美國再保險集團 (RGA) 2021 Q3 法說會逐字稿

Good day, and welcome to the Reinsurance Group of America Third Quarter 2021 Results Conference Call.

Today's conference call is being recorded.

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

Please go ahead, Mr. Larson.

Thank you.

Good morning, and welcome to RGA's Third Quarter 2021 Conference Call.

With me this morning on the call is Anna Manning, RGA's President and Chief Executive Officer; Leslie Barbi, Chief Investment Officer; Jonathan Porter, Chief Risk Officer; and Jeff Hopson, Head of Investor Relations.

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

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

Some of our comments or answers to your questions may contain forward-looking statements.

Actual results could differ materially from expected results.

Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ materially from expected results.

Additionally, during the course of this call, information we provide may include non-GAAP financial measures.

Please see our earnings release, earnings presentation, quarterly financial supplement and website for discussion of these terms and reconciliations to GAAP measures.

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

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

Last night, we reported a loss of $1.11 in adjusted operating EPS, which included pretax $500 million in COVID-19 impacts or $5.59 per share.

Our 12-month trailing ROE was 2.1%, which included 9.8% in COVID-19 impacts.

Premium growth was strong at 9.5%, and we ended the quarter with excess capital of $1 billion.

This quarter saw elevated COVID-19 claims in the U.S., India and South Africa, consistent with the levels of general population mortality.

In the U.S. Individual Mortality business, COVID-19 claims were $235 million in the quarter, slightly above the high end of our rules of thumb range.

We also had a level of excess non-COVID-19 claims, reflecting the elevated levels of excess mortality reported in the general population by the CDC.

COVID-19 claims in India and South Africa were $161 million and $64 million, respectively, as those countries also experienced a material Delta wave.

And Jonathan will provide further insights on our claims shortly.

The performance this quarter ex COVID-19 was strong and featured many highlights, again demonstrating the value of our diversified global business and the strength of our new business franchise.

Highlights this quarter include strong earnings across all lines and regions from our GFS business, deployment of $140 million of capital into in-force transactions, including our largest to-date longevity transaction in the Netherlands.

This brings the year-to-date capital deployment into in-force transactions to a total of $440 million, putting us on track for a very strong year as our pipelines remain very good with opportunities in all regions.

I am particularly pleased with the recent success in our GFS business in Asia.

That business has grown from a relatively small base a few years ago to one that has produced $66 million of adjusted operating income through the first 9 months of this year.

Our success is in large part the result of our high-caliber local teams, working together with our global product and risk experts, to bring new solutions that best fit the needs of the local markets and clients.

We are actively managing our capital position, balancing deployment into organic business and attractive in-force block opportunities with shareholder dividends and, in this quarter, the resumption of share buybacks.

And we generated additional capital with the completion of a financially-attractive asset-intensive retrocession transaction.

I believe clear evidence on an efficient and effective capital management approach.

Investment results were favorable in the quarter despite the continued challenges of the low market yields, impairments were minimal and we realized some nice gains in our limited partnerships and real estate joint ventures.

Both our U.S. group and U.S. Individual Health business performed above our expectations, continuing a recent trend.

As I think about this quarter and the last 6 quarters of the pandemic, I remain encouraged by the resilience of our global business and by the positive momentum in our new business opportunities and growth prospects.

Looking forward, we expect some continuing impact from COVID-19 claims, but believe these will be manageable and point to increasing vaccination rates globally as a reason for optimism.

We operate from a position of strength with an outstanding workforce, valued client relationships and healthy business fundamentals.

We have a strong balance sheet and a track record of successful execution against our strategy.

All this gives me confidence in our business and in our opportunities for growth.

Even though a lot of the focus this quarter is on COVID-19 claims, we are accomplishing a lot in terms of adding substantial new long-term value.

I am proud of this team and all that we've achieved, and I am excited about the future and look forward to sharing more thoughts at our Investor Day on December 9.

