美國再保險集團 (RGA) 2019 Q3 法說會逐字稿

Good day, and welcome to the Reinsurance Group of America Third Quarter 2019 Results Conference Call.

Today's call is being recorded.

At this time, I would like to introduce Mr. Todd Larson, Senior Executive Vice President and Chief Financial Officer; Ms. Anna Manning, President and Chief Executive Officer.

Please go ahead, Mr. Larson.

Thank you.

Good morning, everyone, and welcome to RGA's Third Quarter 2019 Conference Call.

With me this morning in St.

Louis is Anna Manning, RGA's President and Chief Executive Officer.

Anna and I will discuss the third quarter results after a quick reminder about forward-looking information and non-GAAP financial measures.

Following our prepared remarks, we will be happy to take your questions.

To help you better understand RGA's business, we'll 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 revenues, premiums 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'll make comments on pretax and after-tax adjusted 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 the press release and quarterly financial supplement for more information on this measure and reconciliations of net income to adjusted operating income for our various business segments.

These documents and additional information may be found on our investor website at rgare.com.

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

Thank you, Todd, and good morning.

As indicated in our press release last evening, we reported adjusted operating EPS of $4.02 for the quarter compared to $4.03 a year ago.

This was a very good quarter in many respects.

As the bottom line was above expectations, organic growth remains strong, and we had another successful quarter for transactions.

Very favorable performance by certain key business units more than offset shortfalls in others resulting in strong consolidated results, which continues to demonstrate the benefits of earnings diversification arising from our global platform.

Further, we were able to deliver these results in the face of ongoing macroeconomic headwinds, including low interest rates and weak foreign currencies.

Let me touch on a few highlights and points of interest in the quarter.

Top line momentum continued in the quarter as both reported premiums and organic growth were strong.

Our strategy of providing broad-based solutions to our clients through our risk expertise and capital solutions expertise continues to deliver.

Bottom line results were above expectations with contributions from many of our businesses.

The Canadian business had another strong quarter, reflecting favorable mortality.

This is the fourth quarter in a row of favorable large case mortality.

Our Global Financial Solutions business continues to perform very well with strong bottom line results and continuing success in the in-force transactions business.

We deployed approximately $150 million into in-force transactions in the quarter, bringing the year-to-date deployment to $385 million.

This quarter's deployment included deals in every region, including asset-intensive deals in the U.S., U.K. and Asia.

With the successful deployment of considerable capital since 2018, the incremental earnings contribution from these transactions is becoming more meaningful.

The pipeline is robust, we remain active and we hope to close 2019 on a strong note.

The U.S. traditional segment performed well in the quarter as we had good performance from our U.S. Group business and we also had favorable variable investment income.

The combination of these helped offset some of the unfavorable experience in individual mortality.

In EMEA, both the traditional and financial solutions businesses had very good quarters as we saw favorable mortality in the traditional business and favorable longevity in the financial solutions business.

Again, we were also active on the transaction spread in EMEA on both longevity and asset-intensive opportunities.

Asia continues to be a success story for us as our top line growth remains strong, given our solid overall franchise and leadership position in product development.

When we combine our capabilities in product developments and financial solutions, we are able to deliver broad-based solutions to our clients.

And with lower interest rates and their impact to local statutory capital levels, we are seeing increasing demand in this region for those solutions.

Longevity experience overall was very good across the organization in EMEA, Canada and the U.S. And we completed several new transactions in EMEA.

We remain optimistic about the potential in this market, and believe that we are well positioned to take advantage of the many opportunities on a global basis.

Investment performance was good due to strong performance of our alternative investments, in large part from gains in our real estate joint ventures and private partnerships.

We made a strategic decision to expand our investments in these alternative categories a number of years ago and we are benefiting from that decision.

These are cash gains, money in our pocket, and we expect to continue to generate good returns going forward, although the quarterly amounts will fluctuate.

There are many highlights in the quarter and year-to-date and reasons for optimism about our business going forward.

