RGA - NYSE

Welcome to the Reinsurance Group of America Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jeff Hopson, Head of Investor Relations. Please go ahead.

Thank you. Welcome to RGA's Fourth Quarter 2025 Conference Call. I'm joined on the call this morning by Tony Cheng, RGA's President and CEO; Axel Andre, Chief Financial Officer; Leslie Barbi, Chief Investment Officer; and Jonathan Porter, Chief Risk Officer. A quick reminder before we get started regarding forward-looking information and non-GAAP financial measures. Some of our comments or answers may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ from expected results. Additionally, during the course of this call, the information we provide may include non-GAAP financial measures. Please see our earnings release, earnings presentation and quarterly financial supplement, all of which are posted on our website for a discussion of these terms and reconciliations to GAAP measures. Throughout the call, we will be referencing slides from the earnings presentation, which again is posted on our website. And now I'll turn the call over to Tony for his comments.

Good morning, everyone, and thank you for joining our call. Last night, we reported Q4 operating EPS of $7.75 per share, which is our second consecutive record quarter in terms of earnings. Our adjusted operating return on equity for the trailing 12 months, excluding notable items, was 15.7%, which exceeded our intermediate-term target range of 13% to 15%. The quarter capped off another year of excellent financial results with strength across our businesses and geographies. These results underscore the value and diversity of our global platform and the exceptional work of our local teams. Looking back at the full year 2025 results, we delivered record operating EPS, generated a 15.7% ROE and increased the value of in-force business margins by 18%. From a capital perspective, we deployed $2.5 billion of capital into in-force transactions at attractive risk-adjusted returns, reinstated share buybacks and maintained a strong balance sheet with $2.7 billion of excess capital. These are clear indicators that we are successfully delivering on our strategy and are on track to continue meeting or exceeding our intermediate-term financial targets. Now let me highlight a few specifics from the fourth quarter. Beginning by region, the U.S. was particularly favorable, driven by management actions and variable investment income, with individual life mortality in line with expectations. EMEA results reflected strong volume growth and favorable experience. And APAC continues to see growth momentum along with in-force actions. In the quarter, we benefited from the continued contributions of our balance sheet optimization strategy. We saw the positive effects of various management actions in terms of current earnings and ROE, an increase in future value and an improvement in our liability risk profile. These actions are a regular part of our daily operations, though the timing and size can be difficult to predict. Additionally, we continue to see contributions from new business that we have added over recent years, including the Equitable block. We are confident that our most recent vintages of new business will generate risk-adjusted returns that meet or exceed our targets. Moving to investments. Our team and platform delivered strong results, boosted by favorable variable investment income coming from our alternative investment portfolio. Our team continued their efforts to reposition certain acquired portfolios, and we are on track to see these benefits in the periods ahead. To be clear, our portfolio repositioning leverages our expertise on both sides of the balance sheet with strong asset liability management to incrementally enhance our risk-adjusted returns. Additionally, we continue to expand our capabilities, including external partnerships to enable us to offer superior client solutions. On the capital front, we again repurchased shares, allocating $50 million this quarter at attractive prices. A balanced use of excess capital is an important part of our plan to generate long-term shareholder value. Shifting to full year 2025 performance. Our diversified global platform continues to deliver strong long-term results. Our operations in North America, Asia and EMEA have all been successful in executing on our strategy and delivering attractive financial results. Our APAC region produced excellent bottom line results for the year. Pretax operating income, excluding notable items, was up 18%, reflecting strong underlying growth and favorable underwriting experience. This business continues to grow at a nice rate given our success in delivering product development across the region as well as some of the favorable market and regulatory dynamics in places like Japan and Korea that lead to a high level of opportunities to solve client issues through in-force transactions. In EMEA, our full year pretax earnings, excluding notable items, were up 35%, reflecting continued strong new business growth, along with favorable experience. North American results reflected the contribution from the Equitable block, which continues to perform in line with expectations and strong contributions from in-force management actions. These positives helped overcome the challenging results from U.S. Group, specifically the excess medical business. We fully reprice this business for 2026 and expect a significant improvement in results over the next year. Looking beyond the recent renewal cycle, we completed a broader strategic review and have decided to exit the group health care lines of business. For the year, both organic flow and in-force transactions were very strong, with in-force transactions particularly robust from the Equitable deal and a wide range of other opportunities that we executed on. Focusing on organic new business, we continue to have very good success and momentum built on our long established biometric expertise and innovative mindset. We continue to see ongoing strength in Asia, driven by our product development and range of innovative solutions. Similarly, in the U.S., our value-added underwriting solutions and underwriting outsourcing efforts have given us strong momentum in a market that is generally considered mature. The 2025 successes I've highlighted are visible in the increased value of in-force business margins. We introduced this concept in 2024 to convey the underlying value and future earnings power of our in-force business. It is a measure of how much value is being created by a range of means, most importantly, new business, but also management actions and experience. In 2025, the value increased by $6.6 billion or 18%, with meaningful contributions from both new business and management actions. Over the past two years, the future expected value has increased by over $11 billion or approximately 16% per annum. Stepping back, let me provide some perspective on how we are positioned today and for the future and why we expect to deliver on our strategic and financial objectives. RGA has several unique strengths, including strong biometric expertise, asset management capabilities, a global platform, market-leading brand and flexibility to partner across the industry. We leverage these strengths as we execute across four key areas of focus. First, we use a proactive business approach to create win-win transactions, generating higher returns for RGA and greater value for our clients. Second, we optimize our balance sheet, including in-force liability management, improved risk-adjusted investment returns and leveraging third-party and internal sources of capital. Third, we operationally scale the platform and ensure that our portfolio of businesses aligns with the opportunities in the market. And lastly, we maintain a sharp focus on capital stewardship, ensuring we achieve the right balance between allocating capital to attractive business opportunities and returning capital to shareholders, which is critical to us. Whether it is the record 2025 results or the past three years where we have met or exceeded our ROE and EPS targets, RGA is delivering successfully on our strategy. We have strong momentum, a clear focus and the right strategy, and we remain confident in our ability to generate attractive shareholder value going forward. With that, I will turn the call over to Axel.

