Q3 2024 Reinsurance Group of America Inc Earnings Call

Good morning, and welcome to the reinsurance group of America third quarter 'twenty 'twenty four earnings conference call.

Operator: Good morning, and welcome to the Reinsurance Group of America third quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

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Operator: I would now like to turn the conference over to Jeff Hobson, Investor Relations. Please go ahead.

Speaker Change: I would now like to turn the conference over to Jeff Hopson Investor Relations. Please go ahead. Thank you welcome to Rga's third quarter 2024 conference call I'm joined on the call. This morning, with Tony Chang Rga's, President and Chief Executive Officer, XO, Andre Chief Financial Officer Leslie Bar.

Operator: Thank you.

Jeff Hobson: Welcome to RGA's third quarter 2024 conference call. I'm joined on the call this morning with Tony Cheng, RGA's President and Chief Executive Officer, Axel Andr, Chief Financial Officer, Leslie Barbi, Chief Investment Officer, and Jonathan Porter, Chief Risk Officer.

Speaker Change: B, Chief investment Officer, and Jonathan Porter, Chief Risk Officer.

Speaker Change: A quick reminder, before we get started regarding forward looking information and non-GAAP financial measures 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 import.

Jeff Hobson: A quick reminder before we get started regarding forward-looking information and non-GAAP financial measures. 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 from expected results.

Speaker Change: Factors that could cause actual results to differ from expected results. Additionally, during the course of this call. The information. We provide may include non-GAAP financial measures. Please see our earnings release earnings presentation, and quarterly financial supplement all of which are posted on our website for a discussion of.

Jeff Hobson: Additionally, during the course of this call, the information we provide may include non-GAAP financial measures. Please see our earnings release, earnings presentation, and quarterly financial supplement, all of which are posted on our website for discussion of these terms and reconciliations to GAAP measures. Throughout the call, we will be referencing slides from the earnings presentation, which, again, is posted on our website.

These terms and reconciliations to GAAP measures throughout the call we will be referencing slides from the earnings presentation, which again is posted on our website and now I'll turn the call over to Tony for his comments.

Tony Cheng: And now I'll turn the call over to Tony for his comment. Good morning, everyone, and thank you for joining our call. Last night, we reported adjusted operating earnings, excluding notable items, of $6.13 per share. This is yet another record quarter for RGA. Our adjusted operating return on equity, excluding notable items, for the past year was 15.5%. Both the profit figure and the ROE continues to exceed the intermediate term targets we have previously shared. This is the result of RGA's strong focus to create long-term shareholder value. We do this by optimizing both our new business activities, as well as our balance sheet management, and we are excited about the future opportunities as we continue in this fashion.

Tony Chang: Good morning, everyone and thank you for joining our call.

Tony Chang: Last night, we reported adjusted operating earnings excluding notable items.

Tony Chang: Sure.

Tony Chang: This is yet another record quarter for RJ.

Tony Chang: Adjusted operating return on equity excluding notable items, while the past year was 15.5%.

Tony Chang: Both the profit figure and the Arrow continues.

Tony Chang: <unk> continues to exceed the intermediate term targets, we have previously shared.

Tony Chang: This is the result of our strong focus to create long term shareholder value.

We do this by optimizing both our new business activities as well as our balance sheet management and we are excited about the future opportunities as we continue in this fashion.

Tony Cheng: It was another quarter where we showed continued strong business momentum with excellent capital deployment and strong premium growth. For 2024, we have deployed into transaction $1.4 billion of capital, which is more than 50% higher than in 2023, with one quarter remaining to go. Our internal measure, new business and better value for this year, already exceeds what we achieved during all of last year. This is the result of both the quantity as well as the quality of the new Business One as we continue to execute a material number of exclusive transactions around the world. Exclusive and other higher value business, which we call creation.

Tony Chang: It was another quarter, where we showed continued strong business momentum with excellent capital deployment and strong premium growth.

Tony Chang: For 'twenty 'twenty four we have deployed into transaction, one $4 billion of capital, which is more than 50% higher than in 2023 with one quarter remaining forgot.

Tony Chang: Our internal Misha new business embedded value for for this year already exceeds what we achieved during all of last year.

This is the result of both.

Speaker Change: Thank you Qi <unk>.

Speaker Change: Well, it's the quality of the new business won.

Speaker Change: Continue to execute a material number of exclusive transactions around the world.

Speaker Change: Exclusive.

Speaker Change: Hi, Matt.

Matt: Which we call creation business has fallen off once two yes, I mean the.

Tony Cheng: has for the past 1-2 years been the majority of our new business embedded value.

Speaker Change: Alrighty.

Speaker Change: You bet.

Speaker Change: Let me provide more details on our business and some of these exclusive wins focused on al or areas of notable growth.

Tony Cheng: Let me provide more details on our business and some of these exclusive wins focused on our four areas of notable growth. Commencing with our Asian traditional business. We see conditions there that are as favourable as I have seen over the past 15 years. This is due to our teams, the unique RJ platform, and the successful execution of the product development strategy. We have biometric capabilities second to none. We can re-insure both sides of the balance sheet and we will always exercise discipline to transact only when the risk-reward trade-off is favourable.

Speaker Change: Commencing with our Asian traditional business, we see conditions there.

Speaker Change: As favorable as I have seen over the past 15 years.

Speaker Change: This is due to our teams.

Speaker Change: RJ platform and the successful execution of the product development strategy.

Speaker Change: We have biometric capabilities second to none.

Speaker Change: We can reinsure, both sides of the balance sheet, and we will always exercise discipline to transact.

Speaker Change: The risk reward trade off is favorable.

Speaker Change: I want to highlight three examples of exclusive transaction, where we have broken new ground strategically during the quarter.

Tony Cheng: I want to highlight three examples of exclusive transactions where we have broken new ground strategically during the quarter. In Korea, we continue to successfully execute the product development strategy that we launched nearly 20 years ago. We created a new cancer treatment product earlier this year and have completed 19 agreements with clients to sell this product. This product has already sold over 2 million policies in 2024 and will increase in 2025. Secondly, in Mainland China, we take our product development strategy one step further. We can provide a solution for the biometric liability and asset sides of the balance sheet.

Speaker Change: In Korea, we continue to successfully execute our product development strategy that we launched nearly 20 years ago.

Speaker Change: We created a new cancer treatment product earlier this year and have COVID-19 agreements with clients to sell this product.

Speaker Change: This product has already solved.

Speaker Change: Milligan policy in 2024 and will increase in 2025.

Speaker Change: Secondly in mainland China, when you take out product development strategy one step further.

Speaker Change: You can provide a solution for the biometric liability and asset side of the balance sheet.

Tony Cheng: We believe this capability is unique to RGA, it generates material value for our clients and that not only supports their sales, but also helps manage their new business capital strength. Finally, in Hong Kong, this strategy has taken yet another step further by combining our underwriting technology to our product development capabilities and our ability to re-insure both sides of the balance sheet. One of the market leaders in Hong Kong announced their use of our MedScreen Plus digital underwriting system. This is a major differentiator as it streamlines the underwriting process for the Mainland Chinese buying policies in Hong Kong.

Speaker Change: What do you believe its capabilities, Judy <unk> and generate material value for our clients.

Speaker Change: On the call today.

Speaker Change: But also helps manage their new business capital strengths.

Speaker Change: Finally in Hong Kong niche strategies taken yet another step by combining our underwriting technology.

Speaker Change: Development capabilities, and our ability to reinsure, both sides of the balance sheet.

Speaker Change: One of the market leader in Hong Kong announced their juice off al Med screen top digital underwriting system.

Speaker Change: This is a major differentiator as it streamlines the underwriting process for the mainland Chinese buying policies in Hong Kong.

Speaker Change: These three examples in three market shows that each element of this product development strategy can lead to quality business.

Tony Cheng: These three examples in three markets show that each element of this product development strategy can lead to quality business. When the elements are combined together, you can see why we are able to generate a high proportion of our... through explicit transactions. Clearly you can see in Asia we link our strategies, capabilities, and data across the region and then tailor and innovate in each of these markets for our treasured clients. As other markets in Asia evolve, RJ will export and tailor these initiatives to help our clients grow.

Speaker Change: When the elements are combined together you can see why we are able to generate a high proportion of our business through exclusive transactions.

Speaker Change: Clearly you can see in Asia, we see cost strategy capabilities and data across the region and then Taylor and innovate in each of these markets.

Speaker Change: Our <unk> clients.

Speaker Change: Other markets in Asia in Paul.

Speaker Change: Thanks, Paul and tell you that these initiatives to help our clients grow.

Tony Cheng: In our second area of notable growth, U.S. traditional The third quarter was one of our strongest for new business in recent memory. As announced, an important win during the quarter was with American National. This transaction includes a balanced mix of asset and biometric risk. As mentioned previously, RJ prides itself on our strong pricing discipline and prudent capital deployment. We believe the U.S. market is presenting increasingly attractive opportunities that align with RGA's sweet spot. We had over 20 other new business wins with considerable activity in terms of both organic and in-force block transactions. These wins can take months, if not years, to cultivate.

Speaker Change: Second area of notable growth U S traditional.

Speaker Change: The third quarter was one of our strongest for new business in recent memory.

As announced and important wins during the quarter was with American National.

Speaker Change: This transaction includes a balanced mix of asset and biometric risk.

Speaker Change: As mentioned previously RJ prides itself on our strong pricing discipline and prudent capital deployment.

Speaker Change: What do you believe the U S market is presenting increasingly attractive opportunities that align with <unk> sweet spot.

Speaker Change: We had only about 20 of our new business wins with considerable activity in terms of both organic and in force block transactions.

Speaker Change: These wins can take months, if not years to cultivate.

Tony Cheng: This quarter is one where many things successfully came together.

Speaker Change: This quarter is one where many things successfully came together.

Speaker Change: Our third area of notable growth in the PRT and the longevity market.

Tony Cheng: Our third area of notable growth is the PRT and the longevity market. In the US PRT market, we completed another transaction this quarter, the pipeline remains very strong, and we are optimistic about our prospects going forward. In the UK, we continue to have a very strong... Like in Hong Kong, we have another market-leading digital underwriting. which allows us to win exclusive business reinsuring individual retail annuities. In addition, we continue to win more than our fair share of business in the UK PRT reinsurance market. We are on track to surpass last year's new business performance, which was a record year for RJ.

Speaker Change: In the U S. PRT market, we completed another transaction this quarter the pipeline remains very strong and we are optimistic about our prospects going forward.

Speaker Change: In the UK, we continue to have a very strong year.

Speaker Change: Like in Hong Kong, we have another market, leading digital underwriting system, which allows us to win exclusive business re insuring individual retail annuities.

Speaker Change: In addition, we continue to win more than our fair share of business in the.

Speaker Change: U K PRT reinsurance market.

Speaker Change: We are on track to surpass last year's new business performance, which was a direct one for Jay.

Tony Cheng: Finally, in our Asia Asset Intensive business, we further expanded our presence in the Korean market where we completed two additional co-insurance transactions. This included one with a market leader for an asset size equivalent to approximately 500 million US dollars. These landmark transactions have created a strong pipeline for future growth for RJ. The Korean market shares many characteristics for co-insurance business as we have seen in Japan over the past decade. Our teams are best in class, and we have already cultivated many client relationships over the past 20 years on the traditional reinsurance side.

Finally, Asia asset intensive business.

Speaker Change: Further expanded our presence in the Korean market, where we completed two additional co insurance transactions.

Speaker Change: This included one with a market leader alright asset size equivalent to approximately $500 million U S dollars.

Speaker Change: These landmark transactions have created a strong pipeline for future growth project.

Speaker Change: The Korean market shares many characteristics.

Speaker Change: Characteristics full co insurance business as we have seen in Japan.

Speaker Change: Okay.

Speaker Change: Our teams are best in class.

Speaker Change: We have already cultivated many client relationships.

Speaker Change: Top 20 years on the traditional reinsurance side.

Speaker Change: Record earnings and strong business wins sure reasons, why 2024 has been successful.

Tony Cheng: Record earnings and strong business wins are two reasons why 2024 has been successful. The third reason that is just as important is our strong progress in the optimization of our balance sheet. I have previously mentioned that we have other management levers beyond winning new business to enhance our ROE and EPS growth.

Speaker Change: A third reason that is just as important is our strong progress in the optimization of our balance sheet.

Speaker Change: I have previously mentioned that we have other management members be on winning new business to enhance our ROE and EPS growth.

Speaker Change: This quarter, we initiated a transaction to recapture retro ceded business, which we expect will generate $1 $5 billion in long term value and will be accretive so aro <unk> in 2025 and beyond.

Tony Cheng: This quarter we initiated a transaction to recapture retroceded business, which we expect will generate $1.5 billion in long-term value and will be accreted to ROE and PTAOI in 2025 and beyond.

Speaker Change: Axel will expand on this topic shortly.

Tony Cheng: Axel will expand on this topic shortly. This example of balance sheet management follows other initiatives we have completed this year, such as asset repositioning and in-force management action. Collectively, balance sheet management actions have raised our expected value of in-force business margins by $2 billion, and we believe there are continued opportunities in the future. With our strong business growth and exciting pipelines, we continue to be focused on capital management. RJ continues to actively explore alternative capital sources on multiple fronts. We will imminently complete the capital raise for Ruby Re at the upper end of our park.

This example of balance sheet management, followed other initiatives, we have completed this year, such as asset repositioning and enforce management actions.

Speaker Change: Collectively balance sheet management actions have right our expected value of in force business margins by $2 billion and we believe there are continued opportunities in the future.

Speaker Change: Without strong business growth and exciting pipelines, we continue to be focused on capital management.

Speaker Change: <unk> continues to actively explore alternative capital sources.

Speaker Change: A couple fronts.

Speaker Change: We will imminently complete the capital raise so rich right at the upper end of our pocket.

Speaker Change: In addition, we placed another transaction with rupee rate during the third quarter.

Tony Cheng: In addition, we placed another transaction with Ruby Reads during the third quarter. Finally, I am very pleased to see that the value of our in-force business margins increased 13.9%, or $4.6 billion over the past three quarters. Long-term economics remains our key focus and this measure is clearly aligned to that. As our earnings presentation shows, there are both material contributions from the new business place and the balance sheet management actions, examples of which I shared earlier on the call. We believe this financial information provides another lens into the intrinsic growth in value of our enterprise.

Speaker Change: Finally, I am very pleased to see the agile now in full fits as margins increased 13, 9% or $4 $6 billion over the past three quarters.

Speaker Change: Long term economics remains our key focus and this is clearly aligned to that.

Speaker Change: As our earnings presentation shows there are both material contributions from our new business placed and the balance sheet management actions examples of which I shared earlier on the call.

Speaker Change: What do you believe this financial information provides another lens into the intrinsic growth in value of our enterprise.

Tony Cheng: So in conclusion, we enter Q4 with accelerating momentum and firing on all cylinders. I could not be more pleased with our team, our strategy, and our execution. And this shows up in results for the quarter and year-to-date. Our intention will be to continue this momentum, build to sustain our future growth and ensure capital sources are diverse and best to fund this growth. Clearly we have had great results year-to-date, and I am fully confident that the best is yet to come.

Speaker Change: So in conclusion, we entered Q4 with accelerating momentum and firing on all cylinders.

Speaker Change: I could not be more pleased without team our strategy and execution and this shows up in results for the quarter and year to date.

Speaker Change: Our attention will be to continue this momentum built to sustain our future growth and ensure capital sources.

Speaker Change: To best can fund this growth.

Speaker Change: Clearly, we have had great results year to date.

Speaker Change: Im fully confident that the best is yet to come.

Axel Andr: I will now turn it over to our new CFO, Axel Andr, to discuss the financial results in more detail. Thanks, Juni. RGA reported pre-tax adjusted operating income of $314 million for the quarter, or $3.62 per share after tax. Pre-tax adjusted operating income excluding notable items was $508 million for the quarter or $6.13 per share after tax. For the trading 12 months, Adjusted Operating Return on Equity excluding notable items was 15.5%. This was a busy and productive quarter. We delivered excellent overall results above our targeted run rate for the quarter, which included two material in-force actions.

Speaker Change: I will now turn it over to our new CFO as Andre to discuss the financial results in more detail.

Speaker Change: Thanks, Tony.

Speaker Change: <unk> reported pre tax adjusted operating income of $314 million for the quarter were $3 62 per share after tax.

Speaker Change: Pre tax adjusted operating income excluding notable items was $508 million for the quarter or $6 13 per share after tax.

Speaker Change: For the trailing 12 months adjusted operating return on equity excluding notable items was 15, 45%.

Speaker Change: This was a busy and productive quarter, we delivered excellent overall results above our targeted run rate for the quarter, which included two material in force actions.

Axel Andr: We added significantly to the long-term value of our business, which adds recurring earnings. and we continue to execute on our strategic initiatives. With strong new business momentum, we deployed $382 million into in-force block transactions in the quarter. For the first nine months of the year, the value of enforced business margins increased by $4.6 billion, or 13.9 percent, reflecting strong new business as well as balance sheet management actions designed to increase long-term value. I will provide further details shortly. Additionally, we had another quarter of in-force management actions in the U.S. that had positive impact on results and will have an ongoing impact to future earnings.

Speaker Change: We added significantly to the long term value of our business, which adds recurring earnings.

Speaker Change: And we continued to execute on our strategic initiatives.

Speaker Change: With strong new business momentum, we deployed $382 million into in force block transactions in the quarter.

Speaker Change: For the first nine months of the year the value of in force business margins increased by $4 $6 billion or 13, 9%, reflecting strong new business as well as balance sheet management actions designed to increase long term value.

We provide further details shortly.

Speaker Change: Additionally, we had another quarter of enforce management actions in the U S that had a positive impact on our results and will have an ongoing impact to future earnings.

Speaker Change: Lastly, we are closing on the final capital raised for Rubiera, Yes, Tony mentioned and executed an additional retrocession of a U S. PRT deal in the third quarter.

Axel Andr: Lastly, we are closing on the final capital raise for Rubiri, as Tony mentioned, and executed an additional retrocession of a US PRT deal in the third quarter. Reported premiums were up 3.2% for the quarter over a strong third quarter of 2023. This quarter included approximately $600 million from a single premium U.S. PRT transaction compared to approximately $800 million in the prior year quarter. Our traditional business premium growth was a healthy 8.5% for the quarter and 7.9% year-to-date on a constant currency basis. premiums are a good indicator of the ongoing strength in our traditional business, and we continue to have good momentum across our region.

Reported premiums were up three 2% for the quarter over a strong third quarter of 2023.

Speaker Change: This quarter included approximately $600 million from a single premium U S. PRT transaction, you know financial solutions business compared to approximately $800 million in the prior year quarter.

Our traditional business premium growth was a healthy eight 5% for the quarter and seven 9% year to date on a constant currency basis.

Speaker Change: Premiums are a good indicator of the ongoing strength in our traditional business and we continue to have good momentum across our regions.

Axel Andr: In this regard, I will note that the U.S. premiums were up 6.7%, reflecting both enforced block transactions and strong new business. The effective tax rate for the quarter was 23% on a pre-tax-adjusted operating income, below the expected range, primarily related to income earned in non-U.S. jurisdictions. For the full year, we expect the effective tax rate to be at the lower end of the 24% to 25% range.

Speaker Change: This regard I would note that the U S premiums were up six 7%, reflecting both in force block transactions and strong new business.

Speaker Change: The effective tax rate for the quarter was 23% on a pre tax adjusted operating income below the expected range primarily related to income earned in non U S jurisdictions for the full year, we expect the effective tax rate to be at the lower end of the 24% to 25% range.

Axel Andr: I now want to make a few comments on notable items reported in the period. As presented on slide seven of our earnings presentation, there were two key drivers impacting notable items. The first was the completion of the Annual Actuarial Assumption Review. The impact to current period of pre-tax adjusted operating income is an unfavorable $58 million. However, the impact to expected future cash flows from the Assumption Update is a positive $100 million contribution to the value of enforced business margins. In other words, the net economic long-term impact of the Actual Assumption Review is a positive $42 million.

Speaker Change: And I want to make a few comments on notable items reported in the period.

Speaker Change: Presented on slide seven of our earnings presentation. There were two key drivers impacting notable items.

Speaker Change: The first was the completion of the annual actuarial assumption review.

Speaker Change: The impact to current periodic pretax adjusted operating income is an unfavorable $58 million. However, the impact to expected future cash flows from the assumption updates is a positive $100 million contribution to the value of in force business margins.

Speaker Change: In other words, the net economic long term impact of the extra one assumption review is a positive $42 million.

Axel Andr: As a reminder, the economic impacts that are not recognized in the current period will be recognized over the remaining life of the business. The primary drivers of the current period charge were updated lapse rate assumptions on term life products in India, partially upset by favorable mortality updates in the US and Canada. The second driver of notable items was the expected future recapture of retroceded business starting in 2025. This is the result of our decision to increase our retention limit, which is effective January 1st, 2025. Under U.S. GAAP accounting, the impacts of the expected future recapture are recognized in the current period.

Speaker Change: As a reminder, the economic impacts that are not recognized in the current period will be recognized over the remaining life of the business. The primary drivers of the current period charge were updated lapse rate assumptions on term life products in India, partially offset by favorable mortality updates in the U S and Canada.

Speaker Change: The second driver of notable items was the expected future recapture of retro ceded business starting in 2025.

Speaker Change: This is the result of our decision to increase our retention limit which is effective January one 2025.

Speaker Change: U S GAAP accounting the impact of the expected future recapture are recognized in the current period.

Axel Andr: As noted in the presentation, this notable item resulted in a $136 million unfavorable impact to pre-tax adjusted operating income in the third quarter. However, we expect a favorable impact of approximately $20 million to 2025 run rates, increasing to $40 million per year by 2030 and $60 million per year by 2040. In total, this action is expected to have a favorable $1.5 billion impact to the value of enforced business margins that will be recognized over the remaining life of the business. This is a good example of us managing our business to unlock long-term value for shareholders.

Speaker Change: As noted in the presentation. This notable item resulted in a $836 million unfavorable impact of pretax adjusted operating income in the third quarter. However, we expect a favorable impact of approximately $20 million to 2025 run rates increasing to $40 million per year by 2030.

And $660 million per year by 2040 in total this action is expected to have a favorable one $5 billion of impact to the value of enforced business margins that will be recognized over the remaining life of the business.

This is a good example of us managing our business to unlock long term value for shareholders.

Speaker Change: Finally, before turning to the quarterly segment results I would like to speak to slide eight you know earnings presentation.

Axel Andr: Finally, before turning to the quarterly segment results, I would like to speak to slide 8 in our earnings presentation. This displays the total company claims experience and the related financial statement impact. Biometric experience, which includes mortality, mobility, and longevity, has been positive over the last six quarters. In the current period, underlying biometric experience was favorable relative to expectations, with the U.S., Asia, and EMEA all favorable. The financial statement impact, recognized in the current quarter, on the other hand, was minimal. The difference between actual experience and the financial statement impact is a function of LDTI cohorting and duration of experience.

Speaker Change: This displays the total company claims experience and the related financial statement impacts.

Speaker Change: Biometric experience, which includes mortality morbidity and longevity has been positive over the next the last six quarters.

Speaker Change: In the current period underlying biometric experience was favorable relative to expectations with the U S Asia and EMEA all favorable.

Speaker Change: The financial statement impact recognized in the current quarter on the other hand, it was minimal the difference between actual experience and the financial statement impact is a function of L. D T high cohort thing and duration of the business.

Speaker Change: Turning to the quarterly segment results starting on slide six.

Axel Andr: Turning to the quarterly segment results, starting on slide 6. The U.S. and Latin America traditional segment results reflected favorable in-force management actions and benefits from other rating In these cases, there is a catch-up effect and then ongoing benefits in the future. Overall claims experience was slightly favorable, while the financial impact was slightly unfavorable due to where the experience occurred by LDTI cohorts. The U.S. financial solutions segment results were below expectations due to lower contributions from new business. Canada traditional segment results reflected modestly unfavorable experience. However, year-to-date underlying mortality experience is favorable. The financial solutions segment in Canada reflected the negative impact of a modest one-time In the Europe, Middle East, and Africa regions.

Speaker Change: The U S and Latin America traditional segments results reflected favorable enforce management actions and benefits from other rate increases.

Speaker Change: In these cases, there was a catch up effect and then ongoing benefits in the future.

Speaker Change: Overall claims experience was slightly favorable while the financial impact was slightly unfavorable due to where the experience occurred by LPTA cohorts.

Speaker Change: The U S financial solutions segments results were below expectations due to lower contributions from new business.

Speaker Change: Canada traditional segment results reflected modestly unfavorable experience however year to date underlying mortality experience was favorable.

Speaker Change: The financial solutions segments in Canada reflected the negative impact of a modest one time item.

Speaker Change: In the Europe, Middle East and Africa region.

Axel Andr: The traditional segment results were modestly above expectations and reflected favorable experience both in the UK and on the continent, and was consistent across profitable and capped cohorts. EMEA's financial solutions segment results were above expectations, reflecting the impact of strong new business in recent periods.

Speaker Change: Traditional segment results were modestly above expectations and reflected favorable experience both in the U K and on the continent and was consistent with gross profitable in caps cohorts.

Speaker Change: Emea's financial solutions segment results were above expectations, reflecting the impact of strong new business in recent periods.

Speaker Change: Turning to our Asia Pacific region.

Axel Andr: Turning to our Asia-Pacific region. The traditional segment results were above expectations, reflecting some one-time items as well as favorable claims experience. Underwriting experience was favorable on an economic basis, but the bottom line impact was in line as the favorable experience in profitable cohorts was deferred into the future. Financial solutions segment results were solid, reflecting favorable overall experience, partially offset by a delayed impact from recent transactions due to planned portfolio reposition. The corporate and other segments reported a pre-tax-adjusted operating loss of $18 million, favorable compared to the expected quarterly average run rate, primarily due to higher investment income.

Speaker Change: Traditional segment results were above expectations, reflecting some onetime items as well as favorable claims experience.

Speaker Change: Underwriting experience was favorable on an economic basis, but the bottom line impact was in line as the favorable experience and profitable cohorts was deferred into the future.

Speaker Change: Financial solutions segment results were solid reflecting favorable overall experience, partially offset by a delayed impact from recent transactions due to planned portfolio repositioning.

The corporate and other segment reported a pretax adjusted operating loss of $18 million favorable compared to the expected quarterly average run rate primarily due to higher investment income.

Speaker Change: Moving to investments on slides 10 through 13.

Axel Andr: Moving to investments on slides 10 through 13. The non-spread portfolio yield for the quarter was 5.08% as compared to 4.72% a year ago, reflecting the impact of new money rates, benefits from previous portfolio repositioning as part of our balance sheet management, and variable investment income that was in line versus expectations. For non-spread business, our new money rate was 5.68%, which was down from the second quarter but still well above the portfolio yield. Credit impairments were minimal and we believe the portfolio remains well positioned.

Speaker Change: The non spread portfolio yield for the quarter was 5.08% as compared to 472% a year ago, reflecting the impact of new money rates benefits from previous portfolio repositioning as part of our balance sheet management and variable investment income that was in line versus expectations for.

Speaker Change: For non spread business or new money rates was 568%, which was down from the second quarter, but still well above the portfolio yield.

Speaker Change: Credit impairments were minimal and we believe the portfolio remains well positioned.

Speaker Change: Related to capital management as shown on slides 14, and 15 or capital and liquidity positions remain strong and we ended the quarter with excess capital of approximately $700 million. We had another strong quarter of capital deployed into in force block transactions across multiple geographies.

Axel Andr: Related to capital management, as shown on slides 14 and 15, our capital and liquidity positions remain strong, and we ended the quarter with excess capital of approximately $700 million. We have another strong quarter of capital deployed into enforced block transactions across multiple geographies. We expect to remain active in deploying capital into opportunities to achieve attractive returns as our pipeline remains healthy. As part of our planning for continued growth in the fourth quarter, we will be evaluating how we view excess capital across the multiple frameworks we manage. We believe our current excess capital estimate is conservative.

Speaker Change: We expect to remain active in deploying capital into opportunities to achieve attractive returns as our pipeline remains healthy.

Speaker Change: As part of our planning for continued growth in the fourth quarter, we will be evaluating how we view excess capital across the multiple frameworks. We manage we believe our excess or current excess capital estimate is conservative.

Axel Andr: Additionally, we continue to be active in seeking various forms of capital to effectively and efficiently fund these opportunities. This is demonstrated by Ruby Re, where we are closing on the final capital raise, bringing the total capital raise to the higher end of the $400 to $500 million range previously disclosed. We're very happy with the level of interest expressed by investors and this gives us confidence that there will be interest in future vehicles that we pursue. We successfully completed a retrocession of $350 million of liabilities to RubyRee in the third quarter. Including the additional capital raised, we have roughly two-thirds of the capital capacity left available to be deployed.

Speaker Change: Additionally, we continue to be active in seeking various forms of capital to effectively and efficiently fund. These opportunities. This is demonstrated by Ruby right, where we are closing on the final capital raise bringing the total capital raised to the higher end of the $400 million to $500 million range previously disclosed.

Speaker Change: We're very happy with the level of interest expressed by investors and this gives us confidence that there will be interest in future vehicles that we pursue.

Okay.

Speaker Change: We successfully completed a retrocession of $350 million of liabilities to Ruby re in the third quarter, including the additional capital raised we have roughly two thirds of the of the capital capacity left available to be deployed.

Speaker Change: During the quarter, we continued our long track record of increasing book value per share as shown on slide 16, or a book value per share, excluding <unk> and impacts from B 36 embedded derivatives increased to $151.79, which.

Axel Andr: During the quarter, we continued our long track record of increasing book value per share. As shown on slide 16, our book value per share excluding AOCI and impacts from B36 embedded derivatives increased to $151.79, which represents a compounded annual growth rate of 10.4% since the beginning of 2021.

Speaker Change: <unk>, a compounded annual growth rate of 10, 44% since the beginning of 2021.

Turning to the value of in force business margins on slide 17 as.

Axel Andr: Turning to the value of enforced business margins on slide 7. As mentioned, the metric has grown by over $4.6 billion, or 13.9% during the first nine months of 2024, and ended the quarter at $37.6 billion. This is split roughly evenly between our traditional and financial solutions business. The increase was primarily driven by strong new business, which contributed $3.8 billion, and $2 billion from balance sheet management actions. This includes $1.5 billion from the expected retrocession recapture, and around $500 million from management actions executed in 2024 and previously discussed. These increases were partially offset by the unwind of in-force margins that contributed to earnings during the year.

Speaker Change: As mentioned the metric has grown by over $4 $6 billion of 13, 9%. During the first nine months of 2024 and ended the quarter at 37 6 billion.

Speaker Change: This is split roughly evenly between our traditional and financial solutions business. The increase was primarily driven by strong new business, which contributed $3 $8 billion and $2 billion from balance sheet management actions. This includes $1 5 billion dollar from the expected retrocession recapture and around $500 million for men.

Speaker Change: What actions executed in 2024 and previously discussed.

Speaker Change: These increases were partially offset by the unwind of enforced margins that contribute to earnings during the year.

Axel Andr: Overall, the growth of this metric is a testament to our ongoing success in delivering long-term value to the enterprise.

Speaker Change: Overall the growth of this metric is a testament to our ongoing success in delivering long term value to the enterprise interest.

Speaker Change: Summarize we've had a great first nine months of the year, we continue to see very good opportunities across all geographies and business lines, and we are well positioned to well position to execute on our strategic plan.

Axel Andr: To summarize, we've had a great first nine months of the year. We continue to see very good opportunities across our geographies and business lines, and we are well-positioned to execute on our strategic plan. With that, I would like to take a moment to thank everyone for your continued interest in RGA. This concludes our prepared remarks.

Speaker Change: With that I would like to take a moment to thank everyone for your continued interest in RGA discontinue.

Speaker Change: Discontinued or prepared this concludes our prepared remarks, we would now like to open it up for questions.

Operator: We would now like to open it up for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To draw your question, please press star then 2. Please limit yourselves to one question and one follow-up. If you have additional questions, you may rejoin the queue.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: Please limit yourself to one question and one follow up if you have additional questions you may rejoin the queue.

John Barnidge: Our first question today is from John Barnridge with Piper Sandler. Please go ahead.

Our first question today is from John Barnidge with Piper Sandler. Please go ahead.

John Barnidge: Good morning, Congrats axle nice to hear your voice again.

John Barnidge: Good morning. Congrats, Axel. Nice to hear your voice again.

John Barnidge: Around the excess capital redefinition could you talk about utilization of purposes other than enforce organics.

John Barnidge: Question around the excess capital redefinition. Could you talk about utilization of purposes other than Enforce Organic? Could you see it? optimizing the investment portfolio through stakes and asset managers similar to Velocity Partners back in 2022.

Speaker Change: Could you see it.

John Barnidge: Optimizing the investment portfolio through stakes in asset managers similar to velocity partners back in 2022. Thank you.

John Barnidge: Thank you.

Tony Cheng: Hi John, thanks for the question. Yes, look, as you know, for use of capital, right, obviously the primary use is towards growth of the business, so going into transactions. We have, of course, also a long-term track record of paying dividends to shareholders and then at times buying back stock.

Speaker Change: Hi, John Thanks for the question.

Speaker Change: Yes look I said as you know we are for use of capital all the rights to oversee the primary use is towards growth of the business, so going going into angel transactions.

Speaker Change: We have of course also a long term track record of paying dividends to shareholders and then at times buying back stock obviously in the current environment. We're just so excited by the opportunities in front of US that we are redeploying capital into opportunities that would include a potential opportunities are on the asset side that gives us access.

Tony Cheng: Obviously, in the current environment, we're just so excited by the opportunities in front of us that we're redeploying capital into opportunities. That would include potential opportunities on the asset side that gives us access to private asset origination. Again, we have a long-term track record of doing so, and that can absolutely be part of the foreseeable use of capital.

Speaker Change: To private asset origination again, we have or we have a long term track record of doing so and that's going to absolutely be part of the of the foreseeable use of capital.

Thank you and my follow up question the growth opportunity in Asia. It sounds really exciting arguably the demographic trends around an aging population maybe more advance there than here right now but.

John Barnidge: Thank you.

John Barnidge: My follow up question, the growth opportunity in Asia sounds really exciting. Arguably, the demographic trends around an aging population may be more advanced there than here right now, but will get there eventually.

Speaker Change: We'll get there eventually can you maybe talk about how you can take that country to country past portability success in Asia and.

John Barnidge: Can you maybe talk about how you can take that country-to-country past portability success in Asia and products to maybe other global markets? Thank you. Sure.

Speaker Change: And products to maybe other global market. Thank you.

Speaker Change: Sure.

Tony Cheng: Thanks, John. You know, throughout Asia, we're already doing that. already quite a lot.

Speaker Change: Thanks, John.

Speaker Change:

Yeah look throughout Asia, we're already doing that.

Speaker Change: Already quite a lot. If you can recall back to Investor day, where we had a very successful mainland Chinese success last year.

Tony Cheng: If you can recall back to invest today where we had a very successful mainland Chinese success last year with AIA and subsequently many other clients, which was essentially as a function of aging population, simplified underwriting, which is something we saw in Korea, I think about five to 10 years earlier. So, you know, really out our hallmark The reason we're able to do these things is the strength of the local teams, you know, whether the populations are aging or getting younger or whatever happens in each of these markets. Our local teams are so strong with their biometric capabilities, their understanding of the consumer and so on and so forth, that they're able to adapt and create new products, which is obviously the basis of a lot of our creation business that I mentioned earlier today.

Speaker Change: With AIA and subsequently many other clients, which was essentially as a function of aging population a simplified underwriting which is something we saw in Korea, I think about five to 10 years earlier.

Speaker Change: You know I really out our hallmark and end.

Speaker Change: The reason, we're able to do these things is the strength of the local teams you know what whether the population of their aging or getting younger or whatever happens in each of these markets. Our local teams are so strong with our biometric capabilities day.

Speaker Change: Understanding of the consumer and so I'm, sorry for that they're able to adapt and create new products, which is obviously the basis of a lot of our creation business that I mentioned earlier today.

Tony Cheng: How we export that around the world, absolutely. I mean, you know, one example, which is not necessarily from Asia, was an initiative we did in South Africa, believe it or not, you know, where over there there's a lot of, I guess, final expense products for maybe the middle class. Lo and behold, you know, the next day I flew from South Africa to the U.S. and it was also a major initiative in the U.S., obviously in the U.S. maybe for the lower income segment. So our ability to understand the drivers commercially and leverage off the data, the technical elements and export that around the company is as strong a strength that we have, you know, within the company.

Speaker Change: How we export that around the world absolutely I mean, one example, which is not necessarily from Asia was and initiative, we did in South Africa and believe it or not.

Speaker Change: Other than that there's a lot of I guess final expense products for that maybe that the middle class.

Speaker Change: Lo and behold.

Speaker Change: The next day I, absolutely from South Africa to the U S.

Speaker Change: And that was also a major initiative in the U S. Obviously in the U S magnify that lower income segments.

Speaker Change: Our ability to understand the drivers commercially.

Speaker Change: Average off the data then.

Speaker Change: Technical elements and export that around the car.

Our company is strongest strength that we have.

Speaker Change: Within the company.

Speaker Change: The next question is from Sydney come off with Jefferies. Please go ahead, yes. Thanks. Good morning, I just wanted to start with some quick clarification I think there might have been some confusion overnight.

Suneet Kamath: The next question is from Suneet Kamath with Jefferies.

Suneet Kamath: Please go ahead. Yeah, thanks.

Suneet Kamath: Good morning. I just wanted to start with some quick clarification. I think there might have been some confusion overnight. So just wanted to confirm that the decision to recapture this block was 100% your decision and not because for whatever reason the counterparties that you had been using had some issues with the business or didn't want it. I just want to clarify that.

Just wanted to confirm that the decision to recapture this this block.

Is 100% your decision and not because for whatever reason the counterparties that you had been using had some issues with the business or or Didnt want it I just wanted to clarify that.

Tony Cheng: Suneet, thank you for the question. If it could be more than 100% it would be. You know, this was our decision, make no mistake about it. The precondition for us to recapture the Enforced Block is us raising the retention and the block being seasoned a certain amount of time. We've known this block, obviously, it's our business for over 10 years. And it's been very, very highly profitable over that period of time. And when the treaty, you know, obviously treaty conditions allowed, we did kind of wait till COVID was over. We considered the risk elements and absolutely we executed it as quickly as we could.

That said hey, Thank you for the question, if I could be more than 100% it would be.

Speaker Change: This was our decision that make no mistake about it.

Speaker Change: A precondition for us to recapture the enforced block is authorizing the retention and the block being seasoned.

Speaker Change: Certain amount of time with non this block obviously, it's our business portfolio over 10 years.

Speaker Change: And it's been very very highly profitable.

Speaker Change: Over that period of time and when the treaty.

Speaker Change: Obviously trading conditions allowed.

Speaker Change: White to Covid, what it's all about we considered the risk elements and absolutely we executed as quickly as we call it.

John Barnidge: Okay. Thanks for that Tony and then I guess Relatedly, how how should we think about the capital that should be back in this business is that $700 million of excess capital sort of already pro forma for the capital that this that youll need to back this business and are you looking at other sizable recapture opportunities or should we think about this as mostly.

Suneet Kamath: Okay, thanks for that, Tony.

Suneet Kamath: And then I guess relatedly, how should we think about the capital that should be backing this business? Is that 700 million of excess capital, sort of already pro forma for the capital that this that you'll need to back this business? And are you looking at other sizable recapture opportunities? Or should we think about this as mostly kind of a A big step and then, you know, maybe not as much of this kind of going forward.

John Barnidge: A big step and then you know maybe not as much of this kind of going forward. Thanks.

Axel Andr: Thanks.

Speaker Change: Yeah, Hi, so need to check so it looks like from an overall mortality risk perspective, the recapture increases in mortality exposure by 1% to 2%. So it's really you know it's very marginal so from a from a capital perspective think of it as it's yeah. The excess capital figure already includes that that slight increase in.

Axel Andr: Yep, hi Suneet, it's Axel. Look, from an overall mortality risk perspective, the recapture increases the mortality exposure by one to 2%. So it's really, you know, it's very marginal. So from a from a capital perspective, think of it as it's, yeah, the excess capital figure already includes that, that slight increase in, in risk capital for mortality.

Speaker Change: In risk appetite from what that is.

Speaker Change: The next question is from Elyse Greenspan with Wells Fargo. Please go ahead.

Elyse Greenspan: The next question is from Elyse Greenspan with Wells Fargo, please go ahead. Hi, thanks. I want to, you know, stick on capital as well. You guys said that, you know, you're evaluating right this quarter, how you view excess capital, I guess, appreciating that that's ongoing. But can you just give us a sense of, you know, some things that you're, you know, going to consider as you go through kind of this methodology change, you know, during the fourth quarter, relative to your excess capital position?

Elyse Greenspan: Hi, Thanks.

Elyse Greenspan: What stick on capital as well you guys said that you know you are evaluating right. This quarter, how you view excess capital I.

Elyse Greenspan: I guess appreciating that that's ongoing but can you just give us a sense of you know some things that you're going to consider as you go through kind of this methodology change.

Elyse Greenspan: During the fourth quarter relative to your excess capital position.

Speaker Change: Yeah, absolutely. Thanks for the question Yeah. So look we talk a lot about the value of in force business margins on this call.

Elyse Greenspan: Yeah, absolutely.

Elyse Greenspan: Thanks, Elise, for the question. Yeah, so look, we talk a lot about value of enforced business margins on this call. So really, that's a major driver, right?

Speaker Change: So really that's a major driver right.

Axel Andr: So at the end of the day, the value of that business, the value of the enforced is a source of available capital. In fact, you know, we get third party validation on that, for example, we can borrow against the value of enforceable block, we have a track record of doing value of enforced securitizations or surplus note insurance. So it's a real source of capital. So it's really kind of making sure that our models are catching up to the substantial generation of value that we've had over this year.

Speaker Change: At the end of the day the value of that business the value of the enforced Asus sources of available capital.

Speaker Change: In fact, you know we've got a we could we get third party validation on that for example, we can we can borrow against the value of enforceable block, we have a track record of.

Speaker Change: Doing value of enforced securitizations or surplus note issuance.

Speaker Change: So it's a real source of capital so, it's really kind of making sure that our model's eye catching up to the substantial generation.

Speaker Change: Of or value that we've had over the over this year. That's number one and then the second is really again with the pace of change of the business the new business that we're adding making sure. We've got the diversification impact our recalibrated on a more frequent regular basis than perhaps we've had historically so does.

Elyse Greenspan: That's number one.

Elyse Greenspan: And then the second is really, again, with the pace of change of the business, the new business that we're adding, making sure we've got the diversification impact recalibrated on a more frequent or regular basis than perhaps we've had historically. So those are really the kind of the two main drivers that are running into that.

Speaker Change: That really the kind of the two main drivers.

Speaker Change: Without running into that.

Speaker Change: Yes.

Elyse Greenspan: Thanks.

Elyse Greenspan: And then my second question, can you just, you know, update us just on the, your LTC exposure, just in terms of the US and international exposure and how the experience has been there. And I know, you know, of course, you know, as we've gone through earnings, we've heard, you know, some companies have said that, like, in terms of potential transactions for that business that we've seen kind of the bid ask narrow, what are you seeing just in terms of, you know, on the LTC side? And would you guys consider doing additional things there? Thanks for the question.

Speaker Change: And then my second question can.

Speaker Change: Can you just update.

Speaker Change: Update us just on the your LTC exposure just in terms of the.

Speaker Change: The U S and international exposure and how the experience has been there and I know.

Speaker Change: Plus we've gone through earnings we've heard you know some companies have said that like in terms of potential transactions for that business that we've seen kind of the bid ask narrow what are you seeing just in terms of on the LTC side and would you guys consider.

Speaker Change: Doing additional things there.

Speaker Change: Alright, Thanks for the question, let me kick it off and then I'll.

Tony Cheng: Let me kick it off and I'll let Axel go into some of the numbers. But overall, our liabilities are modest. If you can recollect, we actually stayed out of the long-term care business for, gosh, many, many years. And it was only at the point in time where we felt the new products coming on board were obviously at the right risk-return tradeoff that we entered the market. As you know, strategically, and as we've said many times, we truly believe that we are the biometric experts of the world, including long-term care in the life and health space.

Speaker Change: Excellent gone to some of the numbers, but over a while.

Speaker Change: Liabilities Oh.

Speaker Change: If you can really collect.

Speaker Change: Well, you're actually stayed out of the long term care business.

Speaker Change: Many many years and was there any other point in time.

Speaker Change: We felt the new products coming on board.

Speaker Change: Obviously at the right risk return trade off that we entered the market.

Strategically and that's what I've said many times, we truly believe in and that we are the biometric experts of the world, including a longtime player in the life and health space.

Tony Cheng: And to answer your question, look, if the risk aligns with our risk thresholds, obviously, once again, the right return profile, then we will consider these types of transactions more so in line with what we've done historically on the books.

Speaker Change: And to answer your question.

Speaker Change: <unk> aligns with our risk thresholds, obviously once again the right return profile and we will consider these types of transactions are also in line with what we've done historically on the Bulks, maybe axel on the amount of impulse, how how much have we got.

Axel Andr: So maybe, Axel, on the amount of in-force, how much have we got?

Axel Andr: Yeah, just to add to that, so our current in-force block, we've got about $4 billion of reserves on the books currently.

Speaker Change: To that source or are currently enforced block good about $4 billion of reserves on the books currently and again, we're very pleased with the performance that we've had historically on that broke.

Axel Andr: And again, we're very pleased with the performance that we've had historically on that block.

Speaker Change: The next question is from Joel her wits with Dowling partners. Please go ahead.

Joel Hurwitz: The next question is from Joel Hurwitz with Dowling Partners.

Joel Hurwitz: Please go ahead.

Speaker Change: Hey, good morning. So you noted for as part of the assumption update there was a favorable mortality updates in the U S. Can you just provide some more color on the changes there and any way to help us think about what you baked into assumptions for excess mortality over the next few years at this point.

Joel Hurwitz: Hey, good morning. So you know, as part of the assumption update, there was a favorable mortality updates in the US. Can you just provide some more color on the changes there and any way to help us think about what you've baked into assumptions for excess mortality over the next few years at this point?

Yeah, Hi, this is Jonathan and I can take that question.

Jonathan Porter: Yeah, hi, this is Jonathan. I can take that question. So we do, as you can expect, we do a pretty comprehensive review of our mortality assumptions on an annual basis. The drivers of the updates this period is really both considering, you know, our view on the immediate excess or excess mortality that we expect to continue, as well as, you know, considering potential long term implications. So the changes is, was been a modest release of reserve that's consistent with the experience that we've had to date. We still have an expectation for excess mortality built into our reserve assumptions within the US and in other markets.

Jonathan Porter: So we do as you can expect we do a pretty comprehensive review of our mortality assumptions on annual basis.

Jonathan Porter: The drivers of the updates this period is really both considering.

Jonathan Porter: Our view on the immediate access to an excess mortality that we expect to continue.

Jonathan Porter: As well as considering potential long term patient. So the changes is what's been a modest release of reserve that's consistent with the experience that we've had to date, we still have an expectation for excess mortality built into our reserve assumptions within the U S and in other markets think of it more in the sort of four four to five year time frame is what we expect excess more.

Jonathan Porter: Think of it more in the sort of four, four to five year period. is what we expect to access.

Jonathan Porter: He used to be.

Speaker Change: Okay helpful. And then just one on the recapture can you help me understand what exactly drove the $136 million impact is that accounting noise or is that some upfront capital cost.

Joel Hurwitz: Okay, helpful.

Joel Hurwitz: And then just one on the recapture. Can you help me understand what exactly drove the $136 million impact? Is that accounting noise? Or is that some upfront capital cost?

Speaker Change: Yep Hydraulics XO.

Axel Andr: Hi Joel, it's Axel. Yeah, think of the $136 million, basically, this was kind of a reinsurance recoverable we had embedded in our reserves against, you know, potential, potential future claims and the retro, the retro agreements. So with the decision to recapture, we basically write off that, that contract liability or that asset, if you want to think about it that way. So that's kind of yeah, that's the accounting impact today.

Think of the $136 million basically this was kind of a reinsurance recoverable, we had embedded in our reserves against potential.

Speaker Change: Actual future claims and the retro are the retro agreements so with the decision to recapture we basically write off that that contra liability or that assets. If you want to think about it that way.

Speaker Change: So that's kind of yeah. That's that's the accounting impact today, but of course with what happens in the future is that we get to not pay those premiums.

Axel Andr: But of course, what what happens in the future is that we get to not pay those premiums. And so the, as I mentioned, the impact of that to the run rate of pre-tax operating income is, you know, $20 million a year in 2025, ramping up to $40 million by 2030, further ramping up to $60 million by 2040. So all of that, you know, basically resulting in the present value impact to the value of enforced business margins of $1.5 billion.

Speaker Change: And so the as I mentioned the impact of that to the run rates of pretax operating income is $20 million a year in 2025 ramping up to $40 million by 2030 further ramping up to $60 million by 2040, So all of that basically resulting in the <unk>.

Speaker Change: <unk> value impact to the value of in force business margins of $1 $5 billion.

Speaker Change: The next question is from Tom Gallagher with Evercore. Please go ahead.

Tom Gallagher: The next question is from Tom Gallagher with Evercore. Please go ahead. Good morning, good morning.

Tom Gallagher: Good morning. Good morning, first first question actually I just wanted to come back to the capital question and how you are reevaluating the model for defining access the so the covariance benefit and the value. They enforce it sounds like those are the two changes.

Tom Gallagher: First question, Axel, I just wanted to come back to the capital question and how you're re-evaluating the model for defining XSD. So the covariance benefit and the value of the enforced sounds like those are the two changes.

Tom Gallagher: I guess I'm not so interested in how that's going to change your definition of excess, but to me the biggest overhang on your stock has been the fear that at some point you may have to raise common equity to fund your what's been exceptional growth. So I guess my main question is, would you, given the model changes that you're contemplating, would you, do you think you'll be able to organically finance your organic growth plans with those changes or do you think you'd still need to look at additional either sidecar capital or even common equity to fund your future growth plans?

Tom Gallagher: I guess I'm not so interested in how that's going to change your definition of access but to me the biggest overhang on your stock has been the fear that at some point you may have to raise common equity to fund your <unk>.

Tom Gallagher: What's been the exceptional growth. So I guess my main question is would you given the model changes that you're contemplating would you do you think youll be able to organically financier organic growth plans.

Tom Gallagher: With those changes or do you think you'd still need to look at additional either sidecar capital or even common equity to fund your future growth plans.

Speaker Change: Okay. Thanks, Tom Thanks for the question.

Axel Andr: Thanks, Tom. Thanks for the question. So yeah, so coming back to the first part, so yes, absolutely, it's the value of in-force and basically marginal diversification impact. So that goes into our excess capital view. So taken together, so both where that will land us versus in addition to that, taking into account, I was mentioning the two-thirds of capital for Ruby that's left undeployed, you know, that's relative to our pipeline. We feel really good about being able to put the money to work with transactions that we have in front of us. And further, related to value of in-force, as I said, we have a track record of basically being able to monetize that and to, you know, to either borrow yen state or to actually turn it, you know, turn it into capital.

Speaker Change: So yeah, so coming back to the first part of fourth so yes, absolutely. It's the value of in force and basically marginal diversification impacts.

Speaker Change: So that's that goes into our excess capital.

Speaker Change: <unk>.

Speaker Change: So taken together so both what's you know what what that where that will land us versus a in addition to that taking into accounts, whereas finishing the two thirds of capital for Ruby that's left them deployed that's relative to our pipeline, we feel really good about being able to to put their money to work with.

Speaker Change: Transactions that we have in front of us.

Speaker Change: And further.

Speaker Change: Related to the value of in force with a as I said, we have a track record of basically being able to monetize that into you know to either borrow against state till two actually started turning into capital. So I understand you know very clearly the really strong hurdle against raising equity in the public markets. That's clear we understand very much the whole share.

Axel Andr: So I understand, you know, very clearly the really strong hurdle against raising equity in the public markets. That's clear. You know, we understand very much how shareholders don't like the dilution, et cetera. So we would, of course, always look for our resources, our capital on balance sheet, third-party capital before ever coming to equity, you know, to public investors for an equity.

Speaker Change: Orders don't like the dilution et cetera.

Speaker Change: So we would of course always look for our resources all capital on balance sheets third party capital before ever coming to two equity to public investors for foreign equity raised.

Speaker Change: Okay. Thanks for that and then.

Tom Gallagher: Okay, thanks. Thanks for that.

Tom Gallagher: And then my second question is, when I look at the biometric table, and I see how the experience has looked versus the cap versus the uncapped cohort, and think about how this has been playing out on underlying capital generation, I guess I just have two questions related to that. One is, I know it gets smooth for gap, because most of your favorability is coming from the part that gets deferred. But how does that work on a statutory basis? Does that get recognized immediately? And then I guess my related question is, I know, under the new gap, reserve assumptions were reset to embed some conservatism.

Speaker Change: My second question is when I look at the biometric table and I see how the experience has looked versus the cap versus the uncapped cohort.

Speaker Change: And think about how this has been playing out on underlying capital generation I guess I just have two questions related to that one is I know it gets smooth for GAAP because all of your most of your favor ability is coming from.

Speaker Change:

Speaker Change: The part that gets deferred but how does that work on a statutory basis is that does that get recognized immediately.

Speaker Change: And then I guess my related question is I know under the new GAAP reserve assumptions were reset to embed some conservatism. So I guess im wondering.

Tom Gallagher: So I guess I'm left wondering, if the statutory and cash flows getting recognized immediately. for the uncapped versus capped cohorts. But then there, I don't know, maybe there's less conservatism in them. Because I don't think you reset statutory reserves like you did under GAAP.

Speaker Change: If the statutory and cash flows getting recognized immediately.

Speaker Change: For the Uncap versus capped cohort, but then there I don't know maybe theres less conservatism in them because I don't think you reset statutory reserves like your debt under GAAP.

Tom Gallagher: So anyway, I know it's a long winded question, but just curious, like what all this means for underlying cash flows that you've been seeing? Thanks.

Speaker Change: Anyway, I know, it's a long winded question, but just curious like what all this means for our underlying cash flows that you've been seeing thanks.

Speaker Change: Yeah.

Tom Gallagher: Okay, thanks, Tom. That's a lot.

Speaker Change: Okay. Thanks, Tom.

Axel Andr: I'm not sure that I'll get to a crisp answer to that, but yeah, look, for stat, the experience, the experience comes in, right? It comes through basically immediately. The reserves are based on, you know, generally speaking, on formulaic, on tables, right? So we don't, we don't, reserves are what they are. We don't get to reflect that in the future.

Speaker Change: I'm not sure that we get to a crisp answer to that but.

Speaker Change: Yeah look for stat. The experience the experience comes in right. It comes through basically immediately the reserves are based on you know generally speaking on formulaic on tables right. So with it. So we don't we don't reserves are what they are we don't get to reflect that in the future.

Axel Andr: So, I guess, yes, potentially it creates kind of a disconnect where the stat has seen the impact whereas on the GAAP side you have the deferral, so it's going to come in over time. I don't know that it's mature enough at this point for it to lead to truly a material shift, for example, in how we view free cash flow generation. That is, when you look at a dollar of GAAP operating income, how much of that results in truly distributable earnings, it's a good question, but I don't think that it's been material and sustained enough that it has led to a material change, and I think historically we've talked in the past about roughly a 60% free cash conversion ratio.

Speaker Change: So I guess, yes, potentially eat free it's kind of a disconnect where the staff has seen the impact whereas the gap the.

Speaker Change: The GAAP side, you have you have to deferrals, so it's gonna call me and overtime.

Speaker Change: I don't know that it's mature enough at this point for which to lead to a truly are.

Speaker Change: Material shifts for example, how we view free cash flow generation that is you know when you look at the dollar level of GAAP operating income how much of that results in truly distributable earnings are it's a good question, but I don't think that it's that it's been material and sustained enough that it has led to a two material change and I think historically.

Speaker Change: Quickly we've talked in the past about you know roughly a 60% free and free cash.

Speaker Change: Conversion ratio I at this point I'm, not I'm not prepared to change that guidance.

Axel Andr: At this point, I'm not prepared to change that guidance.

Speaker Change: The next question is from Ryan Krueger with K B W. Please go ahead.

Ryan Krueger: The next question is from Ryan Krueger with KBW, please go ahead. Hey, thanks. Good morning. My first question was on balance sheet optimization. You've clearly done a number of things so far, but I wanted, I was hoping to get a sense of kind of how far through the different options are you at this point, whether it be further in course actions or investment portfolio, portfolio repositioning or other things, but do you still have a fair amount left to do? Or have you?

Ryan Krueger: Hi, Thanks. Good morning, My first question was on balance sheet optimization.

Clearly done.

Ryan Krueger: Number of things, so far but I wanted I was hoping to get a sense of how.

Ryan Krueger: How far through the different options are you at this point, whether it be further and of course actions or investment portfolio portfolio repositioning or other things, but do you still have a fair amount left to do or have you have you done a lot of of what Youre able to do at this point.

Tony Cheng: Have you done a lot of what you're able Hey, Ryan, thanks. Thanks for the question. Obviously, the recapture is a one-off. We might want to do that all the time, but that's an opportunity that arose. But with regards to your question on portfolio optimization and enforced management actions, yeah, I'd say we're in the first, you know, few innings of that. I mean, you know, that will continue. We continue to see opportunities there. As I shared during Investor Day, they can be material in size. You can't predict them from quarter to quarter, obviously. But this year, we've had great success in those areas, and we anticipate continuing into the future.

Hey, Ryan Thanks, Thanks for the question.

Obviously the <unk>.

Ryan Krueger: Recapture it's it's a one off.

Ryan Krueger: Mike does that all the time, but that that's an opportunity that arose.

Ryan Krueger: But with regards to your question on our portfolio optimization and enforce management actions.

Ryan Krueger: Yeah, I'd say, we're in the first few innings of that I mean, you know that that will continue will.

Ryan Krueger: We continue to see opportunities there are as I shared during investor day, they can be material inside you can't predict them from quarter to quarter, obviously, but this year, we've had great success in those areas and we anticipate continuing into the future.

Speaker Change: Great. Thanks, and then.

Ryan Krueger: Great, thanks.

Ryan Krueger: And then just one quick one on the the mortality assumptions.

Speaker Change: Just one quick one on the the mortality assumptions.

Speaker Change: The comment on four to five years of kind of endemic mortality is that four to five years from where we are today or from.

Jonathan Porter: The comment on four to five years of kind of endemic mortality is that four to five years from where we are today, or from, or guess I guess from when we would have considered the pandemic? Yeah, Ryan, this is Jonathan. It's four years from today, roughly speaking. It varies a bit by market, but you can think of Okay, great.

Speaker Change: Org, that's I guess from when we would've considered the pandemic.

Yeah.

Speaker Change: Yeah. Ryan this is Jonathan it's four years from today roughly speaking it varies a bit by market, but you can think of it that way.

Ryan Krueger: Okay, great. Thank you.

Jonathan Porter: Thank you.

Speaker Change: And right now obviously.

Jonathan Porter: And Ryan, as you know, obviously any favourable relative to that will come through in our profitability.

Speaker Change: Any favorable relative to that I'm sure in our profitability.

Speaker Change: The next question is from Alex Scott with Barclays. Please go ahead.

Alex Scott: The next question is from Alex Scott with Barclays. Please go ahead.

Alex Scott: Hi, Good morning, another Ruby range is as you know starting to put more meaningful amount of capital to work I was hoping maybe you could give us a sense of how the economics work and what we should expect in terms of.

Alex Scott: Hey, good morning. You know, now that Ruby Ray is You know, starting to put more meaningful amount of capital to work. I was hoping maybe you could give us a sense of, you know, how the economics work and what we should expect.

Alex Scott: you know where and how it Europe, you know.

Alex Scott: Where and how it impacts your P&L.

Alex Scott: Sure.

Axel Andr: Sure.

Tony Cheng: Yeah, I can start Erik. So for Ruby, you know, we basically as we seed business into Ruby, we've got various forms, various fee streams, we've got origination fees. We've got ongoing admin fees, servicing fees, if you will, and then, of course, assets management fees because we're the asset manager for the vehicle. you know, all of that, all of that adds up. You know, I don't know that it's material enough for us to start talking about, you know, fee related earnings and, and, you know, pretending that it needs to be a whole new business segment. But it is, you know, it is meaningful, it is material, and we're looking to build up over it over time.

Speaker Change: Yes, I can start I think so for Ruby.

Speaker Change: You know, we basically as we seed business into Ruby we've got a very strong burst fee streams are we've got origination fees.

Speaker Change: We've got ongoing.

Speaker Change: Admin fees servicing fees, if you will and then of course asset management fees, because where the asset manager for the vehicle.

All of that are older that adds up.

You know I I don't know that it's material enough for us to start talking about you know fee related earnings and and you know I'm pretending that it needs to be a whole new business segment.

Speaker Change: But it is you know it is meaningful these materials and we're looking to build up overage overtime.

Tony Cheng: And maybe, maybe just on the strategic side, I mean, we did Ruby, obviously, it's a meaningful source of capital, but it is really to open up that channel as another form of capital down the road for other vehicles, as Axel has shared previously. So that was the more strategic direction as to why we did it.

Speaker Change: And maybe it might be just on the strategic side I mean.

Obviously, it's a meaningful source of capital but.

Speaker Change: Total open up that channel as another form of capital down the road for other vehicles as Axel has shared previously.

Speaker Change: That was the more strategic direction as to why we pursued it.

Speaker Change: Got it second question I had is on Japan and in the regulatory environment there.

Alex Scott: Got it. Second question I have is on Japan and in the regulatory environment there. You know, one of the primaries. past week commented on just how disruptive This new ESR regime is for longer-duration life products. You know, I was interested in, you know, how big could that opportunity be? I mean, is it truly disruptive enough that, you know, a large portion Bigger Life Underwriters in Japan. I have to look at these deals. How big do you expect to go on that opportunity? with regards to the reinsurance, the co-insurance of those blocks down the road. Yes, correct.

You know one of the primaries.

Speaker Change: In the past we commented on just how disruptive.

Speaker Change: This new ESR regime is for longer duration life products and.

Speaker Change: I was interested in you know how how big could that opportunity be I mean is it truly disruptive enough that you know a large portion of the bigger life underwriters in Japan I have to look at these deals and you know.

Speaker Change: Uh Huh, how big do you expect to go on that opportunity.

Speaker Change: With regards to the reinsurance all the car insurance blocks down the road.

Speaker Change: Yes, correct, yeah reinsurance to help them you know take care of our regulatory.

Tony Cheng: Yeah, reinsuring to help them, you know, take care of regulatory Yeah, no, I'd say a few areas, a few comments. Firstly, to answer your question, I think we're very early in the stage, and the reason why is... You know, firstly, it's a major change in how the Japanese life insurance company does its, I guess, its capital management and really recognizing some of the negative spread elements that have been embedded in the older financial regime. So, I'd say, you know, the companies are only getting comfortable with it and we're starting to see, obviously, accelerated deal flow there.

Speaker Change: Yeah.

Speaker Change: Yeah, No I'd say fewer area a few comments.

Speaker Change: Firstly to answer your question I think with very early stage.

Stage and the reason why is.

Firstly in terms of a major change in how the.

Speaker Change: Japanese life insurance company.

Speaker Change: So I guess since it's capital management and really recognizing some of the negative spread elements that have been embedded in the OTA.

Speaker Change: National regimes.

Speaker Change: I have copies are only getting comfortable with it and we're starting to see obviously accelerated deal flow there.

Speaker Change: The other element is clients tend to not want to do it all in one go so once they've made the decision to go ahead and.

Tony Cheng: The other element is clients tend to not want to do it all in one go. So, once they've made the decision to go ahead, they don't do it all in one go and that they, you know, spread it out over a number of years. So, for example, the client that we've done our first transaction with, I think we're on tranche six or seven. So, essentially, every year that opportunity arises as companies get more comfortable with the approach.

Speaker Change: Do it all in one go in that light.

Spread it out over a number of years.

Speaker Change: For example, the client that went on.

Speaker Change: Our first transaction with I think we're on trench six or seven so essentially.

Essentially every year that opportunity arises.

As companies get more comfortable with the approach.

Tony Cheng: Hopefully, that answers the question.

Speaker Change: Hopefully that answers the question.

Speaker Change: The next question is from Wes Carmichael with Autonomous Research. Please go ahead, hey, thanks.

Wes Carmichael: The next question is from Wes Carmichael with Autonomous Research. Please go ahead. Hey, thanks. Good morning. First question on US financial solutions. I think you mentioned that there was a lower contribution from new business, but I think there was a $600 million PRT deal in the period. Can you maybe just elaborate on what drove a little bit of weakness in that segment this quarter? Yeah, sure.

Good morning first question on U S financial solutions I think you mentioned that there was a lower contribution from new business, but I think there was a $6 million PRT deal in the period can you maybe just elaborate on what drove a little bit of weakness in that segment this quarter.

Speaker Change: Yes sure highways.

Wes Carmichael: Hi, Wes. Yeah, I think, look, on the US financial solutions business, I think probably what's been slightly lower than what we expected when we put the run rates together is really the rate of origination of the more kind of classic asset intensive side of the business. The PRT side has actually been quite nice and on track, although, you know, of course, it's episodic. It's a, you know, big, chunky transaction in one quarter and not in the other, but overall, that's on track. And just further to that, I mean...

Speaker Change: Yes, I think look on the U S. Our financial solutions business, I think probably what what's what's been slightly lower than what we expected when we put the run rates together is really the rates of origination of the more kind of classic asset intensive side of the business. The PRT side has actually been quite quite nicely on track although of course, it's episodic.

Speaker Change: So you know a big chunky transaction in one quarter and not in the other but overall that's a that's on track.

Speaker Change: And just further to that I mean.

Tony Cheng: You know, as Axel said, the pure asset is not necessarily our sweet spot. We obviously love the transactions that have both the biometric and the asset risk within it, given that's our unique, I feel, one of our key unique differentiators. So, as you know, American National Transaction, you know, that happened to be put in our traditional segment and was part of the great growth we saw there. But, you know, the pure asset risk, we will do time to time, but we don't feel we've got a huge advantage in that area.

Speaker Change: Yeah, that's actually set the asset to asset and it's not necessarily our sweet spot, we obviously announced the transactions that have closed.

Speaker Change: Biometric and the asset risk within a given that sounds unique.

One of our key unique differentiator.

As you know American National transaction.

Speaker Change: That happened to be put in our traditional segment and what part of the great growth we saw there.

Speaker Change: But.

Speaker Change: The pure asset risk.

Speaker Change: We will do time to time, but we don't feel we've got a huge advantage in that area.

Speaker Change: And lastly, just to close it up on you know financial solutions just to bring it to the global perspective, because I do think that's important you know so fine U S. You know U S is slightly behind on in terms of the run rate, but remember that's APAC and EMEA was substantially running above the run rate. So on a global basis were ultimately very pleased with the performance of the financial suite.

Wes Carmichael: Now, lastly, just to close it up on, you know, financial solutions, just to bring it to the global perspective, because I do think that's important, you know, to find U.S., you know, U.S. is slightly behind in terms of the run rate, but remember that AIPAC and EMEA are substantially running above the run rates on a global basis. We're, you know, ultimately very pleased with the performance of the financial solutions. Yep, understood. And that's, that's very helpful. Thank you.

Speaker Change: Solutions business.

Yep understood that's very helpful. Thank you.

Wes Carmichael: My second question was on the retrocession recapture, can you maybe just talk about how much of that business is within capped and uncapped cohorts for LBTI? And what I'm really curious about is, you know, as you think about retaking the business on like how much potential volatility are you kind of adding to the income statement if we get kind of quarterly mortality experience fluctuating?

Speaker Change: My second question was on the retrocession recapture can you maybe just talk about how much of that businesses within capped and uncapped cohorts for ELD DTI and what I'm really curious about it.

Speaker Change: And as you think about taking the business on like how much potential volatility or are you kind of added to the income statement, if we get kind of quarterly mortality experience fluctuation.

Speaker Change: Yeah, So I can get them there Jonathan probably be on the royalty side. So I believe on the cap side, you know relatively small very small proportion of that Ah was reading category, what's called it around 10%, so 90% gas, 10% and capped.

Jonathan Porter: Yeah, so I can start there.

Jonathan Porter: Jonathan probably on the volatility side. So I believe on the cap side, you know, relatively small, very small proportion of that was really in cap cohorts coded around 10%. So 90% in uncapped, 10% in capped. And so when you think of the financial statement impact, you can kind of apply that same logic of capped and uncapped cohorts in terms of that $136 million impact.

Speaker Change: And so when you think of the financial statement impact you can kind of apply that same logic logic of capped and uncapped cohorts in terms of that $136 million or impacts.

Jonathan Porter: In terms of the volatility, Jonathan, go ahead. Yeah, so, you know, I think one thing to keep in mind is that, you know, volatility is two directional as well. Right. So, you know, we will have the opportunity to actually see favorable results from volatility. You know, we've done some, as you would expect, in our modeling, we've looked at some stochastic simulations and, and for the business to understand the volatility, and we do think it's quite modest. So just looking at our US business, specifically, you know, we're talking, you know, low double digit millions of volatility at a 90th percentile over a full calendar year.

Speaker Change: In terms of the provided J T. Jonathan go ahead.

Jonathan Porter: Yeah. So you know I think one thing to keep in mind is that volatility is two directional as well right. So we will have the opportunity to actually see favorable results from volatility.

We've done some as you would expect in our modeling we've looked at some stochastic simulations.

Jonathan Porter: And for the business to understand the volatility and we do think it's quite modest so just looking at our U S business specifically.

Jonathan Porter: We're talking low double digit millions of volatility at a 98 percentile over a full calendar year something in that regard.

Jonathan Porter: in that range. Sorry, just to add and put it in perspective, as Axel said, you know, broadly 10% is in the CAP cohort. The actual block is not that big in size, it's just highly profitable, hence the big long-term value number that pops out, so, you know, just wanted to add commentary there.

Jonathan Porter: And sorry, just to add them put it perspective as Expo Center.

Jonathan Porter: 10% is in the cap cohort are the actual block and it's not that inside and that's just highly profitable.

Jonathan Porter: Hence the big long time value number that pops out yeah, I, just want to add a commentary that.

Jonathan Porter: Yeah.

Jimmy Baller: The next question is from Jimmy Baller with J.P. Morgan. Please go ahead.

Speaker Change: The next question is from Jimmy Buhler with J P. Morgan. Please go ahead.

Jimmy Baller: Hey, good morning. I had a couple of questions. First, if you could just discuss the financial implications of the reinsurance recapture. Should we assume higher earnings volatility given the increase in single life retention, or do you think it'll just get absorbed in your results given the growth in the business over the last several years and the smoothing mechanism of the LDTI counting changes? So, like Jonathan said, the additional volatility that we would expect going forward is really minimal, right? Because, like we said, the whole motivation was we wanted to increase the retention limits because we were able to, we're a bigger company, we're more diversified, and the LDTI accounting change helps because really the noise ultimately mostly gets smoothed over time.

Jimmy Buhler: Hey, good morning, I had a couple of questions first if you could just discuss the financial implications of the reinsurance recapture.

Jimmy Buhler: Should we assume higher earnings volatility given the increase in single life life retention or do you think it will just get absorbed in your results given the growth in the business over the last several years and the smoothing mechanism of.

Jimmy Buhler: The <unk> accounting changes.

Speaker Change: So yeah, it's like Jonathan said.

Speaker Change: So yeah, it's virtually cheated the additional volatility that we would expect going forward is really minimal right because like we said the whole motivation ores.

Speaker Change: You know we wanted to increase the retention limits, because we were able to where we're a bigger company with more diversified and the LPTA accounting change helps because really the noise ultimately mostly gets smoothed over time so from that.

Jimmy Baller: So from the, you know, let's say from the motivation perspective of wanting to manage earnings volatility, that basically wasn't there anymore. So nothing, really not a material contribution to volatility going forward.

Speaker Change: Let's say from the motivation perspective of wanting to manage earnings where the GTT that basically he wasn't there anymore.

So nothing really nothing material.

Speaker Change: Contribution to two volatility going forward.

Tony Cheng: Just to add, to give you a sense, Firstly, you know, we have not raised our retention for 15 years. So in a way, this is a bit of catch-up to an appropriate level.

Okay, just to give you a sense.

Speaker Change: Uh huh.

Speaker Change: We had not raised our retention plus 15 years, so in a way and it's just been a catch up.

Speaker Change: And until an appropriate level the second as David.

Jimmy Baller: The second is even, you know, I guess Unknown Executive, Wesley Carmichael, Jian Huang, Tony Cheng, Joel Hurwitz, Ryan Krueger, And then secondly, on your excess capital, you gave out a fairly high number, and I think you're implying that the actual level might even be higher than that as you do your additional analysis.

Speaker Change: I guess.

The biggest scenario testing.

Speaker Change: Mortality volatility.

Speaker Change: And during that period of time this block remained profitable over that period of time.

Okay.

And then secondly on your excess capital you gave out a fairly high number and I think you're implying that the actual level might even be higher than that as you do your additional analysis. So just wondering to what extent are these numbers vetted by third parties or rating agencies, because if I if I think about your.

Jimmy Baller: So just wondering to what extent are these numbers vetted by third parties or rating agencies, because if I think about your ratings, your BBB overall, which is good, but it's lower than many of your peers or single A, despite the fact that your liability profile is actually probably more conservative than many of the other guys, then it would sort of come down to capital.

Speaker Change: Reading your Triple B overall, which is good but it's lower than many of your peers, who are single a.

Speaker Change: Despite the fact that your liability profile is actually probably more conservative than many of the other guys and then on the.

Speaker Change: Then it would sort of come down to capital just so just wondering like do you have any external affirmation of your.

Axel Andr: So just wondering, do you have any external affirmation of your excess capital numbers and whether you've got aspirations to be higher rated, or are you comfortable being rated at these levels, and then you'd put the excess capital to work elsewhere? Yeah, absolutely. Thanks, Jimmy, for the question. So first, let me clarify, we're double A minus financial strength rating from S&P. Just want to clarify that, because we take great pride in that. Second, absolutely. So look, this is our view of excess capital. It incorporates, so this is RGS view, this is management's view. It incorporates, of course, our internal economic capital framework.

Speaker Change: I've got the numbers and and whether you've got aspirations to be higher rated or are you comfortable waiting are being created at these levels and then use the excess capital to work elsewhere.

Speaker Change: Absolutely. Thanks, Jami for the questions. So firstly, let me clarify with double a minus financial strength rating from S&P, a just one I just want to clarify that.

Speaker Change: Because we take great pride in that.

Speaker Change: Second absolutely. So look all of this is our view of excess capital you didn't cooperate. So this is the algae is viewed as management's view. It incorporates of course are our internal economic capital framework. It incorporates our regulatory capital have you bought them up for Motorola legal entities, the jurisdictions of dairy and et cetera, and it includes of course.

Axel Andr: It incorporates a regulatory capital view, bottom-up from all of our legal entities, jurisdictions that they're in, etc. And it includes, of course, rating agency capital perspective. Yes, when I talk about the changes, I mentioned, you know, recognizing the value of in-force. Yes, absolutely, there's third-party validation of that. As I mentioned, we've been able in the past to securitize blocks of business and to borrow against that value. So it's not just a theoretical number. It's actually something that we can borrow against. And from a rating agency perspective, you know, again, there are rating agencies that provide credit for value of in-force.

Speaker Change: Rating agency capital perspective, yes, when I talk about the the changes I mentioned you know the recognizing the value of in force.

Speaker Change: Ah, Yes, absolutely there's third party validation of that as I mentioned, we've been able in the past to securitize books of business and to borrow against that that value. So it's not just a theoretical number it's actually something that we can borrow against.

Speaker Change: And from a rating agency perspective, you know there again, they're they're all rating agencies that provide a credits for a value of in force the.

Axel Andr: The change in the accounting to LDTI positions U.S. companies with, you know, cash flow models that enable the calculation of such value of in-force. And so, you know, my understanding is that there's a lot of companies that are putting that ask to rating agencies to incorporate that as part of the framework.

Speaker Change: The change in the accounting tool DTI positions U S companies with cash flow models that enable the calculation of such value of in force and so you know my understanding is that there's a lot of companies at all there are putting that ask to two rating agencies to to incorporate that.

Part of the frameworks.

Tony Cheng: Let me just add, from a business or competitive perspective, as Axel mentioned, AA- It's been that way, gosh, I should know, but as long as I remember, and I've been at the company 27 years, and from a competitive position, we're definitely on the stronger side relative to our competitors. So there's absolutely no commercial reason we would need to strengthen that rating.

Speaker Change: Let me just add from a business a competitive perspective.

Axel mentioned double a minus.

Speaker Change: It's been that way gosh, I should note that as long as I remember and I've been at the company 27 years.

Speaker Change: And from a competitive position, where we're definitely on the strongest side relative to our competitors. So there's absolutely no commercial reason, we would need to strengthen that rating level.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Tony Chang for any closing remarks.

Operator: This concludes our question and answer session.

Tony Cheng: I would like to turn the conference back over to Tony Cheng for any closing remarks. As always, thank you very much for your questions and your continued interest in RJ. This was a strong quarter, continuing a very strong year, further demonstrating our continued momentum and sustainable earnings power.

Tony Chang: As always thank you very much for your questions and your continued interest in RJ.

Tony Chang: The strong corridor, continuing a very strong year a further.

Tony Chang: Further demonstrating our continued momentum and it's sustainable.

Tony Cheng: I'd like to once again thank you all, and this concludes our third quarter.

Tony Chang: Our I'd like to once again, thank you all and this concludes our third quarter call.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Speaker Change: Okay.

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