Good day, and welcome to the Reinsurance Group of America First Quarter 2017 Results Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to introduce Mr. Todd Larson, Senior Executive Vice President and Chief Financial Officer; and Ms. Anna Manning, President and Chief Executive Officer. Please go ahead, Mr.

Larson..

Thank you. Good morning everyone, and welcome to RGA's first quarter 2017 conference call. Joining me here, in St. Louis this morning, is Anna Manning, RGA's President and Chief Executive Officer. Anna and I will discuss the fourth quarter results, after a quick reminder about forward-looking information and non-GAAP financial measures.

Following our prepared remarks, we will be happy to take your questions.

To help you better understand RGA's business, we will make certain statements and discuss certain subjects during this call that will contain forward-looking information, including, among other things, investment performance, statements relating to projections of revenue or earnings, and future financial performance and growth potential of RGA and its subsidiaries.

Keep in mind that actual results could differ materially from expected results. A list of important factors that could cause actual results to differ materially from expected results is included in the earnings release we issued yesterday.

In addition, during the course of this call we will make comments on pretax and after-tax adjusted operating income, which is considered a non-GAAP financial measure under SEC regulations. We believe this measure better reflects the ongoing profitability and underlying trends of our business.

We have modified the labeling of our non-GAAP measure operating income to adjusted operating income. This modification does not affect previously reported results.

Please refer to the tables in the press release and quarterly financial supplement for more information on this measure, and reconciliations of net income to adjusted operating income for our various business segments. These documents and additional information may be found on our investor relations Web site at rgare.com.

With that, I'll turn the call over to Anna for her comments..

Thank you, Todd, and good morning. As indicated in the earnings release, last night, we reported adjusted operating earnings per share of $1.86 compared to $1.85 a year ago. While the quarter did include some extra volatility amongst the segments, we're satisfied with the overall results, and the start to the year.

We did experience elevated seasonal mortality claims in North America that caused weakness in our U.S. traditional and Canadian traditional segments. At the same time, Asia and EMEA produced strong results, and Australia was profitable. A lower effective tax rate reflecting the geographic composition of our earnings also contributed to these results.

We continue to point to our global model and earnings diversification as key strengths. And this quarter was another good example of that value, where the elevated claims in North America were primarily offset by strong results in other segments. Premium growth was strong again, up 10% on a reported basis, and in constant currencies.

This reflects solid to strong organic growth across most regions, Asia and EMEA in particular. Now in terms of the higher mortality claims, this was all driven by an elevated number of large claims in both the U.S. and Canada, while non-large claims were slightly better than expected.

We attribute the results to random volatility, which is an inherent part of our business, and we have no reason to believe that there is an underlying negative trend. In EMEA, underwriting results were favorable, and our Financial Solutions business has another very strong quarter.

Asia underwriting results were also favorable and top line growth in this segment was particularly good. It was a light quarter in terms of executed transactions, typical of most first quarters, but we are encouraged with the pipeline activity, and remain optimistic on this front.

Now, while recognizing some seasonal volatility of segment results, we view this as a satisfactory start to the year, and our overall business momentum remains strong. We remain confident that we can continue to execute on our strategy and achieve our financial goals and objectives.

We have a proven strategy and approach, and we continue to see strong and good demand for our services and solutions by clients worldwide. With that, let me turn it back over to Todd..

Thanks, Anna. I will now provide information on our investment results, capital management, and additional details on segment-level results.

Starting with investments, the average investment yield, excluding spread business, was down five basis points to 4.41% from the first quarter of 2016, reflecting the impact of lower yields on new money and reinvested assets.

The average investment yield was 28 basis points lower than the fourth quarter yield due primarily to the lower of variable investment income. We did not close any significant transactions or repurchase any shares this quarter.

Our excess capital position was approximately $1.2 billion at the end of the first quarter, and we are well positioned to pursue deployment opportunities as we move forward. We continue to take a balanced approach at managing our capital over time, as given the nature of our business the exact timing of deployment is always difficult to predict.