Thanks, Tony. RGA reported record pretax adjusted operating income of $515 million for the quarter or $7.75 per share after tax. For the trailing 12 months, adjusted operating return on equity, excluding notable items, was 15.7%. During the quarter, we achieved strong results across our global businesses. This was generally driven by the continued emergence of earnings from recent new business, including the Equitable block, favorable in-force management actions and strong investment performance. As Tony mentioned earlier, we continue to execute on our strategic initiatives, which positions us well for 2026 and beyond. I'll speak a bit more about 2026 expectations shortly. We deployed $98 million into in-force transactions in the quarter and $2.5 billion for the full year. We remained selective in the quarter, but overall had a very successful year across multiple geographies and products. On the traditional side, our premium growth was 7.4% year-to-date on a constant currency basis, which has benefited from strong growth across North America, EMEA and APAC. Premiums are a good indicator of the ongoing vitality of our traditional business, and we continue to have strong momentum across our regions. We also completed $50 million of share repurchases in the quarter at an average price of $187.40, bringing total repurchases to $125 million since we reinstated buybacks in the third quarter. Our capital position remains strong, and we ended the quarter with estimated excess capital of $2.7 billion and estimated next 12 months deployable capital of $3.4 billion. The effective tax rate for the quarter was 23.8% on adjusted operating income before taxes and 22.8% for the full year 2025. Looking ahead to 2026, we expect a tax rate in the range of 22% to 23%. We continued our balance sheet optimization strategy in the quarter with additional in-force management actions. For Q4, these actions had a $95 million favorable financial impact. Managing our in-force block remains a core part of our strategy and has significantly contributed to results over the past few years. As a reminder, these actions come in various forms, ranging from large upfront actions such as strategic recapture to more recurring items like rate increases on specific blocks of business. Turning to biometric claims experience, as outlined on Slide 11 of our earnings presentation. Economic claims experience was unfavorable by $51 million in the quarter with a corresponding unfavorable current period financial impact of $53 million. Approximately half of this result was driven by the U.S. group business, consistent with the updated expectations that we communicated earlier in the year. Claims experience in U.S. Individual Life was in line with expectations. Taking a step back, since the beginning of 2023, when we more fully emerged from COVID, economic claims experience for the total company has been favorable by $226 million. As a reminder, the favorable economic experience that has not been recognized through the accounting results will be recognized over the remaining life of the business. Before getting into the segment results, I'd like to discuss a new slide, highlighting certain key considerations for the quarter and the year. On Slide 9, we've included details on the financial impact of certain items, including actual to expected biometric claims experience, variable investment income and in-force management actions. After considering these impacts, we view run rate EPS for 2025 at approximately $24.75 per share, which we believe provides a reasonable basis to apply future EPS growth expectations. We are also reiterating our intermediate-term targets of 8% to 10% annual EPS growth and a 13% to 15% return on equity. Regarding ROE, we acknowledge that we are running at or above the high end of the range and we'll continue to evaluate this target. For 2026 specifically, we are assuming a 7% variable investment income return. This is above the 6% in 2025, though below our long-term expectations of 10% to 12%, primarily due to a still muted environment for real estate sales, which is when income from real estate assets is recognized. Regarding in-force management actions, our activity has been elevated in recent years, generating earnings of about $75 million in 2023, $225 million in 2024 and $135 million in 2025. We will remain active going forward, but the timing and size of these actions is highly unpredictable. Thus, we are projecting a more limited financial impact compared to recent experience. Additionally, we will continue to balance capital deployed into the business with returning capital to shareholders through quarterly dividends and share repurchases. Our base case expectation for capital deployed into in-force transactions is around $1.5 billion in 2026. And we also expect to allocate $400 million of excess capital to reduce financial leverage