美國再保險集團 (RGA) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the Reinsurance Group of America first-quarter 2013 results conference call.

Today's call is being recorded.

At this time, I would like to introduce the President and Chief Executive Officer, Mr. Greig Woodring, and Senior Executive Vice President and Chief Financial Officer, Mr. Jack Lay.

Please go ahead, Mr. Lay.

Okay, thank you.

Good morning to everyone and welcome to RGA's first-quarter 2013 conference call.

Both Greig and I are here this morning.

I'll turn the call over to Greig after a quick reminder about forward-looking information and non-GAAP financial measures.

Following Greig's prepared remarks, we'll open the line for your questions.

To help you better understand RGA's business, we will make certain statements and discuss certain subjects during this call that will contain forward-looking information, including, among other things, investment performance, statements relating to projections of revenue or earnings, and future financial performance and growth potential of RGA and its subsidiaries.

Keep in mind that actual results could differ materially from expected results.

A list of important factors that could cause actual results to differ materially from expected results is included in the earnings release we issued yesterday.

In addition, during the course of this call we will make comments on a pretax and after-tax basis for operating income, which is considered a non-GAAP financial measure under SEC regulations.

We believe this measure better reflects the ongoing profitability and underlying trends of our business.

Please refer to the tables in our press release and quarterly financial supplement for more information on this measure and a reconciliation of operating income to net income for our various business segments.

These documents and additional financial information may be found on our investor relations website at RGARE.com.

With that, I'll turn the call over to Greig.

Thank you, Jack, and thanks, everyone, for joining us.

Overall, we are pleased to report a good start to 2013 with a relatively stable first quarter.

Results benefited from relatively little volatility in claims flow and from relatively strong performance in our Asset-Intensive business.

Operating income totaled $123 million, up -- or $1.65 per diluted share.

Consolidated premiums were up more than 7% in original currencies quarter over quarter.

We produced an annualized operating ROE of 10% this period, despite the low interest rate environment and some foreign currency headwinds.

Our average portfolio yield was 4.83%; that is the same as the fourth quarter of 2012, but down about 22 basis points from last year's first quarter.

A relatively stronger US dollar lowered after-tax operating income almost $2 million, or $0.02 per share.

We saw mixed, although relatively stable, claims experience across our various markets.

As a reminder, we typically see relatively higher claims and lower premiums in the first quarter, due to the seasonal effects of higher death rates in the winter months for some of our largest mortality portfolios.

We continue to benefit from the growing geographic and product diversity of our businesses.

We returned about $48 million of excess capital to shareholders during the quarter in the form of stock buybacks, and another $52 million so far in April.

Additionally, as announced yesterday, our Board increased the previously-approved $200 million stock repurchase program by another $100 million, so we still have capacity of $200 million remaining.

We will continue to consider share repurchases, along with other opportunities.

There continues to be a number of block or M&A transactions throughout the industry, which could present attractive opportunities to deploy excess capital.

Book value per share increased to $94.34, including AOCI, and $67.37 without it.

In addition to continued strong contributions from ongoing operations, the current period benefited from a pretax $47 million gain associated with the repurchase of discounted collateral finance facility securities that we had issued in 2006.

That gain is not included in operating earnings.

Turning now to our segment results, pretax operating income in our US Traditional business increased 10% quarter over quarter, totaling $70 million this period.

Individual mortality claims were generally in line with expectations and slightly adverse group reinsurance results were offset with a good quarter in our individual health business.

US Traditional premiums increased about 2% over the first quarter of 2012.

According to a Society of Actuaries-sponsored reinsurance market study, we retained our number one position in the US for recurring new business during 2012 with 19.6% market share.

We also remained one of the top reinsurers in terms of in force, with a market share of 19.5%.

We are pleased with another strong quarter from our US Asset-Intensive business, which reported pretax operating income of $46 million and benefited from a strong equity market, as well as good performance from the large block of fixed deferred annuities acquired last year.

