Q4 2021 Reinsurance Group of America Inc Earnings Call

February 4, 2022

[music].

Please standby we're about to begin.

Good day and welcome to the reinsurance group of America fourth quarter 'twenty 'twenty. One 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 MS. Anna Manning, President and Chief Executive Officer. Please go ahead Mr. Larson.

Thank you.

Good morning, and welcome to Rga's fourth quarter 2021 conference call.

With me this morning on the call is Anna Manning, Rga's, President and Chief Executive Officer.

Leslie Barbie, Chief Investment Officer, Jonathan Order, Chief Risk Officer, and Jeff Hopson head of Investor Relations.

We will discuss the fourth 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 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 earnings presentation quarterly financial supplement and website for discussion of these terms and reconciliation to GAAP measures.

And now I'd like to turn the call over to Anna for her comments.

Good morning, everyone and thank you for joining our call today.

Last night, we reported a loss of 50 <unk> expense and adjusted operating EPS, which included COVID-19 costs of $350 million pre tax or $3 95 per share.

This quarter is a story of continued strong underlying performance active capital management and favorable business momentum, while absorbing a meaningful level of COVID-19 claim costs.

In the quarter.

With 19 claims were material in the U S and South Africa, while we had more moderate claim levels in other countries.

Jonathan will provide further insights on our global COVID-19 claims shortly.

Turning to some notable performance highlights for the quarter.

Our global financial solutions business delivered very strong earnings across all lines and regions and for the full year. The GFS business had a record year for profits.

I'm very proud of the work the teams have done to continue to build this business to generate a growing stream of high quality earnings.

Our U S individual health business performed well continuing a recent trend.

Our Asia traditional business also had a record profit in the quarter as underwriting results were favorable and COVID-19 impacts were very modest.

The Australia traditional business reported a small profit.

We are cautiously optimistic about ongoing market development in Australia as pricing levels terms and conditions and general industry dynamics are showing progress towards more sustainable levels.

We were again successful this quarter deploying $106 million of capital into a number of in force block transactions, including several notable longevity deals in Europe .

This brought the full year capital deployment into transactions to a total of $543 million, our highest level of annual deployment in our history.

Also notably the 2021 transactions were broad based across all our regions. The U S EMEA and Asia and across a range of products.

We start the new year with an active transaction pipeline.

Organic new business activity was very good this quarter building on a good third quarter and continuing our positive momentum.

As we discussed at our Investor Day in December we see favorable dynamics for insurance products and many of our traditional markets and strong demand from clients for our reinsurance solutions.

Investment results were favorable in the quarter. Despite the continued challenges of the low market yields.

Impairments were minimal and we realized some nice gains from a real estate joint ventures and limited partnerships.

And then addition to deploying capital to support organic new business and in force block transactions, we also repurchased $50 million in shares in the quarter, bringing the total for the year to $96 million.

These highlights from this quarter demonstrate the continued resilience of our people our business and our balance sheet.

And as we shared during our Investor day, we see many reasons to be optimistic about the future.

First although uncertainty remains there are signs that infection levels from the on the cross variant are declining in many places and as such we would expect to see death decline from their current levels as we move forward.

Second our value proposition and client partnerships have been strengthened and we've been adding material long term earnings through our new business efforts.

And finally, the RJ and global platform combined with the depth of our technical expertise and capabilities and the strength of our client relationships positions us extremely well to capitalize on the many attractive growth opportunities as we move forward.

I continue to be proud of all that we've achieved during these difficult times and I remain confident and excited about our future.

Thank you for your interest in RGA I Hope you all remain safe and stay well, let me now turn it over to Todd to go over the detail financial results.

Thanks Anna.

RJ reported pretax adjusted operating loss of $36 million for the quarter and adjusted operating EPS loss of 56 per share which.

Which includes a negative COVID-19 impact of $3 95 per share.

While we did experience a meaningful level of COVID-19 claims our underlying non COVID-19 results were strong.

Our trailing 12 months adjusted operating return on equity was 8%.

Which was net of COVID-19 impacts of 10, 1%.

For the full year, our book value per share, excluding <unk> grew 5% to $139 53.

This was achieved after absorbing approximately $1 $4 billion of pretax COVID-19 claim costs.

Consolidated reported premiums increased four 5% in the quarter.

When adjusting for currency effects, and one time items organic growth was six 5% for the quarter as.

As we saw good growth across all segments.

The effective tax rate for the quarter was five 2% expense on pre tax adjusted on a pretax adjusted operating loss.