during 2026. We intend to remain opportunistic with share repurchases and expect total shareholder return of capital to range between 20% to 30% of after-tax operating earnings over the intermediate term. Moving to the quarterly segment results on Slide 7. The U.S. and Latin America traditional results reflected the favorable impacts from in-force management actions and strong variable investment income. These were partially offset by the expected unfavorable group claims experience noted earlier in the year. A quick note on the group business. The block is now fully repriced, and we expect significant improvement in 2026 results back towards our historical run rates. The U.S. Financial Solutions results reflected the contribution from the Equitable transaction, which continues to perform in line with our expectations. The Equitable business generated earnings consistent with our $60 million to $70 million guidance for the second half of 2025, and we continue to expect $160 million to $170 million of earnings from the transaction in 2026. Canada traditional results reflected favorable impacts from group and Individual Life businesses. The Financial Solutions results were in line with expectations. In the Europe, Middle East and Africa region, the traditional results were largely in line with expectations with favorable other experience offset by modestly unfavorable claims experience. EMEA's Financial Solutions results reflected favorable longevity experience and strong growth in the segment. We continue to see high-quality opportunities and the longevity business remains an area of notable growth for us. Turning to our Asia Pacific region. Traditional had another good quarter, reflecting favorable underwriting margin and the benefit of ongoing growth. The segment performed very well this year, which is a reflection of our excellent competitive position and our execution of value-added solutions to clients. The Financial Solutions results were in line with expectations. Finally, the Corporate and Other segment reported an adjusted operating loss before tax of [ $54 ] million, impacted by higher financing costs and general expenses. For 2026, we expect a corporate and other loss of approximately $50 million to $55 million per quarter. Moving to investments on Slides 12 through 14. The non-spread book yield, excluding variable investment income, was slightly higher than Q3, primarily due to new money rates in excess of portfolio yields. While the new money rate was lower in the quarter, primarily due to lower market yields and a lower allocation to private assets, it remains above our portfolio yield, providing a tailwind to our overall book yield. Total company variable investment income was above expectations by around $48 million, driven by higher limited partnership income. Overall, our portfolio quality remains high and credit impairments were in line with expectations for the year. Turning now to capital. Our excess capital ended the quarter at an estimated $2.7 billion, and our next 12 months deployable capital was an estimated $3.4 billion. It's important to note that we manage capital through multiple frameworks, including our internal economic capital, regulatory capital and rating agency capital. From a regulatory lens, we maintain ample levels of regulatory capital in the jurisdictions where we operate. Also, our strong ratings are important to our counterparty strength, and thus, we manage our rating agency capital to support those ratings. On a holistic basis, considering all capital frameworks, we remain very well capitalized. In the quarter, we successfully retroceded another block of U.S. PRT business to Ruby Re, and we are actively working on additional retrocessions. We still expect vehicle to be fully deployed by the middle of 2026, and third-party capital remains a key component of our capital management strategy. During the quarter, we continued our long track record of increasing book value per share. As shown on Slide 19, our book value per share, excluding AOCI and impacts from B36 embedded derivatives increased to $165.50, which represents a compounded annual growth rate of 10% since the beginning of 2021. To summarize, this was another great quarter to close a very successful and rewarding 2025. We continue to execute on our strategic objectives, and we are confident in our ability to deliver on our intermediate-term financial targets. Specifically, our adjusted operating EPS, excluding notable items, has grown at a compound annual growth rate of more than 10% since the beginning of 2023. And our adjusted operating ROE, excluding AOCI and notable items, has averaged around 15%, which is at the high end of the targeted range. With that, I would like to thank everyone for your continued interest in RGA. This concludes our prepared remarks. We would now like to open it up for questions.

[Operator Instructions] Our first question today is from Wes Carmichael with Wells Fargo.

I wanted to start on capital allocation. So you had a strong deployment year in 2025 with Equitable and another $1 billion on top of that, bought back some stock. I guess my question is, a couple of quarters ago, you spoke to a 20% to 30% payout ratio in terms of buybacks and dividends. As you look at the opportunities in front of you and excess capital you have and will generate, is that 20% to 30% payout ratio still the right level? And what might change your view there?

Yes. Thanks for the question, Wes. Look, as we stated earlier, we reinstated share buybacks in the second half of 2025, and we repurchased $125 million of stock in 2025. We're taking a balanced approach to capital deployment. Maintaining financial flexibility is very important to us. We continue to see attractive opportunities to deploy capital into new business at strong risk-adjusted returns, which also aligns with our strategy and leverages our unique strengths but we also recognize the importance of returning capital to shareholders. We're targeting 20% to 30% total payout ratio going forward, but we also have the flexibility to be opportunistic as the year goes on.

Okay. And my follow-up is if you continue to grow the asset-intensive business, and I think you may have had this question before, but curious if anything has changed in your mind. But would you be open to additional partnerships with asset managers or alternative asset managers? And I know you do a lot of this yourself in-house, but just wondering if you gain access to any additional capabilities or perhaps even some outside capital.

Wes, it's Leslie Barbi. Thanks for that question. You might be interested to know that we have been using external partners for decades, and we definitely continue to plan to do that. Really, when we look out in the market. We're constantly talking to potential partners. We want to make sure we don't miss any additive capabilities or expertise, anything that can add value for RGA and our shareholders. I think this flexible approach and our ability to partner is a real strength because what we're trying to do is really get the right capabilities and the right expertise into the total opportunity set. So to reinforce that, we're absolutely already using external partners, and we're very open to continuing to do that if it adds value for RGA.

The next question is from Joel Hurwitz with Dowling & Partners.

I wanted to touch on Group Health first. Can you just let us know what rate actions you took in '26? And then Tony, I think you said you'll be exiting the business, I guess, after '26. What drove that decision? And any color on the overall size of the business that you're exiting and sort of what run rate earnings were expected to be?