That's not to say that we don't have challenges.

In Australia, we had a larger loss than we'd experienced in recent quarters.

The industry remains under scrutiny by the public and regulators, and the overall industry dynamics continue to be challenging.

We have a strong local team with the support of global expertise throughout RGA focused on actions to remediate this business.

In summary, we view this as a very good quarter with many highlights.

Looking forward, RGA is well positioned, we have a proven strategy, our business is in good shape and we remain optimistic about the future and our business prospects.

Ours is a long-term business and can best be judged by results over longer periods of time.

We can point to a track record, a long track record of successful execution, a long track record of delivering strong financial results, and we expect to continue to deliver attractive financial results into the future.

With that, I'll hand it back to Todd to provide more detail on our results.

Thank you, Anna.

I'll touch on a few financial metrics and provide some highlights of our segment results.

Our adjusted operating return on equity for the trailing 12 months was 10.7%, which is within our guidance range of 10% to 12%.

Our excess capital position at the end of the quarter was approximately $1 billion.

Now considering Anna's comments on the active pipeline, this has us in a good position to continue to execute on opportunities.

Net foreign currency fluctuations have an adverse effect of $0.02 per diluted share on earnings as compared with the prior year.

The effective tax rate on pretax adjusted operating income was 23.5% for the quarter, at the high end of our expected range of 21% to 24%.

On a year-to-date basis, the effective tax rate on pretax adjusted operating income was 22.2%, well within our expected range.

The average investment yield, excluding our spread business, was 4.83%, up 26 basis points from a year ago, primarily due to higher variable income this quarter.

Our new money rate was 3.82%, down from 4.02% in the second quarter.

We continue to maintain a high-quality investment portfolio and have been selective with new money investments in the current environment.

I would also like to add some context to Anna's previous comments around alternative investments and the expectation that they will continue to add incremental returns over time, although subject to variability in the short term.

As these investments season, we expect embedded gains to be realized over time.

The point is that we expect to continue to generate higher returns from this source into the future, and we view them as recurring in nature but certainly will be some volatility from quarter-to-quarter.

Now turning to our business segments.

The U.S. and Latin America Traditional business reported pretax adjusted operating income of $122.1 million compared to $116.4 million a year ago.

There were a number of items that affected results this quarter.

Group experience was favorable and we had strong variable investment income.

These were offset by unfavorable individual mortality experience as we experienced volatility from large claims this quarter.

Our asset-intensive business reported pretax adjusted operating income of $65.6 million this quarter, above the expected range benefiting from addition of new business and favorable longevity experience on a block of payout annuities.

Our financial reinsurance line reported pretax adjusted operating income of $19.2 million this period, in line with our expectations.

Moving to Canada.

The traditional segment had another strong quarter, with pretax adjusted operating income of $44.3 million.

This reflects continued favorable individual mortality experience, the fourth quarter in a row.

Premiums were up 11% on a reported basis and 13% on a constant currency basis primarily due to in-force transactions we entered into in 2018.

Canada Financial Solutions reported pretax adjusted operating income of $3.1 million compared to $1.6 million in the year-ago quarter, with the current quarter -- current year quarter, reflecting favorable longevity experience.

In the Europe, Middle East and Africa segment, our Traditional business reported pretax adjusted operating income of $25.5 million, reflecting favorable underwriting experience across the region.

Currency negatively influenced the bottom line by approximately $1 million.

Reported premium totaled $359.4 million, up 6% on a reported basis versus a year ago and up 11% on a constant currency basis.

EMEA's Financial Solutions business, which includes asset-intensive, longevity and fee-based transactions reported pretax adjusted operating income of $59 million compared to last year's $56.4 million.

Both periods were above our expectations, reflecting favorable asset-intensive and longevity experience.

Currency had a negative impact of approximately $3 million.

Now to our Asia Pacific business.

On the traditional side, our pretax adjusted operating income totaled $21.5 million compared to $62 million in the year-ago period.

This quarter reflects results in Asia that were modestly unfavorable, and a loss in our Australia business of approximately $24 million.

The Australia results included onetime claims catch-up of about $6 million from one of our clients.

Both the Group and the individual business in Australia underperformed this quarter as the runoff of the closed treaties continues to be more extended and unfavorable than what we had expected.

Some of our open treaties underperformed this quarter, and we plan to continue to take rate actions to remediate these remaining open treaties.

The year-ago period had favorable underwriting experience in Asia and a smaller loss in Australia.

Reported Asia Pacific Traditional premiums were up 19%, reflecting 29% growth in Asia offset by a decline in Australia.

Our Asia Pacific Financial Solutions business reported pretax adjusted operating income of $4.6 million, up from $1.3 million in the year-ago quarter, reflecting the addition of several new treaties this year.

Anna mentioned how we are combining our capabilities in product development and financial solutions to help our clients.

This is producing some nice growth opportunities in Asia.

These broad-based solutions have resulted in new treaties this year, generating $30 million of premium in the current quarter.

The Corporate segment reported a pretax adjusted operating loss of $29.9 million, higher than the expected run rate, primarily due to costs related to higher incentive-based compensation accruals and our strategic initiatives and service businesses.

In conclusion, we view this as a very good quarter with many positives to highlight.

We have continued to deliver strong organic growth and successfully execute on in-force transactions.

Our bottom line continues to benefit from a diversity of earning sources by both geography and product.

As Anna mentioned, the financial impact of recent transactions has become more meaningful, and thus, we are seeing higher earnings run rates in the U.S. asset-intensive and EMEA segment.

Based on the strong business fundamentals, despite some ongoing headwinds and challenges, we expect to continue to deliver attractive financial results over time into the future.

We thank you and appreciate your support and interest in RGA, and now we'll open the call for questions.

(Operator Instructions) We'll go first to Jimmy Bhullar with JPMorgan.

So I had a question on the U.S. business.

So any insight into -- or color into what drove the weak results on the individual life block?

And then on group business, you've had sort of volatile margins, and its been a business that, I think, you were in the process of repricing.

So the improvement this quarter, obviously, better than normal.

But to what extent is it the result of your repricing actions taking effect and flowing through results versus just maybe a positive aberration in terms of claims?

Yes.

Overall, the U.S. Traditional segment had a good quarter compared to our expectations.

And maybe it would be good for me to break it down a little bit to the major pieces.

You're right.

On the group side, which we have been in the process of repricing over the course of the last several quarters and that's basically done at this point.

So -- and that business has produced some good results throughout 2019.

Now as far as the results of the repricing efforts, that will continue to emerge over time as those underwriting years develop.

And then taking a step back for the overall U.S. Traditional segment, the U.S. mortality markets business did have negative underwriting experience of $45 million, which was related primarily to large claims in the quarter.

We did end up having really a handful of fully retained claims in this quarter on that line.

Now offsetting that was this strong variable investment income that we mentioned in our prepared comments.

And I would sort of measure that at about $23 million above our normal run rate for that segment.

And then overall, for the group and health line, I would say their overall underwriting experience was about $15 million favorable.

And then we had, as we always do, some -- across the segments, some model refinements and some client-reporting catch ups that went to the good or favorable for us for the quarter of about $15 million.

And then in Australia, like what's -- and then I think it was individual disability that caused the issues.

To what extent are some of these issues ongoing versus maybe just contained to this quarter?

Yes.

Well, on the -- yes, on the individual side, we have continued to see some poor experience there.

There -- for the open treaties that we have, we will continue to pursue repricing efforts to remediate the experience on that business going forward.

And we're very focused on managing the in-force block that we have there, both on the individual side and on the group side.

And on the individual side, we're really not and have not been quoting much in the way for new business.

Jimmy, I would add that we feel that some of the performance in this quarter is volatility related, but there is that ongoing persisting underperformance that, as Todd just mentioned, we are addressing through rate actions and also a really keen focus on claims management.

We'll now take our next question from Andrew Kligerman with Crédit Suisse.

Just kind of looking at your invested assets to equity.

I think it's roughly 7x right now in terms of that leverage figure.

The question is how high would you be willing to let that leverage ratio go?

I think the average for a life company is around 8.5x.

Is that where you want to be?

Maybe a little color on that.

Yes.

Andrew, I would not say we have a target of where we want to be as far as that metric, but it's certainly something that we pay close attention to throughout our entire risk management process and approach.

And also you need to look at it by the underlying types of liabilities as well.

For the most part, if you look at our traditional mortality side, there's not a lot of liquidity concerns on that business as premiums come in and we pay the claims outflows.

And then on the asset-intensive side in the Financial Solutions business, most of those blocks we've brought on, on an in-force basis.

So we can do a very good job with asset liability management, sort of right off the bat and minimize some of the -- sort of the any mismatch we might have there.

And there's not a lot of situations, even if when you drill down into those underlying liabilities that there's a lot of sort of liquidity or force-selling events where we would be forced to sell those investments in a bad environment.

So I guess it's a long-winded way of saying that the market value of the assets can go up and down, and we definitely need to be considerate around the overall asset leverage that we have in the enterprise.

But the way the scenarios we look at, there's not a lot that would end up with us having to liquidate in a bad environment.

Yes.

And Andrew, sorry, just I'd like to add one thought in that.

Having Langhorne is going to be helpful in this respect as well.

And just to kind of wrap that question.

So you would be comfortable growing the asset-intensive business, if that pushed the invested asset to equity ratio up a little bit, that would be something okay, given your comfort with your asset liability matching?

No.

We certainly would -- are interested and will pursue asset-intensive related deals that we like.

We're fairly opportunistic in the -- go hard after the underlying liability profiles that we're comfortable with, and certainly, stay away from maybe underlying annuity-type products or asset-intensive products that might be a little bit more liquid like, for example, that were sold through a brokerage chain and that type of thing.

(Operator Instructions) We'll take our next question from Ryan Krueger with KBW.

On the variable investment income to $23 million above normal.

Does the normal expectation reflect your comments that you expect kind of better earnings to emerge from from this portfolio over time?

Or would that be on top of kind of what you view at this point as a more normal level?

I'm not sure I, Ryan, exactly understand your question.

Maybe I'll start responding this way and then maybe you can follow-up.

That portfolio of alternative investments that made up of real estate equity ventures as well as some private partnerships.

And we began investing in that several years ago, and now it's gotten to a size and the underlying investments are getting to a little bit more of a mature stage.

So we are seeing our ability to generate some income from those increase over time and be a little bit more predictable.

Although I'll say, it's still hard to predict quarter-to-quarter how much we might see in those.

But we do expect the alternative assets, again, the real estate equity and the private partnerships to produce double-digit returns over time, albeit it's going to be lumpy.

Got it.

Yes, my question was just, you said it was $23 million above your normal expectation, but then you also said, it sounded like your expectation is rising.

So I wasn't sure if the kind of that already incorporated your rising expectation?

Or you think that could just perform above kind of normal over time now?

You're right that our expectation is -- has increased over time.

And again, as those investments have gotten more seasoned and ready to harvest some of those underlying line gains.

Got it.

And then just on Australia, as you continue to have some volatility there.

I just wanted to just confirm that you're still viewing this as more of an earnings issue, and you still feel okay about the reserves?

We do.

We view it as an earnings headwind.

One we don't like but one that we feel is manageable.

And as you look at our overall operations within the RGA Enterprise, we make pretax well over $1 billion.

So this is not a material amount overall to our earnings.

Although, clearly, we don't like the experience that we're seeing.

And yet, at this time, we see no material causes to increase reserves.

So we're still comfortable with the balance sheet.

Our next question will come from Dan Bergman with Citi.

I guess to start in terms of EMEA, I think the latest guidance you've given for the region was a $50 million to $55 million quarterly run rate in terms of earnings.

With results generally strong in that business and some of the recent top line growth, I just wanted to see if that's still a reasonable range?

Or has your expectation moved a little bit higher?

No.

Our expectation is a little bit higher.

We have been growing that business very nicely.

And I would look at sort of a run rate going forward for the entire EMEA segment in the $55 million to $60 million range.

Got it.

And then maybe just moving to follow-up on Australia.

Just in terms of the repricing actions and the runoff of some treaties.

How soon should we expect some of those actions to have an effect on the earnings trajectory?

Could that business return to profitability near medium-term?

Or will any improvement likely take longer?

Really just any thoughts around the earnings trajectory and pace of improvement would be helpful.

No.

We were repricing treaties as they come up for renewal on the group side and also as we can on the individual side.

It's going to be, I think, improvement more over time versus an immediate or short-term increase, like we see in the U.S. group business.

Those will take a little bit more time.

Our next question will come from Humphrey Lee with Dowling & Partners.

Just want to follow-up back on U.S. group.

You talked about this quarter was roughly $50 million favorable relative to your expectation.

At the same time, you're going through the repricing.

So I guess, from this quarter's perspective, do you feel like it would be kind of comparable to a normal quarter of earnings power for the group?

Or would there still be kind of room to grow as you kind of continue to go through the -- I mean, for the repricing to emerge?

Yes.

One, maybe a slight clarification, the $15 million related to group and our health line, albeit the majority of that number relates to the group business.

No, and this quarter was a good quarter for the U.S. group line.

It's good to see it back to some solid profitability after we experienced the underperformance last year in 2018.

And as long as our efforts continue to play out as we expect them to, we'll expect the earnings of that -- the U.S. group line to be in the range of, call it, $35 million to $40 million as I think I mentioned last quarter, once it gets back to full profitability and all the rate increases have kicked in.

So for this quarter, are you below that?

Or were you above that?

For the quarter for the U.S. group line, they performed a little bit better than what we were -- better than what we expect.

It's hard to -- that's just for our -- for the quarter.

Humphrey, I'm not sure exactly what you -- the question is trying to get to.

No.

I just want to try to get sense of for the performance this quarter relative to, I guess, a full earnings power of that business line.

But I think you got it.

Yes.

For the quarter, it's probably towards the high end.

But again, like all of our businesses, just looking at 1 quarter, it's hard to draw run rate conclusions.

Again, we'd like to look at it over a longer period this time.

So the group line is performing well, better than it has last year and remediate -- mediation efforts seem to be going in the right direction.

And our next question will come from Erik Bass with Autonomous Research.

Big picture, just given the volume of in-force transactions over the past 2 years.

Can you just help us think about the incremental earnings contribution you expect?

Where we should see this come through?

And the timing of the earnings emerging?

Well, I think overall, on the capital deployment side, we're happy with what we're seeing as far as the opportunities and the actual deployment.

Most of the larger activities and opportunities we're seeing are -- have been on the U.S. asset-intensive side, where we closed a couple of nice transactions this year, and also over in EMEA, primarily in the U.K. And we price for sort of lower double-digit returns, 12%, 13% range.

And the way U.S. GAAP works, it takes a little bit of time for the new treaties or new blocks to get up to that level.

But overall, I think that's a good way to look at it.

Got it.

I guess, maybe asking it a different way.

When you've given run rates for asset-intensive for the U.S., I guess, I think it's $55 million to $60 million per quarter.

And EMEA, you were talking about something in a similar range.

So does that contemplate the contribution from recently closed blocks?

Or could that move those ranges higher as they start to fully earn in?

Okay.

Yes, sure.

Yes, it does.

Though, I would say, since we have been successful with some of those blocks more recently, we expect to be towards the higher end of those ranges.

And hopefully, over time, exceed them.

Our next question will come from Alex Scott with Goldman Sachs.

First question I had was on U.S. Traditional.

So I guess, when I go through some of those building blocks that were outlined before, it gets me up somewhere in like the $125 million to $130 million range, I think, is what I was getting to.

So I'd just be interested in understanding like that, I guess, as a percentage of the sort of the $350 million that you've communicated in the past as a run rate.

Is that a good way to think about like how much of the earnings is concentrated in 3Q?

And it seems like that's become more concentrated over time.

And just any color you can give around as sort of the seasonality increases as the policyholders are aging.

How that will change things in 2020 and 2021?

Yes.

So maybe to start out, you quoted the $350 million run rate for the traditional segment.

I think that's still a good run rate to benchmark off of.

Yes, this quarter, we were about -- all in at around $120 million-ish, $122 million for the quarter for that segment, which there is some seasonality there quarter-to-quarter, which generally the third quarter has been a fairly good quarter.

Alex, I would add, we would expect and I think we've spoken about this in prior quarters, we would expect that as the mortality business ages that we would see more seasonality.

And when we think of seasonality, really we think about first and second quarters tend to be lighter.

And then third and fourth quarters tend to be heavier in respect of earnings.

Now the only additional element that I would add is, as we continue to be successful on organic business, new organic business and in-force blocks.

And here, it's mortality blocks, I'm referencing not the asset-intensive, that can put a little bit of pressure in the other direction.

But given the scale of our business, I would expect seasonality to increase steadily as we go forward.

That's all helpful.

And then maybe just to follow-up on Langhorne and the deal pipeline for the kind of deals you'd be targeting in there.

Does the interest rate environment just make it too difficult to achieve the kind of returns that you all want to hit here?

Or is it still pretty active?

The way I would describe our Langhorne pipeline is, it's a promising pipeline.

And it has transactions in it that are U.S.-based transactions and European-based transactions.

U.K., Netherlands, those type of countries.

It's a really -- it's a very highly competitive market as you can appreciate for those deals.

We're talking about very large deal sizes.

I'm pleased with the progress and the process we've been following.

We're not chasing deals.

We're not relaxing our risk disciplines to chase deals.

We're being responsible.

And although it's taking time, we remain -- I remain optimistic.

I think interest rates are a factor.

But they're not the only factor.

And as I said, we think this pipeline is promising.

(Operator Instructions) We'll go next to John Nadel with UBS.

So we've seen -- or we've -- I guess, we've heard from some companies now over the last couple of quarters.

And most specifically, just before your call, on the Lincoln call, some adjustments for the primary underwriters to reflect higher reinsurance costs.

Anna, I think in the past, you've indicated that RGA really has not raised prices in any material way on in-force treaties.

But can you just sort of update us on that?

Yes.

Yes, we do not have a broad-based repricing strategy.

We're not following that approach as others in the market have followed because we think this is a long-term business.

We have long-term relationships.

What we do, do and have been doing is we take a look at the balance of our relationship with the client across all their business across all countries.

And if we see that, that balance of relationship is tilted to extreme, then we will sit down and we will work with clients to come up with ways for us to rebalance that.

Now we'll also look at things like, are there systemic issues with the client?

For example, has there been really poor underwriting practices?

And in those instances, if there has been that type of activity, we do take action.

But again, it's through working with our clients to realign those relationships.

What RGA -- RGA strategy is really -- we're in it for the long haul, and we're in it in a partnership with our clients for the long haul.

Got you.

That's helpful.

And then I know there's an awful lot of moving parts to earnings growth, whether it's capital deployment organically, inorganically, seasoning of various blocks, et cetera.

But just focusing in on how much long-term interest rates have declined here.

I just wanted to get a sense if we thought about your intermediate term, 5% to 8% annual operating EPS growth, and we isolate it on interest rates, is -- are we low enough on rates that all else equal, that 5% to 8% growth objective is pressured to the downside?