We expected to earn roughly $30 million to $35 million per quarter in this sub-segment in 2013, so this quarter was very strong.

Our US Financial Reinsurance operation reported another good quarter and added $8 million of pretax operating income.

Turning to Canada, pretax operating income in Canada totaled $33 million this quarter, a decent result, but far below the very strong comparable prior-year period when we earned $47 million and benefited from a treaty recapture.

Claims were slightly adverse in this period, and foreign currency fluctuation lowered pretax operating income by about $0.5 million.

Premiums grew nicely to $243 million, a 12% increase over last year's first quarter and net of a $1.6 million foreign currency headwind.

Our Canadian operation also retained a number one position for recurring new business in the Canadian marketplace in 2012.

Their market share was 33.1%.

In Asia-Pacific, we had a good quarter with pretax operating income of $19 million, compared with a strong $27 million result last year.

The current period benefited primarily from favorable results in Japan and several other Asian markets.

Results in Australia were moderately positive this period, and we continue to restructure the business profile there.

Unfavorable foreign currency fluctuation reduced pretax operating income by $1.8 million, largely due to a weaker Japanese yen.

Net premiums totaled $364 million, an increase of 12% in reported US dollars and 14% in original currency.

Moving on to Europe and South Africa, pretax operating income of $16 million was more than triple the result from the first quarter of 2012, still a little below expected run rate due to adverse critical illness claims experienced in the UK and, to a lesser extent, some adverse claims in South Africa.

That adverse claims experience was partially offset by favorable results in several European markets.

Net premiums rose 11% to $324 million in Europe and South Africa.

In original currencies, premiums were up 14% over the first quarter of 2012.

Our corporate segment reported pretax operating loss of $8 million this period, pretty much in line with our expectations.

The $47 million pretax gain from the repurchase of collateral-financed facility securities I mentioned earlier is included in this segment's pretax income of $36 million, but was excluded from pretax operating income.

So overall, we were pleased with the first-quarter results, including good consolidated premium growth and strong results in our US Asset-Intensive business.

Operating ROE was 10% annualized.

Recall that first-quarter ROEs are generally lower than the other quarters, due to claim seasonality.

We are pleased to announce the recent stock buybacks and the increased authorization under our current repurchase program.

We will continue to evaluate opportunities to deploy or return excess capital, which now stands between $500 million and $600 million.

We are still seeing a good deal of block acquisition opportunities in the marketplace and we expect those opportunities to persist for some time.

We thank you and appreciate your support and interest in RGA, and with that, we will now take your questions.

(Operator Instructions).

Jimmy Bhullar, JPMorgan.

I had a few questions.

The first, margins in the US business seemed a bit weak, so if you could just talk about what drove that.

And then, on the deal environment, how is the competition for properties?

And has it been affected by private-equity hedge funds being more active?

And then, just lastly on buybacks, if you could talk about the rationale for the timing of buybacks, because last quarter you weren't really clear on whether you would do it in the first half of the year or the second half.

And does this imply -- the fact that you bought back as much as you did in the first quarter, does that imply that you don't see any deals in the short term or does it not?

Jimmy, first of all, margins in the US I thought were okay.

The mortality in the US was slightly better than expected, very slightly, so that was a good result, considering the first quarter we had some administrative cleanup that was negative in that quarter.

But generally speaking, US margins, we thought, held up quite well and we're happy with that.

In terms of competition in the market, we do see very substantial competition for assets by the private equity guys, such as Apollo and Guggenheim and so forth.

And so, they are very strong competitors in that space, and we compete with them, but realistically, we are not winning too many of those battles.

Jimmy, this is Jack.

On the buybacks, maybe I could address that.

Sure.

We certainly take a look at different opportunities for capital deployment, and buybacks is obviously one of those.

But it's always a dance, in some respects, because we are looking at various opportunities to deploy into the business via block transactions.

But those can be very difficult to predict, so we are not particularly comfortable with just simply being on the sidelines vis-a-vis buybacks and waiting for the block transactions to occur.