Yes. Joel, this is Axel. We've taken significant actions to fully address the U.S. health care excess book. We raised rates by 40% on average, beginning mid-2025 through January 2026, which gives us confidence that 2026 would improve over 2025 results. As mentioned in the prepared remarks, following a strategic review, we have decided to stop writing new business effective immediately and also to not renew existing business at the end of the current 1-year term across our group health care lines of business. So for some context, the U.S. health care business has approximately $400 million of annual premium and generates approximately $25 million of pretax run rate earnings in a typical year. So this decision will have limited impact in 2026, will primarily emerge in 2027 results. We remain focused on best positioning RGA for the future by ensuring that we're deploying capital in businesses that are strategically aligned, and we also believe that the rate actions taken will result in significant improvement to the U.S. Healthcare results as the business winds down.

Got it. Very helpful. There continues to be activity in the market and optimism from primary writers on further derisking of legacy blocks like long-term care and universal life with secondary guarantees. I know you've done a little in this space, but just wanted to get an update on your appetite for these types of businesses.

Yes. Let me take that one. Thank you very much for the question. Look, we remain very selective and disciplined on ULSG and LTC long-term care risk. As you know, we have significant biometric risk capabilities, but we also keenly recognize the need for higher hurdle rates on these lines of businesses, especially within our public company balance sheet. Now it's important to note that all of our ULSG and LTC businesses have been priced with updated assumptions and has performed well over time. And then the final point is that our ULSG and LTC liabilities are less than 10% of our balance sheet today, and we expect it to remain this way going forward.

The next question is from Jimmy Bhullar with JPMorgan.

I had a couple of questions. One was on the Equitable block. You're reinsuring 3/4 of the block, but your results -- there's not a long history, but the results this quarter were not correlated between the two companies because they basically had weaker mortality than normal, you guys had better. So I'm just wondering if you could just give us some color on what parts of the book you're not covering either by vintage or by type of product or any other factor?

Yes. Thanks for the question, Jimmy. This is Axel. Maybe let me start with the high level. The Equitable transaction, first of all, generated earnings consistent with our $60 million to $70 million guidance for the second half of 2025. We also continue to expect $160 million to $170 million of earnings from the transaction in 2026. Now there are four key drivers of economic upside for RGA relative to the original performance of this block. Number one, we repriced the business, which allowed us to reflect updated mortality and policyholder behavior experience. This means our reserving assumptions differ from Equitable's, and therefore, will produce different actual to expected mortality experience on the same block. Number two, we benefit from uplift from higher asset yields. We're repositioning the transferred assets into a higher-yielding environment and in a manner that is consistent with our overall portfolio asset allocation targets and ratings. Number three, we operate with lower expenses as we've absorbed the business into our existing infrastructure and did not bring over their expenses. Lastly, number four, we were able to benefit from capital efficiency given our legal entity structure. So also, please keep in mind that there are meaningful ongoing benefits to our strategic relationship with Equitable, including underwriting new flow reinsurance business and participation from AllianceBernstein in our sidecar strategy. Altogether, we remain confident that the Equitable transaction will generate strong risk-adjusted return for RGA. And then lastly, you're correct that our share of this business does not represent a 75% quota share of the entirety of Equitable's life business, but it is only a portion of that business.

And are you able to share what it is that you don't cover, whether it's older rate business, IUL, like anything in that regard?

So I'm not going to get into the specifics, but suffice it to say that, of course, we monitor very closely the claims reporting from Equitable and that the performance has been in line with our expectations. We would also note that Equitable on their call cited less reinsurance coverage on these particular claims that impacted them.

The next question is from Suneet Kamath with Jefferies.

First question just on the capital deployment. If I look back to 2023, it looks like you've deployed about $5 billion of capital. And I guess the question is, if we think about the earnings power of that deployment, how much of that would you think is that sort of full earnings power? Like I know Equitable is not there yet, so that's $1.5 billion out of the $5 billion. But of the $3.5 billion left, are you getting your full expected returns at this point? Or is there still more in front of us?

Yes. Great. Thanks for the question. Well, it is an important question. Look, at a high level, we still view our 8% to 10% EPS growth target as a good intermediate-term target. As we've said before, we can achieve this with approximately $1.5 billion of capital deployed into in-force transactions, together with the ongoing growth of our traditional flow business and with a level of share repurchases consistent with our stated target total 20% to 30% payout ratio. So when thinking of recent capital deployment, in particular, the Equitable transaction, keep in mind that it occurred in the middle of 2025. So it did contribute to 2025 earnings with some further ramp-up expected in 2026. The 8% to 10% is an intermediate-term target. Higher levels of capital deployment may allow us to come in at the higher end of the range; however, over the intermediate term, we're comfortable with the 8% to 10%, which we have met and exceeded at times in recent years.

But should we think about the non-equitable business as sort of fully earning at this point? Or is there still more on that piece? I'm talking about the $3.5 billion of related deployment.

So like we've discussed before, on any capital deployment, there's a period of repositioning of the asset portfolio and as a result, a ramp-up in earnings. And our results reflect the blend of capital deployment and the trajectory of that earnings ramp-up. All of that is being factored into our intermediate-term EPS growth target.

The next question is from Tom Gallagher with Evercore ISI.

Just shifting gears to -- away from mortality to morbidity. The -- can you comment on both the Manulife long-term care risk transfer deal and your broader exposure to long-term care? How has that been performing if you just look at it on a 2025 basis? Is that in line? Is that in line with your ROE? Has that been a lot higher? Any clarity there?

Yes. Tom, this is Jonathan. We don't talk about experience at a block-by-block level. But what I can say is that we're very happy with our LTC business, and it has performed well over time. And as you know, we have focused on a subset of available LTC business that's available in the market that aligns with our risk appetite and return expectations. And we continue to manage our overall exposure to the product relative to the size of our balance sheet. So we expect this to continue to be our approach going forward.

And Jonathan, would you say the performance of that -- any broad range ROE that that's been trending at?

No, Tom, we don't break down the performance at that level to discuss externally. But again, just to reiterate, we're very happy with the performance of that LTC business over time.

The next question is from John Barnidge with Piper Sandler.

My first question, can you talk about your exposure in the investment portfolio to software-related companies and how you're thinking about disruption from AI within the portfolio?

Thanks, John. This is Leslie. So in terms of your first question on the software, we look closely at that exposure. I'll note that software lending is typically done against enterprise value or revenue. It's become more popular in the market, but we've not been a big participant in that. So when we drill down on our exposure within direct lending, it's very modest, less than 30 basis points of our total investment portfolio. So we're very comfortable with where we're positioned. In terms of AI, that's something among many other factors that we continue to look at across the portfolio, so analyst by analyst, and we discuss it in our portfolio management meetings. And like our approach to anything that's changing in the market, we look at trends that are coming, assess where they could impact. We make decisions where we need to and take actions at those times. And as we get more information because this will definitely be evolving. So we'll continue to do that and actively managing the portfolio.

And sticking with the portfolio, if I can. Leslie, you talked about using external partners for decades that have specialized capabilities. We saw a transaction earlier this year in January with cross ownership between alternative asset managers, which resembled the transaction from a number of years prior in some ways. And so curious about maybe the evolution in the relationships that you've already had for decades with kind of the new environment.

Okay. Thanks for that question. I'm not sure I was completely clear on what you were referring to, but let me just comment generally about our partnerships or use of external managers. So we certainly -- we look at what capabilities we want on the platform and then -- who is best suited to do that. So often, it's our strong internal teams. Other times, we want to use an outside partner that has different or more scaled expertise than we have. We've also engaged in partnerships where when we have a lot of alignment, it's win-win. We can see that our alignment, our culture, our needs are all going to align for a long time. We will engage in partnerships. And so we've done that a number of times in the past. There's a few smaller ones we've announced. There's aspects of larger ones you may have gleaned from some of our other transactions. But it's really engaging in this more wholesome approach and making sure all the value is considered.

The next question is from Alex Scott with Barclays.

First one is on, I guess, regulatory regime in Europe. And my understanding is Solvency II is going to have some changes that are beneficial to invest in things like alternatives and some of the privates that are out there, et cetera. Are you seeing any increased competition in pricing related to that? Do you anticipate that, that will happen at all? I'm just trying to understand how to think about those changes.

Yes. Look, let me start here and if Tony wants to add something. So we have multiple legal entities. We're a global company. We have presence in Europe, in APAC, in America, in Bermuda with multiple jurisdictions and regulatory regimes that we operate in. So we're obviously well aware of the benefits of the various regimes and the ability to pool risks and achieve efficiencies. And we're engaged with our regulators in terms of monitoring the evolution of the regulatory regimes. We've been active in EMEA for a long time with our longevity business, with our asset-intensive business and our traditional business.

Yes. And Alex, let me add to it. And Axel absolutely alluded to it at the end. In EMEA, the large majority of our profits in our business is longevity swaps, which have no asset risk and really rely on, gosh, I guess, 52 years of phenomenal experience in mortality and longevity. So really, the change you're sharing has less of an impact, obviously, to that business. What I would add is we obviously are very focused on blocks of business that have both asset and biometric risk in it. It leverages off one of our strongest strengths, which is able -- ability to reinsure both sides of the balance sheet. So even for the plain vanilla types of blocks, it really is not in our sweet spot. And there's a lot of opportunities around the world we can pursue that have both the asset and biometric risk, which is where we focus.

Yes. Understood. Yes, I was thinking more along the lines of your biggest competitors being the multiline reinsurers. I think they generally manage the Solvency II. So even outside of EMEA, one could theoretically think that those companies may be able to get more aggressive on pricing. But it sounds like you're not seeing that at all right now, at least, right?

Yes. Look, I confirm we -- that has not bubbled up to the surface of being even a threat or risk going forward.

The next question is from Mike Ward with UBS.

Kind of a good segue there. Just wondering, Tony, if you could elaborate on any specific regions or product lines that you think might be looking incrementally attractive this year so far?

Yes. Thanks, Mike. Maybe I'll just go around the regions around the horn and talk a bit about our pipeline and answer your question there. Look, I'd say our pipeline is both rich and diverse. And as you know, we always focus on the quality of the pipeline as much as the quantity of business opportunities. So firstly, in Asia, we continue to see a strong pipeline, both in the product development area as we continue to serve the emerging middle class as well as the financial solutions as clients adjust to the new capital frameworks in markets like Japan and Korea. I've already mentioned the U.K. longevity market that continues to be strong as a market, and we continue to be the market leader, and that momentum continues into 2026. And then in the U.S., we continue to benefit, obviously, from the industry realignment as we saw with the Equitable deal. But let me -- it's really important to note that there are many more modest sized wins due to our biometric and underwriting strength that collectively are very meaningful in terms of returns and positioning us strategically in the future. So all in all, the pipeline is rich and diverse. It's across the board. And as a result, that's one of the reasons why we're so optimistic about delivering attractive returns from the business.

Great. And then just in the U.S. on traditional kind of mortality, pretty solid result, I think, considering the severe flu season. Just wondering if you have any insight if it's ticked up in January at all? Just wondering if you have any view there.

Yes. Mike, this is Jonathan. It's still too early to predict the final outcome of the current flu season, but the latest declining trends in population level flu activity in the U.S., Canada and the U.K. are encouraging. So influenza hospitalizations look to a peak at year-end, and that peak was at the higher end of a normal flu season range. But since that time, those hospitalization rates are down substantially. This year, the Northern Hemisphere flu season is driven by influenza A, and there's no evidence at this point of increased virulence compared to other seasonal strains. And when we look at our Q4 results, we didn't see any material evidence of seasonality in that experience. And as we noted in the prepared remarks, our mortality experience was in line overall.

The next question is a follow-up from Tom Gallagher with Evercore ISI.

Axel, I just wanted to make sure I understand all the components of earnings. I followed everything you said in terms of the 8% to 10% intermediate-term EPS growth expectation. And it sounded to me because of the $1.5 billion of capital you expect to deploy into in-force deals in 2026 that you, all things equal, should be running at that 8% to 10% intermediate-term growth rate in 2026 would be my best guess. But I guess, based on how you're thinking about things for '26, are there any other adjustments you would make to that? The two that I could think of would be your alt return assumption is a little better, so that could provide upside. And then to the extent that you do any more in-force transactions, I don't think you've included those, but any further color you could give?

Yes. Tom, thanks for the question. So I would point you to Slide 9 in the deck, where we show our key assumptions, right, for 2026. Number one, we, of course, are assuming much improved U.S. group experience, which was the largest contributor to the unfavorable biometric experience in 2025. Number two, we are assuming a smaller contribution from in-force management actions since it has had outsized positive impact in recent years. And lastly, we are also assuming a variable investment income return of 7% for 2026. So the key takeaway is that we view $24.75 as a reasonable starting point for 2025 run rate EPS. And we are reiterating our intermediate-term 8% to 10% EPS growth target, which, as you said, assumes approximately $1.5 billion of annual capital deployed into in-force transactions. That applies to the intermediate term. We don't comment specifically on the year-by-year forecast.

And Axel, sorry, just to follow up. The baseline, the $24.75, does that have any of the in-force management rate actions in it?

Yes. Look, I appreciate the question. So like I said, right, it's important to remember, we manage the in-force business, and it's a core part of our strategy. It will continue to be. We take a partnership and holistic approach to these situations, balancing the client relationship with our long-term business. We feel this approach is a means of differentiation, leading to other business opportunities. We've had very good success over the past 3 years. I'll remind you, we've generated approximately $425 million of cumulative pretax income and significant long-term future value. Like we said, in-force actions are unpredictable in terms of size and timing. Looking towards 2026, we feel there's less opportunity compared to recent periods. And thus, we expect a more limited impact on earnings going forward. So like I said, as a reminder, the $24.75 of 2025 run rate earnings implied from Slide 9 removed all in-force actions from 2025 results. Therefore, actual in-force actions in 2026 could provide upside to these targets.

The next question is a follow-up from Alex Scott with Barclays.

I wanted to ask on Japan, just around the macro volatility associated with interest rates and FX. Does that have any impact on your business? And I guess, connected to that, does it create new opportunities or reduce the opportunity set? How should I think about how it affects in-force and go-forward deployment there?

Yes. Thanks, Alex, for the question. It's Tony here. Look, as you shared, look, Japan has strong tailwinds from the recent regulatory changes and like you mentioned, the macroeconomic changes and clients are taking actions to address balance sheets which results in considerable opportunities for risk transfer in RGA. And we are incredibly well positioned with our strong local presence, obviously, our trusted client relationships and our world-class expertise on both sides of the balance sheet. And this is why it's one of our key markets. Now the impacts you've referred to, look, when we look at the competition that's entered the Japanese market, many of which are alternative asset managers, they've had some success in the more vanilla asset-intensive business. But let me reiterate, our focus is on the sweet spot, which are transactions, which have both asset and biometric risks and leveraging off that key strength. So we remain very optimistic about our position in Japan and the ongoing momentum in the market overall and RGA winning a very good share of that.

Yes. And Alex, this is Jonathan. Maybe just on the in-force part of your question. So just as an overarching comment, higher interest rates are good for us from an overall earnings perspective, given our positive reinvestment cash flows and illiquid liability profile. With regards to the Japanese asset-intensive business, our exposure to disintermediation risk from higher rates is modest, and we wouldn't expect to be -- have a significant impact at the current rate levels. And then specifically, on blocks -- on our older blocks of in-force business, we have high minimum guaranteed interest rates and they're protection-oriented, making them less likely to have higher lapses. And on our newer vintage products, we have protections from surrender charges and market value adjustments.

This concludes our question-and-answer session. I would like to turn the conference back over to Tony Cheng for any closing remarks.

Thank you for your continued interest in RGA. We've had a great quarter to cap off a great year, and we look forward to continuing to deliver in the future. This ends our Q4 conference call. Thank you.