Thank you for your interest in RGA, I hope you all remain safe and stay well.

And let me now turn it over to Todd to go over the detailed financial results.

Thanks, Anna.

RGA reported a pretax adjusted operating loss of $89 million for the quarter and adjusted operating EPS loss of $1.11 per share.

which includes a negative COVID-19 impact of $5.59 per share.

Our trailing 12-month adjusted ROE was 2.1%, which is net of COVID impacts of 9.8%.

While we did experience a significant level of COVID-19 impacts, our underlying non-COVID-19 results were strong, as demonstrated by the year-to-date growth in our book value per share excluding AOCI of 4% to $137.60.

I would highlight this growth in book value per share is after absorbing approximately $1 billion pretax of COVID-19 claim costs.

Consolidated reported premiums increased 9.5% in the quarter or 7.7% on a constant currency basis.

The reported premiums did reflect a couple of one-off items.

The organic growth was very good and new business activity is encouraging across all regions.

The effective tax rate for the quarter was 15.2% on pretax adjusted operating loss, below our expected range of 23% to 24%, primarily due to adjusted operating income in higher tax jurisdictions and losses in tax jurisdictions for which we did not receive a tax benefit.

This was partially offset by favorable adjustments from tax returns filed in the quarter.

Turning to the segment results.

As listed on Slide 6 of the earnings presentation, the U.S. and Latin America Traditional segment included approximately $250 million of COVID-19 claim cost.

Approximately $235 million of which was in our U.S. individual Mortality Business and the balance in our U.S. Group business.

We saw non-COVID-19 excess claims of approximately $75 million, which is consistent with higher non-COVID-19 population mortality as per CDC reporting.

The U.S. Group and Individual Health business both performed better than our expectations due to favorable experience overall, even after reflecting $15 million of COVID-19 claims in our U.S. Group line of business.

Variable investment income was strong in the quarter as both limited partnership performance and real estate, joint venture realizations were favorable.

The U.S. Asset-Intensive business reported very strong results.

This segment had favorable overall experience and higher variable investment income.

We continue to be pleased with the results in this segment.

The Canada Traditional segment results reflected favorable experience in the Group and Creditor lines of business, slightly offset by COVID-19 claim costs in the individual life line of approximately $5 million.

The Canada Financial Solutions segment results reflected modestly unfavorable experience.

In the Europe, Middle East and Africa segment, the Traditional business results reflected COVID-19 claim cost of $80 million in total, of which $64 million was in South Africa and $13 million in the U.K. We also saw some excess mortality claims believed to be directly or indirectly COVID-19 related.

EMEA's Financial Solutions had a good quarter as business results reflected favorable longevity experience, $4 million attributable to COVID-19.

Turning to our Asia Pacific Traditional business.

Asia results reflect COVID-19 claim cost of $169 million, of which $161 million was in India.

This impact was higher than our expectation, and Jonathan will provide further information in a few minutes.

Australia reported a small loss for the quarter.

We continue to take necessary actions to manage the business back to consistent profitability.

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

As Anna mentioned, we continue to be pleased with the growth and contributions from this segment.

The Corporate and Other segment reported pretax adjusted operating loss of $27 million, which is in line with our quarterly average run rate.

Moving on to investments.

The non-spread portfolio yield for the quarter was 4.95%, reflecting both our well-diversified portfolio allocation and strong variable investment income, primarily due to realizations from limited partnerships and real estate joint ventures.

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

The investment portfolio average rating was unchanged in the quarter and investment credit impairments were again nominal.

Our new money rate increased to 3.7% with the majority of purchases in public investment-grade assets and contributions from strong private asset production.

Regarding capital management, our excess capital position at the end of the quarter was approximately $1 billion.

Our capital position remains strong, and we have ample liquidity.

We deploy $140 million into in-force transactions and repurchased $46 million of shares.

