1 FHLBanks Insurance Conference: Introduction to RGA Timothy Matson EVP & Chief Investment Officer June 16, 2015
Jan 17, 2016
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FHLBanks Insurance Conference:Introduction to RGA
Timothy Matson
EVP & Chief Investment Officer
June 16, 2015
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RGA at a Glance
RGA is recognized as a high-quality, global provider of risk-transfer and other financial solutions
RGA helps clients manage risk and capital efficiently & effectively
RGA is unique as the only pure-play, global life reinsurer
RGA is a global leader in a concentrated sector – top 5 players control 80% of global premiums
RGA has proven expertise in mortality, morbidity, longevity, and structured solutions
RGA has a unique culture – client centric, innovative, collaborative
55%
18%
16%
11%
2014 Premiums
U.S.
APAC
EMEA
Canada
38%
25%
11%
15%
11%
2014 Operating Income
U.S. Trad
USFS
Canada
EMEA
Asia
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Ordinary life reinsurance in force of $2.9 trillion Total assets of $44.7 billion Market capitalization of $6.0 billion 45% of net premium income derived outside the U.S. Total revenue in 2014 of approximately $10.9 billion Net income of $684 million in 2014
*as of December 31, 2014
Key Financial Metrics*
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A Global Life and Health Reinsurer
U.S. Canada U.K. Australia Japan South Africa Mexico Spain Hong Kong Malaysia Taiwan
Where we are in 2014…
India South Korea Ireland China Poland France Germany Italy New Zealand Netherlands U.A.E. Singapore Turkey
Represents offices opened since 2001
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Top 10 Global Life and Health Reinsurers Ranked by 2014 Net Earned Premiums
($ Millions as of December 31, 2014)
1Does not include Munich Health2Net premiums3Does not include BHRG results4 Due to unavailability of 2013 data, we have used 2012 results 5Gross written premiums
Sources: Annual filings, A. M. Best insurance reports
Rank ReinsurerNet EarnedPremiums
1 Munich Re1 12,707
2 Swiss Reinsurance Company 11,265
3 Reinsurance Group of America2 8,669
4 SCOR Global Life Re 7,529
5 Hanover Re 7,130
6 London Re4 3,862
7 General Re3 3,161
8 China Life Re4 2,524
9 Partner Re 1,222
10 Pacific Life4 896
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Ratings
RGA Reinsurance Company
RGA Life Reinsurance Company of Canada
RGA Americas Reinsurance Company, Ltd.
RGA International Reinsurance Company
Limited; RGA Global Reinsurance Company, Ltd.; RGA Reinsurance Company of Australia
Limited
RGA Atlantic Reinsurance Company
Ltd.
Standard & Poor’s AA- AA- AA- AA- NR
A.M. Best Company A+ A+ A+ NR A+
Moody’s Investors Service A1 NR NR NR NR
Standard & Poor’s A-
A.M. Best Company a-
Moody’s Investors Service Baa1
RGA Senior Debt Ratings
All ratings on “Stable” outlook
Financial Strength Ratings
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Role of Investments within RGA
Investments is a key function within RGA to manage assets for in-force businesses and to support future growth
RGA Investments has three key long-term objectives:• Manage balance sheet strength and investment income
• Partner with business segments on new deal flow
• Enhance the investment platform
Target• Best-in-class investment operation specializing in insurance - related activities
• Third-party asset manager quality in all facets of operation, including mastery of capital, financial reporting, and regulatory issues
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RGA’s Investment Philosophy
Achieve appropriate risk-adjusted returns relative to liabilities
Maintain a diversified portfolio
Take an agnostic approach to manager selection• Use both internal and external investment managers
• Access best-in-class external managers; best long-term track record
• Take advantage of scale and lower costs where they exist
• Gain flexibility as asset allocation or business mix change
Avoid frequent trading to minimize costs
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Manage Balance Sheet Strength and Income
Ability to manage assets for balance sheet strength and to meet income targets• Enhance investment performance for in-force business• Generate optimal level of realized gains/losses
St. Louis-based investment team• Investment securities group managing investment grade credit, RMBS/CMBS, and some alternatives (private
equity funds/co-investments and mezzanine debt); 60 staff, includes 10 credit analysts• Commercial mortgage team originating/servicing loans in the U.S. and Canada from 6 regional offices; 30 staff
London-based investment team• Investment securities group managing investment grade sterling and euro portfolios; 5 staff
External managers for domestic and international portfolios• Utilize top tier third-party managers for specialty asset classes• 8 managers covering domestic and emerging market high yield, senior bank loans, and RMBS• 7 managers covering local currency portfolios in Canada, U.K., Australia, Korea, and South Africa
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Partner with RGA Business Segments
Demonstrated ability to work closely with business units to develop investment strategies that contribute to new business development
• Global Acquisitions
• Global Financial Solutions
Maintain ongoing communication with business leaders with regard to deal flow
Active involvement in capital markets through in-force management aids in solutions capability, perspective, and creativity
Investment staff incorporate RGA’s dynamic business model; not just a group of index-focused asset managers
Ultimately create an environment when Investments not only finds asset solutions for liabilities, but also seeks liability solutions for assets
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Enhance RGA’s Investment Platform
Expanded credit staff, documented credit analysis process, designed training program for new credit staff
• Capture beta from investment grade corporate bonds and minimize downside
• Build strong credit culture
• Develop staff for other asset classes
Commercial mortgage group becoming “brand name” manager with third-party asset management qualifications
• Group has achieved critical mass to compete in market
• Expect third-party capability by year-end
• All mortgage servicing brought in-house in 2014
Building out investment team in Asia Pacific for business support and asset management
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Identification of Key Metrics
Investment Performance• Meet or exceed plan projection for net earned book yield
• Total return measures – employ where needed
Cost Structure• Target asset management expense/AUM of less than 10 basis points
Realized Gain/Loss• Low turnover commensurate with book yield approach
Compliance Breaches• Expect 0%
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Asset Allocation
Note: Excludes the Timberlake note of $272 million MV, the RGA note of $82 million MV, the derivatives used for VA/EIA and NIFO hedges totaling $306 million MV, two liability replication portfolios totaling $2 million MV and five positions related to Aurora repos liabilities totaling –$1.4 million MV
Well-diversified portfolio• Investment Policy Statements define limits
by asset type and issuer • Illiquid assets below policy limits
Allocations vs. Peers• No significant allocation differences• Higher foreign government exposure due to
asset mix in Canada operation
Total U.S. Total IntlGrand Total
MV (USD million) $24,225 $11,235 $35,460BV (USD million) $22,670 $9,513 $32,183Cash & Short Term 1.9% 3.5% 2.4%Treasuries 1.5% 6.2% 2.9%Other Government 2.3% 38.2% 12.9%Municipal 6.1% 0.3% 4.4%Corporate IG 37.0% 43.7% 39.0%Corporate HY 2.8% 0.3% 2.1%EMD IG 4.9% 3.5% 4.5%EMD HY 1.2% 0.0% 0.8%Bank Loan 1.5% 0.0% 1.1%Hybrid 2.5% 1.5% 2.2%ABS 6.5% 0.5% 4.8%Agency MBS/CMO 4.1% 0.2% 2.9%Non-Agency MBS/CMO 1.7% 0.5% 1.3%CMBS 7.8% 0.6% 5.6%CML 12.5% 0.0% 8.8%Equity Real Estate 0.6% 0.0% 0.4%Private Placement 3.6% 0.8% 2.8%Alternatives 1.5% 0.1% 1.1%Derivatives 0.0% 0.0% 0.0%Total 100% 100% 100%
12/31/2014 (BV Weight)
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Commercial Mortgage Portfolio
OFFICE32%
RETAIL30%
INDUSTRIAL16%
MULTI FAMILY
14%
OTHER7%
HOTEL1%
Property Type(Book Value Basis)
0%
5%
10%
15%
20%
25%
30%
East NorthCentral
East SouthCentral
Mountain NewEngland
Pacific SouthAtlantic
West NorthCentral
West SouthCentral
Mid-Atlantic
By Region
RGA ACLI
C1 & C23%
D1 & D21%
A122%
A227%
B133%
B214%
Rating Distribution(Book Value Basis)
ACLI Region
Total Outstanding Prin. Bal. (000s) 2,908,764$
Wtd. Avg. Coupon 4.89%
Wtd. Avg. Loan to Value 53%
Wtd. Avg. Debt Service Coverage Ratio 1.90x
Wtd. Avg. Rating A2/B1 (A- to BBB+)
Portfolio performanceBalance (000s) Percent
Current: 2,908,764$ 100%
60 days: - 0%
90 days: - 0%
> 90 days: - 0%
In foreclosure: - 0%
Total 2,908,764$ 100%
As of March 31, 2015
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Important Steps over Next Three Years
Improve Efficiency• Enhance ability to price and execute deals on tight timeframes • Drive total asset management expenses to less than 10 basis points
Develop reputation as a best-in-class asset manager • Key for business development• Important to attract and retain top level talent• Provide third-party asset management, where profitable
Enhance stability and scalability of investment technology platform• Improve data integrity and functionality for all applications• Enable more activity, such as third-party asset management and tailored solutions for block transactions• Continue automation of back office activities
Build out investment platform in Asia Pacific region• Fastest growing geographic region• Local presence for deal support• Enhance asset management capabilities
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