Turning to our segment results, the U.S. and Latin America traditional business reported pretax adjusted operating income of $28 million versus $53.2 million a year ago. As Anna indicated, this quarter reflected a high number of large claims, while last year's quarter was generally in line with expectations.

The claims were approximately $30 million above our expectations. Premiums totaled $1.3 billion, up 6% from the prior year's quarter reflecting ongoing organic growth.

Or asset-intensive business reported pretax adjusted operating income of $51.6 million this quarter, slightly above the run rate due to favorable spreads and mildly higher equity markets.

Our financial reinsurance line reported pretax adjusted operating income of $17.8 million in this period, an increase versus a year ago as we added some new treaties in the quarter. Our Canadian traditional segment reported pretax adjusted operating income of $16.8 million, down from $19.4 million in the prior year period.

Both periods' results reflect modestly unfavorable individual mortality claims, with current quarter results primarily driven by large claims. Premiums totaled $215.8 million in translated U.S. dollars, basically flat with a year ago. The fact that premiums were flat reflects the loss of one higher premium low-margin treaty.

Otherwise, premiums would've increased a little over 6%. Canada's Financial Solutions business, which includes longevity and fee-based transactions reported pretax adjusted operating income of $3.6 million this period versus $600,000 a year ago. Longevity experience was favorable this quarter, whereas last year's experience was unfavorable.

Switching to Europe, Middle East, and Africa, our traditional business reported pretax adjusted operating income of $14 million, up from the pretax adjusted operating loss of $1.1 million last year, as the experience was favorable overall this period.

Traditional premiums rose 10%, reflecting some positive impact of new treaties across a number of geographies. EMEA's Financial Solutions business, which includes asset-intensive, longevity, and fee-based transactions, continues to perform well.

Reported pretax adjusted operating income was $27.5 million, compared to last year's $25.6 million, due to favorable ongoing longevity experience. Turning to our Asia-Pacific traditional business, pretax adjusted operating income totaled $41.7 million, compared to $41.1 million in the prior year period. Both periods reflect strong results.

Underwriting experience for the current quarter was favorable across most markets, while Australia was in line and profitable. In the year-ago period Australia produced a particularly good profit.

Asia-Pacific traditional premiums were up 29%, reflecting healthy growth from new treaties across most of the region, particularly Hong Kong, as well as some catch-up premiums on existing treaties.

The growth rate this quarter was particularly high, reflecting continued success with innovative product development and client solutions, combined with growth in the underlying markets.

We are encouraged with these trends, but recognizing there was also some client reporting catch-up this quarter, we would expect some moderation of the growth rates for the remainder of the year. Our Asia-Pacific Financial Solutions business reported pretax adjusted operating loss of $500,000 versus pretax operating income of $7.4 million a year ago.

While there continued to be unfavorable experience on a particular treaty that has run off, the experience this quarter improved versus the recent trend and better than our expectations.

The corporate segment reported pretax adjusted operating loss of $26.6 million compared with $30.3 million a year ago, effectively in line with our expectations when adjusted for seasonal variation.

In summary, while we were disappointed with North American mortality volatility, our global model and diverse business profile helped us to deliver an overall satisfactory start to 2017. Before we open up the call for questions, I would like to remind you of our upcoming Investor Day on May 18th, in New York. We hope to see you there.

With that, we thank you and appreciate your support and interest in RGA. We will now open the call for questions..

Yes, thank you. [Operator Instructions] And we'll go to our first question from Jimmy Bhullar with JP Morgan..

Hi. First, just on the mortality in the U.S. and Canada, and obviously I understand this is a normal part of your business. But have you looked at the results, and what sort of gives you confidence that it's not a pricing issues, and it's just normal aberration.

So, if you could give us some more details in terms of just claims trends, and anything that you've seen? Maybe there was a spike in claims through a specific order in terms of age, vintage year, or otherwise?.

Jimmy, it's Anna..

Hi, Anna..

