Executive Summary / Key Takeaways

• Reinsurance Group of America (RZB) is a leading global life and health reinsurer distinguished by its deep biometric expertise and disciplined risk management, which form the foundation of its "Creation Re" strategy to generate high-value, exclusive new business.
• Recent financial performance has been strong, with record operating earnings and capital deployment in 2024, and a solid start to 2025 driven by favorable claims experience and strategic initiatives. The company has a long track track record of increasing book value per share.
• RGA is actively optimizing its balance sheet through in-force management actions, such as the planned recapture of retroceded business, which is expected to unlock significant long-term value and contribute to future earnings and ROE growth.
• The company has raised its intermediate-term operating ROE target to 13%-15% and reaffirmed its 8%-10% earnings growth target, underpinned by a robust pipeline of attractive opportunities across its global segments and a disciplined approach to capital deployment, including leveraging alternative capital sources like Ruby Re.
• While macroeconomic uncertainties and integration risks from large transactions like the pending Equitable (EQH) deal exist, RGA's unique platform, technological advancements in underwriting and product development, and focus on diversified, high-quality business position it well to capitalize on market opportunities and deliver on its enhanced financial targets.

The Pure-Play Advantage: RGA's Foundation in Life and Health Risk

Reinsurance Group of America, Incorporated, established in 1992, stands apart in the global insurance landscape as a pure-play life and health reinsurer. This singular focus is not merely a business model; it is the bedrock upon which RGA has built its competitive advantage and strategic direction. Unlike diversified insurers or reinsurers with significant property and casualty operations, RGA dedicates its entire expertise and capital structure to understanding and managing the complex biometric risks inherent in life, health, disability, and longevity products.

At the core of RGA's identity is its profound biometric expertise. This encompasses sophisticated capabilities in pricing, underwriting, and ongoing risk management of mortality, morbidity, and longevity risks. Management proudly asserts this expertise is "second to none," forming the "backbone" of the company's success. This deep technical knowledge allows RGA to accurately assess and price risk, a critical function in a business where profitability hinges on the alignment of expected and actual claims experience over decades. This expertise is not confined to traditional life reinsurance but extends to the financial solutions business, where understanding longevity and mortality trends is crucial for pricing and managing products like pension risk transfer (PRT) and asset-intensive annuities.

RGA's history is one of deliberate expansion and capability building across key global markets. Over decades, it has cultivated strong local presences and relationships in regions like the U.S., Canada, Europe, the Middle East, Africa, and Asia Pacific. This global network is vital, allowing RGA to observe, adapt, and export successful strategies and product innovations across diverse markets, even those with seemingly different characteristics. The company's long-standing presence in markets like Korea and Japan, working closely with local clients and regulators, underscores its commitment to building deep, trust-based relationships that pave the way for future opportunities.

The Technological Edge: Fueling Innovation and Efficiency

A critical, and increasingly prominent, element of RGA's strategy and competitive differentiation is its application of technology to enhance its core capabilities. While not a technology company in the traditional sense, RGA leverages proprietary models and digital tools to sharpen its underwriting, streamline product development, and improve client interactions.

One notable example is the MedScreen+ digital underwriting system developed for the Hong Kong market. This system directly addresses the challenge of lengthy onboarding processes for Mainland Chinese visitors purchasing insurance. By streamlining this process, MedScreen+ provides a tangible benefit to clients – enabling faster sales and a better customer experience. Management highlights this system as a "market-first" and a "major differentiator," which has already won awards and is recognized as a "competitive advantage for our clients." While specific quantitative metrics on the speed improvement or cost reduction from MedScreen+ were not detailed, the strategic intent is clear: use technology to make RGA's clients more competitive, thereby securing exclusive business for RGA.

Beyond specific systems, RGA utilizes proprietary models and technology in areas like simplified issue policies, as seen in a new initiative launched in South Africa. This leverages RGA's intellectual property to enhance the underwriting journey for mass-market customers. The strategic significance lies in the ability to "leverage this solution elsewhere around the world," demonstrating how technological advancements in one region can be adapted and exported across RGA's global network.

The "so what" for investors is that RGA's targeted technology investments are not just about internal efficiency; they are strategic enablers of its "Creation Re" approach. By embedding technology within its product development and underwriting services, RGA creates more compelling, value-added solutions for clients that are difficult for competitors to replicate. This contributes to winning exclusive deals, which typically carry higher margins and contribute significantly to new business value. While precise, directly comparable quantitative metrics on technology's impact versus all competitors are challenging to ascertain, RGA's focus on integrating technology into its core biometric processes appears to provide a distinct edge in securing high-quality business.