So we're going down a path where we're trying to take advantage of each.

Certainly we have taken advantages of the trading value of the stock relative to the buybacks, and it remains to be seen the extent to which we can take advantage and execute on the block transactions.

But certainly, there is a lot of activity underway in that respect.

And then, I thought the group reinsurance business in the US had slight weakness.

Yes, it did.

Yes, it did.

In a different line than the -- it had some weakness in the fourth quarter -- in the third quarter last year, too, as we essentially repriced or got out of some situations where the experience was a little bit bad.

It returned to normal on the excess health business.

But we had some life claims in the first quarter, and that happens.

And then, just lastly, would you be open to pursuing a large transaction?

And would you consider issuing equity if there was something that was attractive, like a $1 billion-plus property?

Yes, we are always open to a good transaction and a good deal.

And we would be open to that, although we don't expect that to happen.

We have excess capital, and for the transactions we're looking at, we think we are in good shape.

Thanks.

Yes, Jimmy, maybe I could comment on that, as well.

Certainly we wouldn't want to lead with issuing any equity.

And we do have some leveragability and there is a reasonably active market for hybrid securities.

So certainly our goal would be to finance any deal, even a rather sizable deal, internally.

And to the extent we issue securities, equity would be last on the list at this point.

Got you.

Thank you.

Humphrey Lee, UBS.

So on the UK results, critical illness was again unfavorable.

I think since 2012, we have seen three bad quarters out of five.

And on the last earnings call, you mentioned that there was a lot of anecdotal evidence about -- for critical illness experience in the marketplace, but too soon to send up any alarm bells.

So how should we think about the situation now?

Should we begin to be concerned?

And any updates on what you are seeing in the market?

Humphrey, yes, it's true.

The last couple of quarters in particular, we've had a little bit of softness in there.

We are not talking about big variances; we're talking about relatively minor deviations from expected.

But still, the size of the block is big enough that it makes a few cents' difference.

So we are looking at it very carefully.

We have been, over time, adjusting our pricing upward over the last couple of years on critical illness.

And after having some very good experience, say, four, five years ago on that line, we're seeing a little bit of deterioration in that line overall.

But it's hard to separate the noise from the signal.

At this stage, we're still looking at it.

We think it's mostly fluctuation.

And we have, though, seen a drift of increased pricing on our side in that business.

And then, I think last quarter you mentioned the drag on earnings was $7 million from the critical illness.

What is the size of the drag for this quarter?

And also, you mentioned the block has a relatively large size.

Can you remind us how big is the critical illness book in the UK?

I don't know that I know the answer to that off the top of my head, but it is in the -- my guess is it's in the $200 million to $400 million range.

In terms of premium, that's right, yes.

In terms of premium.

For the quarter, I think we were somewhere around, after tax, GBP200 million off.

Perfect.

And then, looking to Asia-Pacific, the 14% premium increase on a constant-currency basis was really strong.

How much of it is a result of pricing actions in Australia versus the pipeline coming through?

And also in terms of the geographic splits, how should we think about that 14% increase?

Yes, the Asian premium increase does include Australia.

And Australia is a place where we're not really expecting much, if any, premium increase.

And in fact, it would not surprise us at all if we see some noticeable premium decrease over the next little while as we work our way through repricing business in Australia.

So that is a blend of zero to negative in Australia -- it actually probably was up a little bit in Australia this particular quarter, but not much -- and very strong growth in the rest of Asia, where we have a very strong position.

Remember, our Asian business for the last years has been characterized by rapid organic growth, but in Japan and Korea we have had to replace large transactions in the pipeline of premium.

So if you wipe out or look through that situation of replacing the pipeline, the rest of the growth has been quite strong in Asia because it's a growing market.

Okay.

So it was basically just the pipeline from the past couple of years finally flowing through and getting the benefit of that.

Yes, I think we've probably pretty much come to the end of the filling of the pipeline stage in both Korea and Japan, and we are ready to see some growth beyond current levels.