Additionally, we entered into an asset-intensive retrocession transaction that generated $94 million of capital and enhanced our returns.

This quarter highlights our balanced approach to capital management and our ability to absorb the impacts of COVID-19, fund organic growth, deploy capital into transactions and return capital through share repurchases and dividends.

We'll now turn the call over to Jonathan Porter, our Chief Risk Officer, who will provide additional comments on our COVID-19 related experience.

Thanks, Todd.

I'm going to review our Q3 claims experience and then provide some views on our COVID claim cost expectations for Q4.

The global emergence of the Delta variant has been a key driver of higher general population mortality in the quarter.

We were optimistic in our last earnings call that trends in the U.S. would lead to an improvement in mortality over the remainder of the year.

However, Q3 saw increases in both COVID-19 and non-COVID-19 general population mortality.

As you will see on Slide 12 of our earnings presentation, the U.S. population graphs show the level of COVID-19 reported deaths and the number of non-COVID-19 excess deaths over the course of the pandemic.

There are 3 key takeaways.

COVID-19 reported deaths increased substantially in the quarter.

COVID-19 deaths under the age of 65, ages where there is more life insurance exposure were at their highest point over the past 6 quarters.

Non-COVID-19 excess deaths were at their highest relative and absolute level since the start of the pandemic.

Our individual mortality claims results are -- sorry, U.S. Individual Mortality claims results are consistent with what was happening in the general population.

COVID-19 claim costs were $235 million in the quarter, slightly above the higher end of our rule of thumb.

Q3 results reflect higher mortality in ages under 65 and larger average claim sizes.

On a year-to-date basis, COVID-19 claims are at the midpoint of our range.

Our excess non-COVID-19 experience was also driven by higher claims frequency, consistent with the elevated deaths in the general population.

Turning to markets other than U.S. Individual Mortality.

COVID-19 claim costs of $161 million in India were higher than our prior estimates, reflecting the more adverse impact of the Q2 Delta wave.

Similar to what we are observing in the U.S., the Delta variant has resulted in higher general population deaths, a shift of deaths to younger, more insured ages and a larger average claim size.

$30 million of this impact in the quarter relates to an increase in IBNR, resulting in a COVID-specific IBNR balance for India of $75 million at the end of the quarter.

COVID-19 claim costs in South Africa are estimated at $64 million in the quarter, reflecting a change in the distribution of general population deaths by province as well as some large claims volatility.

Q3 general population data indicates that provinces with higher socioeconomic levels and, therefore, more insurance penetration and larger-sized policies were more adversely impacted this quarter.

Other markets, including Canada and the U.K., accounted for $30 million of estimated COVID-19 claim costs.

As expected, our longevity offset was modest in the quarter, given relatively low levels of general population deaths in the U.K. where our longevity business is concentrated.

Looking ahead to Q4, elevated levels of excess general population mortality are continuing in the U.S. through October, although currently running at lower levels than experienced at their peak in September and trending downward.

We are maintaining our claim cost rule of thumb of $10 million to $20 million for every 10,000 general population deaths.

We are also maintaining our rule of thumb for the U.K. and Canada at this time.

General population COVID-19 deaths in India and South Africa have been relatively modest through October.

Predicting COVID-19 claim cost continues to be challenging, in particular in India where comprehensive data is not available.

Although India and South Africa vaccination levels are still below our other key markets, they have increased materially in both countries since the beginning of Q3, which will reduce the severity of future COVID-19 impacts.

We remain confident that the impacts will be manageable.

Let me now hand it back to Todd.

Thank you, Jonathan.

Before opening it up for questions, I would like to remind you of our upcoming Investor Day scheduled for December 9. We hope you can join us for our discussion.

We now like to open it up for questions.

(Operator Instructions) We will take our first question from Humphrey Lee of Dowling & Partners.

