Global Financial Solutions (GFS) combines deep technical expertise, local market knowledge, and global experience to help clients de-risk portfolios, optimize capital efficiency, and increase financial returns.
In 2020, GFS partnered with clients to navigate ongoing regulatory and economic pressures, as well as the uncertainty of the COVID-19 pandemic, to position their businesses for profitable growth.
Consistent execution generates diversified growth
GFS produced excellent results in 2020 amid pandemic-driven disruption, generating $633 million in pre-tax income following a record $659 million in pre-tax income in 2019. An active transaction pipeline entering the year, coupled with proactive client engagement while working remotely, ensured continued success. For insurers facing a fast-changing environment, RGA continued to bring counterparty strength, seasoned expertise, and execution certainty. Strong performance across all regions and product lines delivered balanced, diversified growth.
At RGA our success depends on forming and fostering long-lasting partnerships, and relentless client focus has fueled our business since the very beginning. We listen to our clients and work collaboratively to develop customized financial solutions to meet their capital and risk management needs.
Executive Vice President, Global Financial Solutions
GFS Pre-tax Income
Existing blocks of business as well as new transactions in 2020 generated positive results in all product lines: asset-intensive, longevity, and capital solutions. Asset-intensive solutions reduce capital strain and improve returns on savings and retirement products, such as fixed and variable annuities, payout annuities (including group annuity contracts in the pension risk transfer space), and various types of whole-of-life insurance. The longevity line delivers customized solutions via longevity swaps to clients in the U.K., Continental Europe, Canada, and the U.S. The capital-solutions business focuses on surplus relief, solvency capital relief, and structured financing to help clients meet regulatory requirements, free up capital, and grow their businesses.
Disciplined strategy drives business in North America
Despite the market disruptions introduced by the pandemic, GFS in the U.S. produced a solid year overall, totaling $295 million in pre-tax income. The capital-solutions line, RGA’s original GFS business, recorded one of its best years ever in surplus and capital relief placed. Continued discipline in asset-intensive business, bolstered by an enterprise-wide commitment to maintain capital strength amid elevated, COVID-19-related claims, established clear standards to guide transactional opportunities. As new players continued to enter the asset-intensive space, RGA’s risk management expertise, counterparty strength, and client focus remained cornerstones of a proven, time-tested approach. GFS strengthened its value proposition, capacity, and capabilities in the U.S. longevity business in 2020, leveraging global expertise and investing in resources and infrastructure. As the first reinsurer to execute a longevity swap in the U.S., RGA is well-positioned to lead the future of the U.S. pension risk transfer reinsurance market.
RGA’s stable value business, which provides wrap coverage to 401(k) and other defined contribution plans in the U.S., enjoyed an exceptional year in 2020. Economic uncertainty and a downturn in equity markets at the onset of the pandemic drove many savers to transfer investments to stable value funds, a trend that persisted for RGA throughout the year. At year-end, the notional amount of RGA’s stable value wrap portfolio was $16.6 billion, a 20% increase over 2019.
GFS in Canada, which specializes in longevity reinsurance and fee-based services, provided ongoing support for clients facing regulatory pressures from new solvency requirements and upcoming changes to accounting standards. The team built on sustained momentum of recent years to generate pre-tax income of $21 million, a 40% increase over 2019, reflecting favorable longevity experience and increased fees from new business. By helping insurers address the financial challenges of the COVID-19 pandemic, RGA strengthened partnerships with clients in Canada and ended the year well-positioned for future growth.
RGA executed its largest longevity swap to date in 2020. This transaction encapsulates why our partners turn to RGA: our experience, our partnership approach to meeting client goals, and the confidence we'll do it right.
Vice President, U.K. Business Development, Global Financial Solutions
EMEA and Asia Pacific teams deliver strong years
Success across all GFS business lines in EMEA produced favorable results in both new business production and income generation. Pre-tax income increased 16% over 2019 to reach $258 million. In the U.K., the pension risk transfer market remained active despite the uncertainty around future mortality trends created by COVID-19. Among other transactions, RGA executed its largest-ever longevity swap of approximately $6.7 billion with a major retirement fund. Omnilife, a London-based insurer acquired in 2019 to help RGA consolidate closed blocks of business, executed its first transaction as an RGA company. For smaller pension funds, RGA’s flow structures continued to provide valuable capital relief. In the Netherlands, another very active market, RGA agreed to sell its Dutch life insurance company, Leidsche Verzekering Maatschappij N.V., to a long-time insurer partner to support their long-term growth strategies. Throughout EMEA, GFS professionals identified opportunities to apply reinsurance as a financial management solution for clients seeking to improve capital efficiency.
For GFS Asia Pacific, years of foundational work resulted in several cornerstone transactions and a breakout year: Pre-tax income more than doubled, from $23 million in 2019 to $59 million in 2020. Earnings were broad-based, reflecting growth across a range of product types and markets. Risk-based regulatory regimes in Asia drove asset-intensive business, where RGA’s status as a U.S.-based reinsurer and global innovator positioned the GFS team as a financial solutions partner of choice. An especially strong year in Japan featured RGA’s largest-ever asset-intensive transaction in Asia. Product diversification and innovation fueled growth throughout the region, for both RGA and its client partners. Flow structures, for example, enabled insurers to bring competitively priced products to market while limiting risk and maximizing capital flexibility. As markets in the region continue to mature amid ongoing low interest rates and regulatory changes, RGA continues to serve clients as a trusted partner and financial solutions leader.
Senior Vice President, Stable Value, Global Financial Solutions
Senior Analyst, Stable Value, Global Financial Solutions
Commitment leads to smart, disciplined growth for stable value team
“While the stable value industry grew 15%, RGA’s stable value business experienced even greater growth and enjoyed its most successful year ever.”
Vice President, Business Development, GFS Asia
Go with the flow: New reinsurance solutions improve capital efficiency in Asia
“As a U.S.-based reinsurer and an established innovator, RGA is well-positioned to bring pioneering new financial solutions to the region.”