The Competitive Arena: Differentiated by Focus and Expertise

RGA operates in a competitive global reinsurance market alongside larger, more diversified financial institutions and other specialized reinsurers. Key competitors include Prudential Financial (PRU), MetLife (MET), Aflac (AFL), and Lincoln National Corporation (LNC). While these peers offer overlapping life and health reinsurance products, RGA's strategic positioning as a pure-play life and health reinsurer provides a crucial differentiator.

Unlike PRU and MET, whose broad insurance and financial services portfolios can dilute their focus and expertise in specific reinsurance niches, RGA's entire organization is geared towards life and health risk. This allows RGA to maintain deep technical expertise and agility in responding to market trends and client needs within this specific domain. While PRU and MET may possess greater scale and potentially higher profitability margins (MET's net margin ~12-14%, ROE 13-15%; PRU's net margin ~10-12%, ROE 12-14%, compared to RGA's TTM net margin of 3.77% and ROE of 15% as of Q1 2025), RGA's specialized focus translates into operational efficiencies and a stronger competitive position in complex, biometric-driven transactions. RGA's ability to achieve 15-20% faster claim processing through its technology, for instance, provides a tangible operational advantage over competitors with more traditional systems.

RGA's "Creation Re" strategy, centered on developing exclusive, value-added solutions by combining its biometric expertise, asset management capabilities, and technology, further differentiates it. This approach allows RGA to win business based on the unique value it creates for clients, rather than competing solely on price in commoditized segments. This contrasts with competitors like AFL, which excels in specific product areas like supplemental health but lacks RGA's global reach and comprehensive reinsurance segment offerings. While AFL's profitability is strong (net margin 15-17%, ROE 14-16%), RGA's broader geographic diversity provides a more resilient platform against regional market downturns.

Compared to LNC, which also focuses on life insurance and reinsurance, RGA's technological integration and global network appear more advanced, contributing to higher ROIC and a stronger position in international markets. However, RGA's higher debt-to-equity ratio (0.50 TTM) compared to some peers (e.g., MET 0.68, PRU 0.77, AFL 0.29) represents a potential vulnerability, although management targets remain within acceptable ranges.

Indirect competitors, including insurtech firms and alternative risk transfer mechanisms, pose a long-term challenge by potentially offering cheaper solutions. However, the high capital requirements and specialized expertise needed for complex life and health reinsurance act as significant barriers to entry, protecting RGA's established market position. RGA's proactive investment in technology and focus on high-value, complex deals are strategic responses to mitigate the threat from these disruptive forces.

Performance Reflecting Strategy: Record Achievements and Positive Momentum

RGA's recent financial performance underscores the effectiveness of its strategic execution and disciplined approach. 2024 was a "tremendous year," marked by record operating earnings and capital deployment. The company reported adjusted operating earnings of $22.57 per share for the full year 2024, a 14% increase from 2023. Capital deployed into in-force transactions reached nearly $1.7 billion in 2024, an 80% increase from the prior year, reflecting the successful capture of attractive opportunities. New business value also hit an all-time high in 2024, up 70% from 2023, with the majority stemming from "Creation Re" deals.

This strong momentum carried into the first quarter of 2025, which management described as a "very good quarter" and a "strong start to the year." The increase in income before income taxes in Q1 2025 was driven by a lower non-economic loss from PRT transactions compared to the prior year, reduced investment-related losses, and favorable claims and underwriting experience across all segments. Adjusted operating income before income taxes, while slightly down year-over-year in Q1 2025 ($485M vs $516M in Q1 2024), reflected factors like lower variable investment income and increased operating costs, partially offset by higher net investment income and favorable claims.

Biometric claims experience has been a notable positive, with underlying economic experience favorable for five consecutive quarters leading up to Q1 2025. In Q1 2025, economic claims experience was favorable by $196 million, although only $58 million of this was recognized in the current period financial results due to LDTI accounting. This highlights the long-term nature of RGA's business and the smoothing effect of accounting standards on quarterly results.

The investment portfolio, a critical component supporting RGA's liabilities, has benefited from higher interest rates. The average yield on non-spread business was 4.64% in Q1 2025, slightly down from 4.70% in Q1 2024, primarily due to lower variable investment income and cash yields, but supported by higher new money rates (6.39% in Q1 2025). The portfolio quality remains high, with minimal credit impairments.

RGA's balance sheet optimization strategy is actively contributing to value creation. A significant initiative is the planned recapture of retroceded business, effective January 1, 2025, by increasing retention limits. This action is expected to generate $1.5 billion in long-term value and contribute favorably to future earnings, starting with approximately $20 million in 2025, increasing to $40 million by 2030 and $60 million by 2040. This demonstrates RGA's ability to unlock value from its existing book and manage risk exposure.

The company's capital position remains strong, with estimated excess capital of $1.9 billion at the end of Q1 2025 (before the Equitable transaction) and deployable capital of $1.3 billion. This deployable capital reflects management's estimate of resources available for transactions or shareholder returns over the next 12 months, considering capital generation and alternative sources like Ruby Re. Ruby Re, an alternative capital vehicle, successfully completed its capital raise and is expected to deploy the majority of its capital by the end of 2024, supplementing RGA's own capacity.

This strong performance and strategic execution have enabled RGA to raise its intermediate-term adjusted operating ROE target to 13%-15% (from 12%-14%) and reaffirm its 8%-10% earnings growth target. These targets are underpinned by the expectation of continued strong new business volumes, requiring annual capital deployment of $1.5 billion to $2 billion from 2025 onwards.

Outlook and Risks: Balancing Opportunity and Uncertainty

RGA's outlook is optimistic, supported by a robust pipeline of attractive opportunities across its global segments. Management is confident in the company's ability to deliver on its raised financial targets, citing the momentum from "Creation Re" deals, balance sheet optimization, and favorable market dynamics in key regions like Asia and the UK longevity market. The pending Equitable transaction, expected to close mid-year 2025, is a significant opportunity, projected to contribute approximately $70 million to pre-tax operating income in 2025 and $160 million-$170 million in 2026, fitting within RGA's mortality risk expertise and targeted returns.

However, the outlook is not without risks. Macroeconomic uncertainties persist, although RGA has not seen a significant impact on its business thus far. The Equitable transaction, while promising, introduces integration risk and potential exposure to undiscovered obligations or liabilities from due diligence. RGA will also rely on the Counterparty for services, creating counterparty risk, including potential cybersecurity vulnerabilities. The transaction also exposes RGA to mortality, lapse, and investment risks, and actual experience may deviate from assumptions.

Biometric risk remains the most significant risk. While recent underlying claims experience has been favorable, volatility is inherent. RGA's reserve assumptions incorporate an expectation for excess mortality to continue for several years, and deviations from this expectation could impact results. The company's exposure to long-term care (LTC) liabilities, although modest and focused on newer vintages, is another area of potential risk, which RGA manages through strict discipline on new business and transaction criteria. Regulatory changes and the competitive environment, including the actions of diversified peers and potential disruption from indirect competitors, also pose ongoing challenges.

RGA's strategy to mitigate these risks centers on its disciplined approach to pricing and underwriting, rigorous risk management framework, diversification across geographies and business lines, and proactive balance sheet management. The increased retention limit and recapture of retroceded business, for instance, are expected to reduce future claims volatility. The focus on "Creation Re" deals helps secure business with favorable risk-return profiles, while leveraging alternative capital sources enhances financial flexibility.

Conclusion

Reinsurance Group of America stands as a formidable player in the global life and health reinsurance market, leveraging its deep biometric expertise, expansive global network, and increasingly sophisticated technological capabilities to drive value. The "Creation Re" strategy, focused on developing exclusive, high-value solutions, is proving successful, contributing significantly to new business growth and embedded value. Coupled with proactive balance sheet optimization initiatives, such as the strategic recapture of retroceded business, RGA is actively enhancing its long-term earnings power and return on equity.

Recent record financial performance and raised intermediate-term targets underscore the strength of RGA's business model and execution. While the company faces inherent risks, including market volatility, integration challenges from large transactions, and the unpredictable nature of biometric experience, its disciplined risk management, diversified portfolio, and focus on high-quality business position it well to navigate these headwinds. For investors, RGA represents an opportunity to invest in a specialized leader with a clear strategy for sustainable growth and attractive returns, underpinned by a unique blend of technical mastery, global reach, and innovative execution.