Hi. The unfavorable mortality was caused by an extra 20 large claims in the quarter. Now, we got off to a good start. Both January and February claims were essentially in line, and really we saw these extra-large claims in the month of March. Those claims were spread out over a few areas, including our 9904 block.

They were also spread out over and across ages. So we had large claims both on our older age business as well as younger ages. So the diversity of the age grouping and the concentration of the claims variance into that single month into March really reinforces our view that this is simply mortality volatility.

And we're not changing any future expectations as a result of this quarter..

And was there any concentration among cedents [ph], or was that fairly dispersed as well?.

That was also fairly dispersed..

And then similarly, on Canada, have you observed anything there?.

Well, the Canada extra-large claims. So in the U.S. there were 20, in Canada there were a lot fewer than that. But the data is just too small to draw any conclusions. A quarter's worth of variance you can't really draw any inferences from it..

I understand. And secondly, on your share buybacks, to what extent do you -- I think there was a quote in the release that you might have preserved some capital in anticipation of deals.

Was that the main reason for no buybacks this quarter or was it influenced by the stock price as well?.

Jimmy, this is Todd. We're in a very long-term business, and we need to keep that in mind as we manage our overall capital. And again, as we've stated before, we do like to keep a capita cushion of between $300 million and $500 million over time.

And I think we've demonstrated in the past that we've done a pretty good job balancing our overall capital management in a very prudent manner.

So there are going to be periods when our elevated or excess capital level increases over time, but as we've demonstrated in the past, I think we'll deploy that capital back into the business at appropriate returns in deals that meet our risk profile or through share repurchase. And I would expect that to continue..

And just anything lastly on the deal pipeline in the U.S.

and International?.

Well, our pipelines are active in all our markets. In terms of competition, we're continuing to see strong competition in all those markets. And that includes both the established players as well as some new entrants. Now, as a generalization, there's less competition for these smaller and mid-sized deals compared to the larger.

And there's no light [ph] competition for some of these early bespoke solutions that we're working on. So what I will say is that the opportunities are there. It's hard work, but we're used to this type of environment. We're optimistic. Over time, we really expect to get our fair share of those deals.

We're in this business really for the long haul, and we think of success along those lines rather than quarter-by-quarter. We remain patient; we look for deals that meet our requirements. And I would note that over the last five years we've demonstrated the success of that approach, Jimmy.

In that period, if you will recall, we deployed on a cumulative basis an excess of $2 billion in capital. So some years are going to be chunkier than others. And that's something that we accept, and we understand. And I would say we remain optimistic..

Okay, thank you..

You will go next to Erik Bass with Autonomous Research..

Hi, thank you. You mentioned that Australia returned to profitability this quarter.

I was just hoping you could comment more specifically on the results in the individual disability block?.

Sure. So the poor performance on our individual disability business in Australia had emerged in the second half of last year. That did not continue into this quarter.

If you will recall, there were three factors that worked against us in the third and the fourth quarters of last year, and those factors were higher incidents, lower terminations, and higher average sizes. All three of those factors have returned to more expected levels. And performance tracked our expectations.

So it's really hard to say much more based on just this one quarter. It's still too early to conclude much, but I would say it's good to see the recovery from last year..

Thank you. And then, Anna, you mentioned in terms of the competition for deals some entrants.

I was just hoping maybe you could expand on that a little bit more in terms of what type of new entrants and competitors you're seeing, and what types of deals they're looking at or you're coming up against them in?.

Well, I would say it's new reinsurers coming into some of our markets. And it's also some of our clients; some of our insurance companies -- life insurance companies in specific markets for specific risks are also pursuing some of those block transactions..

Got it, so primary companies that hadn't historically necessarily looked at block deals?.

Correct..

Okay, thank you..

And we'll now go to Humphrey Lee with Dowling & Partners..

Good morning and thank you for taking my questions. Just to follow up on the M&A pipeline and your appetite. Given your excess capital right now, being at [ph] $1.2 billion, and I think in the past you've talked about how your sweet spots for a deal would be probably a couple of hundred million.

Given the much higher capital position right now, would you be open to doing something in bigger sizes?.

Humphrey, I would say that there are sufficient opportunities in terms of small, middle, and larger sizes that I wouldn't expect that that would be where we would concentrate our efforts. We have an active pipeline that we're comfortable with and that we're optimistic about. So, in the short-term, I would say not likely..

Okay. So, still kind of stick to your sweet spot in terms of deal size..

Yes..

Okay..

Now, that doesn't mean that we won't and wouldn't entertain partnering with a potential buyer to help on the larger deals by either taking some blocks that they aren't particularly attracted to or to provide support in terms of proportional participation across the board. That's been part of our acquisition strategy for the last three-five years..

Okay. And then in terms of the unfavorable mortality in U.S.

and Canada, how much those 20 additional loss claims affected your numbers this quarter in the U.S? And then also the number of loss claims in Canada for your earnings there?.

Yes, in the U.S. those additional claims I think I mentioned probably generated $30 million adverse effect to our earnings pretax..

In Canada?.

In Canada, it's probably around 10 million to 12 million our expected results will be..

Okay, thank you..

And we will go next to Ryan Krueger with KBW..

Hi, thanks. Good morning.

I was hoping if you could give an update on the progress you're making on Solvency II type solutions in terms of getting more broad acceptance from regulators there?.

The demand remained strong for those financial reinsurance solutions in Europe and U.K. And it is continuing to settle down. So clients are getting clearly on their own models and with what regulators will accept. And we see high demand in interest.

That's lead to these Solvency II motivated deals that are targeting lapse solutions, longevity solutions and others. Now, our deals continue to be on the smaller side. We haven't yet seen scaling of these deals, but we have no reason to believe that they won't scale. What we are seeing is that clients are regulators are remaining cautious for now.

What's interesting is we're also noting that the Solvency II opportunities are also shifting to full risk solutions and targeting both in-force business and new business and not just in Europe but other parts of the world where these European companies are active.

So we will be providing more color on that on those efforts in three weeks in our Investor Day in New York..

Understood. Thank you. And then, just to follow-up on Asia. I know you mentioned there was some lumpiness in the premium growth.

Could you just provide a little bit more color on I guess maybe what you view as the underlying growth you are seeing right now there?.

Yes, this is Todd. Yes, no the business fundamentals in Asia are developing quite nicely so in combination seeing some of the newer treaties come online. Some of the existing treaties where the reporting can be a little lumpy, we did see some catch up this quarter. So, I think we are optimistic that the growth rates are increasing a little bit in Asia.

But I wouldn't expect the current quarter-over-quarter increase to continue. So, it's probably trending more towards the higher double digits. Maybe close around -- up close to 20%..

Okay, thanks a lot..

And now we will go to Kenneth Lee with RBC Capital Markets..

Hi, thanks for taking my question. Just a quick follow-up on the mortality claims in U.S. and Canada.

Anyway you can give us a sense of the breakdown of claims within either the facultative side or non-facultative side of the business?.

The facultative part of our business performed essentially in line with expectations. Maybe little bit better I would say so. The extra large claims were from our automatic part of our business..

Okay, great. Very helpful. And just in terms of the very strong premium growth, you mentioned contributions from EMEA and Asia.

Anyway you can quantify those contributions and any other drivers for the recent strength including like recently acquired blocks?.

Yes, in EMEA it was really -- it was really -- it was nice to see, but it was spread across a lot of other different geographies over in Europe. So, it wasn't any one particular spot, but it was sort of a nice contribution from across the -- across Europe. And Asia, really probably made the comments a few minutes ago around the Asian growth.

I am not sure we can really add much more at this point..

Okay, great. And just one last one in terms of housekeeping, it looks like the 1 trillion [ph] run off is performed much better than expected. The last you gave an expectation for generally $10 million to $40 million on losses for the year. I am wondering if that expectation has changed..

Yes. So, yes that treaty is in run off. It did perform better than what we are anticipating this quarter. And while our expectation for the full year might be a little bit more positive, I still think based on the information we have right now that that I think I said 10 to $14 million loss for the year back in January.

It's still probably within that range, but maybe coming back towards the lower end of the range..

Okay, thanks..

And we will now go to Dan Bergman with Citi..

Thanks. Good morning. The Corporate segment [indiscernible] and running over the past couple of quarters. Is there any color you can provide on any unusual items impacted that segment this quarter? Or any thoughts around the quarterly run rate or seasonality in corporate expenses will be much appreciated..

Yes. In this quarter, the part of that I think the miss was we are off a little bit on what we were expecting on the variable investment income side so that decreased the result a little bit for this quarter.

And then we do have some seasonal expenses in the first quarter and we are truing up some accruals in that kind of thing, but so that's so maybe gives a little bit more color on the first quarter. As far as the run rate, I don't think our view has changed much between that 20 to 25 million. We still feel somewhere within that range is appropriate..

Got it. Thank you. Maybe just switching gears a little; I think you mentioned earlier that Australia individual disability saw an improvement from in the trends in the second half of last year, but it's too early to conclude much on that block.

I was wondering if there is any sense you can give on how far long you are in the process of reviewing that block and what timeframe you might expect when there might be a more definitive conclusion in terms of what's driven the recent trends and whether there has been anything more systemic underlying the results?.

Yes. If you remember, the performance in the last part of 2016 was really concentrated on couple of treaties. And, that business is generally reviewable. And we have been actively managing that portfolio. And we have price increases coming through -- expected to come through in 2017.

So we continue to make corrective -- or take corrective price actions in terms of these rate increases as appropriate. And we want to make good long-term decision. We review results on a quarter-by-quarter basis. But, we have to acknowledge and reflect the inherent volatility in that business.

So this quarter's results will get added to prior quarters and appropriate rate actions will be taken..

Great. It's very helpful. Thank you..

And we will go next to Sam Hoffman with Lincoln Square Capital..

Good morning. Thanks for taking my question. I just wanted to ask if you could review the basic economics of a buyback versus an acquisition.

And in my understanding of this is if you buy back stock at 1.3 times book value for 11% return on equity and that's versus buying something for cash through an acquisition, what type of IRA or return on equity are you targeting on that type of block?.

Usually overall when we're looking at the deploying capital back into the business on transactions, we are generally targeting 13% return or higher in our history. And we don't really alter that return hurdle all that much over time because again our business review is very long term.

So, we want to make sure we are pricing our transactions at a return that we think makes sense over the longer term and not just consideration of the current environment..

So do you feel given your comments earlier today that the 13% return or higher is available given as you said increased competition from some of your clients and also some of the new players like [indiscernible] and so forth that has a tax advantage?.

Yes. So, we've been in the business for some time and I think we've shown a disciplined approach to our -- looking at various transactions over time and we are very knowledgeable which types of businesses we should be. And I think we have proven over time that we've been able to deploy capital into the transactions that we like over time..

And I guess two more quick ones.

What is your competitive advantage on what you say are transactions that fit RGA better and let's say one of the annuity reinsurers?.

We have many competitive advantages. I would start with the technical expertise and the knowledge that we have on the underlying risk. And it's not just the market risk which is one of the primary risks on, say, asset-intensive business, but it's also the insurance-based risks, mortality, longevity, critical illness et cetera.

We have a very strong financial position. So, a seller appreciates that RGA is going to be in the business for the long haul. We have a reputation where when we say that we are going to execute on transactions, we execute on transactions. We have a good reputation.

We have strong relationships with regulators where we can create solutions that are customized to the needs of the clients, the needs of the market. I think we have a number of competitive advantages. And as we've been saying throughout this call, we remain optimistic. We've shown over the course of the last five years that can execute on deals.

And we focus on those where obviously our competitive advantage becomes a larger part of the decision criteria..

Great.

And my last question is how do you define large, medium, and small in terms of size?.

Generally, we think of it with respect to how much capital is deployed in the deals. So when we think of our large deals, we sometimes call those 100, 200, 300 million. I would state that range. Then our midsized deals are double digit million deals. It can range anywhere from $15 million –$20 million up.

And then our smaller deals, and we do a number of small and midsized deal; it could be a few million dollars..

Perfect. Thanks again for taking my questions..

And we will now go to Sean Dargan with Wells Fargo..

Hi, thanks. Good morning. I recently became acquainted with RGAx, which is your innovation incubator. I am just wondering you haven't really spoken much about that unit.

Are they doing anything that contributes to your bottom line?.

So we're going to be -- we hope that you can join us three weeks from in New York at our Investor Day. We'll be providing more color on RGAx as well as some of our other innovative solutions across the globe whether they are product development solutions, accelerated underwriting solutions.

So, I would suggest that that is probably where you'll get a lot more color than I could potentially provide in this short conference call..

Okay, great, thanks. I'll look forward to that. And then just in terms of where you're interested in deploying capital. There's at least one primary carrier that is leading investors to believe that there are highly rated onshore counterparties who may be willing to taken on some legacy long-term care risk.

Is that something that's on your radar screen for capital deployment in doing block deals?.

So, we've looked at a number of in-force legacy LTC blocks over the years. And I think we've been reporting that we just haven't been able to find a legacy block and a transaction that works for us. So we concluded after a few years that the likelihood of finding a deal where we could be successful was pretty low.

So we essentially stopped pursuing those type of deals.

However, we may from time to time look at blocks that either don't have all the risk characteristics of those typical legacy blocks that we've explored time and time again, or perhaps where a solution may involve the transfer of some of the elements, and not all of the elements of the underlying risk.

But what I will say is that we've taken a conservative approach at looking at legacy blocks, and we're going to continue to take that conservative approach to any opportunities that arise. And that's not going to change going forward..

Got it. Thank you..

We will now go to John Nadel with Credit Suisse..

Hi, good morning. So, I'm curious, your top line growth, and I recognize, Todd, you mentioned there's maybe a little bit of catch-up in a couple of regions driving some of that. But your top line growth has been very strong.

I'm curious, if you kept up a pace of high single-digit kind of top line growth what kind of free cash flow are you generation at around those levels? Is it still order of magnitude $300 million to $400 million? Or should we be thinking that you're generating something lower than that?.

On the free cash flow I don't have the exact number. But as that growth continues, just the way some of the underlying financial reporting works, some of the margin that we'll see come to the bottom line sort of expand over time on some of that business. But on the underlying cash flow I don't have an exact number.

But the $300 million to $400 million of generation of the, sort of, free capital, if you will, that we expect over the year-over-year over an extended period of time, may increase over time if we can continue to keep that level of growth..

So, I recognize, right, that over time a faster level of top line ought to drive bottom line growth. I just -- I thought that that growth would come with maybe a little bit more capital requirement, at least early on, and so your free cash flow generation is you're growing faster would actually slow.

Am I thinking about that the wrong way?.

Well, it depends on the mix of business. Some of the businesses are more capital intensive than others. So it's difficult to really pinpoint exactly what that number is. But, yes, to the extent there's higher growth there could be some more capital deployment depending on what the block characteristics look like..

Okay. And then two other questions, if I could, Anna, I recognize the idea of holding on to capital for the potential. And we've seen this now for quite some time. I'm curious though, and I recognize you've raised the dividend a few times over the last few years.

But I'm curious why not at least at the margin take the dividend up, and maybe do a more significant level, such that at a minimum the dividend yield on the stock could be similar to the peer group..

We evaluate all of those options on a regular basis. And so annually we review our dividend levels, and we review them in light of opportunities, we review them in light of the financial conditions. We don't want to get ahead of ourselves because we still are a growth company. And I think that there are opportunities out there.

In 2016, although it was a light year for transactions, I would note that we did deploy $130 million. Now, that's on the low side of the average over the five-year period before that. But that's something that is not insignificant.

I think when we look at dividends, when we look at share buybacks we need to think about it with a longer-term lens, longer-term horizon than maybe one more quarter or two more quarters..

Yes, and this is Todd. We have historically over the past few years looked at our dividend rate after the second quarter. So that's what -- so it's probably premature to comment beyond that at this point..

Okay. I'm just sort of talking philosophy though. I think the incremental capital deployed to, let's say, take your dividend yield from 1.25% to 2.5% wouldn't be that significant. You'd barely really make a dent in your $1.2 of excess capital.

I don't think it would really change your -- I don't think it would change your demand side, the types of deals that you could potentially be looking at to accomplish, that's all.

My last question is this, and I know this is premature probably, but there is that Trump is on the table right now with a proposal that, among other things on the tax front, would eliminate the estate tax. And whether that get's passed or not, who knows. But if we thought about the in-force business, particularly in the U.S.

obviously, what proportion of the in-force life reinsurance do you think is sort of specifically related to estate tax planning?.

So, as a reinsurer, we have better insights into the purpose of the life insurance sale on our facultative business, less so on our automatic business. So let me start with the facultative business. There, we do see estate and have seen estate planning cases, but they made up a very small percentage of the submitted cases.

Most of our facultative business is purposed for income replacement, with lesser reasons including things like the buy-sell agreements for small business, key man and key woman insurance, and then estate planning. Now, on the automatic side, we don't have that same specific data, right. But we've looked at proxies for estate planning cases.

Now, those proxies aren't going to be exact. So, for example, products used for estate planning are typically permanent products rather than term products. And the majority of our business is reinsurance of term products as opposed to reinsurance of permanent products. Also, sales for estate planning or going to be typically high face amount.

So if we look at face amounts in the $3 million to $5 million-plus on permanent products at the slightly older ages, we're not talking about millennials. That really represents a small part of our business.

So putting all that together with the caveats about it's not perfect, the proxies we've used, but putting all that together we believe that the elimination of the estate tax isn't going to have a material impact on our U.S. business..

That's very helpful. Thank you so much..

[Operator Instructions] We'll now go to Yaron Kinar with Deutsche Bank..

Good morning. First, I just had a clarification question around the mortality claims being about $30 million above expectation in the U.S., about $10 million above expectation in Canada.

Are those seasonally adjusted expectations?.

This is Todd. Yes, they are. They're our best estimate based on how we've put our expectations together over the year..

Okay. And then going back a second to the excess capital position and the appetite for deals. So, I recognize that last year was a little bit on the lighter side, but even if I go to more robust years in terms of deal activity or transactions, I guess.

Your current excess capital position basically would fund two years' worth of that, and maybe even a little more than that.

So is that a product of just seeing more opportunities or a bigger pipeline emerging, or has your appetite changed?.

No, I don't think that's the case. And although the average, as you say, would fund a couple of years of the average, we've had years where we've deployed $400 million or $500 million of capital. We like to have a capital cushion for flexibility of $300 million to $500 million.

So the level of capital that we have right now would support another year like the year we had when we had some multiple significant transactions..

Okay. And are you still -- I understand that the deal size or the transaction size hasn't really changed in terms of the sweet spot that you're looking.

Probably there are lines of business or types of liabilities that you are more interested in today?.

That hasn't changed from our answers in prior quarters. It's really mortality. We would do larger-end deals on mortality. We're comfortable with other insurance type risks, longevity, lapse, critical illness. And we have appetite for some market risks..

Got it. Thank you very much..

It appears we have no further questions at this time. I would now turn the call back to Mr. Larson for any additional or closing remarks..

Thank you. Well, everyone, thank you for joining us for our first quarter 2017 earnings call. We appreciate your continued support and interest in RGA. And please let us know if you have any questions or follow-up. Thank you..

And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation..