Reinsurance Group of America, Incorporated

Q2 2023 Earnings Conference Call

8/3/2023

spk10: Good day and welcome to the Reinsurance Group of America Incorporated second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note, This event is being recorded. I would now like to turn the conference over to Todd Larson, Senior Executive Vice President and Chief Financial Officer. Please go ahead.
spk07: Thank you. Welcome to RGA's second quarter 2023 conference call. I'm joined on the call this morning with Anna Manning, RGA's Chief Executive Officer, Tony Chang, President, Leslie Barbee, Chief Investment Officer, and Jonathan Porter, Chief Risk Officer. As a quick reminder before we get started regarding forward-looking information and non-GAAP financial measures, some of our comments or answers to your questions may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ materially from expected results. Additionally, during the course of this call, the information we provide may include non-GAAP financial measures. Please see our earnings release, earnings presentation, and quarterly financial supplement, all of which are posted on our website for further discussion of these terms and reconciliations to GAAP measures. And now I'll turn the call over to Anna for her comments.
spk01: Thank you, Todd. Good morning and thank you for joining our call today. Last night we reported second quarter adjusted operating earnings of $4.40 per share. This was a strong quarter with many regions and business lines performing very well. It was also another quarter demonstrating the power of the underlying earnings engine in our business. as well as the ongoing success of our growth strategy that is adding meaningful long-term value to that engine. Let me turn to a few of the highlights in the quarter which include favorable mortality experience in our U.S. individual business, as well as favorable performance in our U.S. group and individual health businesses. Our Asia traditional business also benefited from favorable claims experience, as well as higher yields. Our global financial solutions business had another strong quarter with contributions from both spreads and favorable longevity experience, continuing the trend of excellent performance over a number of years. Investment performance in the quarter was good as new money rates remained attractive and impairments were minimal. We believe our investment portfolio is well positioned to withstand any ongoing economic uncertainties. And strong new business momentum in our organic business continued through the quarter and notably picked up in Asia. In a few minutes, Tony will expand on the quarter's activities and on our future growth opportunities. We had another very successful quarter on the capital management front, deploying $190 million into Inforce and other transactions, bringing the year-to-date total to $384 million of capital put to work. I am pleased with the start of the year and with the state of our transactions pipelines, which are at very healthy levels with opportunities across many geographies and risks. In the quarter, we also repurchased $50 million of shares, bringing the year-to-date total to $100 million in share repurchases. And we increased our quarterly dividend to 85 cents per share, representing a 6.3% increase to our shareholder dividends. This has been a very busy six months of active capital management. At our recent Investor Day, we highlighted the earnings power in our business and the reasons for the excitement we have about our growth opportunities. We talked about favorable industry dynamics driving stronger demand for what we do so well. whether that is to help clients find new ways or better ways to reach consumers or to underwrite products in a more efficient and effective manner. We also see strong demand for new products to better meet the changing needs of consumers and increasing demand to help our clients better manage their risk and capital needs. We are very well positioned to benefit from all of those opportunities. We have the breadth and depth of capabilities technical expertise, and crucially, the risk discipline necessary to thrive in this highly complex industry. We have a collaborative culture, strong client partnerships, global scale, and a proven and successful strategy that is delivering substantial long-term value to our clients and for our shareholders. which gives me a great deal of confidence in RGA's future and in our ability to continue to deliver growth and attractive returns to our shareholders over many years to come. Thank you for your continued support and interest in RGA. I will now hand it over to Tony to provide additional thoughts on our business momentum.
spk16: Thank you. As Anna mentioned, we see favorable industry dynamics and we are well positioned to benefit from these many opportunities. During our recent investor day, we highlighted four areas with particularly good growth opportunities. These four areas are longevity and PRT, Asia traditional, Asia asset intensive, and our US traditional business. We have seen strong success across all four in 2023. Our longevity business is experiencing strong volumes in Europe, and we are delighted with the announcement earlier this week of the 5 billion UK pound longevity swap transaction. We continue to see a strong pipeline of business in the region. Our US PRT business continues to gain momentum, and we are increasingly confident of our prospects in this sizable and growing market. In Asia, there is a strong recovery in economic activity driving the demand for new products we have launched with our partners. We see strong momentum in all our businesses with particular success this quarter in South Korea. During Investor Day, we spoke of a new product we launched in China in late 2022. We are pleased with the reception of this product in the market and are actively working with other market-leading insurers on similar product ideas. And our Hong Kong business has the additional tailwind of the rebound of mainland Chinese visitors to closer to pre-pandemic level. These visitors are a material source of business for the Hong Kong insurance market. These new product initiatives are very much examples of how we grow by partnering with clients to help grow the underlying insurance market. For the Asia asset-intensive business, we are partnering with multiple clients to optimize their risk and capital management. This is best exhibited by another important transaction this quarter in Japan with a new client. A number of our previous coinsurance transactions were with the international companies with Japanese operations. This new transaction was sizable in nature and with one of the larger domestic companies. It's an example of how we grow by expanding the use of reinsurance within a market, which is an important element of our strategy as we expressed during Investor Day. As Asia regulators adopt new capital standards, our teams are providing first-to-market capital solutions that lead to exclusive transactions around the region. Finally, in our U.S. traditional business, we continue to see strong demand for our broad range of underwriting programs. These programs not only directly generate reinsurance business, but also strengthen our value proposition. Combining this value proposition with our relentless client focus has led to RJ being chosen for significant shares in many major reinsurance pools over the past 12 months. As you can see, we are pleased with the volume and the breadth of our business wins. What is just as pleasing is how we are winning a large part of this new business. We communicated previously that RJA's business model is to provide risk and capital solutions to address the complex business needs of our clients. The examples I have just cited show the power of our underwriting, product development and capital management expertise. When they are all combined with proactive business development, we increase the chance of winning exclusive business. We are particularly pleased with the positive results from exclusive transactions this year and are confident this can continue going forward. These transactions generate greater value for RJ and our partners and ultimately benefit the insurance industry and consumers through innovation. In addition, we can replicate these successes in other markets through our strong teams worldwide. Thank you for your interest in RGA. I will now turn it over to Todd to discuss the financial results.
spk07: Thanks, Tony. Turning to the quarter's results, RGA reported pre-tax adjusted operating income of $376 million for the quarter, and adjusted operating earnings per share of $4.40, which includes a foreign currency headwind of 7 cents per share. The trailing 12 months adjusted operating return on equity was 10.9%. Excluding the 2022 assumption changes, referred to as notable items, the trailing 12 months adjusted operating return on equity was 13%. We are pleased with the strong quarterly results as well as new business production, capital deployment into Inforce and other transactions, and investment results. Reported premiums were up 3.3% for the quarter. After adjusting for adverse foreign currency impacts, premiums were up 4.7% in the quarter and 7.7% year-to-date, both on a constant currency basis. As Tony and Anna mentioned, we have strong momentum in the business activity and we expect this to continue to contribute to premium growth over time. Turning to the quarterly segment results on slide six in our earnings presentation that can be found on RGA's Investor Relations website. The U.S. and Latin America traditional segment reflected favorable mortality experience in our individual mortality business. Good results in group and individual health partially offset by some one-time items of approximately $12 million. The favorable individual mortality experience is widespread and driven by lower large claims and better-than-expected older age mortality. This experience occurred in both our capped and uncapped cohorts. As we've previously discussed, under LDTI, current period mortality experience has a modest impact on the bottom line on the uncapped cohorts, as part of the results are spread into the future. And that is what we saw in this quarter, where favorable mortality results were spread into the future periods. The one-time items reflect certain actions that together had an adverse impact in the second quarter, but are expected to be favorable to long-term future cash flows. The U.S. asset intensive business results were strong, reflecting improved investment spreads, including higher yields on floating rate securities. And our U.S. capital solutions business continues to perform in line with our expectations. Canada traditional results reflected slightly favorable mortality experience, and the financial solutions business reflected favorable longevity experience. In the Europe, Middle East, and Africa segment, the traditional business results reflected moderately unfavorable mortality experience in the UK, consistent with excess mortality general population trends. The media financial solutions business results reflected favorable longevity experience. Turning to our Asia-Pacific traditional business, results reflected favorable claims experience, most of which came through in the second quarter due to the LDTI cohorts impacted. The Asia Pacific Financial Solutions business performed well, reflecting favorable investment spreads and claims experience. The corporate and other segment reported pre-tax adjusted operating loss of $55 million, more than the expected quarterly range, primarily due to higher financing costs and the timing of some general expenses. Year-to-date, results are in line with the expected run rate. Moving on to investments on Slides 8 through 11, The non-spread portfolio yield for the quarter was 4.42%, reflecting a lower contribution from variable investment income, primarily in limited partnerships. For non-spread business, our new money rate rose to 6.09%, reflecting higher available market yields with select opportunities in structured securities and private assets. Credit impairments were minimal, and we believe the portfolio is well-positioned as we move through any ongoing economic uncertainties. Moving on to capital management, as shown on slides 12 and 13, our capital liquidity position remained strong, and we ended the quarter with excess capital of approximately $1.2 billion. In the quarter, we deployed $190 million of capital into Inforce and other transactions, bringing the year-to-date total to $384 million. We also returned a total of $104 million of capital to shareholders through $50 million of share repurchases and $54 million in dividends. We expect to remain active in deploying capital into Inforce and other transactions and returning excess capital to shareholders through dividends and share repurchases. As shown on slide 14, we have a long track record of increasing book value per share over many periods. including at a compounded annual growth rate of 10.5% since the beginning of 2021. To summarize, we are very pleased with our second quarter performance, which follows the strong first quarter. Our business is resilient with substantial underlying earnings power. Momentum is strong, and we see good opportunities across our geographies and business lines. Looking forward, we are well positioned for the future and expected to deliver attractive returns to shareholders over time. This concludes our prepared remarks. We would now like to open it up for questions.
spk10: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. In the interest of time, please limit yourself to one question and one follow-up. And you may re-queue for more follow-up questions. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jimmy Bolar with JP Morgan. Please go ahead.
spk08: Good morning. I had a couple of questions. First, on your new money yield, it went up a lot faster than it's gone up in the past several quarters at slightly over 50 basis points and by a greater magnitude than I think what the rise in interest rates would suggest. So just wondering if you think that this is a normal level to think about as we think about your investment income, or was it mostly allocations into certain securities that lifted it beyond what it would have normally been this quarter.
spk12: Oh, sorry. Go ahead.
spk08: Why don't you go ahead and then I'll ask the other question later.
spk12: Then I don't have to remember both. Okay. Yeah. Thanks for the question, Jimmy. It's Leslie Barbie. Yeah. So the new money rate did go up quite a bit. As you know, market yields went up. I think the investment grade index is up 31 basis points. We did have some mix shift because we had some very attractive opportunities and select private assets and structured securities. So there's a sum of both, but I think that that, you know, 6% ballpark is not a bad expectation. So it'll come off a little bit, but it's, you know, going back to the normal mix will send it down tremendously.
spk08: Okay. And then just on the tax rate, it was lower than it normally has been and what we had expected. Were there any one-timers there? And what's your expectation for the tax rate going forward?
spk07: No, the tax rate will move around a little bit, quarter to quarter. But what we saw this quarter was, one, where the mix of earnings emanated from, from around the world and how that translated into And also, this is the time of year when we have filed various tax returns and we true up provisions to the tax return, no filings, and that results in a positive reduction to the tax rate, I should say. Okay.
spk09: Thank you. The next question comes from John Barnage with Piper Sandler.
spk10: Please go ahead.
spk04: Good morning. Thanks for the opportunity. Can you talk about the investment yield XDII? I know it's a gross figure, so there may be some expenses, but maybe talk about the roll-off to portfolio yield gap a little bit.
spk12: Sure. Thanks. This is Leslie again. So on the portfolio yield, you're right. It came off a little bit XDII, and that was really due to some expenses. timing in the quarter that tends to vary. So all things equal, we expect the portfolio yield to continue to rise. And, you know, versus things that are rolling off, we're probably picking up about 150 basis points right now. So the new money rates will continue to be additive to the portfolio yield.