Okay, got it.

Thank you.

Steven Schwartz, Raymond James & Associates.

Actually, I wanted to ask about the Japanese pipeline.

I do want to follow up, though, on Jimmy Bhullar's question with regards to the private equity and how you frame that, Greig.

You said that they were interested in assets.

And I'm assuming that to mean the fixed annuity business where they're mostly concentrated on.

I'm wondering if you are seeing them potentially being more active in true insurance as opposed to asset accumulation.

No, we see them focusing pretty much on asset-intensive businesses.

Now, they may take blocks of universal life business or other things like that in order to gather assets under management because I think they view that they have their real expertise in the asset management sector.

And so, very often there are partnership discussions we can have with them about how to approach blocks of business.

But for the most part, they're not really interested in biometric risk, at least as I understand it.

Okay.

And then, one more from me, and this may be more along the lines of the Investor Day, but given we just finished the first quarter, I'm interested in wondering about territory expansion and if maybe there are new geographies, new countries, that you might be looking at this year.

Really not much.

We are pretty solidly entrenched in the major markets.

I think we will be over time and a little bit this year looking at more growth in South America.

And there are other markets, such as Turkey, that are interesting to us.

But those are not big efforts.

We would love to get our license in China.

We think that will be a big step when we can get that done, and we have been in the queue for some time and working hard to try to do everything to convince the Chinese that we are worthy of a license.

And so, that's a process we have no control over, but we'd like to see that happen soon.

Okay, thanks, guys.

Erik Bass, Citi.

Could you give a little bit more color on what you are seeing in Australia?

You mentioned results were a little bit better than you had expected this quarter, but maybe provide an update on how you expect profitability to trend near term in that block.

Yes, Australia has seasonality, just like the US does, but it's reversed, of course, because of the Southern Hemisphere.

At least that's what appears in our numbers.

If you remember, last year's first quarter in Australia was extremely good.

So if you look at the Asia-Pacific comparisons this year versus last year, you are seeing some really strong Australian results in the first quarter that, of course, got completely wiped out in the course of the year.

So we don't read too much into a good first quarter in Australia.

It is a turnaround story.

We are expecting results to improve substantially from last year, but not necessarily to be good in Australia in 2013.

So we're not expecting a substantial contribution from Australia as we would have had, say, four or five years ago, but rather a turning, an inflection from the poor experience of the last couple of years.

Got you.

So that thinking sort of a breakeven year?

Do you think the block is profitable in 2013?

We hope to do a little bit better than breakeven this year.

Okay.

And then, just one on your outlook for US Traditional margins, particularly on the mortality business.

Are you still expecting mortality claims to be somewhat elevated and more akin to the last couple of years, given the drag that you've talked about from the 2000 to 2005 vintage blocks?

Yes, the block from, say, 1999 to 2004 -- and we describe it in different ways.

Sometimes I describe it based on the pricing environment; sometimes based on policy issue date.

But say that block right around the turn of the century, turn of the decade, is still problematical.

That is the block that has our lowest return.

And that is a block that we thought we would have outgrown a little faster, but new business writing has come down so dramatically in the US that we're not able to get past it quite as quickly as we would have.

But that's part of our experience, and our block performed pretty well in the last couple of quarters now.

Okay, thank you.

Ryan Krueger, Dowling & Partners.

I had a follow-up on the question on if you were to find a larger deal, how that could be financed.

One, how much -- could you quantify how much debt capacity you think you have at this point?

Ryan, this is Jack.

We probably have in the neighborhood of $300 million of senior debt capacity right now.

And I commented earlier, we've got obviously some capacity for some hybrid as long as that market hangs in there.

So I think you could stack another $300 million or so of hybrid on top of that.

Okay.

So quite a bit, actually.

All right, and then a couple of more.

On the Asset-Intensive segment, good quarter there.

It seemed to be boosted a little bit from the equity market.

What's your thinking going forward for a good run rate in that segment?