I guess my first question is about the non-COVID-19 excess mortality in the U.S. Can you provide some color in terms of maybe the age cohorts or average claim size or maybe the cause of deaths based on, kind of, your analysis?

Yes, Humphrey, it's Jonathan.

I'll take that.

So our U.S. mortality experience this quarter is really driven by broad-based higher frequency of claims, and that's COVID and non-COVID of the whole piece.

There's no notable patterns by issuing your cohorts or policy size or clients.

Consistent with general population data, we are seeing an overall increase in excess mortality at ages less than 65, which is really a change that we've highlighted from earlier in the pandemic.

The average claim size at the -- sorry, aggregate level across U.S. mortality is actually relatively stable quarter-to-quarter.

But as I mentioned earlier, the COVID specific claim size has increased.

Got it.

My second question is more about India and South Africa.

How much did you normally earn in India and South Africa before the pandemic?

Just kind of looking at the claims so far by my account, the COVID claims from these 2 countries have been roughly $400 million since the pandemic, pretty much kind of 1/3 of the claims that you've seen in the U.S. And looking at the kind of the mortality amount of risk disclosure that you provided in the first quarter '20 deck, they can be more than kind of low single-digit percentage points.

So can you just help us to kind of get a better perspective of the exposure for this country and how the size of those claims could be relatively large compared to your exposure there?

Yes, I'll talk about the exposure from a minimum amount of risk perspective, Humphrey.

So India represents about 5% of our global net amount of risk.

South Africa is between 1% and 2% of our net amount of risk, just to give you a sense of the scale.

As you mentioned, the COVID claims experiences has been material in both of those markets.

I guess you can say disproportionate to the actual net amount of risk exposure we have, that's really a function of the underlying general population mortality experience that we're seeing.

We also routinely, obviously, discuss with clients, what's happening in those markets and what we're seeing in South Africa as an example is consistent with what our clients are seeing.

So again, it's -- the impacts we're seeing from COVID is really a reflection of what's happening in the general population.

We will move on to our next question from Andrew Kligerman of Crédit Suisse.

Maybe just start off on capital management.

You indicate $1 billion of excess capital.

Given the sharp losses this quarter, maybe a little color on your outlook for share repurchases and any other uses of capital?

Could you keep the buyback going?

Andrew, it's Todd.

Apologies, Todd.

Maybe I can start and then ask you to add.

Andrew, we're in a long-term business and supporting clients, whether on their organic needs or block deals, that's really core to our strategy.

So when we think about capital management, we start there.

We start by looking at the new business opportunities in the pipelines and how we feel about those opportunities and then the likelihood of winning and what are the return levels we think we can get.

And remember, some of our deals do take time to complete.

We then weigh that against all the alternatives, returning capital through buybacks and through dividends, really looking for the best and most valuable use of our excess capital.

That's how we've approached capital management in the past.

It's produced a nice balance.

We expect to go back there.

And in my mind, this quarter doesn't change that.

Todd, would you like to add?

I think that covers it.

Thanks, Anna.

Okay.

And just -- I actually have one more major question on -- this is aside related to that.

$94 million of asset-intensive retrocession.

So you raised $94 million of capital.

Maybe a little color on why that was done.

Andrew, it's Todd.

So this is a transaction that we entered in -- the inbound transaction we've entered into fairly -- recently when we -- like the overall characteristics of the block, but we were able to find a financially attractive retrocession terms that actually helped enhance our returns overall on the block, which we thought was very attractive.

And when we retroceded part of that asset-intensive block, it freed up some of the capital that we had against the block.

Okay.

And then just with regard to premium, I mean, U.S. looked really good.

You mentioned a onetime restructuring of an existing tree.

I wasn't sure what the normalized number would be in the U.S. ex that restructure?

And what did it relate to.

And with that, why were the premium so strong?

That's terrific.

I mean Canada and EMEA, they all looked great in terms of growth, but U.S. in particular, why strong?

Yes.

