Reinsurance Group of America’s Q2 2025: Key Contradictions on Capital Models, Earnings Volatility, and Investment Income

Value of in-force credit and capital model adjustments, earnings volatility and transaction impact, investment income expectations, deployable capital and share buybacks, capital deployment and run rates are the key contradictions discussed in Reinsurance Group of America's latest 2025Q2 earnings call.



Financial Performance and Capital Position:
- RGA reported adjusted operating return on equity of 14.3% for the trailing 12 months, excluding notable items, with excess capital increasing to $3.8 billion.
- The company's financial performance was impacted by large claims volatility in U.S. individual life and unfavorable claims in the health care access business.
- The improvement in capital position was due to balance sheet optimization and recognition of additional value in existing business models, allowing for increased flexibility in funding strong growth and capital returns.

Business Growth and Strategic Success:
- RGA achieved significant growth in financial solutions and traditional businesses, with notable success in Asia and the U.S., contributing to a 11% constant currency increase in premiums year-to-date.
- The growth was driven by the company's focus on creating innovative solutions, strategic acquisitions like the Equitable transaction, and the successful execution of asset-intensive transactions across multiple regions.

Investment Performance and Returns:
- The total nonspread portfolio yield increased to 4.98%, with variable investment income significantly higher than the previous quarter.
- The strong investment performance was attributed to realizations in limited partnerships and real estate joint venture sales, stemming from prudent long-term investment management and higher new money rates.

Capital Allocation and Shareholder Returns:
- RGA increased its dividend by 4.5% to $0.93 per share and plans to be active in share repurchases, targeting a total shareholder return of 20% to 30% of after-tax operating earnings.
- The decision reflects the company's confidence in its strong business pipeline and excess capital position, aiming to balance capital deployment between business growth and shareholder returns.