would be in this segment, but just can you talk about all of inside the other favorability that you had in the quarter.
Yeah, Hi, Humphrey it's Todd.
Yeah, we saw some of that.
No really favor ability are you you mentioned the variable income and certainly that was of.
You know of portion of it but we also saw it.
In our low.
Group and individual health line as well to remember the group line as we went along we went through a pretty comprehensive.
Repricing exercise a couple of years ago, we might have lots of little bit of.
New business, there, but the profitability has continued to be.
I'm good so really it was across the board and a piece of it was the via the variable investment income.
Yeah, Todd is there any way of salad.
Sorry, I was just going to add important to note I think our ex Covid our U S individual claims.
Performance was good which are sort of continues a string of pretty good quarters absent COVID-19.
I think so but I was just wondering can you size the kind of I guess the benefit for the VII in the growth in health benefit.
Yeah. The V. I I. These are you know well.
Rough numbers, probably but it was probably for the traditional.
You know business that was probably in the neighborhood of 40 million $42 million or so.
That's pretax.
Above the above what we would say of the you know the average run rate would be.
And then I think.
Group group and individual health were somewhere in the $10 million to $15 million range.
That's helpful. And then my second question is Wow.
And I understand maybe a little premature but can you just talk about the outlook for potential COVID-19 impact for the third quarter, especially for the countries that you don't have you don't provide sensitivity like yourself of Africa and India.
Yeah, Hi, Humphrey it's Jonathan.
So obviously, we continue to closely monitor the spread of the Delta Varian, but as we mentioned you know we're pretty optimistic that the success of vaccination programs will result in maintaining that effect of Michigan severe outcome of deaths. So far this quarter. The general population deaths in the U S. The U K and Canada remained at relatively modest levels of.
You know again that example of the U K demonstration of the case counts are not as closely linked to 2 of mortality as we've seen in the past.
So we also believe that based on socio economic data in the U S that reinsurance population take up rate of vaccinations is likely a little bit higher than the general population, which is part of the reason why we've lowered our rules of thumb.
For India, and South Africa.
The vaccination rates are lower so we still expect to see some impact in the coming quarters, India right now the daily deaths are the general population or about 15% of what they are worth of peak of the prior wave.
Which is good.
For this quarter South Africa case counts are going up at the end of the quarter. They appear to have peaked in early July and are coming down now from the most recent wave and deaths also seem to have peaked at about 75 per cent of what they were in the past. So so again those are.
2 good signs in those markets as well and again, given the nature and size of our business in those markets, we think that our future claims.
Manageable level force.
We'll take our next question from Andrew <unk> of Credit Suisse. Please go ahead Sir.
Yes.
Yeah, Hey, good morning.
Just staying on that topic and I think earlier in the call I heard you mention that despite.
The delta of dairy and vaccinations share.
Should prevent deaths, maybe you could elaborate a little bit more on that day. It seems like you're very confident 1 company earlier kind of updates its estimate for mortality claims. So it would suggest maybe a little more color around the delta variance and what you're seeing globally.
Okay.
Yeah sure Andrew.
So you know again, when we look at some of theirs.
Multiple studies not just 1 set of data. So there's a real life example, I mentioned from the U K, but you know data from public Health, England.
New England Journal of Medicine, the CDC reporting that's recently come out at the end of July They all point to very high degrees of effectiveness stills for 4 of the.
The vaccinations against the Delta variant. So you know again, we think that will.
They make the or limit our dampened the impact.
Of higher case counts just.
Because of mortality should be quite of bit reduced.
And as we talked about already too and in markets with lower vaccination levels, there will be more.
Potential for those variants of it has a larger impact although another thing to keep in mind is that India has gone through that Delta wave already of their first delta wave. So.
It's not yet to come there.
Do think that the increasing levels of vaccinations in those countries, even though they are low at this point.
We'll keep improving and will result in a dampened effect as well in the future.
Yeah Andrew.
Comment.
Yeah.
Maybe to add 1 other comment Andrew in terms of you know our business and how what we're seeing out there translates into our business very complex lots of factors underwriting socio economic.
And what other companies are saying is going to very much depend on the nature of their underlying business, whether it's individual or whether it's group. So I wouldn't try to direct of lines.
Between those 2.
Very very helpful. And then with regard to overall premium growth was very.
Very robust net premium growth of 11%, but then probably if you adjust for FX and some other unusuals, maybe it was 4% which is still very good premium growth.
Could you talk about.
Each of your key regions, and what kind of premium growth youre expecting older.
Of the near and intermediate term.
And Andrew It's Alan you made why don't I take a stab at that and maybe I'll talk a little bit of boat business volumes as opposed to premium growth just because of.
There's a lot of factors that impact premium growth as you mentioned foreign currency Theres also.
<unk> from client reporting of times.
There's also the type of structure on which we reinsure of for example, whether it's why our T or co insurance, but generally speaking I think if we sort of go around the world, we're feeling pretty good about our business.
Certainly in the U S. We're seeing.
A meaningful uptick in our production numbers now whether that's it I'll say pent up demand coming through or a new level of sustained activity I think remains to be seen but we're certainly seeing.
No better production of the direct company level not translating into a.
Better reinsurance production for US Canada again, a similar story to the U S, where we've got very good business production coming through and that's reflected in reinsurance.
In Asia, I think Todd alluded to it in his comments we are seeing some.
Some good activity there I think.
No in the sort of Hong Kong, China region, there's still we're.
We're still a little bit down in terms of production numbers, but in.
And it's mainly because of lot of our business in Hong Kong as you know.
Chinese mainlanders that come across but generally speaking good new business.
I think there's room to do more in.
In EMEA, we're seeing a good production levels and maybe the only area, where you know still a little bit cautious as in Australia, where we're looking to see some of them.
Rehabilitation and product terms and conditions, which by the way I should add we're expecting to see.
Later this year the regulator there has come out with defined.
Terms and conditions on our individual business and that.
Of that takes hold of October 1st and so we're starting to see evidence of signs of change there. So all in all and I think Anna mentioned earlier, just from of GFS standpoint, right across the board.
Good level of activity certainly.
Good deals done in the first half of the year end end of all and all of US I would say some some of them.
Strong optimism for production in the next half of the year.
Yeah.
Well now take our next question from Erik Bass of Autonomous Research. Please go ahead.
Hi, Thank you just wanted to come back to the U S asset intensive segment I think Todd you talked about 60 to 65 million still being.
All of them kind of a normal earnings run rate for that segment. So I'm, just wondering should that move a little bit higher over time, given the modern woodman transaction as that earns in.
Yeah. So again it was a very strong quarter for the U S asset intensive segments of the reasons are.
So we went through I guess, 1 thing that we didn't touch upon in the comments is that we also have you know.
Overtime amortization of the existing portfolio because that.
Annuity blocks of rundown over over time, I'm, not going to be 5% to 10% of.
A year or so as of a very low rough estimate so adding the the transaction. We did this last quarter of helps a little.
Offset some of that natural.
Amortization.
Over time, so again, a very strong quarter, but as we look through it you know very pleased with the result of still feel at least sitting here right now of that $60 million to $65 million.
There's probably a reasonable estimate and hopefully will come at the high end and beat it.
Got it. Thank you and then maybe if you could talk a little bit about the outlook for the transactional environment in the second half of the year, obviously, a good start to the year with 300 million deployed but.
You can talk about what level of types of activity you're seeing.
And I guess thinking both from our <unk> perspective, but also if theres anything that kind of falls into land corns wheelhouse.
Yeah.
But let me let me address that question. So I'd start by saying pipelines are very good in all our regions I'm, starting maybe with the Asia region asset intensive pipeline a pipeline of Scott are you saw that in our first.
Quarter of the deal that we completed in the first quarter was in that region.
We are seeing a few more competitors there, but we believe we have some advantage of switch getting to help us win and are helping us when we have a long standing relationships as we've been in those markets for many many years that also means that we're familiar with and we understand the products the risks.
The regulatory environment.
Hum patterns are still you know getting operational of some of these markets. So we think we think we're well positioned there.
In the U S. B asset intensive pipeline is also very good competition of strong and there are a lot more competitors. There deal sizes vary as you saw in the second quarter with the announced deal that we did where we're winning our fair share and we're also working on the Langhorne.
So specifically to your question and we're optimistic about completing langhorne transactions and then and on the longevity in PRT opportunities again pipeline is good in the U K Netherlands.
Some sizable transactions there are competitors, but again, we feel good about the business.
Because in part of our underwriting expertise and and you know there really part of the sweet spot of of deals that are we we focus on so I would say again, we feel good about the business and we're optimistic as we look forward.
Okay. Thanks, and you didn't touch on kind of biometric pipelines from mortality morbidity or you're seeing blocks. There is it does seem like there's more interest at least in the U S. From some companies in terms of transacting legacy life's work.
Yes, I should have added that you're exactly right. There there are deals and sizable deals with underlying insurance risks, where again from US you know you need more than just the asset expertise on those blocks you really need the underwriting expertise and and we are very strong in that respect.
We'll take our next question from John Barnidge of Piper Sandler. Please go ahead.
Thank you the delayed longevity benefits certainly seems to be arrived in the second quarter is there any way to get a sense for average date of guests for that longevity benefits that occurred just to get a sense of how we should think about it in the third quarter.
Thank you.
Yeah, Hi, John This is Jonathan I don't have an exact number to give you like as far as states go but I think it's fair to say that generally speaking the experience. We're seeing in this quarter is probably lagged about 4 to 5 months on average so most of the experience in Q2 would've been from reporting in Q4 and Q1.
Okay, Great and then can you talk about you talked about group health and individual health that there've been some favorable claims tail winds in that was re price in 2019.
Can you talk about the expectations around durability of that do you view any of that changing claims behavior of somewhat semi permanent in nature.
Yeah, John thought no you know that that business does well.
Generally reprice on a.
Annual basis, or so so we can stay close.
Most of the claims trends and you know just of.
Accordingly, but we think it's a very low overall good block of business and you know as we continue to monitor it we should be able to go to adjusted any trends over time.
Yeah.
Maybe I'll just add a comment.
I think it's fair to say that that's some of the benefit.
Is it potentially a reflection of the differed deferral of care and our medical line. Although it is net of Covid related medical and Kaufmann group life costs, but overall, we feel the majority of the performance is really that reflection of all the actions. We took in the last couple of years and more.
Awesome.
Yes.
Thank you.
Okay.
We'll take our next question from Ryan Krueger of <unk>. Please go ahead.
Hi, Thanks, good morning.
Just was hoping for a little more detail on the U S.
Covid claims of the in the quarter, particularly can you give us any sense of like the average age of of the claim in the quarter and is that.
I guess relative to prior quarters and it is that the main driver of the lower average claim size is declining.
The decline in our average age.
Yeah, sorry, I don't have that at my fingertips, maybe something we can follow up with but.
I think.
The number of how it's translating through to lower average claim size is really the driver. So we're seeing in the current quarter our COVID-19.
Cause of death claims or about 35 per cent or so lower in size than what we've seen in the past. So we don't know whether that's true.
The start of of or as a.
That will persist or if it's just something that is you know some volatility in the quarter, but that's something that we'll obviously continue to monitor as we think about our rules of thumb going forward.
Second question was it done in the past you've.
Shied away I think from Cowen share in Universal life with secondary guarantees are you would you be interested in block transaction. There at this point are you still more cautious on that line.
We I I would say that we constantly are looking at.
Opportunities and.
Sample all all off of her up Ah is a L. T C. Yeah, we watched that Mara cat, we didn't participate because we just felt that the risk reward profile at at that time, just didn't fit but overtime that sat moved and and we entered the market and I think.
We've done a very good job in that business has been very valuable for us that's how I think about questions like what you've just posed it it's a constant reevaluation because conditions change and if we see conditions are in the market that we feel of.
Are appropriate and and you know and value and that's the right level of squash, we will engage.
Thanks Anna.
A quick last 1 do you have an updated view of the Asia Pacific run rate earnings you would expect if we if we exclude COVID-19 impact.
Excluding COVID-19 on the traditional side I think that 40 to 45 million of.
Pretax quarterly rates, good and then on the.
So the financial solutions side, which is doing.
Doing quiet well no 15, maybe $15 million to $20 million as we go forward, we'll see how the activity goes.
Alright, great. Thanks, a lot.
We'll take our next question from Tom Gallagher of Evercore. Please go ahead.
Good morning, just a question on U S. Traditional can you comment on how <unk>.
Individual mortality compared to the your your group business has been performing group life business has been performing have you seen a noticeable change in trend between those 2 what we've seen from some others is it seems like almost all of the claims are coming through on the group side now.
It's not nearly as much of a COVID-19 COVID-19 impact from individuals and just.
Curious if you're seeing the same thing and then Relatedly can you.
Provide some clarity on the mix of individual in force versus group in force.
Okay.
Yeah, Hi, this is <unk>.
Jonathan I can just give you some historical context, I guess from what we've seen on the group and individual side so for us the buy.
As far the larger components that we've seen inception to date through the pandemic is on the individual business. So.
Over over 90% of our U S mortality claims or any individual line and less than 10% would be in the group space.
That relationship hasn't really changed materially over the course of the pandemic so far.
Yeah.
Got it have you, but on an underlying basis.
If you look at <unk> results.
Was was there a noticeable change in trend for Covid claims that work group versus individual or does your answer should we just take the answer at face value and say you haven't really seen of change in trend between the 2.
Yeah, that's right if I look at the split for Q2 on its own it still is that 90.10.
<unk> the same.
Okay.
And the.
Just in terms of the the day Covid hotspots internationally.
It sounds like you're feeling better overall about how you see that developing.
Are there any areas, we see Latin America seems to be.
<unk> still running on the high side some of some emerging.
Growth countries and in Asia also seem to be a bit elevated can you just talk a little bit about are there any other regions that are kind of on your watch list outside of India, and South Africa, which both both sound like they're getting better.
Yeah, Yeah, no happy to and I guess first of all I will say that all of our regions are always on our watch list at this time, we don't have.
Any significant concerns outside of the 5 markets that we've talked about U S U K, Canada, India and South Africa. So you know if I look at Latin America as an example, but 90% of our business. There is annually renewable and a large component of it is health related.
Been averaging less than $5 million of quarter over the last 5 quarters of Covid costs. I mean, just looking at southeast Asia. So in particular, Malaysia, Indonesia as an example of where we're seeing higher general population deaths, Indonesia or mortality exposure is very small and there's a lot of our business Theres morbidity related.
Asia is about 1% or so of our global mortality exposure.
It's a relatively young book of business. So we don't 1 per cent of our businesses over the age of 65 in Malaysia, and vaccination rates are climbing steadily there which is of good signs as well so they're now about 45% with 1 dose and 23% fully vaccinated in Malaysia, which should help dampen future impacts of this fall.
Yes.
Okay. Thanks.
Okay.
We'll take our next question from Mike Ward of UBS. Please go ahead.
Thanks, Good morning, I just had a question on vaccinations overall.
I was wondering if you have any data on the on the new mortality as Covid mortality is still coming in and whether or not they had been vaccinated.
On the other side of that the remaining population that isn't vaccinated or doesn't want to get vaccinated at least in the U S. Do you think that time of demographic is maybe less likelihood of have life insurance in the first place just trying to think about the geography of your remaining COVID-19 mortality exposure relative to the parts of the country that are more or less vaccinated.
Yeah, Yeah, I know happy to give a few thoughts there so.
So we don't have vaccination status.
On death that we get that's not information we have we can look at external sources of data.
That helps the CDC study that I mentioned before.
Clearly showing that there is a very.
High level of efficacy and very low level of death of a mortality for people who've been vaccinated. So I think the numbers are something like 163 million people have been vaccinated and to date. There's only been 6600 people that had been in the hospital or of died who has been fully vaccinated. So that just gives you a sense of the magnitude of the difference.
In the numbers there.
For sure and sorry, I've just temporarily forgot the second part of your question could you just repeat it.
Yeah, No I guess just geographically in the U S. It seems like Theres lower vaccination rates in the south of the southeast and wondering about your.
Yeah, Yeah, so from a geographic perspective, theres not that much difference hum sort of in our book versus the U S population, but we do think socio economically there will be of benefit.
From when you mentioned that are insured people more likely to be vaccinated. There is studies that we've seen some out of direct study that looks at insured vaccination levels, but.
Things that correlate vaccination rates to education level, which is correlated to sort of economic and are also.
You have to have insurance do demonstrate that.
It is more likely that we believe that people who have insurance would be more vaccinated and again, that's partly impacting our reduction in our rule of thumb that we're seeing as well.
Great. Thanks, and then I was just wondering about how the pandemic might change your capital model going forward or your pricing targets for new business are you pricing new business under the assumption or recognizing the potential for another more frequent pandemics going forward or is it just too early to tell on that.
Yeah, Yeah, I think the long term effects, it's still a little too early to tell we're definitely devoting a lot of resources to looking at multiple categories of things that we believe could affect our future mortality are absolutely in the short term, though so the current COVID-19 impacts.
Pricing those into all of the business that where we're actively writing hospitals are being reflected correctly.
Thanks very much.
Yeah.
And there are no further questions at this time I would now like to turn the call back to Mr. Larson for any additional or closing remarks.
Okay. Thank you.
You for everyone for joining.
Joining us today for our second quarter earnings call. Your continued interest in RGA and we look forward to continue to.
We don't talk in the future. So thank you very much.
Thank you that now completes the call. Thank you for your participation you may now disconnect.
Okay.
Yeah.
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Okay.
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