John, this is Todd.

As you know, we generally update comprehensively our guidance in January when we go through year-end.

But specifically on interest rates, we have been looking at that.

And it's -- if you look at, say, 1% or so decrease in rates from where we are today, that would have an impact clearly on our earnings power going forward and create a headwind.

And sort of on our traditional business, these aren't exact numbers, I'd say, 1% decline from here could impact next year earnings by -- in the neighborhood of $20 million of pretax.

But that being said, we're still going to do our best to overcome any of that headwind through our business operations.

And also, currency has an impact, too.

That can go both ways.

We'll now take questions from Andrew Kligerman with Crédit Suisse.

Going back to Australia, just hoping for kind of a recap on the geography of the losses.

I guess most of it was individual disability, maybe the mix of group and individual and then where you think that -- what are you thinking for 2020 in terms of these different product areas?

Andrew, for the quarter, the loss was really across the product lines, both the group and the individual lines experienced poor performance.

And I think, as we mentioned and Anna also mentioned, on the group side, we had some volatility related to some catch-up on claims from one of our clients.

So going forward, projecting out what we expect for 2020, it's difficult given the experience.

But again, we are actively managing that in-force block.

But I would say, for 2020, we'll likely be in a loss position.

Although, as I mentioned earlier, I think it will be a manageable loss given RGA's overall operations and just the size of the business in Australia.

Is this a market that you would consider exiting?

Or is it just you need to work through the issues.

Yes.

Andrew, maybe I'll take that.

So first, we're concentrating, obviously, on managing the in-force on rehabilitation.

But let's take a step back for a minute.

Our group business has been profitable since 2014, albeit with some ups and downs.

And the group reinsurance market in Australia is one of the largest markets in the world.

Now we want to support our global clients.

And that is part of our strategy, part of the strategy that has been successful.

This is an industry problem.

It's not just a problem isolated to RGA and it's a well-recognized industry problem.

And it's in everyone's best interest to have a viable, a sustainable market.

And it's in everyone's best interest to work together to get us there.

There's not going to be a quick fix.

And so for us, as Todd mentioned, it's an earnings headwind, it's a manageable earnings headwind in the context of the global operations.

And certainly, given the strength in all of our other areas.

But we think that we can continue to remediate this and work with the other participants in the industry to fix the industry.

And then we believe we can continue to make money over the long run.

We'll now take a question from Alex Scott with Goldman Sachs.

I just thought I'd ask about expenses, just thinking through some of the initiatives that are going on.

The current expense base, which maybe had something in there for a little more deployment activity recently.

I mean, how should I think about how that will trend sort of overall for expenses?

And maybe, I guess, specifically the corporate segment?

Yes.

Overall, expenses enterprise-wide, like every company, I guess, will go through a pretty diligent process and budgeting expenses, and compared to our overall budget for the enterprise on operating expenses, we're doing fairly well against that benchmark.

Now if you look at it year-over-year, there can be some fluctuations as we've acquired some businesses that brought in expenses that maybe were in '19, but not '18.

But compared to our expectation, our budget overall so far through the year, we're doing okay.

Now switching to the corporate segment, there, you see a little bit more volatility, and we're running a little bit high compared to the $25 million average loss in the quarter.

And that's a overall loss for the corporate segment, not necessarily targeted directly to just expenses because we have the operations of Langhorne in there and some of our RGAx and service businesses that go through the corporate line.

But as of right now, I think, through the first 3 quarters, the average corporate loss for the segment is about $27 million.

So maybe running a little bit higher from that $25 million.

But that $25 million right now is, I think, still a fairly good estimate.

And it appears there are no further questions at this time.

Mr. Larson, I'd like to turn the conference back to you for any additional or closing remarks.

Well, everyone, thank you for joining us this morning for the call and your continued support for RGA.

Thank you very much.

This concludes today's call.

Thank you for your participation.

You may now disconnect.