Expanding Investment Capabilities in a Low Interest Rate Environment
From left, from Investments: Brian Butchko, Senior Vice President, Head of Global Portfolio Management; Steve Myers, Vice President, Head of Private Debt & Equity; Kim Grobbe, Vice President, Head of Securities Operations.
As insurers’ needs for capital solutions have increased, RGA has expanded its investment operations to help make providing these solutions possible. A growing team of investment professionals works closely with reinsurance experts to facilitate transactions, reposition assets in acquired portfolios, and optimize in-force business. This valuable in-house support enables RGA to remain nimble and flexible in meeting the capital efficiency needs of clients.
In 2016, persistent low interest rate headwinds increased interest in less-liquid, higher-yielding investments. With limited immediate liquidity needs among its liabilities, RGA was well-positioned to capitalize on this industry trend and gain access to these yield-enhancement opportunities.
RGA’s Real Estate team, for example, expanded commercial mortgage loan origination capabilities, achieving a significant yield advantage over investment-grade corporate bonds. In 2016, the team closed 96 loans totaling $1.2 billion, increased its commercial mortgage portfolio by 21% to $3.8 billion, and extended lending services to the Canadian market.
Similarly, the Private Debt and Equity group nearly doubled the number of investment professionals on staff, enabling it to grow both fund and direct investments by 18% to $504 million, with investment income of $42 million. Eight new private equity funds were added to the portfolio totaling $125 million of new commitments.
In the U.K., RGA built on its growing portfolio of assets denominated in British pounds. Moving forward, the U.K. investments team seeks broader diversification and is exploring additional opportunities to invest in commercial mortgage loans and direct corporate lending.
To support success and expansion for all of these efforts, RGA implemented an investment front-end and accounting system for private investments. This system is the latest example of progress on Project TRADE, a multi-year, foundational effort to improve management of securities and complex assets. Project TRADE improves RGA’s investment capabilities and infrastructure through business process enhancements, new system implementations, data cleansing, and data management centralization to support RGA’s strategic initiatives.