So the first part of your question, yes, we had a transaction that has been in place for a little bit of time in the U.S. and Latin America segment that converted from what we call sort of low risk or deposit accounting to where we took more of the biometric risk and under GAAP accounting, it turned in -- translated into risk accounting where you recognize the premiums and benefits and that type of thing on the income statement.

So that added to the premium growth in the U.S. and Latin America segment.

If you back that out, I think the growth in the U.S. is probably between 4% and 5%.

Okay.

So more normalized.

And Canada...

Yes.

No, no...

And Canada in the (inaudible) were really strong.

Anything driving that?

No, it really -- no, Canada did some transactions and saw good business growth.

And then really for EMEA, it was across the region, which was -- it's good to see just a lot of good activity.

I would add, Andrew -- yes, Andrew, I would add it's reflecting what I believe to be -- or reflecting our approach during the pandemic, which was -- we stayed close to our clients.

We provided a lot of thought leadership throughout the pandemic underwriting expertise.

And I think part of that is translating into the business activities that we're seeing.

And Andrew, maybe add on details point is -- for Canada and EMEA, there was some positive FX contribution to the reported premium growth.

Right.

Saw that in the release.

We will move on to our next question from Erik Bass of Autonomous Research.

For the U.S. Traditional block, can you give some more color on the age and product breakdown of your mortality book and where the COVID impacts occurred this quarter?

I guess I'm trying to get a sense of why your sensitivity this quarter looks different from what we've seen from a lot of the primary companies and even the other reinsurers where they're seeing less COVID losses in individual life as a percentage of population deaths as the mortality moves to younger ages.

Yes.

This is Jonathan, Erik.

So yes, so we have the largest proportion of our business would be in sort of that middle age range.

So what I mean is sort of in that 40 to 65 range.

So that is a larger proportion of our business relative to the older ages where we're seeing the early impacts from the pandemic.

So I think that shift down below 65% as part of that impact there.

Also, we tend to have larger policy sizes as well when you move down into those age ranges, which I think is partly what's driving some of the increase in size.

Got it...

And just on the...

with a lot of term block where you may have sort of higher base values or you're taking kind of sort of excess amounts above.

So the primary companies are seeding kind of excess risk to you?

Erik, I don't think that's necessarily the case.

I think the thing to remember when you're comparing our sensitivities or our rules of thumbs against others, is that the size of the block matters.

Because we're all using per 10,000 deaths in the population.

So you would expect that if you're comparing a sensitivity from one firm to another, if there's double and triple the size of the block of business, you would expect to see that in the resulting sensitivities.

Got it.

Now I was looking at relative to in ranges where others were coming in sort of at the lower end of the ranges versus yours at a slightly above the high end, so not the absolute number, but the relative.

I was going to say, Anna, just one more thing to keep in mind, too, is that we do think there's potentially some quarterly volatility here as well.

So it's hard to draw conclusions from -- based on one quarter's information, just as kind of an immediate or something that's occurred recently.

Q2, we actually saw quite a low level relative to our range.

So they can move around quarter-to-quarter.

So that's why we want to see some more data emerge before we consider making a change to our range.

Got It.

And if I could just ask one follow-up on the India business?

How much of a reporting lag are you seeing in that business?

It looked like the population that were actually lower in 3Q than 2Q.

So is a lot of this kind of a catch up on kind of deaths that, that actually occurred in earlier periods?

Yes.

Yes.

No, that's exactly right.

So of the $161 million charge that we took this quarter, the majority of it, so around $130 million or so relates to Q2 experience.

So due to these longer reporting lags, we did establish an expectation in IBNR last quarter.

But really, that was done pre-Delta wave, right?

So we were going on information that we had based on what we had experienced in India, as you recall, is really the first country to have a material Delta wave impact.

So that's really what's causing the difference now.

So we're seeing the Delta wave moving to younger ages, higher policy size amounts.

