Capital Solutions

RGA built on its industry leadership in the use of reinsurance as a financial management tool in 2017. Amid increased regulatory and economic pressures, capital solutions experts partnered with clients to execute structured transactions, improve capital efficiency, and increase profitability.

 

From left, from Global Financial Solutions, EMEA: André de Vries, Vice President, Business Development; Paul Sauvé, Senior Vice President; Rolf Lukas, Director, Structuring.

Client Focus Drives GFS Business

RGA’s Global Financial Solutions (GFS) team combines local market knowledge and expertise with global experience and resources to help clients de-risk portfolios, optimize capital, and strengthen their businesses. An unrelenting focus on delivering long-term value to clients fuels innovation across all product lines, including capital-motivated, asset-intensive, and longevity reinsurance solutions. GFS enjoyed an outstanding year in 2017, generating pre-tax income of $555 million, a 28% increase over 2016.

In the U.S., a proactive approach of identifying client needs, educating them on possibilities, and being the first to propose solutions resulted in another market-leading year. GFS generated a wide range of new business and added several new clients, including insurers executing their first financial reinsurance transaction. To complete an innovative asset-intensive transaction with a U.S. subsidiary of a large multinational client, GFS collaborated with RGA Investments in structuring the deal, which increased RGA’s invested asset base by approximately $2.3 billion. RGA also explored future opportunities in the emerging U.S. pension risk transfer market, where longevity and asset-intensive expertise position RGA as a potential solutions provider of choice.

In Canada, reinsurance support for longevity products offered to pension plans and individual annuitants remained the primary focus. With the implementation of Canada’s Life Insurance Capital Adequacy Test (LICAT) guidelines, GFS is leveraging global experience in regulatory compliance and working in collaboration with the RGA Canada team of experts to identify LICAT-compliant strategies that optimize clients’ capital efficiency.

A disciplined and selective approach defined the year for GFS in Continental Europe. As Solvency II further settled into the market and many insurers sought to complete transactions strictly for regulatory capital, RGA pursued opportunities providing the greatest long-term value from a reinsurance perspective. Following years of market-first innovations in longevity, lapse risk, and other capital-motivated structures, RGA is well-positioned to combine expertise with discipline in achieving lasting results for clients in Europe.

The U.K. team produced another strong year, solidifying RGA’s position as a market leader for innovative capital solutions. Significant contributions from larger transactions included an asset and longevity risk transfer that resulted in RGA reinsuring over $1 billion in individual annuities. For smaller pieces of longevity business, an innovative small-schemes flow structure enabled clients to partner with RGA on pre-established terms, greatly enhancing transactional efficiency.

 

From left, from Global Financial Solutions: Keith Politte, Vice President, Business Development, North America; Wenan Fei, Vice President and Actuary; Xueli Zhang, Vice President and Actuary; Ryan Stevens, Vice President, Structuring and Product Specialist.

In Asia, GFS significantly advanced its key strategic initiative to grow asset-intensive business in the region, highlighted by the completion of a multi-currency transaction with a large multinational. RGA’s long-standing relationship with the client enabled a collaborative solution to free up capital and improve returns. As the potential for capital-motivated and asset-intensive reinsurance in Asia becomes clearer, RGA is capitalizing on emerging opportunities and investing in future growth.

Part of GFS operations, RGA’s dedicated stable value team continued to provide wrap coverage to 401(k) and other defined benefit plans, enabling plan participants to preserve principal while achieving a steady return on investment. Since entering the stable value business in 2012, RGA has selectively increased the program size and broadened the scope of the type of defined benefit plans covered. As of December 31, 2017, the notional amount of the company’s stable value wrap portfolio reached $10.1 billion, a 14% increase over the previous year.

Rene Cotting, Senior Vice President, Product Development, Global Financial Solutions.

RGA Optimizes Strategic Growth Opportunities

RGA’s work in acquisitions is a natural extension of the company’s traditional reinsurance businesses, leveraging expertise in analytics and modeling, knowledge of underlying risks, and long-term partnerships to provide strategic divestiture solutions. RGA professionals support clients with customized approaches for reallocating capital and assumed risk from in-force business and seek strategic partnerships to capitalize on emerging opportunities.

In 2017, exploring potential acquisitions and new ventures represented an important component of the company’s disciplined growth and diversification strategy. Most significant was the creation of RGA Capital Partners and subsequent launch of Langhorne Re, a global reinsurer targeting large in-force life and annuity blocks (see A Long-Term Capital Solution). Setting up the new company, established through a partnership between RGA and RenaissanceRe, required RGA experts to help guide the process and coordinate collaboration among professionals throughout both organizations.

As the RGA enterprise has grown larger, as well as more varied and complex, in-force optimization has become vital to ongoing success. In 2017, the in-force team focused on portfolio management and consistency of analytics company-wide in order to boost risk-adjusted performance, maximize scale, and improve capital efficiency.

RGA INDUSTRY INSIGHTS