spk03: Thank you very much. And my follow-up question, EMEA mortality has had a bit of an unfavorable tail. I know the NHS is challenged in that country. Is that a repricing opportunity or is that something that needs some structural addressing to improve profitability? Thank you.
spk14: Yeah. Hi, John. It's Jonathan here. Yeah, certainly we are reflecting our current expectations for the heightened mortality environment in the UK and our pricing. So, I think we have taken appropriate action there from a new business perspective. Just a reminder that we do have a very sizable longevity book of business as well in the UK. So the higher general population mortality, although it's providing a headwind to the mortality business, which we've accounted for, it's also providing a tailwind to the longevity business. And we saw that come through our results in the current period too, where our longevity gains and our financial solutions line actually a little bit more than offset the mortality drag in the traditional business.
spk05: Thanks for the answer.
spk10: The next question comes from Wes Carmichael with Wells Fargo. Please go ahead.
spk02: Hey, good morning. Just hoping you guys could provide some color on the pipeline and the outlook for pension risk transfer transactions in the U.S. I'm just kind of wondering, what's kind of your sweet spot in terms of size and maybe timing of the rest of 2023, what that's looking like? Thank you.
spk16: Thanks, Wes. This is Tony. As we've shared previously, look, we're very pleased with the progress that we're making in the PRT part of the market, and we're actively quoting, and there is a very strong pipeline of opportunity. You know, we strategically know that, you know, we are the natural home for longevity given our very, very sizable block of mortality. and we've got the expertise now in the U.S. that we've exported from other parts of the world. In terms of size, we tend to focus on the upper end of the market in partnership because we feel there is less competition in that area. So unfortunately, we haven't closed the transaction this quarter, but we've closed the transaction earlier this year, and we're eagerly anticipating future transactions in the future.
spk02: Thanks, Tony. And just wondering, did you have any impact in the quarter from enforced pricing actions? I think there was a little bit of maybe benefit in the first quarter results. So just wondering if there was any of that that came through in the second quarter results.
spk07: This is Todd. As far as actual repricing activity, not really anything in this quarter. We had talked about the activity in the first quarter, but nothing this quarter. Thank you.
spk10: The next question comes from Tracy with Barclays. Please go ahead. Thank you.
spk11: I realize that you've seen favorable mortality. I'm wondering on the margin, are you seeing any adverse for VUL, any pull forward? At least that's a comment made by a student who gathered that information from reinsurance.
spk14: Yeah. Hi, Tracy. It's Jonathan. I won't comment specifically at the product level. Once you start to really drill down and parse the enforced book of business, the credibility falls quite a bit. But in total, as was mentioned in our prepared remarks, we have seen favorable experience this quarter for sure. It's mostly driven by fewer large claims in the current period, and it is concentrated more in the older ages where it's been more favorable for us. And most of our business, again, is a reminder for VUL. Specifically, we reinsure the mortality risk on that book of business, again, just as a reminder.
spk11: Yeah, totally get it. I was just asking about the margin. Hey, last quarter you shared that you've done some repricing efforts. Was that done this quarter as well?
spk14: Todd, do you want to take that?
spk07: Hi, Tracy. It's Todd. Yeah, no, we did do some repricing activity in the first quarter, but as I mentioned a little while ago, during the second quarter, there was not any specific new repricing activity.
spk10: Thank you. The next question comes from Eric Bass with Autonomous Research. Please go ahead.
spk05: Hi, thank you. Relative to the guidance you provided at Investor Day, Asia earnings this quarter came in well above expectations. Was this just favorable experience this quarter, or has the earnings power improved given the business growth and macro environment you're seeing?
spk07: Hi, Eric. It's Todd. We provided the updated financial targets and run rates back at Investor Day mid-June. So we're not updating any of that at this point. You know, it's great to see the results that we've seen, you know, in the segment, especially in the second quarter. And a lot of that was, you know, favorable experience that came through in the current quarter.
spk05: Got it. And then maybe could you provide some more color on the – sorry.
spk16: I was going to just add, I mean, you know, just strategically in Asia, we're obviously very – bullish about both the traditional and the asset-intensive business. The pipelines are very, very full, and as I mentioned earlier, it's not just the volume of business we're seeing, but just the breadth across the region and, to be honest, across the globe, as well as the number of exclusives. So they're all very good signs that our strategy is working in many, many places, and that obviously makes us more more and more positive about the future.
spk05: Thank you. Maybe just to follow up on that, can you provide a little bit more color on the premium growth drivers in Asia and sort of how much is coming from new business versus block deals?
spk16: I'd say our focus, I mean, you know, the best measure for growth in, when we look at growth in Asia and, you know, it's really the traditional business or the the organic business when we look at premium growth that we focus more on. So for block transactions, sometimes premium is not the best indicator. I would say just in general, we're seeing great growth opportunities across both lines of businesses for different reasons. But the driver of the premium we focus on is mainly on the organic side or the traditional business.
spk05: Got it. Thank you.
spk10: Our next question comes from Sunit Gamat with Jefferies. Please go ahead.
spk13: Yeah, thanks. Tony, you'd mentioned a deal that you did with a traditional Japanese insurance company, and it sounds like this is the first of that type of transaction. Just any color in terms of what the motivation was for the seed in there, and are you expecting that ESR, I know it's a couple years away, is that going to create some additional opportunities for you guys?
spk16: Yeah, let me take a stab at that. I mean, yeah, absolutely. This was a very important transaction, as I mentioned in the prepared remarks. You know, Japan, as many markets, once you you sort of get a breakthrough of sorts, then others follow. So this one is, I can't go into too much detail, but it's important because I was with a domestic and we would anticipate other domestics are watching very carefully and hopefully following suit. ESR is a very big driver of the opportunities we're seeing in Japan. So absolutely, On the capital management side, companies, even though it's out to 2025, companies are obviously very much preparing for it. And just listening to some of the other calls that you've all been part of in the last few days, you can see the intersection, let's say, of new products and the growth in Japan, but maybe ESR potentially having... an adverse effect on the capital side of that. So we're perfectly positioned to solve both problems, which is obviously new product development and combining that with capital solutions. And that's absolutely why we are very focused on that intersection of those two strong capabilities that we have.
spk13: Got it. Makes sense. And then I guess for Todd, is the 50 million pace of Sherry purchases that we saw in the quarter. Should we sort of think about that as a, as a run rate going forward or are you expecting that to change?
spk07: Hi. No, so, you know, we'll continue to manage capital, you know, over time. I think as we've talked about, you know, we sort of have the three levers. One is we like deploying the capital back into the business and the transactions where we, get a good return for the risk that we're taking, you know, maintaining our dividend. And then we, you know, over time we've balanced it out with, you know, share repurchases. And so I think you'll see us continue to be, you know, active in managing, you know, the capital levels. And we like our current position because I think we're in a position to capitalize on opportunities that we see in a very healthy pipeline. And if those don't develop, then we'll certainly, you know, you know, continue to, you know, manage with the other levers. So I think, you know, we don't have an actual stated program for share repurchase in place, but I think you'll see us continue to use that as a, you know, one of the levers of how we effectively, you know, manage the capital level.
spk13: Okay, thanks.
spk10: The next question comes from Ryan Kruger with ABW. Please go ahead.
spk18: Hey, good morning. Could you provide some more quantification on the favorable U.S. mortality experience in the quarter, or perhaps maybe the actual to expected results? Because I think under LDTI, it's a little bit more challenging to quantify how favorable mortality is given the smoothing impact.
spk07: Hi, Ryan. It's Todd. Yeah, LDTI, I guess it has made it a little bit more difficult to see the actual underlying experience. As a reminder, for the capped and floored contracts under LDTI, the experience flows through in the current quarter. And for uncapped cohorts, some comes through currently and some is spread out into the future. Specifically, for U.S. mortality in the quarter, a good way to think of it is that the underlying experience was favorable by around $25 million, based on our expectation, and about $5 million of that came through in the second quarter, and then the remaining 20 will be spread going into future periods.
spk18: Great, thanks. That's very helpful. And then on the large European longevity transaction, can you give a rough sense of how much capital that will deploy in the quarter?
spk07: We normally don't provide specific transaction capital numbers. Okay, got it. Thank you.
spk10: Our next question comes from Tom Gallagher with Evercore. Please go ahead.
spk15: Good morning. Can you square the $24 million remeasurement loss in the quarter for U.S. traditional with the comments of favorable mortality? What drove the remeasurement loss?
spk07: Hi, this is Todd again. The numbers I provided were related to claims experience. In the remeasurement gain or loss, that includes more than just a claims activity. It can be adjustments to expected premium. It could be anything that impacts future cash flows. And usually a lot of the impact that comes through in that remeasurement gain or loss relates to a lost and floored contract. And it relates, and it doesn't It mainly relates to the impact of any changes in experience or cash flows, premiums, that type of thing, from the transition date or the treaty inception date to the current period. It's not including sort of all the future impacts that you would take into account. Okay.
spk15: Okay. And how was the underlying, within the U.S. traditional business, how was long-term care performing? I think some peers had experienced some elevated claims. Did you see the same? Sure.
spk07: This is Todd again. Just maybe taking a step back, as a reminder, our long-term care block is a relatively recent block. It was not in the era that's, I guess, considered some of the legacy blocks. A lot of ours was issued like 2009 onwards. So it's the underlying product terms, um, I think are much more fair the way I always describe it fair between the policy holder and the insurance company, uh, versus some of the older type longterm care where you might hear a little bit more about the, you know, elevated claims or reserve strengthening and that type of thing. Um, but what, We're seeing continued performance within our expectations on our block. I'd say no concerns at this point based on the experience that we've been seeing. So we're happy with our specific block.
spk15: Gotcha. And then just final one, the 12 million of one-time items in U.S. trad that you mentioned were negatively affecting earnings this quarter. Can you elaborate a little bit on that? What were those and why is it going to improve future cash flows or earnings?
spk07: Sure, sure. Yeah, so we had some recaptures of some retrocessions where we had retroceded business. We had some recaptures and then we had a recapture from our client perspective. And so when we recaptured the retro treaties, we had to reestablish some reserves on that business. So that primarily, you know, created the loss of the adverse impact in the current quarter. But we would expect that to produce positive impacts going forward. And I would size it about, you know, positive impact of around, you know, $4 million on an annual basis, you know, amortizing down over time. So economically, You know, it was a good decision to make. And, you know, like everything, we're constantly, you know, managing our overall, you know, in force book. And this was what we viewed as a good decision to make from an overall economic perspective.
spk15: Gotcha. So that that four million should be additive, I presume, to the segment's guidance when we think about I mean, it's small, but it's, you know, modest upward adjustment. Is that fair?
spk07: That's fair. There's always things that go both ways, but yeah, it should be a positive over time. Thank you.
spk10: Our next question comes from Alex Scott with Goldman Sachs. Please go ahead.
spk17: Hi. I guess a lot of my questions have been answered, but I thought I'd ask about the you know, transaction volume we've seen in the U.S. year to date and just what your take is on the competitive environment. So we, you know, we didn't see RGA participate, you know, in some of those bigger deals that were announced. You know, some of the counterparties involved, you know, not quite as well known as RGA. So what was your perspective on that? And how do you see that pipeline through the end of the year?
spk16: Yeah. Thanks, Alex. You know, we absolutely are still very active in this market and we pick our spots and the transactions that we feel we can add the most value to. So that pipeline, that's probably the area of our company that gains the most attention with regards to competition. But we are very confident we've got all the capabilities to assess the blocks in an appropriate manner. and then, you know, be ready to pounce when the opportunity arises. So, you know, there are meaningful opportunities in the pipeline in that area. And, you know, we're optimistic of closing transactions. I want to say, you know, when these big transactions get announced, we do participate at times around the edges that are still very meaningful. At times it could be a YIP mortality transaction. At times it could be a capital financing part of a transaction. And they are very meaningful transactions for us. So I just want to share that color also.
spk17: Got it. Very helpful. And then maybe just going back to net investment income. I mean, can you talk at all about how much you all have benefited from the floating rate portfolio you do have and Yeah, I guess I'm just thinking through, you know, the lift in NII yield that's probably, you know, been had there, but that may slow down as, you know, rates potentially, you know, are not raised as much at the Fed funds level anyway.
spk12: Hey, Alex. It's Leslie. Yeah, so on the benefit to NII, you know, the benefit we had in the quarter was really a combination of things. you know, extension trades and other relative value transactions. And there has still been a little bit of boost from cash and floating. But when you look at the non-spreading total of the assets that are net of floating liabilities, we've actually had some of that risk out from floating to fixed. So there's really not much impact left there. There's still a little bit more in the spread business. So we keep an eye on that, whether it's, you know, if we thought rates were going to fall more than the forwards, we may hedge some more. But certainly the total sensitivity has been coming down as we've done extension trades and some hedging.
spk00: Got it. Thank you.
spk09: Our next question comes from Mike Ward with Citi.
spk10: Please go ahead.
spk06: Thanks, guys. Good morning. I don't know if you quantify this, but wondering if you could help us kind of size the favorability in Asia in a similar way as you did for the U.S.
spk07: I guess the best way to respond to that right now is that if you look in the aggregate across the rest of our business segments, most of the favorable experience in the quarter did come through in the second quarter. Very little of it was deferred into the future or spread into the future.
spk06: Okay, so I think the U.S. traditional, you mentioned it was like $25 million favorable. Do you have that for Asia?
spk07: No, maybe one way to put it is if you look at Asia particularly, the entire Asia-Pacific segment, you know, most of the, I would say, see the favorable variance to, you know, the range of run rates, a lot of that was due to, you know, some experience and some other, you know, treaty true-ups.
spk06: Okay. And then back on the recapture activity, I'm just wondering if you can sort of help us understand what's driving that and if we should expect more of that going forward.
spk07: No, it's just part of our ongoing overall management of our business and where we see there's appropriate opportunities to take some actions, we will do that. So there's really no way for me to sort of quantify any future activities.
spk00: Okay, thanks, guys.
spk10: Our next question is a follow-up from Wes Carmichael with Wells Fargo. Please go ahead.
spk02: Hey, thanks for taking my question. I had one housekeeping item. I think on corporate, you guys mentioned that there might be some expense timing. So I just wanted to kind of confirm, like, do you think corporate, the loss there should tick back to kind of that $30 to $35 million or $35 to $40 million loss range from the $55 in the second quarter?
spk07: Yeah, so what we saw in the second quarter was some higher financing costs and some timing of some, you know, general expenses. If you look year to date for corporate, we're pretty much, you know, on the run rate. What I would probably maybe suggest or point to that as we go forward or probably might be towards the higher end of the run rate for corporate is Hopefully we can manage that as tightly as possible, but maybe that's the best guidance or information I can give for that.
spk02: That's helpful, Todd. And just on excess capital, it did tick down a bit to $1.2 billion. I just wanted to get your view on should we expect you to kind of manage that lower? And it seems like transaction volume has been pretty healthy, and it seems like it will continue into the second half of the year. So just kind of any view on where we should think about excess capital going?
spk07: As we mentioned earlier, we like our position currently because I think we're in a good position to take advantage of some of the healthy pipeline transactions that we're seeing across the various geographies. We're very comfortable bringing that excess capital level down, again, through transactional activity or other ways to return capital to shareholders. $1.2 billion at the end of the quarter is you know, comfortable bringing it down and look forward to, to point it into some good transactions. Thank you very much.
spk10: This concludes our question and answer session. I would like to turn the conference back over to Anna Manning for any closing remarks.
spk01: Thank you. Thank you for your questions and for your continued interest in RGA. This was another strong quarter, further demonstrating the substantial earnings power in our business. We're a global leader. We're very well positioned to capitalize on the many growth opportunities ahead and that you've heard about through the course of the last hour. And we are confident in our ability to continue to deliver attractive returns to our investors. So thank you, everyone. And that concludes our second quarter call.
spk10: The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.
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