So most of what we're seeing this quarter relates to last quarter.

We'll move on to our next question from John Barnidge of Piper Sandler.

The Chief Operating Officer left, was there a charge in the quarter?

Or is that going to occur in 4Q?

There was -- John, it's Todd.

There was nothing in 3Q and I -- as of right now, I'm not expecting anything material in the fourth quarter?

Okay.

And then my follow-up question, maybe asking the buyback question a little bit differently.

Can you talk about how the cadence of those buybacks changed as the quarter went along and the Delta variant emerged?

No, we -- on the buybacks, we wanted to show our confidence in the business and the value proposition of our enterprise.

So we decided to go ahead and take -- repurchase some shares.

And I'm trying to think back of the exact timing, but it wasn't a huge consideration related to the COVID impact, but it was before the significant, I guess, impact that we knew about how significant the impact was.

We will move on to our next question from Ryan Krueger of KBW.

Back to the U.S. COVID impact.

Could you help us understand in a little bit more detail how material the impact was from the higher average claim size versus just higher incidents.

Yes.

So just to give you a number.

So this quarter, our average COVID claim was about 22% higher than what it has been for the first 2 quarters of the year or through the prior waves.

That's helpful.

And I mean, I guess, at this point, is there any reason to think that wouldn't continue given the shift in the 2 younger ages?

And I guess what I'm getting at is, is the only reason you're not changing your sensitivity because you want to see more data to increase credibility, but kind of sticking through it, there wouldn't be much reason to think this higher severity issue would really change if the age mix continues as it did in the third quarter?

Yes.

I think it's too early to draw that conclusion for certain.

It's possible we could continue to see higher average claim size and the shift to younger ages.

As I mentioned earlier, it does vary a lot quarter-to-quarter, and the prior quarter, which also was showing some increase in COVID mortality into the younger ages, actually was our lowest average claims size quarter for COVID that we had over the course of the pandemic.

So I think it is too early to determine how much of this will persist or not.

And as we get more data over the course of this quarter, we'll evaluate that to see if we need to update our range.

And then on block deals, you've been pretty active this year.

But can you also comment on Langhorne and activity you might be seeing there at this point?

Yes.

Let me take that one.

So first, let me start with your Langhorne question, and perhaps I can provide some color on our deals.

We're remaining -- after that Langhorne, it's -- one of our top priorities.

We have dedicated resources that are actively at work on deals.

And I remain optimistic about getting one across the line, getting more than one across the line.

On the Q3 deals, very pleased with the quarter's deals, as Todd mentioned, $140 million of capital.

And if you add the $300 million in the first quarter, that brings us to $440 million for the 3 quarters.

That puts us on track for a very strong year, especially given the state of the pipeline.

I was pleased with the distribution of the deals.

We did a life deal in Asia, one in the U.K. and then an AID, Asset-Intensive deal, in EMEA.

And overall, I'm very happy with the deal and optimistic on the pipelines.

We move on to our next question from Michael Ward of UBS.

Maybe to expand on the buyback cadence question.

So you said the buyback decision, Todd, was before you realized how kind of bad the COVID impact would be.

So I guess -- does that mean we should think you'll be more cautious going forward?

And have you bought back any shares in 4Q to date?

No.

The way I would look at it is we have -- we continue to have a strong balance sheet, and we feel we can be prudent and balanced around our overall capital management.

Certainly, we're going to keep an eye on what's unfolding with the pandemic, but certainly, as Anna mentioned earlier, we'll look at deploying capital into transactions where we like the liability profile and we can get attractive returns, and we'll continue to look at the dividend and share repurchases, we'll continue that sort of a balanced and prudent approach as we go forward.

Okay.

And then regarding the annuity retrocession deal, you said it was inbound.

But can we think about this as maybe the first of more to come?

Should we be thinking about RGA as potentially in maybe the derisking bucket?