Well, yes, it was boosted by the equity market, but the biggest piece of that business is actually the fixed annuities and the equity annuities, which both had good experience this quarter.

The fixed annuities is a bigger block than we had last year because of that large transaction last year.

So you are seeing the full run rate.

It was a good performance for the quarter, but I think that more came about because of spreads on the fixed side than variable annuity side, which is a relatively smaller block.

But, of course, it did perform extremely well in the quarter, given the equity performance.

(Multiple speakers).

But you should think of that more as fixed annuities than equity annuities -- I'm sorry, than variable annuities as contributing.

Okay.

I think in the past -- in recent quarters, you had been expecting maybe around a $35 million per quarter number there.

Do you expect something higher at this point?

Yes, this is Jack.

I think we're optimistic that we would be towards the top end of that $30 million to $35 million range and potentially above it, just given a look at the margins as we see them now.

Not dramatically above it, but we are optimistic that we will continue to have a pretty good run rate there.

Okay, great.

Thanks.

Jeff Schuman, KBW.

I was hoping to talk a little bit about the US Traditional business.

Obviously, industry sessions and session rates have been coming down for quite a few years.

You've experienced deceleration, but on a lag basis, so you've continued to grow premiums and in force for a number of years.

But now you've gotten to the point where the in force has been flat for a number of quarters; premium growth this quarter -- which it's one quarter; it may not be representative -- but it was down to 2%.

I guess if we extrapolate the trends, it looks like maybe we are headed for a point where Traditional doesn't grow or perhaps could even contract.

I'm wondering, does that shade your thinking about acquisitions and consolidation?

I mean, do you feel a need maybe to do something to preserve operating leverage in that space?

And then, the other thing I am wondering about is, based on past history, I think back to when Swiss Re acquired a lot of market share, what are the constraints on really an effective market share in that business?

I think they found that when they bought a lot of market share, it was tough to hold because clients do want a certain amount of credit diversification.

And that was, I think, a little problematic for them.

Correct.

I think your analysis is pretty good, Jeff.

We don't expect the US business to really shrink, but we don't expect it to grow very much at all.

This particular quarter, we had no blocks of business acquired on the mortality side.

We had a fairly large block of business that was acquired in filtering in in the first quarter of last year, so it's a bit of a tough comparison.

But if there's no blocks, we really are looking at something in the 1% to 2% range for the mortality business itself.

Now, that is supplemented by the group business and the individual health business, the long-term care business a bit, but it's not a growth area for us.

We're not particularly looking to buy blocks of business just to keep growing in that particular market space, unless we can find them attractively priced.

And we are eager to find anything that looks like a well-priced mortality block.

In terms of market share in the current environment, it's very difficult to sustain much more than the low 20% range.

We had a market share of 26%, which we thought was unusually high and due to some special circumstances that we could spot.

And we knew that that was going to come down a bit.

But our market share today, at just -- a little bit under 20%, is a good place to be.

It is hard to get much above that and hold onto it.

Okay.

I guess I'm just trying to reconcile the last couple of comments.

It sounded like you are open to looking at blocks, but that that would increase your market share, but then that would be hard to hold.

So I'm not quite sure how to net those observations.

Yes, when I think of market share, I'm thinking of market share, the organic, what I call the flow business, the new business in the marketplace.

Okay.

Right.

And that market share is hard to sustain above about maybe 22%, 23%.

Once you get to that point, that's about it.

That's about as much as you really want to do.

And so, anybody who acquires another company and picks up some flow will see degradation above that point, clearly.

Okay.

-- which is (multiple speakers) how fast it will happen.

So one could still contemplate a situation like that, but they would need to rationalize it based on earning on the appropriate market share, I guess.

Yes, correct.

Correct.

And I think you addressed this, but of course US Traditional has a number of things in it.

It does have more the block one-off things and it does have group and other products, but if we were just looking strictly at individual flow recurring business, is that growing or shrinking for you at this point?

I think it's almost static.

It's maybe growing just slightly.

Okay, great.

Thank you.

Sarah DeWitt, Barclays.

Your overall premium growth lift this quarter versus historical levels -- and I think a lot of that was from the US Traditional business, so how do you think about the potential to get back to high single-digit to low double-digit topline growth over time?

Is that a reasonable expectation over the long term?

To get above double digits in today's world would require doing some block transactions, and that is certainly possible, Sarah.

But the expectation would be we'd be (technical difficulty) which I believe was a 9% year.

Currency has some effects on that, one way or the other.

Currency is a headwind at the moment.

The growth in same currency in both Europe and Asia for us is fairly strong in the first quarter.

We expect that to be strong all year long.

And Canada is running 12% in the first quarter.

That's likely to be in that ballpark for 2013.

But overall, for us to get above 10% it would require us to do some block transactions, which may happen.

All right, great.

And then, just following up on your comments about the potential for block acquisitions, could you elaborate on what types of block acquisitions you are seeing out there in the marketplace, whether that's by line of business or by geography?

Well, there's a fairly robust pipeline.

It's not increasing, but it's not decreasing, either.

It's been constant over the last year or so, maybe 18 months, in terms of the number of opportunities, split between more Europe and North America.

Not really very much in Asia.

And they're all over the board in terms of what sort of properties.

There's a lot of companies in this low growth rate environment that are focusing their operations more.

Their new ventures are restricted in terms of what they want to do to a fewer number of things that they are focusing on.

And a lot of them are looking to free up capital that is tied up into blocks of business that they would like to set free as part of a streamlining or focusing effort.

And you see pressure from the new regulatory and accounting regimes, such as Solvency II or Basel III having an influence on all this.

So there is a lot of opportunities.

They are all over the board, though, like I say, in terms of what they are.

It's what the various different companies want to sell at this point.

Okay, great.

Thank you for the answers.

Sean Dargan, Macquarie.

Following up in the vein of companies looking to focus on core businesses, there are a number of runoff of variable annuity lines out there.

And I know that's a small part of your Asset-Intensive business now, but as you get a better bead on policyholder behavior, does there come a point where you might get comfortable taking on variable annuity liabilities?

Well, Sean, we've got a little bit of variable annuities, and that business is running off.

I think we would contemplate a modest amount at periods of time just to keep our book flat, not necessarily grow it.

But the products are changing so much that we would be looking at situations where the variable annuities were completely redesigned and had a lot less volatility in them before we would really be entertaining buying a block of existing business.

There's almost no chance we are going to be going after a big block of existing VA business with all the inherent volatility around that.

Okay, thank you.

But some of the newer designs and some of the remediated business could be quite more stable and less volatile on a GAAP basis, and so that would have some interest to us.

Okay.

Thanks for that.

And as your stock price moves closer to book value, I'm just wondering.

Is there a book value, ex-AOCI -- is there a hard and fast price at which you won't repurchase your shares?

Sean, this is Jack.

Yes, there certainly is.

And as you can imagine, the higher it gets, then the less attractive it is.

But we don't like to throw out a price and draw a line in the sand at which we wouldn't want to buy back the shares.

But certainly, I think, at under book value they are attractive now.

Got it.

Thank you.

Trading price under book value.

Right.

(Operator Instructions).

Paul Sarran, Evercore Partners.

I wanted to ask a couple of questions about the collateral-financed security repurchase you did.

I guess I will just ask them all at once.

First, what brought about the opportunity to do this deal?

It seems like a pretty large discount.

You have, I think, around $490 million of additional securities on the balance sheet.

Are they similar?

Could we see more of these?

And then, finally, do you consider this a capital deployment action in the context of your $200 million to $400 million a year of capital deployment goal?

Or are you planning to replace this with new funding?

Is it more of a refinancing deal?

Paul, this is Jack.

Let me take that.

First of all, to your latter question, no, we don't look at this as a capital deployment.

We really look at this as simply an opportunity to take advantage of a market that has fairly poor liquidity.

These securities don't trade much.

There's not that many holders.

And at points in time, for a variety of reasons, they want to get out, which, if you think about it, really affords us an opportunity because we understand the underlying characteristics of the security, so to speak, for those securities, that is the underlying mortality.

And we are very comfortable with it.

We are the ones, obviously, that packaged those securities.

And we think they create a great deal of value.

So we have gone in a couple of times over the last several years and acquired some of those securities.

We have to be careful that we don't run afoul of the securities law as we go about a buyback.

So you have seen them spaced.

But it is very opportunistic.

We see opportunities occasionally where there are sellers that want to get out at what we think -- and we offer what we think is an attractive price.

We don't have to go back and refinance that because technically we keep those securities outstanding.

They are held by a subsidiary investment portfolio, one of our own subsidiaries.

And so, they still serve the purpose of providing collateral financing, so to speak.

But from a consolidated standpoint, we treat them as defeased because we have acquired the securities.

Does that answer your questions?

Yes, I think it does.

Okay, so one other question.

Just wondering if you could comment on avian flu.

I know you don't have any material exposure in China right now, but any thoughts on the current strain that is going around?

And any thoughts just on managing pandemic risk in general?

Well, we are watching the situation.

I suppose that's about all we can do at this point.

There is not really very many cases.

It hasn't affected us at all, as far as I know.

And we'd be watching the situation.

There's always a risk of pandemic.

Flu is the most likely pandemic that we could envision.

The situation is one where we've looked over time at buying mortality bonds where we're finding some protection.

We find them quite uneconomic to buy and not really as good coverage as we would like, anyway.

So we've never really done anything in that realm.

We've modeled our pandemic exposure.

We have, we think, capital to withstand most scenarios very effectively.

All right, thanks.

Humphrey Lee, UBS.

I just have a follow-up on the acquisition side.

You mentioned that there are a lot of opportunities in the market for M&A.

My question is, what prevents a deal from getting done?

Is it because of the asking price being too high and the return portfolio is not attractive?

Or is it just the business that is out there is not something that you are particularly interested at that level?

And then, also, what is the hurdle rate for RGA when looking at M&A, again?

Yes, Humphrey, these deals do get done.

We have done several of them over the last couple of years.

Some of them have been very small, and so you didn't notice them.

We would consider the large annuity acquisition we made last year as one of these transactions.

There was a large in-force mortality block that we did in the early part of the year last year that we would consider in this category.

We've done several blocks of Italian creditor business over the last couple of years.

And there has been several of them, in other words, that have crossed the finish line for us.

They tend to be smaller, on average, and not particularly noteworthy in terms of a big event in a particular quarter, but they add up.

So we're expecting that that is going to continue.

And we are, at any given time, looking at a number of these opportunities.

I think we did serious work on 20-something last year and would have closed a couple of them.

The year before, it was a similar number, maybe looked at 20-something and closed two or three of them.

So the hit rate is about one in 10.

Sometimes we lose because others buy it; sometimes we lose because we are just at the end and not interested in the particular risk profile.

But whatever the cause, that is our hit rate over the last couple of years.

So I guess, how would you characterize the pricing in the market at this point?

Do you consider them -- there is still [value] somewhere or is it kind of frothy at this point?

Well, I think that the pricing is generally okay.

The situations are competitive, though.

And so, you're always competing against other people in these sorts of scenarios.

And it's not something you can count on on any given deal, the timing of this size.

And so, it makes it a little bit difficult to predict.

But the fact that the activity continues to show itself gives us a lot of confidence that it's going to be a part of our story over the next several years.

Okay, thank you.

This is helpful.

(Operator Instructions).

And at this time, I'm showing no further questions.

I'd like to turn the call back to you, Mr. Lay and Mr. Woodring, for any additional or closing remarks.

Okay, thanks to everyone who joined us this morning.

To the extent any other questions come up, feel free to give us a call.

And with that, we will end the first-quarter earnings release conference call.

Thank you.

And again, that does conclude today's conference.

We do thank you for your participation.