John Hayden Senior Vice President, Controller and Investor Relations Thriving in Challenging Times Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 Exhibit 99.1 |
2 Safe Harbor Thriving in Challenging Times This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements relating to projections of the earnings, revenues, income or loss, future financial performance and growth potential of Reinsurance Group of America, Incorporated and its subsidiaries (which we refer to in the following paragraphs as "we," "us" or "our"). The words "intend," "expect," "project," "estimate," "predict," "anticipate," "should," "believe," and other similar expressions also are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Numerous important factors could cause actual results and events to differ materially from those expressed or implied by forward-looking statements including, without limitation, (1) adverse capital and credit market conditions and their impact on our liquidity, access to capital, and cost of capital, (2) the impairment of other financial institutions and its effect on our business, (3) requirements to post collateral or make payments due to declines in market value of assets subject to our collateral arrangements, (4) the fact that the determination of allowances and impairments taken on our investments is highly subjective, (5) adverse changes in mortality, morbidity, lapsation, or claims experience, (6) changes in our financial strength and credit ratings and the effect of such changes on our future results of operations and financial condition, (7) inadequate risk analysis and underwriting, (8) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in our current and planned markets, (9) the availability and cost of collateral necessary for regulatory reserves and capital, (10) market or economic conditions that adversely affect the value of our investment securities or result in the impairment of all or a portion of the value of certain of our investment securities, (11) market or economic conditions that adversely affect our ability to make timely sales of investment securities, (12) risks inherent in our risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (13) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (14) adverse litigation or arbitration results, (15) the adequacy of reserves, resources, and accurate information relating to settlements, awards, and terminated and discontinued lines of business, (16) the stability of and actions by governments and economies in the markets in which we operate, including ongoing uncertainties regarding the amount of United States sovereign debt and the credit ratings thereof, (17) competitive factors and competitors' responses to our initiatives, (18) the success of our clients, (19) successful execution of our entry into new markets, (20) successful development and introduction of new products and distribution opportunities, (21) our ability to successfully integrate and operate reinsurance business that we acquire, (22) action by regulators who have authority over our reinsurance operations in the jurisdictions in which we operate, (23) our dependence on third parties, including those insurance companies and reinsurers to which we cede some reinsurance, third-party investment managers, and others, (24) the threat of natural disasters, catastrophes, terrorist attacks, epidemics, or pandemics anywhere in the world where we or our clients do business, (25) changes in laws, regulations, and accounting standards applicable to us, our subsidiaries, or our business, (26) the effect of our status as an insurance holding company and regulatory restrictions on our ability to pay principal and interest on our debt obligations, and (27) other risks and uncertainties described in this document and in our other filings with the Securities and Exchange Commission. Forward-looking statements should be evaluated together with the many risks and uncertainties that affect our business, including those mentioned in this document and described in the periodic reports we file with the Securities and Exchange Commission. These forward-looking statements speak only as of the date on which they are made. We do not undertake any obligations to update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to review the risk factors in our most recent Form 10-K. |
3 Capital Allocation Effective in 1Q 2006, the Company changed its capital allocation methodology from a regulatory-based approach to an economic-based approach. To enhance comparability, all prior period segment results in this presentation have been adjusted to reflect the new methodology. This change in capital allocation does not affect the Company’s reported consolidated financial results. RGA uses a non-GAAP financial measure called “operating income” as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability and underlying trends of the company’s continuing operations because that measure excludes the effect of net realized capital gains and losses, changes in the fair value of certain embedded derivatives and related deferred acquisition costs. These items tend to be highly variable primarily due to the credit market and interest rate environment and are not necessarily indicative of the performance of our underlying businesses. Additionally, operating income excludes any net gain or loss from discontinued operations, which management believes is not indicative of the company’s ongoing operations. The definition of operating income can vary by company and is not considered a substitute for GAAP net income. Additionally, the Company evaluates its stockholder equity position excluding the impact of “Other Comprehensive Income”. This is also considered a non-GAAP measure. The Company believes it is important to evaluate its stockholders’ equity position to exclude the effect of Other Comprehensive Income since the net unrealized gains or losses included in Other Comprehensive Income primarily relate to changes in interest rates, credit spreads on its investment securities and foreign currency fluctuations that are not permanent and can fluctuate significantly from period to period. Reconciliations of non-GAAP measures to the nearest GAAP measures are provided at the end of this presentation. Non-GAAP Measures |
20-Minute Break Global Acquisitions Scott Cochran, Executive Vice President, Global Acquisitions and Financial Solutions Investments David Fischer, Senior Vice President and Chief Investment Officer Financial Overview Jack Lay, Senior Executive Vice President and Chief Financial Officer Closing Remarks A. Greig Woodring, President, Chief Executive Officer, and Director Q&A Session 4 Opening Remarks John Hayden, Senior Vice President, Controller and Investor Relations Overview A. Greig Woodring, President, Chief Executive Officer, and Director U.S. Traditional Markets Anna Manning, Executive Vice President and Head of U.S. Markets Non-traditional Markets John Laughlin, Executive Vice President, Global Financial Solutions International Markets Allan O’Bryant, Executive Vice President, Head of International Markets and Operations Agenda |