And are there other areas in life or annuities where you could do more of this free up capital and give us maybe a new reason to look at RGA.

You want to mention the inbound transaction.

That was -- it was an inbound transaction to RGA, and then we retro-ed a portion of that to a third party.

I would not view it the retro session that we did as derisking.

It was more -- we were able -- from an economic perspective, it was an attractive transaction for us to do and enhance our overall returns while providing some capital flexibility.

And certainly, it's something -- as we've mentioned in the past, we are looking at our various capital management toolkit items that we can have access to and retrocession at what we would view as favorable economic terms is certainly one of those things that we'll keep in mind over time.

And I'd like to emphasize the motivation for that transaction was not to derisk.

It was an opportunistic transaction, very attractive financially and it happened to generate $100 million in capital.

We'll move on to our next question from Tom Gallagher of Evercore ISI.

My first question is, has the emerging experience caused you to push through any rate or are you contemplating pushing through any rate, whether that's in the U.S. or some of these international markets where particularly India, South Africa?

I'm assuming the loss ratios might be 500%, 1,000%.

We don't know how much premium you're charging because there's, obviously, a lot of uncertainty with where the pandemic's going to go.

But you probably have some scenarios where the loss emergence here could really pressure the -- what the combined ratio would be in these businesses for the next year or 2. So just curious, overall, how are you thinking about that?

And are you planning on pushing through rate where you can in either U.S. or some of these other markets?

Yes.

So...

I'll start with -- sorry, one of the difficulties of these virtual calls is we're not in the same room.

Go ahead, Jonathan.

I'll add my comments at the end.

Okay.

Yes.

Thanks.

I mean I guess I would just say, first, we are taking action and has been for quite some time to reflect our expectations for COVID and the pricing of new business that we're writing.

So that's the first thing I would note.

We're also being cautious in markets where we think there is more risk.

So that relates to how we're evaluating new business, volume is a new business that we're choosing to accept, types of business we're choosing to accept.

And we're also applying a thoughtful approach on our underwriting as well, so again, just to manage the risk exposure.

So when we do have open treaties, and this applies globally, not just in any one market.

We're working with our clients very closely.

We're adjusting underwriting rules and taking new data into account as we assess the risks.

Anna?

Thank you.

You've covered it.

So -- and I appreciate that.

And that's just on new business, though, you're not repricing existing treaties for this emerging experience at all?

Yes.

I mean, certainly, where we have the opportunity to do that, it's being considered.

So for group business as an example, which is annually renewable.

Generally speaking, that absolutely is being repriced and taking into account the COVID expectations.

For longer-term business, I think you have to think of that business in more of a longer-term context as well.

And obviously, we have an approach where we consider not just the current period but future periods and what our -- overall balance of our relationship is with our clients and we take all of that into account which we consider actions on long-term business.

Got you.

And I guess the other -- the next question is sort of enterprise risk management, too.

Do you -- now obviously, this experience, I think most people are viewing this whole emerging experience like a catastrophe that's lasted 1.5 years essentially and not likely to recur hopefully -- much beyond the current time frame.

But does it cause you to rethink enterprise risk management at all?

Like do you think now, given this experience kind of the variants that have occurred, does that cause you to rethink how you're thinking about risk management overall, meaning is there some permanent change in loss ratio you think that needs to be factored in?

And maybe it's the -- maybe set in a better way, is the tail risk here now a lot higher than you would have previously thought that could sort of be sustained higher losses?

And if so, how does that kind of inform your view on either exposure risk management or pricing?

So kind of a high-level question, but just curious how you're looking at this whole experience.

Yes, yes.

And I think a hallmark of a good risk management process and, hopefully, we can put ourselves in that bucket is really looking at lessons learned, right?

So after you go through an event like this really analyzing what the impacts were and making adjustments in the future.

So we're not -- that work is ongoing and really always happening when we analyze and look at our business.

So things like our process over the last 2 decades to diversify our book of business.

