Differentiated Capabilities Deliver Exceptional Results
In 2021, strong performance across all regions and product lines produced outstanding results for GFS and laid the foundation for continued growth. GFS generated a record-high $931 million in pre-tax income for the year, a 47% increase over 2020. Positive earnings growth came from both existing blocks of business and new business acquired through a broad range of structured transactions. RGA deployed $543 million in capital on in-force transactions in 2021, the most active year for capital deployment in company history.
The growing trend of insurers de-risking in-force blocks, coupled with increased demand for pension risk transfer in several key markets, has created an environment in which RGA’s extensive, versatile capabilities provide a competitive advantage. RGA is able to assume both investment-related and biometric risks to deliver holistic client solutions, and RGA’s counterparty strength provides stability and security within a fast-changing industry.
In 2021, GFS developed customized client solutions across all product lines: asset-intensive, longevity, and capital solutions. RGA’s asset-intensive business enables clients to manage asset-related risk efficiently, to optimize available capital, and to improve the performance of savings and retirement products. The longevity team partners with clients to reduce their exposure to longevity risk by executing longevity swaps and pension risk transfer solutions. RGA’s capital solutions provide surplus and regulatory capital strategies and structured financing to help clients meet solvency requirements, free up capital, and pursue new opportunities.
RGA is able to assume both investment-related and biometric risks to deliver holistic client solutions, and RGA’s counterparty strength provides stability and security within a fast-changing industry.
Diversified Portfolio Drives Success in North America
GFS in the U.S. leveraged a strong market position to produce positive financial results in 2021, generating $515 million in pre-tax income, compared to $295 million in pre-tax income in 2020. Earnings growth was driven by asset-intensive business, which was positively affected by investment-related gains and an increased asset base supported by new transactions. In a notable example, GFS collaborated with RGA Investments to execute an asset-intensive transaction with a major member-owned fraternal financial services organization to de-risk a seasoned block of annuity business.
A flexible portfolio of solutions, ranging from large asset-intensive transactions to capital-solutions financing arrangements, differentiated RGA in a competitive U.S. business environment. GFS also continued to build out capabilities and infrastructure to serve insurance company clients in the growing pension risk transfer market, leveraging longevity expertise from established markets in the U.K., Netherlands, and Canada. RGA has identified pension risk transfer business as a strategic growth priority for the organization and brings expertise as a global leader in longevity solutions to capitalize on emerging opportunities.
Despite challenging market dynamics, RGA’s stable value business maintained top-line growth by offsetting industry-wide headwinds with the addition of new contracts, generating nearly $25 million in total revenues. This business line, which provides wrap coverage to 401(k) and other defined benefit plans in the U.S., ended 2021 with the notional amount of its stable value wrap portfolio totaling $16.1 billion.
In Canada, GFS continued to work with clients seeking to optimize capital efficiency within a dynamic regulatory environment. Solvency requirements and the coming IFRS-17 accounting standards have created a growing pipeline of insurers exploring financial solutions to free up capital. As an established market leader in longevity reinsurance, RGA is well-positioned to leverage deep expertise in support of Canadian clients’ long-term growth strategies.
Commitment Pays Off in EMEA and Asia Pacific Regions
GFS in EMEA exceeded $300 million in pre-tax income for the first time to reach $303 million, an increase of 17% over 2020. Strong results in longevity business reflected both favorable experience and new business growth, driven by established flow structures covering smaller pension schemes as well as large in-force transactions. RGA executed three large longevity transactions in the Netherlands in 2021, covering more than €14 billion in underlying reserves. A long-term commitment to the Dutch market and trusted client partnerships cultivated for years by an experienced local and regional team distinguished RGA as a reinsurer of choice in a competitive field.
Pension risk transfer business remained active in the U.K., where a broad range of client solutions and established ability to execute have positioned RGA as a market leader. RGA also acquired Hodge Life Assurance Company in the U.K. in 2021, re-positioned the business to increase return, and added Hodge staff to the local team. Throughout EMEA, GFS built on established business momentum, from an asset-intensive transaction in Ireland to capital-solutions business in South Africa, as well as exploring new solutions with clients in France and Germany.
In the Asia Pacific region, GFS extended and expanded recent years’ growth momentum to generate $98 million in pre-tax income, a 66% increase over 2020. As regulatory changes increased demand for capital relief, years of foundational work by GFS in the region produced results across diverse markets and product types. A large asset-intensive transaction with a major insurer and overall growth in flow business highlighted a strong year for this business line in Japan, where RGA’s partnership focus and established local presence facilitated business execution.
Solutions tailored to specific client needs yielded success throughout Asia. After years of laying the groundwork with clients and regulators, RGA executed the first-ever coinsurance transaction in Korea in 2021. In Hong Kong, continuation and new implementation of flow structures provided a sustainable source of income. In China, GFS worked to deepen its established capital-solutions business and explore additional market-specific solutions. As Asian insurance markets evolve, RGA is dedicated to strengthening client capital positions, enabling them to provide insurance protection to more people.