The income tax expense is primarily due to income earned in high tax jurisdictions and losses incurred in lower tax jurisdictions.

And in the quarter GAAP net income benefited from a significant fin 48 release of the tax liability.

Turning to the segment results listed on slides six and seven of the earnings presentation.

The U S and Latin America traditional segment included approximately $277 million of COVID-19 claim cost.

$247 million of which was in our U S individual mortality business with the majority of the balance in our U S group business.

We also saw non COVID-19, excess claims, which we believe to be directly or indirectly related to COVID-19.

This is consistent with the higher non COVID-19 population mortality.

As per the CDC reporting.

The U S individual health business performed better than our expert patients to the favorable experience overall.

Our group business performed in line with expectations.

As the impact of COVID-19 claims was offset by non COVID-19 favorable experience.

Variable investment income was strong in the quarter due to a real estate joint venture and limited partnership realizations.

The U S asset intensive business reported strong results with favorable overall experience and higher variable investment income demonstrating continued strong performance from this segment.

Canada traditional segment results reflected unfavorable individual life mortality experience.

Due to a handful of large claims in the impact of COVID-19 claim cost of $10 million.

Canada financial solutions segment results reflect favorable longevity experience.

In the Europe Middle East and Africa segment, the traditional business results reflected COVID-19 claim cost of $61 million in total.

Of which $35 million was in South Africa, and $21 million in the U K.

We also saw some excess mortality claims in South Africa.

I believe to be directly or indirectly COVID-19 related.

Emea's financial solutions had a good quarter.

As business results reflected favorable longevity experience and the impact of growth of this business.

Turning to our Asia Pacific traditional business.

Results achieved a record quarter, reflecting favorable underwriting experience with minimal COVID-19 impact in India.

Australia reported a small profit for the quarter.

The Asia Pacific Financial solutions business had a very good quarter, reflecting favorable experience and strong growth in new business.

The corporate and other segment reported a pretax adjusted operating loss of $41 million, which is higher than our quarterly average run rate, primarily due to higher general expenses, including some one time cost.

The full year pretax adjusted operating loss.

Flex did a onetime adjustment of $92 million recorded in the first quarter to correct. The accounting for equity method limited partnerships to reflect unrealized gains and investment income.

Excluding this item the full year adjusted operating loss was in line with the expected annual run rate.

Moving on to investments the non spread portfolio yield for the quarter was four 7%.

Reflecting strong variable investment income pre.

Primarily due to a real estate joint venture and limited partnership realizations.

While hard to predict from a timing perspective variable investment income as a core part of our investment earnings.

And in the quarter investment impairments were again nominal.

Moving on to capital management, our excess capital position at the end of the quarter was approximately $1 3 billion.

Our capital position remains strong and we have ample liquidity.

We deployed $106 million into in force transactions and repurchased $50 million of shares.

This quarter highlights our balanced approach to capital management.

And our ability to absorb impacts from COVID-19.

Fund organic growth dipped.

Deploy capital into transactions.

And return capital through share repurchases and dividends.

In the quarter RGA reinsurance company, our main U S. Based operating company took advantage of attractive market conditions and issued $500 million of surplus notes, which enhances our financial flexibility.

I would also like to highlight that RJ executed our inaugural funding agreement backed note issuance in the quarter.

Followed by a second issuance in January .

In summary, we believe the impacts of COVID-19 are manageable.

Also we believe our well diversified global platform.

Strong balance sheet.

And underlying earnings power positions.

Our underlying earnings power position us to emerge from the pandemic.

In good shape to continue to deliver attractive financial returns to our shareholders over time.

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.

Thanks Todd.

I am going to review our Q4 Covid claims experience and then provide some views on expectations for Q1.

The past two months has seen a global shift to the omicron variant, which is now responsible for the vast majority of the Uk's transmission Gen.

General population mortality experience through Q4, however is still largely based on impacts of the Delta variant.

Slide 13 shows U S General population mortality based on updated CDC reporting that.

The notable takeaways from the CDC reported data or Covid.

COVID-19 general population deaths were up about 30% in Q4 compared to Q3.

Excess non COVID-19 population deaths were still material, but lower on an absolute and relative basis compared to Q3.

We continue to believe that the majority of these excess deaths are directly or indirectly related to COVID-19.

The proportion of COVID-19 population deaths at ages below 65 agents, where there is more life insurance exposure declined from the Q3 peak to about 34% in Q4, but it's still elevated from levels observed earlier in the pandemic.