I think has been part of that thinking around risk managements, and I think will continue to be an element of what we think about, right, as far as our having a solid mix of risks across the enterprise, which has proven itself, I think, over the last 6 quarters.

That's been a very helpful position to be in.

Things like you mentioned about tail risk and capital models, those are elements that we're considering as well.

I think our capital model, even with the impacts we've had so far has proven out to be conservative in what our expectations were for a pandemic event.

But I think you need to look at the data that's emerging, you need to consider what that means.

And obviously, that will push them into pricing to risk management and . So I think it is a work in progress, but I think everything you mentioned are things we're thinking about as well.

Got you.

And then just final question, if I could, on that same topic.

Any changes you're considering over the near term, whether that's limiting risk to some of these markets that have had very high loss ratios, India, South Africa, et cetera, whether it's utilization of retrocession or cutting the size or any risk mitigants that you're thinking about over the near term?

Or are you still got a way to evaluate more experience?

Yes.

No, I mean I think I'll point out again the -- it's already done, right?

So this is something that we've been taking active positions on since the start of the pandemic really, and it goes into what you're saying about managing volumes, managing type of business that we're accepting changing prices.

So all of those things have been things we've been actively doing over the course of the pandemic, and we'll continue to do.

We move on to our next question from James Inglis.

I'm thinking about your ability to generate capital through the retrocessional transaction.

And presumably, that is because there is a capital provider who is willing to take a lower return than you folks would, which is good.

But I'm just trying to draw a contrast if there is, are there any parallels to be made with the ability -- or the availability of capital in the world, if you will, as opposed to your ability to get deals done in Langhorne?

I mean it seems to be there's got to be some parallel there.

And correct me if I'm wrong.

Could you really frame your question because I'm not sure I'm connecting the retrocession transaction, which, again, was not motivated by capital to your question about capital.

No.

You're correct, Anna.

It's not -- I wasn't making the analogy that it was motivated by capital, but it was -- I was trying to make the analogy it was motivated by other capital providers interested in getting a return on that book of business.

And how that must be limiting the fact that there's that capital available out there must be limiting your ability to do deals in Langhorne.

Oh, now I see the connection that you're drawing.

Yes, there is a lot of competition out there, and there are a lot of capital providers who are interested in the type of transactions that -- well, the transaction, in particular, that we did the retrocession transaction.

Look, I think price is a factor in doing deals, but it's not the only factor.

We don't just compete on price.

We compete on a broader value proposition, and that's around expertise.

Our risk expertise and our structuring expertise and, in particular, our appetite to take insurance, life insurance, biometric risk as opposed to the asset type of deals, which I think is generally where the new capital providers are focused.

So yes, the price is a factor, but it's not the only factor.

I remain optimistic about getting deals done in Langhorne.

We'll take our next question from Michael Ward, UBS.

My question is from Langhorne or my question is around the retro session, I wasn't implying that derisking is a negative thing.

I think if anything, it's a positive.

We've been seeing most companies do this, especially over the last year or 2. And even just talking about having a plan to monetize certain assets or block that are maybe more capital intensive and whatnot.

That's been a clear positive for those companies or at least our stock.

So my question was more along the lines of, do you want to do more of this.

I know this was a sort of opportunistic deal, but wondering if this is something that you want to do more of.

Right.

Thank you for that follow-up question.

We're open to considering a future transaction where it makes sense for us.

And as we've already mentioned, this was a nice transaction, and it fits in many respects.

It isn't something that's new for us.

We've done retrocessions and securitizations in the past.

And I expect we'll continue to do them as market conditions, as opportunities arise, as the economics make sense for us.

It's another tool in our toolkits.

And it appears we have no further questions over the audio.

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

Okay.

Thank you.

Thanks, everybody, for joining the call this morning and your continued interest in RGA, and we look forward to seeing you in December at our Investor Day.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect.