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Reinsurer Hungry for Big Life and Annuity Blocks

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Reinsurance Group of America Inc. is eager to start using its new Langhorne Re affiliate to make reinsurance deals involving big blocks of in-force life insurance and annuity business.

Anna Manning, the Chesterfield, Missouri-based reinsurer’s president, talked about the company’s hunger for big blocks Tuesday, during a conference call with securities analysts.

RGA set up the Langhorne affiliate, with help from another company, RenaissanceRe Holdings Ltd., earlier this month. RGA will be able to fuel Langhorne with its own and cash from outside entities.

(Related: Life Reinsurer Is Going Out for Business)

In the past, Manning said, RGA has often had to team up with other reinsurers when it was bidding for big reinsurance deals. High-quality insurers seeking reinsurance deals often “prefer cleaner options” involving just one other company, Manning said.

Langhorne will allow “us to pursue these larger deals independently, without having to partner with another buyer,” Manning said.

The new Tax Cuts and Jobs Act (TCJA) should also help, by putting RGA on a more even footing, in terms of taxation, with non-U.S. players, Manning said.

In the past, some reinsurers that tried to expand rapidly ran into trouble when they assumed responsibility for what turned out to be unexpectedly risk blocks of business.

Manning said during the call that RGA will be seeking the big deals with long-term reinsurance clients. “They will not be new risks to us,” she said. “We’re going to look for those deals that fit our risk appetite.”

RGA held the call to discuss its earnings release for the fourth quarter of 2017, and for all of 2017.

The company is reporting $1.2 billion in net income for the latest quarter on $3.2 billion in revenue, compared with $190 million in net income on $3.1 billion in revenue for the fourth quarter of 2016.

Net income was up partly because of a $1 billion gain related to the TCJA.

Adjusted operating income, which excludes that gain and other unusual gains and charges, increased to $713 million, from $633 million.

At the “asset intensive” unit for the United States and Latin America, which handles reinsurance for annuities, the total account value for the fixed annuities reinsured increased to $6.6 billion, from $5.1 billion.

The reinsured account value fell to $4.1 billion, from $4.3 billion, for indexed annuities, and increased to $2.9 billion, from $2.5 billion, for variable annuities.

The fair value of liabilities associated with living benefit riders fell to $152 million, from $185 million.

—Read ‘Impaired Lives’ May Be Hot: RGA on ThinkAdvisor.

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