A. Greig Woodring President and Chief Executive Officer Thriving in Challenging Times RGA 2012 Investor Day Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
Strategic Overview 6 Thriving in Challenging Times Signature Strengths • Deep technical expertise • Organizational focus on establishing and maintaining strong, multilayered, long- term customer relationships • Collaborative organization that leverages knowledge and skills across products and geographies • Abundance of high- quality data and strong analysis capabilities • Innovation Compelling Competitive Position • Global footprint with substantial market share in key markets • Preferred partner with high customer satisfaction • Diversified revenue streams by geography and product • Experienced executive management team Opportunity • Interest rates • Equity markets • Regulations/ Accounting • Capital • Growth • Expected growth rates of 7-10% for 2012- 2014 • Extraordinary environment • Ability to thrive in challenging times |
RGA is Different than Most Insurance Investment Opportunities 7 RGA: an opportunity to diversify within the insurance space Different risk profile, focus and approach Lower asset leverage Lower equity and interest rate sensitivity Mortality focus – more predictable Higher ROE Built-in, long-term, high-quality earnings Generally, better performance during difficult economic times Thriving in Challenging Times |
8 RGA Canada – Financial Results and Projections *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Thriving in Challenging Times ($ Millions) |
9 Canada Individual Life Market Source: Munich American / Society of Actuaries Reinsurance Surveys Life cession rates expected to decline Thriving in Challenging Times |
Thriving in Challenging Times 10 RGA Canada – NMG Study Source: NMG Consulting Business Capability Index – Momentum – 2011 (All Respondents) |
RGA Canada – NMG Study 11 Value Competitiveness – Likelihood to Recommend (All Respondents) Thriving in Challenging Times Value Competitiveness – Promoters/Detractors Source: NMG Consulting |
RGA Canada 12 Strengths • In force has substantial embedded value • Facultative underwriting expertise • Strong client relationships at all levels • Service all companies • Quality and experience of staff across all product lines Opportunities • Expected growth rates of 8-9% premium; bottom-line 10-12% • Sustain leadership in shrinking mortality market • Continue momentum in Group market • Grow by diversification into new lines of business • Living Benefits • Critical illness • Individual disability • Longevity • Large capital-motivated transactions Thriving in Challenging Times |
RGA 2012 Investor Day 13 Key Messages • Leading global presence • High levels of expertise and collaboration • Challenging environment that is creating opportunities • Principal focus on client relationships Thriving in Challenging Times Proven ability to thrive in challenging times |
Anna Manning Executive Vice President and Head of U.S. Markets U.S. Traditional Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
U.S. Traditional Strong Client Focus Key to Stability and Growth Long-term focus on clients enables stable results Consistent approach to market Pricing discipline Leader in client satisfaction Innovation and continuous improvement leading to differentiated products and services valued by clients Collaboration across product lines, functions, and geographies to understand and meet client needs most effectively and efficiently 15 U.S. Traditional |
Product Line Distribution 16 Product line diversification U.S. Traditional *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 88% 4% 8% Net Premiums Traditional Full Year 2011 Individual Life LTC Group U.S. 88% 7% 5% Pre Tax Operating Income* U.S. Traditional Full Year 2011 - |
*Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Steady financial performance U.S. Traditional Financial Results and Projections $2,647 $2,868 $3,093 $3,314 $3,776 $3,979 $4,246 $4,415 $4,622 17 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 * Individual Life Group LTC Pre-Tax Operating Income* Projection Actual |
18 Difference between Total Claims and Linear Trend U.S. Individual Mortality Monthly Weekly Quarterly Annually U.S. Traditional |
19 U.S. Individual Life Market Source: Munich American / Society of Actuaries Reinsurance Surveys Life cession rates continue to decline U.S. Traditional $ Billions 12% 11% 16% 15% 22% 23% 24% 20% 22% 26% 0% 5% 10% 15% 20% 25% 30% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Amount Reinsured Amount Retained RGA Share 59% 57% 48% 41% 37% 36% 60% 35% 31% 62% |
Source: Munich American / Society of Actuaries Reinsurance Surveys 20 Leading market share U.S. Individual Life Reinsurance Market Share 3% 3% 3% 4% 7% 6% 5% 7% 9% 11% 13% 12% 15% 16% 16% 13% 26% 25% 22% 18% 12% 14% 19% 19% 14% 22% 11% 4% 57% 9% 6% 56% 8% 12% 52% 9% 11% 38% 10% 7% 40% 12% 10% 34% 12% 13% 38% 15% 12% 32% 20% 11% 23% 21% 9% 17% 21% 8% 17% 18% 14% 15% 15% 12% 18% $ Billions U.S. Traditional |
U.S. Traditional – Consistent Approach to Market We Deliver 21 U.S. Traditional Fair and Consistent Pricing Client Focus Value -added Services Technical Risk Expertise Leading to long-term client partnerships Industry-leading facultative services Data-driven analytic insights Leading industry research Innovative thinking Leading client satisfaction |
Leading Client Satisfaction – Flaspöhler Results 22 Source: 2011 Flaspöhler Cedent Survey (Life -- North America) RGA #1 in client perception Factor Ordinal Rank Medical Underwriting Capabilities #1 Financial Value #1 Financial Security #3 Strong Client Orientation #1 Leading Expertise & Market Knowledge #1 Leading Actuarial Product Development Expertise #1 Timely Service #1 High-Quality Risk Management Service #1 Effective Training Courses & Seminars #1 Strong Claims-Handling Ability #1 U.S. Traditional |
Leading Client Satisfaction – Flaspöhler Net Promoter Score 23 Measures How Likely Client is to Recommend Reinsurer Source: 2011 Flaspöhler Cedent Survey (Life -- North America) U.S. Traditional A strong indicator of future growth |
Mortality – Facultative Leadership 24 Key differentiator providing competitive advantage U.S. Traditional Client Support • Facultative call desk • Year-end and high-volume resource support Expertise • Impaired risk expertise • Client education programs • Webcasts Consistency • Consistency of offers • Time service • Experienced staff Technology • Electronic underwriting tools and programs • Electronic facultative submission program |
Data-Driven Research at RGA 25 U.S. Traditional Leader in research • • Analytical expertise • Life insurance business knowledge External Research • Reinsurance pricing • Facultative underwriting • Underwriting rules development • Product development • Client education/ training seminars Competitive Advantage • • Internal Data Largest “clean” database of automatic and facultative life reinsurance business Dedicated research and development team Strong partnerships with industry groups and third-party data providers e- |
Innovation at RGA – Recent Recognition A.M. Best Innovators Showcase, January 2012 26 U.S. Traditional |
U.S. Group Reinsurance Market Leader in U.S. group reinsurance market 27 Sources: LIMRA, CDC, NMG, Internal Adjustments and Estimates $ Millions U.S. Traditional Estimated Premiums and Market Share 20% 18% 8% $ Millions |
U.S. Group Reinsurance 28 U.S. Traditional Focus on employee benefit market RGA Premium by Risk RGA Premium by Distribution Method Healthcare Reinsurance Morbidity risk transfer products Life, Accident and Disability Reinsurance Mortality risk transfer products Ancillary A&H products Long-term and short-term disability products 2011 Premium $339 Million Disability 13% Healthcare 51% Life and Accident 36% Broker 74% Direct 26% Employers Insurers RGA Retrocessionaires Employers offer Life, AD&D, LTD, Medical Benefits Benefits are insured with insurance companies and health providers Reinsures benefits via excess of loss or quota share RGA may choose to reinsure a portion of its assumed risk on either a treaty or facultative basis |
U.S. Group Reinsurance – Approach to Market Reporting systems allow real-time access to treaty level performance – a crucial element in managing annually renewable contracts Short-term contracts require us to continually sell and differentiate 29 U.S. Traditional Portfolio of services provides differentiation and competitive advantage Financial Monitoring Fair and Consistent Pricing Value Added Services We Deliver Income Statements by Contract Market Research Claims Advisory Services Actuarial and Risk Management Underwriting and Product Development Market leadership in value added services Strong risk management programs Innovative thinking Long-term client partnerships |
Established in 2007 to focus on individual living benefit-style products Primary focus has been on new business opportunities, not in-force blocks Limited competition No drag from low or unprofitable legacy business 30 Overview U.S. Long Term Care U.S. Traditional |
U.S. Long Term Care – Approach to Market 31 U.S. Traditional Detailed risk analysis and product modeling Cost-effective risk management programs Underwriting and claims expertise Disciplined pricing We Deliver Alignment of Interests with Our Clients Experienced Staff Financial Monitoring Technical Risk Expertise Disciplined and measured approach |
Competitive advantages from key differentiators Leading market share Deep technical expertise Strong, long-term client relationships Large, stable, high-quality earnings engine Quality and experience of staff U.S. Traditional Summary 32 U.S. Traditional |
John Laughlin Executive Vice President Global Financial Solutions Global Financial Solutions Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
34 Global Financial Solutions Global capital and risk solutions • Financial Reinsurance • Asset Intensive Reinsurance • Longevity Reinsurance Lines of Business • Provide tailored capital and risk solutions to clients • Generate high-return business • Provide diversified income streams • Leverage expertise across global markets Objectives Global Financial Solutions |
35 Global Financial Solutions Global Financial Solutions Environment Trend Opportunity Volatile economic conditions Increased regulation Increased capital requirements Accounting changes Demographic changes Increased demand for efficient capital and risk management Increased management of interest rate, distintermediation, default risks Consumer demand for Protection Guarantees Stability Provide expertise, capital, risk-sharing Asset Intensive coinsurance Embedded value transactions Financially motivated reinsurance |
36 Keys to Success Global Financial Solutions • Consistent growth in profits • High-return business • Industry credibility with clients, regulators • Longest client relationships • Financial Reinsurance – 19 years • Asset Intensive – 15 years We Deliver Strong RGA history, rating, capital Risk Management Strong analytical and structuring expertise; conservative approach to risk assessment Brand Experience Seasoned group, dedicated to line of business, innovation across markets |
37 Financial Reinsurance *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Strengths • Steady growth in Operating Income • Successful expansion into international markets Results ($ Millions) Actual Projection Pre-tax Operating Income* Superior strengths lead to outstanding results • Pioneers in this business • Strong analytical, regulatory, structuring expertise • Large client base; long, established client contacts • Industry credibility with clients and regulators • Global expansion allows further financial reinsurance growth |
38 Financial Reinsurance – Summary Global Financial Solutions • Health & Group • XXX/AXXX Current State • Established expertise • Leading presence in U.S., Japan • Pressure on efficient capital management Strategies • Expand strategic accounts in developed markets: U.S., Japan, Canada • Deploy RGA developed expertise in targeted markets: U.K., Australia, Germany, France, Taiwan Expected Results • 15-20% intermediate- term growth in operating income |
39 Asset Intensive Reinsurance Global Financial Solutions Characteristics Doesn’t require distribution force or substantial fixed administration expenses Complements large mortality base Defined appetite for amount of business allows selective participation in best opportunities Valuable review partner to clients Flexibility as products/markets/economic factors change Optimally positioned to deliver profitable growth |
40 Asset Intensive Reinsurance ($ Millions) ($ Billions) *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • Strong RGA brand; history, rating, capital • Client contacts and relationships • Analytical and Risk Management expertise • Well-positioned to support broad range of products/risks • Capital • Expertise • Risk Management Strengths 0 10 20 30 40 50 60 70 80 90 100 2007 2008 2009 2010 2011 2012 2013 2014 Pre-tax Operating Income* EIA VA FA/BOLI Other Actual Projection 0 2 4 6 8 10 12 14 16 2007 2008 2009 2010 2011 2012 2013 2014 Account Value Reinsured EIA VA FA/BOLI Other Actual Projection |
41 Asset Intensive Reinsurance Estimated Interest Rate and Equity Impacts on Pre-tax Operating Income Global Financial Solutions Manageable interest rate and equity sensitivities -50bps +50bps +10% -10% 7.6 -7.9 0.6 -0.9 -10 -8 -6 -4 -2 0 2 4 6 8 10 Interest Rates Fixed Indexed Annuity Variable Annuity Fixed Annuity/Other 2.7 -2.7 5.3 -6 -10 -8 -6 -4 -2 0 2 4 6 8 10 S&P 500 Index Fixed Indexed Annuity Variable Annuity Fixed Annuity/Other |
42 Asset Intensive Reinsurance – Summary Global Financial Solutions Current State • Established business in U.S. • Strong pricing and risk management skills • Ability to review and support all investment products Strategies • Reinsure products in favorable environments • Target well-designed products from quality direct writers • Expand in established markets: U.S., Japan, Australia • Deploy resources into new markets: U.K., Germany, France, Hong Kong Expected Results • 10-20% intermediate- term growth in operating income • Balanced portfolio of income and risks |
43 Longevity ($ Millions) Pre-tax Operating Income* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 0 5 10 15 20 25 30 35 40 2008 2009 2010 2011 2012 2013 2014 • Effective hedge to large mortality position • Analytical and Risk Management expertise • Strong client contacts • Demand for reinsurance exceeds supply • Defined appetite for amount of business in each market Strengths • Relatively new line of business • Significant, diversified income stream • Primarily U.K., Canada Results Actual Projection |
44 Longevity – Summary Global Financial Solutions Current State • Solid expertise • Strong current and projected demand • Organic profits on in- force business Strategies • Expansion into targeted markets: U.S., Netherlands • Continued production, profits in established markets • Combination with Asset Intensive solutions Expected Results • 10-20% intermediate- term growth in operating income |
Allan O’Bryant Executive Vice President Head of International Markets and Operations International Markets and Operations Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
46 International Growth 34% of net premiums derived from outside North America International Markets and Operations Serve clients in 70+ countries from 25 countries around the world |
International Presence 47 Overview of RGA’s Individual Business International Markets and Operations Individual premiums expected to increase ($ Millions) 28% 27% 26% 27% 29% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2007 2008 2009 2010 2011 US Canada International |
International Presence 48 Overview of RGA’s Group Business International Markets and Operations Continued opportunities for growth ($ Millions) |
($ Millions) International Markets and Operations Asia Pacific Operations 49 *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 865 1,001 999 1,139 1,304 1,380 1,550 1,730 0 10 20 30 40 50 60 70 80 90 100 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2007 2008 2009 2010 2011 2012 2013 2014 Asia Pacific Operations Net Premiums Pre-tax Operating Income* • Recognized market leader, based on NMG survey • Product development key to growth in Southeast Asia • Adverse Australian disability experience in 2011 • Increased focus on financial and asset-based transactions in Japan • Established presence in China, with representative office operating in Beijing Overview Actual Projection |
Asia Pacific Operations 50 International Markets and Operations Market 2011 Net Premiums ($ Millions) 2010/2011 Annual Premium Growth 5-year CAGR 2010/2011 Fee Income Growth Australia/New Zealand 746.2 26% 19% - Japan 183.5 -12% 11% 19% South Korea 177.1 6% 1% -100% Hong Kong & Southeast Asia 125.5 18% 15% - Taiwan 70.3 12% 13% 62% China 1.9 6% 57% - Total 1,304.5 |
Asia Pacific Operations - Emerging Opportunities 51 International Markets and Operations Risk products are being increasingly featured Financial reinsurance demand is high Generally more favorable tax, capital and regulatory regimes encourage growth Economics and demographics support growth Growth of medical insurance Anticipate significant growth opportunities in China after licensing |
Actual Projection ($ Millions) *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 52 International Markets and Operations Europe & South Africa Operations |
Europe & South Africa Operations 53 International Markets and Operations Market 2011 Net Premiums ($ millions) 2010/2011 Annual Premium Growth 5-year CAGR 2010/2011 Fee Income Growth U.K. 755.5 20% 33% 100% South Africa 112.1 37% 33% 80% Italy 87.4 290% 372% - Spain 59.7 17% 35% 50% India 55.2 55% 43% - France 50.4 7% 5040% 62% Latin America 29.4 9% 35% - Middle East 25.0 169% - - Netherlands 9.0 27% 50% - Germany 6.3 80% - - CEE 4.8 60% 240% - Total 1,194.5 |
Europe & South Africa Operations - Emerging Opportunities 54 International Markets and Operations Solvency II forcing companies to reassess their risks and consider capital-efficient transactions Increased focus on risk management encourages life assurers to specialize in key products Financial and banking crisis is forcing bank assurers to create free capital through product restructures and financial transactions Demographics are creating an opportunity for annuities and long- term care products Changes in client distribution channels offer new product development opportunities |
55 International Markets and Operations International Operations - Asia Pacific, Europe & South Africa *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. • International operations play a substantial and growing role in RGA’s worldwide business, now 34% of premiums • Developing significant expertise and economies of scale within these operations • Increasing penetration of multinational and local insurers in key international markets • Significant opportunities in China and India Overview ($ Millions) Actual Projection International Operations |
Market Size Individual Business Estimated to December 31, 2011 56 Estimated Source: NMG Consulting, Life & Health Reinsurance Segment Update 2011 *NMG Life & Health Reinsurance Programme 2010 South Africa – Total Market **NMG Life & Health Reinsurance Programme 2010-2011 South Korea – Total Market Country Market Size (in $ millions) Currency RGA Market Share (%) Australia/New Zealand 210 USD 26% CEE 3 EURO 11% China n/a France 62 EURO 8% Germany / Austria 74 EURO 1% Hong Kong 27 USD 21% India 42 USD 34% Indonesia 8 USD 10% Italy 15 EURO 20% Japan 71 USD 22% Country Market Size (in $ millions) Currency RGA Market Share (%) Malaysia 29 USD 28% Mexico 58 USD 10% Middle East 4 USD 12% Netherlands 25 EURO 14% Singapore 34 USD 23% South Africa* 110 USD 19% South Korea** 72 USD 11% Spain 173 EURO 20% Taiwan 25 USD 22% Thailand 12 USD 34% U.K. & Ireland 396 GBP 23% International Markets and Operations |
Market Size Group Business Estimated to December 31, 2011 57 Market Market Size (in $ millions) Currency RGA Market Share (%) Australia/New Zealand 1,049 USD 36% CEE 7 EURO 12% China n/a France/Belgium 241 EURO 8% Germany/Austria 38 EURO 0% Hong Kong 35 USD 13% India 17 USD 40% Indonesia 2 USD 0% Italy 193 EURO 8% Japan 7 USD 0% Malaysia 14 USD 8% Market Market Size (in $ millions) Currency RGA Market Share (%) Mexico 127 USD 10% Middle East 233 USD 10% Netherlands 28 EURO 7% Singapore 12 USD 2% South Africa* 178 USD 8% South Korea** 27 USD 59% Spain 238 EURO 23% Taiwan 4 USD 0% Thailand 9 USD 0% U.K./Ireland 101 GBP 8% Source: NMG Consulting, Life & Health Reinsurance Segment Update 2011 *NMG Life & Health Reinsurance Programme 2010 South Africa – Total Market **NMG Life & Health Reinsurance Programme 2010-2011 South Korea – Total Market International Markets and Operations |
Looking Forward Growth Factors for Success 58 International Markets and Operations RGA Framework Technical expertise tailored to clients’ needs Deep, long-term multinational client relationships Teams of experts to leverage expertise worldwide Proprietary data collection and analysis Long-term Growth |
• Over 150,000 facultative cases reviewed in 2011 • Global Underwriting Manual (GUM) ranked most preferred manual in 2011 • Client seminars and process reviews • Longer Life Foundation partnership Underwriting Excellence • Ongoing, multi-level, flexible learning framework • Face-to-face interactive learning facilitated by trained RGA associates • 82 modules in 3 streams -- Fundamentals, Intermediate and Advanced • Packaged according to client need • Available to treaty clients globally • Supported by the innovative GULF Stream educational video series Global Underwriting Learning Framework (GULF) • Cutting-edge, automated e-underwriting solutions • Adapted to four client needs, from simplified rules hosted on RGA’s network to complicated multinational rules hosted by clients • Automated underwriting of impaired annuities in the U.K. allowed significant increase in market share • Used by 28 customers in 12 countries in 6 languages; developing rules in other languages • Over 2 million cases underwritten annually AURA ® e-Underwriting Solutions Technical Expertise Tailored to Clients’ Needs 59 International Markets and Operations |
60 Deep, Long-Term Multinational Client Relationships International Markets and Operations Dedicated Teams Deep, Multilayered, Long-term Relationships Comprehensive Understanding Enhance working relationships at global and regional level Complement strong local relationships Ensures RGA associates understand the objectives and needs of their counterparts at the client company Provides effective feedback mechanisms, continually improves the value RGA brings to such clients to maintain trust and remain a valued long-term global partner Oversees global relationships Offers world-class support and solutions at the global, regional or local level |
Teams of Experts Leverage Expertise Worldwide International Support Successes 61 Annuities Annuities Group Group Financial Reinsurance Financial Reinsurance Product Development Product Development Research and Development Research and Development Operational Leadership to Local Business Units Underwriting/ Medical Underwriting/ Medical Pricing Pricing Claims Claims International Markets and Operations |
Proprietary Data Collection and Analysis 62 International Markets and Operations RGA’s research and development teams work with local experts Provide support to clients Market and industry research and analysis including regulatory, distribution and other trending reviews Product development Biometric experience analysis Benchmarking Surveys Strategic and Technical Expertise Market and Industry Research and Analysis Services Provided |
Thriving in Challenging Times RGA 2012 Investor Day Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
Scott Cochran Executive Vice President Global Acquisitions and Financial Solutions Global Acquisitions Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
Expanding a capability to better serve clients and shareholders RGA Global Acquisitions Global Acquisitions |
Launched in 2011, with objective to deploy capital in attractive, closed-block opportunities Significant opportunities exist in numerous markets that RGA already serves Natural extension of RGA’s strengths and capabilities Considerable variation in competitive offerings by market Building our reputation as a creative, fair and reliable partner for in-force transactions Overview 66 Global Acquisitions Another approach to better serve RGA clients and shareholders |
Building on a Strong Existing Platform 67 Evolving Capabilities Building acquisition-oriented team and focus Adding direct policy administration solutions Extending brand to include acquisitions Global Acquisitions + Existing Strengths Solid global brand Strong customer relationships Underwriting and actuarial strengths Capital management solutions Customized reinsurance solutions Geographic reach Diverse product offerings Reinsurance platform |
Block Re Block Acquisition Partnered Acquisitions Solution Description Reinsure in-force block Block Re, with transfer of direct policy administration Supporting an acquirer in their M&A pursuits Client Benefits Monetize future profits Risk and capital relief Divest line of business, and in some situations, retire legacy administrative platforms Refocus management time and reduce pressure on other resources Leverage RGA’s historical capabilities (e.g., risk, product and capital management insights) Acquisition Approaches 68 Global Acquisitions Customized solutions that transition insurance risks to RGA |
Market Outlook 69 Global Acquisitions Outlook is favorable due in large part to market disruptions Strategic refocus European uncertainties Regulatory changes such as Solvency II and Basel III Accounting changes High primary growth rates in Asia, low in U.S. Low stock valuations Historical price expectations Low interest rates Competitive landscape Favorable Trends Neutral Trends Unfavorable Trends |
Customer relationships, both at local and global levels Entrepreneurial culture Global perspective with local skills Capital management Brand / reputation Pricing discipline Reinsurance structuring options Deep insurance risk expertise Existing scalable back office RGA Differentiators 70 Global Acquisitions Competitive positioning varies by market and opportunity |
Continually deploying capital via in-force acquisitions Transactions priced to be accretive Expect to achieve ultimate run rate within 2-3 years, with material near-term financial contributions Transactions irregular in size and frequency…challenging to predict Product and market interests consistent with RGA’s existing business Develop and sustain the reputation of being a creative, fair and reliable partner for in-force transactions Acquisition Goals 71 Global Acquisitions Building a sustainable value-adding capability |
Investments David Fischer Senior Vice President and Chief Investment Officer Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
RGA Investments: Mission 73 Investments |
RGA Investments: Mission Investments Create Optimal Portfolios Balance Different Needs Growing investment income Achieving total return objectives Ensuring balance sheet safety Designed for liability matching and return goals Tailored for the market environment Meeting all constraints 74 |
Risk Management Principles 75 Investments Investment Policies Culture Risk budgets Diversification requirements and limits Interest rate and currency matching Four “Cs” of credit: capital, cash flow, collateral, character Monitor portfolio on total return basis Is there “Margin of Safety”? |
ALM starts with a clearly defined investment mandate for each portfolio, i.e., duration, convexity and gross yield targets Rely on expanded metrics for asset intensive deals such as key rate durations, as well as credit and asset class splits Short-term and long-term profitability analysis prepared to show how profitability of blocks react to changes in the economic environment Risk is measured using regulatory and economic frameworks RGA Asset Liability Management 76 Investments |
Portfolio Overview 77 Investments |
Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Allocation by Asset Class Investments Asset Class December 31, 2011 Market Value ($ Millions) % U.S. Government Bonds $439,215 1.9% Foreign Government Bonds 769,213 3.3% Agency, Provincial & Other Government Bonds 6,482,346 27.8% Investment-grade Corporate Bonds 8,109,866 34.7% High-yield Corporate Bonds & Bank Loans 640,784 2.7% Private Placements 941,785 4.0% Commercial Mortgage Loans 1,162,130 5.0% MBS & CMOs 1,592,313 6.8% ABS 896,688 3.8% CMBS 1,571,906 6.7% Other 751,514 3.2% Total Market Value $23,357,760 100% Total Book Value $20,614,187 Market to Book % 1.13% 78 |
Ratings December 31, 2011 Market Value ($ Millions) % AAA-AA $10,242,710 43.9% A 5,872,729 25.1% BBB 4,778,075 20.5% < BBB 981,033 4.2% Not Rated* 357,022 1.5% Equities & CML** 1,126,191 4.8% Total $23,357,760 100% * Includes Derivatives & Mutual Funds ** Excludes Credit Tenant Loans, as most are rated by NRSRO and included in ratings above Allocation by Rating Investments 79 |
Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Asset Allocation by Currency (in U.S. $ equivalents) Investments 80 Currency December 31, 2011 Market Value ($ Millions) % USD $16,235,100 69.5% CAD 4,654,554 19.9% AUD 1,056,065 4.5% GBP 444,096 1.9% EUR 234,551 1.0% Other 733,395 3.1% Total $23,357,760 100% CAD 19.9% AUD 4.5% GBP 1.9% EUR 1.0% Other 3.1% USD 69.5% |
Current Heightened Focus 81 Investments |
RGA Earned Yield History & Projections Assumes $525 million of net new premiums; cash coupon is equal to the beginning of period book yield and 19% turnover (maturities, calls, paydowns and sales). New money (maturities, calls and paydowns) is assumed to be invested at 4.1%. Securities sold are assumed to be invested at the mid-point between the beginning book yield and 4.1%. All reinvestments are assumed to be invested in the middle of each year. Investments 82 Quarterly Investment Yield and Projection Actual 4.75% Reinvest Rate 4.25% Reinvest Rate 3.75% Reinvest Rate 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% |
RGA After-tax EPS Impact of Low Investment Yields Investments 83 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 2012 2013 2014 2015 2016 2017 After-tax EPS Impact |
Exposure to Europe and Periphery Country Definition: Issue Country (without Funds Withheld) Investments 84 Market Value ($ Millions) Total Greece Italy Ireland Portugal Spain Market Value Book Value Financials $- $- $4,397 $- $20,378 $24,774 $29,650 Industrials - 2,809 8,342 - 33,137 44,288 44,857 Utilities - - 4,807 - - 4,807 4,974 Sovereign - - - - - - - Supranationals/ Agencies - - - - - - - Total $0 $2,809 $17,546 $0 $53,515 $73,869 $79,480 Market Value ($ Millions) Total GIIPS U.K. France Germany Other Europe Market Value Book Value Financials $24,774 $120,558 $80,346 $10,446 $172,958 $409,082 $433,712 Industrials 44,288 158,965 79,437 65,841 179,133 527,664 484,910 Utilities 4,807 68,789 5,842 379 36,392 116,209 109,439 Sovereign - 142,009 4,266 73,869 9,852 229,996 216,223 Supranationals/ Agencies - 8,238 19,570 31,872 63,256 122,936 118,289 Total $73,869 $498,559 $189,461 $182,407 $461,591 $1,405,887 $1,362,572 Exposure to Greece, Italy, Ireland, Portugal and Spain (GIIPS) as of December 31, 2011 Exposure to European Based Institutions as of December 31, 2011 |
$1.004 billion balance outstanding, as of December 31, 2011 218 loans, $4.6 million average loan size 5.74% average coupon Average DSCR* 1.71x Average LTV 59% +90 Delinquent 145bp * Debt Service Coverage Ratio Excludes Asset-Intensive Funds Withheld CMLs Commercial Real Estate – Direct Commercial Loan Portfolio Investments 85 LTV Debt Service Coverage Ratios Total >1.2x 1.0-1.2x <1.0x <65% 57.9% 4.2% 2.2% 64.3% 65-75% 11.9% 3.9% 2.1% 17.9% 76-80% 2.7% 0.7% 1.3% 4.7% >80% 4.2% 4.9% 4.0% 13.1% Total 76.7% 13.7% 9.6% 100% |
Commercial Real Estate - CMBS Investments 86 Vintage Year Market Value ($ Millions) Total AAA AA A BBB BIG Market Value Book Value 2005 & Prior $98,213 $143,609 $31,187 $24,295 $40,753 $338,057 $332,894 2006 227,959 59,727 55,074 26,563 43,559 462,882 447,653 2007 214,510 18,700 122,945 108,047 77,718 541,920 558,241 2008 9,053 59,536 19,237 - 17,554 105,380 99,721 2009 1,709 13,684 9,515 - - 24,908 21,091 2010 28,872 53,480 20,727 - - 103,079 96,703 2011 20,002 12,079 7,594 - - 38,756 Total $650,318 $360,815 $266,279 $158,905 $179,584 $1,615,901 $1,595,059 Commercial Mortgage-backed Securities as of December 31, 2011 Note: Totals include directly held investments with amortized cost of $1,234.0 million and fair value of $1,242.2 million as well as investments in funds withheld with amortized cost of $361.1 million and fair value of $373.7 million. |
Market Outlook 87 Investments |
88 U.S. Outlook Most likely: “Slow Grow Out” U.S. economy stronger than Europe Same as last year: Fed still at 0% Fed still trying to avert Japan-like U.S. future Apparently, will risk an “Inflation Surprise” Source: Data Insight, Bianco Research L.L.C. |
Investments 89 Eurozone Outlook Most likely: EMU to stay (largely) intact Back-and-forth politics and “painsharing” enables this outcome Economic growth necessary to avoid the more pessimistic outcomes Long-Term Refinancing Operations (LTRO) is European-style quantitative easing Source: Data Insight, Bianco Research L.L.C. 1.5 3.0 4.5 6.0 7.5 Italy Spain German Eurozone 10Y Sovereign Bond Yield (7/1/2010-2/14/2012) France |
Investments 90 Asset Class Outlook Fed imposing “financial repression” (negative real rates) on the market Real rates are negative at least to 10-year risk-free rates Spreads on credit asset classes look attractive for the “Slow Grow Out” view and reasonable for other scenarios Credit Asset Classes Spreads Corporate +206 bps Corporate – Non Financial +171 bps CMBS – AAA +201 bps CML +290-310 bps Sources: Barclays, Bloomberg (01/31/2012 Levels) 0 200 400 600 800 1000 1200 1400 1600 Credit Spreads 0.50 1.00 1.50 2.00 2.50 3.00 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 Corporate Fundamentals - |
Investments 91 RGA Commercial Mortgage Lending Market currently in early-mid recovery Indicates best credit environment for RE lending Market early in the recovery cycle Little new construction Space demand is increasing Underwriting remains conservative Valuations remain low Attractive returns Superior spreads +290-310 to Treasuries +100-120 to Corporates Attractive relative value LTV 65% DSCR 1.3x Excellent risk-adjusted returns Outlook: Favorable market conditions, but slow growth for next 3-5 years |
Note: Includes Asset-Intensive Funds Withheld assets Excludes Policy Loans & Other Funds Withheld assets Government bonds includes U.S. Treasuries, foreign government, agencies, provincials and other government bonds Other includes Cash, Short-term, Derivatives and Alternative assets Asset Allocation 2012 Consolidated Projection Investments 92 Asset Class December 31, 2011 Book Value ($ Millions) % of Portfolio Projected Net Investment December 31, 2012 Projected Ending Book Value % of Portfolio Government Bonds $6,008,528 29.1% $389,000 $6,397,528 29.0% Investment-grade Corporate Bonds (Public and Private Placement) 8,359,539 40.6% 725,000 9,084,539 41.2% High-yield Corporate Bonds & Bank Loans 649,064 3.1% 40,000 689,064 3.1% Commercial Mortgage Loans 1,051,684 5.1% 250,000 1,301,684 5.9% MBS & CMO 1,484,642 7.2% 62,000 1,546,642 7.0% ABS 931,443 4.5% 139,000 1,070,443 4.9% CMBS 1,542,493 7.5% (10,000) 1,532,493 7.0% Other 586,795 2.8% (162,000) 424,795 1.9% Total $20,614,187 100% $1,433,000 $22,047,187 100% |
Financial Overview Jack B. Lay Senior Executive Vice President and Chief Financial Officer Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
Financial Overview 94 Thriving in challenging times I. Where We Have Been II. The RGA Investment Opportunity III. Capital Management IV. Where We Are Going Financial Overview |
I. Where We Have Been 95 Financial Overview |
($ Millions) Consolidated Net Premiums Financial Overview 96 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 |
($ Millions) Operating Income* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview 97 - 100 200 300 400 500 600 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 |
Operating Income per Share* *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. . Financial Overview 98 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 |
Operating Return on Equity* *Operating ROE is computed excluding other comprehensive income, using quarterly averages for equity amounts. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview 99 10-Year Average 13.0% 13.1% 12.9% 12.2% 11.1% 13.2% 14.0% 14.1% 13.1% 13.2% 12.6% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 |
Annualized Operating ROE* – Quarterly Performance Financial Overview 100 5-Year Average 13.4% 13.6% 13.7% 14.9% 13.9% 10.6% 15.9% 16.8% 13.3% 8.5% 16.0% 13.5% 14.3% 10.2% 13.0% 13.2% 16.0% 11.5% 12.2% 14.1% 12.7% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 *Operating ROE is computed excluding other comprehensive income, using quarterly averages for equity amounts. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. |
Book Value per Share* 10-Year Trend *Book value excludes other comprehensive income. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Overview 101 $20.43 $22.63 $27.73 $31.08 $34.06 $38.79 $42.93 $43.58 $48.89 $56.34 $61.53 $0 $10 $20 $30 $40 $50 $60 $70 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 |
II. The RGA Investment Opportunity 102 Financial Overview |
The RGA Investment Opportunity Business provides consistent earnings Strong return on equity Comprehensive geographic reach Build-out substantially complete; RGA has operations in virtually all markets in which it intends to operate 103 *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 13.1% 12.9% 12.2% 11.1% 13.2% 14.0% 14.1% 13.1% 13.2% 12.6% 10-Year Average 13.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% Serve Clients in 70+ Countries from 25 Countries around the World ($ Millions) - 100 200 300 400 500 600 Operating Income* Operating Return on Equity* |
The RGA Investment Opportunity Business based on insurance risks (mortality), less sensitive to capital markets Existing mortality portfolio produces “locked-in” premium and earnings flows for years Stable investment portfolio, moderate asset leverage 104 *Note: Figures include results from the U.S., Canada, Asia Pacific and Europe & South Africa operating segments; exclude Corporate segment. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. ($ Millions) Pre-Tax Operating Income* 94% 95% 90% 88% 87% $0 $100 $200 $300 $400 $500 $600 $700 $800 2006 2007 2008 2009 2010 2011 92% Mortality / Morbidity Spread Fees |
Attractive Opportunity Financial Overview 105 2-year Average Book Value Multiple (ex AOCI): 0.96x 2-year Average P/E Ratio: 7.2x 10-year Average P/E Ratio: 9.2x* 10-year Average Book Value Multiple (ex AOCI): 1.2x* * Source: Macquarie (USA) Research $0 $10 $20 $30 $40 $50 $60 $70 RGA Stock Price Performance Feb. 29, 2012 $57.67 |
III. Capital Management 106 Financial Overview |
$2,382 $2,663 $3,165 $3,569 $4,133 $4,514 $307 $527 $519 $897 $898 $1,096 $557 $558 $558 $478 $478 $319 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2006 2007 2008 2009 2010 2011 Hybrid Capital Debt Shareholder's Equity Timberlake Notes/collateral finance facility not included in figures above. ($ Millions) Total Capitalization Levels Excluding Other Comprehensive Income Debt to Total Capital 70% 50% 40% 30% 20% 10% 0% 60% 5.4% 18.5% $5,509 $4,944 $5,929 $4,242 $3,748 $3,246 Hybrid to Total Capital Financial Overview 107 |
108 Current Capital Structure Financial Overview *Excludes accumulated other comprehensive income. Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Shareholders' Equity (ex-AOCI)* Debt Hybrid Capital Excess Capital 8% 68% 19% 5% |
Capital Management Maximizing shareholder value Current excess capital estimated at $500 million Minimum target capital cushion - $300 million Expect to generate ~ $200 million excess capital annually Leverage Debt is a flexible, yet permanent, component of the capital structure On-going attention to efficient capital management Financial Overview 109 |
Potential Deployment of Excess Capital Organic opportunities at target returns Block and M&A opportunities Shareholder dividend increases Other means of returning capital Financial Overview 110 |
111 2012 Excess Capital Guidance Financial Overview Target Cushion Target Cushion ($ Millions) $200 $400 $530 ($275) ($55) 0 100 200 300 400 500 600 700 800 900 1,000 1,100 2011 Generated Capital Required Capital Shareholder Dividends 2012 Projection Excess Capital Roll Forward $300 $300 |
IV. Where We Are Going 112 Financial Overview |
113 *Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. 2012 Operating Earnings Guidance Financial Overview $7.28* $6.99 $7.00 Midpoint ($0.29) ($0.55) $0.71 ($0.15) $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 2011 Favorable Tax Variances 2011 Normalized DAC Accounting Change Business Growth Low Interest Rates 2012 Projection |
*Please refer to “Reconciliations of Non-GAAP Measures” at the end of this presentation. Financial Results and Projections ($ Millions) Financial Overview 114 2012-2014 ROE expectations: 12-13% 4,346 4,909 5,349 5,725 6,660 7,336 7,810 8,440 9,110 - 100 200 300 400 500 600 700 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net Premiums After-tax Operating Income* Actual Projection |
Where We Expect to Be in 5 Years The premier life and health reinsurance company in the world $15 billion in revenue Significantly expanded market capitalization Roughly symmetrical premium distribution between North American and Other International operations Considered to be among the most successful financial services companies in the world Financial Overview 115 |
Thriving in Challenging Times RGA 2012 Investor Day Q&A Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
RGA 2012 Investor Day Proven ability to thrive in challenging times Key Messages Thriving in Challenging Times Principal focus on client relationships Leading global presence High levels of expertise and collaboration Challenging environment that is creating opportunities |
Appendix Reconciliation of Non-GAAP Measures Reinsurance Group of America, Incorporated | Wednesday, March 14, 2012 |
Financial Performance Reconciliation of Pre-Tax Income to Pre-Tax Operating Income ($ in millions) 119 Appendix U.S. TRADITIONAL OPERATIONS 2006 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 287.1 337.6 231.0 255.7 390.0 376.2 Realized Capital (Gains) / Losses 4.1 13.8 71.9 83.9 (24.8) (41.8) Change in MV of Embedded Derivatives net of DAC offset - - - - - (2.4) Pre-tax Operating Income 291.2 351.4 302.9 339.6 365.2 332.0 FINANCIAL REINSURANCE - US & INTERNATIONAL 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 20.0 $ 20.0 $ 32.0 $ 37.0 $ 48.0 $ Realized Capital (Gains) / Losses - 1.0 - - - Pre-tax Operating Income 20.0 $ 21.0 $ 32.0 $ 37.0 $ 48.0 $ ASSET INTENSIVE - US & INTERNATIONAL 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops (18.5) $ (171.8) $ 42.3 $ 143.0 $ 37.0 $ Realized Capital (Gains) / Losses 5.0 5.1 6.4 (4.7) 1.8 GMxB Embedded Derivatives net of DAC offset 3.3 (5.2) 37.9 2.0 10.5 Change in value of modified coinsurance and funds withheld embedded derivatives net of DAC offset 37.5 181.1 (33.1) (44.4) 11.7 Funds withheld capital gains/(losses) net of DAC offset - - - (26.7) (7.3) EIA embedded derivatives net of DAC offset - 15.2 (2.7) 5.9 16.5 Pre-tax Operating Income 27.3 $ 24.4 $ 50.9 $ 75.1 $ 70.2 $ LONGEVITY - US & INTERNATIONAL 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 0.1 $ 7.6 $ 15.6 $ 25.7 $ Realized Capital (Gains) / Losses - - - (0.4) Pre-tax Operating Income 0.1 $ 7.6 $ 15.6 $ 25.3 $ |
Financial Performance Reconciliation of Pre-Tax Income to Pre-Tax Operating Income ($ in millions) 120 Appendix TOTAL US OPERATIONS SEGMENT 2006 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 322.3 327.9 66.1 308.7 539.4 436.7 Realized Capital (Gains) / Losses net of DAC Offset 11.3 13.0 62.5 71.1 (59.6) (84.0) Change in MV of Embedded Derivatives net of DAC offset (2.8) 46.5 206.7 21.4 (30.7) 74.7 Pre-tax Operating Income 330.8 387.4 335.3 401.2 449.1 427.4 CANADA OPERATIONS 2006 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 45.8 81.5 102.2 106.3 122.4 166.6 Realized Capital (Gains) / Losses (5.2) (6.6) 5.0 (18.4) (8.7) (21.8) Pre-tax Operating Income 40.6 74.9 107.2 87.9 113.7 144.8 EUROPE & SOUTH AFRICA OPERATIONS 2006 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 58.3 47.5 65.7 52.3 85.8 100.0 Realized Capital (Gains) / Losses 0.3 2.2 8.7 (1.2) (2.6) (6.0) Pre-tax Operating Income 58.6 49.7 74.4 51.1 83.2 94.0 ASIA-PACIFIC OPERATIONS 2006 2007 2008 2009 2010 2011 GAAP Pre-Tax Income - Cont Ops 58.6 60.1 85.5 83.6 88.8 67.1 Realized Capital (Gains) / Losses 0.4 1.5 2.7 1.0 (5.0) (3.0) Pre-tax Operating Income 59.0 61.6 88.2 84.6 83.8 64.1 |
Financial Performance GAAP / Operating Income and EPS Reconciliations ($ in millions) 121 Appendix RGA CONSOLIDATED 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GAAP After-Tax Income - Cont Ops 128.4 178.3 245.3 235.6 293.3 308.3 187.8 407.1 574.4 599.6 Realized Capital (Gains) / Losses net of DAC Offset 10.0 (3.7) (21.9) (9.8) 1.7 15.0 77.0 42.6 (50.4) (175.9) Change in MV of Embedded Derivatives net of DAC offset - (8.4) 1.3 (0.3) (1.8) 30.2 134.4 13.9 (20.0) 155.2 Less Goodwill Write-off 0.8 - - - - - - - - - Gain on Debt Repurchase - - - - - - - (25.3) - (42.6) Loss on Retirement of PIERS - - - - - - - - - 2.9 After-tax Operating Income 139.2 166.2 224.6 225.5 293.2 353.5 399.2 438.3 504.0 539.2 CONSOLIDATED EPS RECONCILIATION Per Diluted Share Basis 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GAAP Net Income 2.47 $ 3.36 $ 3.52 $ 3.52 $ 4.57 $ 4.57 $ 2.71 $ 5.55 $ 7.69 $ 8.09 $ Realized Capital (Gains) / Losses 0.21 (0.09) (0.34) (0.15) 0.03 0.32 1.18 0.58 (0.67) (0.93) Change in MV of Embedded Derivatives - (0.16) 0.02 (0.01) (0.03) 0.38 2.06 0.19 (0.27) 0.66 Loss from Discontinued Operations 0.11 0.11 0.37 0.18 0.08 0.23 0.17 - - - Less Goodwill Write-off Gain on Debt Repurchase - - - - - - - (0.34) - (0.58) Loss on Retirement of PIERS - - - - - - - - - 0.04 Operating EPS from Cont. Operations 2.79 $ 3.22 $ 3.57 $ 3.54 $ 4.65 $ 5.50 $ 6.12 $ 5.98 $ 6.75 $ 7.28 $ |
Financial Performance Stockholders’ Equity Reconciliation ($ in millions) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GAAP Stockholders' Equity $1,222.5 $1,947.7 $2,279.0 $2,527.5 $2,815.4 $3,189.8 $2,616.8 $3,867.9 $5,040.6 6,137.1 $ FAS 115 Equity Adjustment 102.8 170.6 244.7 361.8 335.6 313.2 (553.4) 104.4 651.4 1,419.3 Foreign Currency Adjustment 0.7 53.6 93.7 85.1 109.1 222.0 19.8 210.9 270.5 234.7 Unrealized Pension - - - - (11.3) (8.4) (14.7) (16.1) (14.5) (31.0) Equity Excluding OCI 1,119.0 $ 1,723.5 $ 1,940.6 $ 2,080.6 $ 2,382.0 $ 2,663.0 $ 3,165.1 $ 3,568.7 $ 4,133.2 $ 4,514.1 $ GAAP Stockholders' Average Equity 1,098.0 $ 1,460.8 $ 2,071.7 $ 2,423.4 $ 2,613.8 $ 2,965.8 $ 2,906.8 $ 3,166.0 $ 4,502.9 $ 5,437.6 $ FAS 115 Average Equity Adjustment 30.8 148.5 180.0 310.5 287.9 282.2 (76.8) (266.3) 462.4 914.6 Foreign Currency Adjustment 6.5 26.9 54.6 84.1 102.3 174.9 161.0 103.8 227.1 262.6 Unrealized Pension - - - - (2.3) (10.9) (9.4) (14.6) (15.7) (17.3) Average Equity Excluding OCI 1,060.7 $ 1,285.4 $ 1,837.0 $ 2,028.8 $ 2,225.9 $ 2,519.6 $ 2,832.0 $ 3,343.1 $ 3,829.1 $ 4,277.7 $ Operating ROE - GAAP Stockholders' Equity 13% 11% 11% 9% 11% 12% 14% 14% 11% 10% Operating ROE - Excluding OCI 13% 13% 12% 11% 13% 14% 14% 13% 13% 13% Book Value per Share Reconciliation 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Book value per share 83.65 $ 68.71 $ 52.99 $ 36.03 $ 51.42 $ 45.85 $ 41.38 $ 36.50 $ 31.33 $ 24.72 $ 20.30 $ Less: effect of FAS 115 19.35 8.88 1.43 (7.62) 5.04 5.46 5.92 3.92 2.74 2.08 (0.01) Less: effect of CTA 3.20 3.69 2.89 0.27 3.58 1.78 1.40 1.50 0.86 0.01 (0.12) Less: effect of Pension Benefit (0.43) (0.20) (0.22) (0.20) (0.13) (0.18) - - - - - Book value per share excluding OCI 61.53 $ 56.34 $ 48.89 $ 43.58 $ 42.93 $ �� 38.79 $ 34.06 $ 31.08 $ 27.73 $ 22.63 $ 20.43 $ 122 Appendix |
Financial Performance 123 Appendix RGA CONSOLIDATED 12/31/2011 9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 GAAP After-Tax Income - Cont Ops 158.5 $ 147.4 $ 132.9 $ 160.8 $ 196.7 $ 128.2 $ 127.0 $ 122.4 $ 112.4 $ 118.2 $ 153.2 $ 23.3 $ Realized Capital (Gains) / Losses net of DAC Offset (4.9) (144.8) (26.4) 0.2 59.3 (25.0) (85.0) - 41.3 13.2 96.1 44.1 Change in MV of Embedded Derivatives net of DAC offset (6.6) 182.1 21.5 (41.8) (94.6) 24.5 79.9 (29.4) (27.9) (16.8) (93.4) (0.1) Gain on Debt Repurchase (6.3) (33.1) - (3.2) - - - - - - (25.3) - Loss on Retirement of PIERS - - - 2.9 - - - - - - - - After-tax Operating Income 140.7 $ 151.6 $ 128.0 $ 118.9 $ 161.4 $ 127.7 $ 121.9 $ 93.0 $ 125.8 $ 114.6 $ 130.6 $ 67.3 $ 12/31/2008 9/30/2008 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007 GAAP After-Tax Income - Cont Ops 15.2 $ 25.3 $ 110.8 $ 36.6 $ 71.5 $ 80.8 $ 79.0 $ 76.9 $ Realized Capital (Gains) / Losses net of DAC Offset (95.3) 65.0 1.2 0.6 3.3 5.4 4.7 5.7 Change in MV of Embedded Derivatives net of DAC offset 180.1 28.3 (2.3) 33.7 16.4 9.4 0.9 (0.5) Gain on Debt Repurchase - - - - - - - - Loss on Retirement of PIERS - - - - - - - - After-tax Operating Income 100.0 $ 118.6 $ 109.7 $ 70.9 $ 91.2 $ 95.6 $ 84.6 $ 82.1 $ |