Our U S individual mortality results were consistent with the CDC reporting.

COVID-19 mortality claim costs of $247 million were within our $10 million to $20 million rule of thumb range at approximately $19 million for every 10000 general population deaths.

This is an improvement from the prior quarter driven by lower average claim size, which declined by about 25% from the Q3 level.

We believe this is partly due to the lower proportion of deaths and younger ages as well as a return to claim sizes that are more in line with what we experienced in early periods of the pandemic.

Excess non COVID-19 mortality experience in the quarter was driven by a higher frequency of claims consistent with the levels of excess mortality in the general population.

There was no notable trend when looking at the underlying experience in our U S mortality book by policy size age or issue year cohorts.

Full year 2021 results for U S individual mortality reflect $777 million estimated COVID-19 claim costs slightly above the midpoint of our rule of thumb range.

COVID-19 impacts in South Africa are estimated at $35 million in the quarter.

Approximately half of this amount is due to adverse claim development on updated reporting from the large delta wave in Q3.

Q4 incurred claim estimates account for the remainder of the impact and are based on our updated experience industry data and a lower level of general population mortality.

Other non U S markets, including the U K, Canada, and India accounted for $44 million of estimated COVID-19 claim costs.

Notably, India COVID-19 claim costs. This quarter are estimated at $1 million as favorable development from prior quarter reporting largely offset Q4 claims which are relatively modest given the lower level of general population deaths.

As we look ahead uncertainty persists due to the developing nature and impact of the omicron variant.

Evidence is clear that the omicron variance is more infectious than previous variance.

Preliminary data also indicates that there is a material reduction in the severity outcomes in particular in populations with high levels of vaccination <unk> prior infection.

Hello, New case counts are now falling in many markets COVID-19 general population deaths remain at elevated levels in January due to the very high number of infections caused by the omicron variant.

This will result in additional mortality claims we do expect to see desk decline from their current levels over the remainder of Q1 consistent with the current drop in cases.

Q1 is also the quarter, where we would expect to see higher mortality due to the seasonal flu.

The northern Hemisphere season is still developing but data so far points to a favorable result relative to a typical flu season.

At this time, we are maintaining our previously stated claim cost rules of thumb ranges for the U S U K and Canada.

Recognizing that Q1 experience maybe at the higher end of those ranges, reflecting mortality that was still partly driven by delta the various impacts.

We expect to have more insights into omicron mortality data over the course of Q1, which we will incorporate into our models as it becomes available and update our rules of thumb if needed.

We remain confident that future impacts will be manageable.

Let me now hand, it back to Todd.

Thanks, Jonathan that concludes our prepared remarks, we'd now like to open it up for your questions.

Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

So in the interest of time, we ask that you. Please limit yourself to one question and one follow up.

Press Star one to ask a question.

Our first question comes from Dan Bergman with Jefferies. Your line is open. Please go ahead.

Thanks, Good morning, I guess to start just in terms of the excess non COVID-19 population deaths. It came down this quarter in the U S. But as you said remained elevated I was just hoping you could expand a little bit on what youre seeing.

Kind of the main drivers and then any thoughts on how you expect that to trend going forward.

If it does do hopefully moderate as we move further into 2022 should we expect.

A similar trend in the non COVID-19 excess deaths or could there be some lag.

Due to deferrals of preventative care and screenings over the past few years is there any color on how youre thinking about how this is going to evolve over the okay great.

Yes, Hi, Dan This is Jonathan.

I think it's pretty reasonable to expect that excess population mortality will continue while COVID-19 is still material that does vary country by country, though so we definitely have seen a correlation.

As you pointed out between increases in excess mortality and increases in Covid mortality when we look at the data.

I think one of the things that makes us believe that these are really direct or indirect COVID-19 is the causes of death tend to be comorbid with with Covid. So all timers diabetes things like that.

But in addition, they tend to move with.

With the Covid deaths, so we would expect those too.

Decline as Covid deaths would come down, but again it may vary in timing and by country.

We'll take our next question from John Barnidge with Piper Sandler. Your line is open. Please go ahead.

Yes.

Thank you can you maybe talk about the funding agreement note opportunity you did an issuance in the fourth quarter talked about doing another one in January can you maybe talk about the size of the opportunity as well as geographies. Thank you.

Yeah. This is Todd John Yes, we had actually.

Set up the program a couple of years ago, we have a $3 billion.

I guess program Thats been set up.

As you mentioned, we did issue 500 million back in November and another $400 million in January .

And we like it because I think it adds a nice spread lending business.

To rga's balance sheet as well as you know.

Allows us to exercise our investment capabilities.

As well, so I think youll see us periodically.

And the market knows that.

Or cadence of issuance, but will be in the market.

When we think it's a good time to continue to issue, but overall, it's a $3 billion.

Program.

We'll go next Tom freely with Dowling <unk> partners. Your line is open. Please go ahead.

Good morning, and thank you for taking my question just to follow up on Dan's earlier question.

As we think about the post pandemic mortality trend.

Not necessary based on looking at Docomo morbidity, but more thinking about the impact of <unk>.

The general populations physical and mental health.

How you may think that would affect the kind of the near term mortality trend post the pandemic I think on one hand that could be an impact but on the other side the medical advancements could.

So just wanted to hear kind of how you're thinking about let's say by 'twenty four 'twenty five like how that near term mortality trends will shape up.

Average Jonathan.

So no firm conclusions yet obviously, we're devoting a lot of resources that you would expect internally to assessing the impacts beyond.

Impact of the pandemic itself I think what you said is correct. There is going to be some pluses and minuses. So things like delayed diagnosis of certain conditions might cause increases in mortality, but then medical advances and other items like you said as well it could go the other direction.

I think on balance like we communicated in Investor day in December we feel that there's probably a little bit more negatives or headwinds for mortality in the shorter term or beyond the pandemic, but we still feel.

The long term.

Benefits of mortality improvement will still be there and in fact could even be more positive because of some of these developments.

No specific quantification at this point.

That's helpful.

We will go next to Tom Gallagher with Evercore. Your line is open. Please go ahead.

Hi.

Sorry, if I missed this and you already went through it but.

Could you talk a little bit about why your excess capital went up by $300 million sequentially what drove that.

Hi, Tom Hi, Tom It's Todd.

Yes, so we actually even though we had an operating loss.

For the quarter, we actually had positive.

Net income generation. So that's one piece of it then also we.

<unk> Opportunistically.

Issued a $500 million surplus note given.

It was a good market conditions, and we have the ability to place.

The surplus note that we thought.

With a relatively attractive price for a very long term.

Security, so that added to the the capital base as well.

Got you. Thank you.

We'll go next to Ryan Krueger with <unk>. Your line is open. Please go ahead.

Hi.

Are you able to quantify.

Amount of estimated non COVID-19 excess mortality claim that <unk> in the U S for both the fourth quarter and the full year.

Brian It's Todd.

Border <unk>.

Is that for the U S at about 55 related to the excess mortality.

I don't have at my fingertips the full.

For the full year would.

We'd have to get back to you on that.

Got it thanks and then.

I guess I think some companies have talked about negative development third quarter Covid claim that David has recognized in the fourth quarter.

Are you able to at this point in time.

Can you can you I guess.

Do you have an updated view of what the incurred claims in the third quarter actually were and if they were higher than you had thought they were last quarter.

Yes, hi, its Jonathan let me take that one.

There's two factors that go into our amount of Covid claims for the for Q3, one is just developments and cause of death reporting.

And that actually I think came down a little bit quarter over quarter. So as we got more information that would have reduced estimate, but as you said we did see some.

Mortality I think which was related to Q3 recognized in Q4 that would have brought it up so I'd say on balance, it's probably a little bit higher for Covid in Q3 than what we would have mentioned last quarter, but not dramatically. So.

Got it. Thank you. Thank you.

We will go next to Andrew <unk> with Credit Suisse. Your line is open. Please go ahead.

Hi, Good morning, just in case I get cut off.

I'll ask my questions in container order, just hey, just to clarify on the incremental excess claims I think last quarter, you were guiding to like 30% of the.

Covid claims so I just wanted to get a little guidance on that.

Some of your reinsurance competitors in Europe has had said that.

They can't really.

No.

This dissect whether the claims are actually closing we're not COVID-19 .

The classification is really a challenge. So my question to you is.

Are you confident in these COVID-19 numbers, maybe you could give us a little clarity.

Why are you confident that COVID-19 numbers that you specify and then just lastly.

Quite see sneaking one in but the renewals.

In January as we look toward the year, you had 7% growth in U S and Latin America.

Net premiums could you talk about what was driving that growth and what your outlook is for 2022.

Thank you.

Yes, let me start Todd and then you can take the premium question.

So just on the excess relative to Covid.

I think the number this quarter is down from what we would see in prior quarter and again, that's consistent with CDC reporting where the level of excess.

As is lower as a percentage of the total deaths in the U S. So I'd say, it's more in the 20 ish percent range or so maybe a little bit higher.

As far as what we classify as Covid, we actually take a.

What I think is probably the most conservative position, we can on what we call COVID-19 .

Because all we do is we look at what actually comes in as a Covid reported claims. So it's specifically identified to us as a COVID-19 claims.

And then we do an extrapolation for unknown cause of death, but really just proportionate to the amount of information. We have so we don't include anything that does not come in unless it's designated as a COVID-19 claims.

Which I think means that.

We're not including things that we feel are essentially directly or indirectly COVID-19 .

Okay.

What you mean by extrapolating that 20% number.

Something you saw on the label.

That made you believe that if we say indirectly related.

Yeah, sorry, just let me clarify so extrapolate we don't get cause of death reporting.

On all of our claims.

Timely basis, so what we report to you as a COVID-19 claims in the current quarter will be based on what we know for sure because it's reported to us that way and let's say as an example, we would have 75% cause of death information. We would then gross up that number to account for the 25%, where we don't have cause of death, yet so basically assuming it's proportionate to our business, which historically.

When we go back as we get the reporting has turned out to be pretty accurate. So we said we feel comfortable that the piece that we're saying is non COVID-19 excess.

That doesn't enter into that Covid number at all so that's that 20% on top of the Covid claims, which is again sort of when you look at the graph we showed for the SEC reporting.

How it split there as well, where it's COVID-19 and non COVID-19 excess.

And the general population.

And then premium question I guess.

Hi, Andrew it's Todd on the premiums.

In the quarter.

There is the impact from we had a treaty that.

Change I think we discussed this last quarter, we had a treaty that went from what we call low risk accounting to full risk accounting, which.

Added to the premium growth and then if I take a step back and look at the full year, we had probably about a 4% organic growth, which is a combination of some.

A small enforced transaction wins continued facultative.

Underwriting and wins on that case, and then just some good flow from clients across the board.

Our next question from Jimmy <unk> Jpmorgan. Your line is open. Please go ahead.

Hi, Good morning. So first just had a question on your international business, and specifically Asia and EMEA. It seems like the claims that you reported Goldman and then just the overall margin than to move around a lot more than what's really happening in terms of population and I'm not sure to what extent it because.

The late reporting and stuff and if you could talk about how <unk> was very different than <unk> in both the <unk>.

South Africa, and then, especially India as well.

And then to the extent it is delayed reporting do you think you've got the issue.

Youre caught up to it or is this something that youll see over the next few quarters as well.

Yes, Jimmy So let me start with India. So you're right. So this quarter, we had a nominal impact from Covid from India really two things driving that one is the population deaths were down.

Significantly versus the peak of the Delta wave, which was in Q2 of last year.

So that's one of the main reasons.

New incurred claims were not that our estimate of those was not that large I'd say high single digit millions the other piece offsetting that to get it down to $1 million of our impact was favorable development from our past IV and higher so we estimated claims in Q3.

<unk> ended up being a little bit on the conservative side. So when you net those two it's the $1 million impact.

Africa. The story is a little bit of the opposite so we had.

More than half of the 35 million COVID-19 impacts that we that we talked about about $20 million of that was related to Q3 experience so really.

<unk> information developed on the insured population.

It turned out that the Covid impact was more significant than what we had estimated back in Q3, so sort of the opposite of what I described to EMEA.

So that accounted for about $20 million or 35 about $15 million of the 35 was specific to Q4 experience.

Just relative to kind of our.

The approach, we use for IV and <unk>.

Its nature.

Because of its nature. It is an estimate each quarter, so theres going to be pluses and minuses like I described but.

But I do think based on the data.

Rates that we've had in South Africa as well as just the general decrease in the most recent mortality wave.

Which is substantially lower than what we saw in Q3 I think the the <unk>.

We should have a material true up plus or minus will be lower going forward and overall, we feel quite comfortable with our IV NR.

We'll go next to Mark Dwelle with RBC capital markets. Your line is open. Please go ahead.

Yes. Good morning, I just have two questions. The first question is could you share the amount of the gross loss COVID-19 losses in India.

Mentioned, a couple of times the $1 million net if you could share that grows.

And the second question.

It seemed like earlier in the pandemic you were enjoying relatively larger longevity benefits. The last couple of quarters, they've been fairly minimal.

Thought as to why that what's changed.

Yes, so in India.

Let me just make sure I between gross and net correctly. So you are just looking for prior to the favorable development from prior quarters, what was the impact in Q4.

Correct.

Yes. It is.

High single digit millions.

As our estimate of Q4 experience if you just isolated to itself rather than take into account. The prior so offset by almost the same amount going the other direction.

Again, that's consistent with.

What we saw earlier in the pandemic prior to a very large delta wave in Q2, one thing to keep in mind with that large claims cost that we had in India in that quarter is that we believe now based on data. We're seeing that there was a significant understating of mortality and what's being reported in the general population mortality to the tune of maybe.

5% to seven times more co the desk and what was actually reported so that just helps sort of size.

What probably happened in the quarter, even though the numbers don't show that in the general population data.

And then as far as longevity goes.

The impact of the benefits have been a little bit less.

Then we would've seen early in the pandemic, that's largely a function of the distribution of our business. So most of our longevity business or a large proportion of it is in the U K.

So we've tended to see.

Less impacts in a number of the past few quarters as far as adverse mortality in the U K, especially for some of the older Ages, which again is where our longevity businesses.

Centered and that's probably due to high levels of vaccinations.

In that older age population.

Going forward.

Because of the distribution geographically as well as.

Vaccination pebble and few other agents and boosters now, we probably would expect to see a more modest offset we did have favorable longevity experience in the quarter in the U K, we just didnt attributed to Covid.

Just based on the nature of the reporting and things we didn't feel like we could confidently say it was COVID-19 driven.

We'll move next to Alex Scott with Goldman Sachs. Your line is open. Please go ahead.

Hi, good morning.

Question I had was.

Round, the sensitivity to Covid I think relative to earlier in the pandemic. It has picked up the last couple of quarters.

Some of that excess mortality some of that.

Appears to be get a sensitivity to does under age 65 kind of being a bigger portion.

Be interested to understand how much of of the experience recently has been associated with group life individual life are you feeling an impact on the group side is that part of this and then maybe if you could compare and contrast sort of what youre seeing in omicron, so far through January versus Delta.

What the things Youre looking for.

Gauge whether changes to the rule of thumb are necessary on the sensitivity.

Yes, so just on group and I'll focus on U S group here specifically.

We did see about $25 million of impact from Covid in Q4 about two thirds of that is on our health care business and.

And about one third or so is on mortality, so still relatively modest impact on the mortality side.

I'll also just keep in mind that.

That is.

Not an immaterial cobot amount, but we also had favorable non COVID-19 experience, which largely meant group without our expectations as Todd as Todd said before.

The.

I'm, sorry, I forgot the second part of your question now.

I was interested in just some of the things you would compare and contrast from omicron to delta various alright.

Yes, sorry about that.

Yes, so I think it's still too early.

One of the reasons why we wanted to just.

Signal that where we're going to be looking at that data as we as we evaluated against the rules of thumb that we have so.

There is no.

No credible data yet that we can point to to look at the relationship between what we did see by age by.

For other kind of demographic characteristics in the general population to use that to extrapolate to our insured lives. So far most of what we've seen so far in January is likely Delta driven just given Wednesday on micron wave peak, but we do think over the next couple of months, we'll get a little more insight there and then to the extent there is anything material, we would we would share that or update.

Our rules of thumb accordingly.

Well go next to Erik bass with Autonomous Research. Your line is open. Please go ahead.

Hi, Thank you can you talk about the level of excess capital that you want to maintain going forward and then given the opportunities that you have to deploy capital for either growth or to repurchase your shares are there. Other sources of inexpensive capital that you could tap kind of like what you did in the fourth quarter with the surplus note.

Hey, Eric It's Todd Yeah, So I think in a post COVID-19 .

<unk>.

Environment I think we've got very strong.

Your line earnings power as you mentioned as we talked about at Investor day, as well and as we demonstrated in the fourth quarter, we are developing other ways too.

No source efficient means of capital and that could also be through embedded value type transactions or strategic.

Retro sessions.

Et cetera. So.

We would be.

Would you expect to run below the current level of excess capital once we get back to.

More normal.

Post pandemic environment, given again, given our comfort with our underlying earnings and capital generation power plus access to other sources of capital.

Got it and I think I mean, historically, you had talked about $300 million to $500 million being the kind of the target level for excess capital is that still the same level or has it moved higher given the growth in the business.

Yes, I would expect it but we haven't set a specific amount, but I would expect it to be a little bit.

Higher than the pre pandemic level.

<unk> like you said, we've continued to grow the company.

<unk> added quite a bit of value to the organization during the pandemic period, so, but we would expect to probably hold a little bit more than the $3 million to $500 million, albeit again I think it would be south of the current excess level.

We will go next to Tom Gallagher with Evercore. Your line is open. Please go ahead.

Hi, I just wanted to come back to you.

I'm not asking for a precise number but can you give a little more clarity on how youre thinking about COVID-19 for the balance of 2022 I think.

One life insurer has put out a 150 K COVID-19 mortality placeholder embedded in their guidance.

It's obviously such a critical part of what you do I'd be curious what what Youre thinking.

If you do have an estimate.

<unk>.

How would you see this playing out and specifically.

Could you even give some kind of indication of what youre thinking for Q1, because right now I see.

Like the the forecasting services that are out there all over the place it's a little hard to get visibility on like how to think about a legitimate range of COVID-19 mortality for Q1. Thank you.

Yes.

We agree Tom with what Youre, saying there are there's a very wide range.

People are currently looking at.

I think historically, we haven't provided a longer range forecast, partly because we just feel it's extremely difficult for anybody to predict what's going to happen beyond further than a couple of months. So when we look at internally.

We cover a wide range of outcomes as you can imagine to make sure that we can plan and manage accordingly, So I guess I would say, we're not prepared to give a specific number or an estimate of the of the numbers for population deaths over the course of the year.

We would point you back to our rules of thumb.

As well as the guidance that I provided to say.

For Q1, we think it is probably not unreasonable to assume that will be towards the higher end of those ranges given what we've seen over the last couple of quarters of Delta.

And also if you just look at even actual reporting so far this quarter January I think.

<unk> in the U S.

70000 level or so.

With two months to go in the quarter now we do expect as I said.

<unk> will follow cases, dropping and should come down from the current run rate level.

Hopefully that gives you at least.

A reasonable bracket around what to think for the first quarter, but.

As you said, it's very difficult to predict.

Number.

And Tom if I can if I can add.

We've shown through the course of the pandemic that the underlying earnings power of our business has been able to absorb COVID-19 claims and still produce meaningful level of earnings.

Continued to demonstrate that.

We expect Covid will be manageable will continue to be manageable, we've been active on the new business front, we've been adding meaningful earnings to that engine.

And as I shared in my prepared remarks, I'm confident and I'm also excited about the future.

Once we get.

Covid behind us.

Our next to Alex Scott with Goldman Sachs. Your line is open. Please go ahead.

Thanks for taking the follow up question.

Wanted to circle back to DTI.

No, you're probably not ready to give full disclosure.

Disclosure and so forth, but I think at the Investor Day, you did mentioned that you expected.

Disaggregation of reserve calculation impact that would impact to retained earnings and I think as other companies have begun to comment it sounds like.

At least for the ones that have it doesn't sound like that's going to be as much of an impact for the industry is maybe it sounds like it could be for you. So I just wanted to find out sort of what's driving that.

Any way for us to think about.

The magnitude high level.

What are the conversations with the rating agencies.

Looking like in terms of how they're going to treat that.

Yes. This is Todd.

Yes, so LTI.

First point is the overall.

Economics and cash flows of the block of business arent changing this as financial reporting and Thats not changing.

The economics of the cash flows or underlying value of the.

The business.

We continue to work through the details. So we are not ready to provide quantitative.

Your numbers at this point.

More targeting at this point, probably the middle of this year to provide a quantitative impact and so as I think about it there's going to be in the opening balance sheet a reserve adjustment.

In the opening balance sheet as at the end of 2010.

<unk>.

And the way the standard works reserves can only increase.

And that's because of a couple of reasons. One is you have to eliminate any negative reserves that you might have on the balance sheet and then yes. As you mentioned the level of aggregation is going to be much more granular where now we can aggregate the say the entire.

Block of business now is going to be broken down more.

The treaty year issue year, it's going to be much more granular so all the positives don't necessarily.

Cover the the potential negatives and certain era. So there will be an adjustment on the opening balance sheet, but.

As I've been thinking about it I think what's more important than the opening balance sheet.

Reserve or equity adjustment is.

What do things look like when we go live in 2023.

As we go through and restate.

2021 income and then 2022 income on the new accounting basis.

All of that opening balance sheet adjustment is going to come back through as positive earnings over those couple of years. So I think what I would point towards what.

Is more important to look at it sort of what are the things looked like at the end of 2012.

<unk> 22, as far as the overall equity position and.

And balance sheet position.

Okay Dennis.

Far as the rating agencies.

Or are beginning to have some discussions, but I would say there is still fairly early on as.

As far as those discussions.

We'll move next to Erik bass with Autonomous Research. Your line is open. Please go ahead.

Thank you for taking the follow ups is two things one just on the Lv Ti since the implication then because youre, bringing reserve levels up that he would actually translate to higher earnings prospectively and then on a different topic could you just quantify the level of VII.

This quarter, and then talk about what sort of a normal expectation going forward given that your portfolio has grown.

Yeah on the first question.

What I was trying to comment on is that it might set up some additional reserves on the opening balance sheet, but some of that's going to come right back through earnings in the <unk>.

First couple of years under higher earnings under <unk> than what you would have seen under.

Fast 60, that's why I think the.

More important.

Data point to look like as one of the things look like as we go into 2020 fee as we go live on the new standard.

And then as far as the variable investment income for the quarter, we were probably about 35.

Over the the average run rate for the quarter.

We'll move next to Ryan Krueger with K B W.

Hi, Thanks.

I may have missed this but.

Do you have an updated view of the run rate for the U S asset intensive business in terms of earnings quarterly earnings.

Yes, so for the U S asset intensive is that.

Yeah, that's right Yeah, no I think it's still around we put on new business.

Then some of the existing business amortize off, but it's still around $365 million a quarter $60 to $65 million a quarter.

Okay.

My best estimate of the run rate.

Great. Thank you.

Well move next to Tom Gallagher with Evercore. Your line is open. Please go ahead.

Hey, thanks, Thanks for taking a follow up.

Yes.

Curious if you had any evolution in your thinking for whether you'll look to get.

Push for rate increases on your and enforced treaties just related to abuse.

Longer term mortality that you would expect or and if not changes in longer term mortality expectations, maybe maybe just the volatility around mortality and future pandemics.

Further thinking that you've had as you've gone through this in whether whether or not you might pursue rate increases.

And the view of future mortality. Thanks.

Yes. This is Jonathan.

And so at this point, we haven't changed our long term view on mortality.

As I mentioned before.

Honestly devoting a lot of resources into the thinking around this.

Analyzing information as the pandemic unfolds and develops to see what the implications may or may not be on long term mortality, but no changes right now I mean, clearly we are reflecting price action on the.

The immediate impacts of Covid, which we're experiencing so as we think about new business, we're definitely adjusting pricing.

To account for our estimate to fill that impacts were being cautious on new business, where appropriate we have modified underwriting things. So quite a few actions related to new business as far as enforced goes I think as we develop our <unk>.

Conclusions on the longer term impacts of Covid.

And to the extent, we believe that there will be negative long lasting or medium term lasting impacts related to COVID-19 . We would certainly expect to review our enforced business on a client level.

Looking at those impacts and taking action or using options that we have available to us. If we think there is a systemic or sort of a level shift in their expectations for mortality going forward.

Well move next to John Barnidge Piper Sandler Your line is open. Please go ahead.

Great. Thank you I.

I would like to go back to something you said at your Investor day about vaccination underwriting b vaccination status being utilized for underwriting and pricing in South Africa has this expanded other countries at all since then.

Or are there plans to thank you.

Yes, I think the.

I'm not the expert here. So we'll follow up with you John if we need to.

No I don't believe that Theres been a material expansion to other markets I think there is regulatory and other requirements that may prevent you from asking specific questions.

Related to the vaccination market by market, but certainly we do take into account.

Variables and elements, which are kind of connected to COVID-19 are connected to.

Underlying health status and Comorbidities market by market. So we have definitely made.

Writing adjustments for other reasons to account for and select make sure we're selecting appropriately the risks that we're underwriting.

But I think specifically to vaccination status I think theres unlimited use case for that.

South Africa.

And with no other questions holding I'll turn the conference back to Mr. Larson for any additional or closing comments.

Okay. Thank you.

Thank you everyone for joining us for fourth quarter earnings call. This morning, and your continued interest in RGA, but with that we'll conclude the call. Thank you.

Thank you and ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.

[music].

Please standby we're about to begin.

Good day and welcome to the reinsurance group of America fourth quarter 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 MS. Anna Manning, President and Chief Executive Officer. Please go ahead Mr. Larson.

Thank you.

Good morning, and welcome to Rga's fourth quarter 2021 conference call.

With me this morning on the call is Anna Manning, Rga's, President and Chief Executive Officer Lasse.