Reinsurance Group of America, Incorporated (RGA) Q1 2015 Earnings Report, Transcript and Summary

Please stand by. We are about to begin. Good day and welcome to the Reinsurance Group of America First Quarter 2015 Results Conference Call. Today's call is being recorded. At this time, I would like to introduce the President and Chief Executive Officer, Mr. Greig Woodring; and Senior Executive Vice President and Chief Financial Officer, Mr. Jack Lay. Please go ahead, Mr. Lay. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Thank you. Good morning to everyone. Welcome to RGA's first quarter 2015 conference call. Joining me in St. Louis this morning is Greig Woodring, our Chief Executive Officer. Greig and I will discuss the first 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 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 pre-tax and after-tax 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. Please refer to the tables in the press release and quarterly financial supplement for more information on this measure and reconciliations of operating income to net income for our various business segments. These documents and additional information may be found on our Investor Relations website at rgare.com. With that, I'll turn the call over to Greig. A. Greig Woodring - President, Chief Executive Officer & Director: Thank you, Jack, and good morning, everyone. Thanks for joining us this morning. I will provide some general overview comments on the quarter. Jack will go over the financial results. And then, we will open it up for Q&A. Operating EPS was a $1.77 per diluted share compared to a $1.61, so an improvement versus a year ago, but modestly below our expectations, as our U.S. mortality business was unusually weak and our Asia Pacific business was unusually strong. We experienced adverse mortality results in our North American operations again this year, noting that we had unfavorable results a year ago. It is not uncommon for us to have some volatility in claims in the short term and Q1 tends to have some seasonal effect from winter weather in the Northern Hemisphere, but the experience this year was admittedly more extreme. I'll expand on the claims shortly, but, otherwise, there were many positives to report as our global operating model and diversified sources of earnings again served us well and our international and global financial solutions or GFS segment continued a pattern of strong results and overcame the currency headwind that we anticipated. As indicated, our Asia Pacific business was unusually strong as the results were favorable across the region and including an unusually strong result from the Australian operation. Premium growth, adjusted for foreign currency and the U.S. mortality retrocession transaction we executed in the fourth quarter of 2014, was 6% as several areas showed solid progress. Moving back to mortality results, I'd like to provide some additional details and color. Underwriting experience was about $60 million worse than expected in the U.S., whereas last year the higher claims were concentrated in large claims, particularly in our facultative book; this year it was a much broader issue with an increase in book frequency or claim count and severity or average claim size, with the automatic impact business underperforming. The one common denominator this year was age and almost all of the higher claims came from older age individuals, pretty much irrespective of the year on which the policies were issued. Our experience is similar to industry data that we have seen in terms of a material increase in mortality overall and the higher percentage coming from those over age 65. Further, the flu season was particularly difficult in many areas this year and there is ample historical evidence of a direct and indirect influence of the flu and overall mortality rates from a wide variety of illnesses including the obvious respiratory illnesses such as pneumonia to the less obvious such as cardiovascular with the elderly typically affected disproportionally from this influence. In Canada, our underwriting results were $11 million worse than expectations and another in a string of tough quarters as there was a combined effect of higher than expected claim, large claims and some increase in the frequency of smaller claims. We continue to analyze the claims data, especially relative to the more recent trends but the results aren't conclusive and we suspect the biggest influence from flu related seasonality. At this point we would expect the mortality fluctuations to smooth up going forward. On a capital management front, we were aggressive in the quarter in terms of share repurchases, noting that our excess capital position coming into the year was very strong. We hope to continue to take a balanced approach to capital usage as we are funding solid organic growth that we continue to look at in-force blocks. We will return capital to shareholders through repurchases and dividends as appropriate. Pipeline of potential in-force blocks in the market remains ample. The size and timing of any such deals reaching execution is always a bit uncertain. As we look forward, we remain optimistic given a constructive overall environment and RGA's ability to take advantage of opportunities given our client solution mentality and strong balance sheet. Our new business activity is strong, notably in EMEA, Asia and through our GFS unit and we would expect our North American underwriting results to normalize. While we have started the year slightly behind our expectations, our intermediate term financial expectations have not changed and we note that 2014 started out in a similar manner and we ultimately delivered strong results. With that, I will turn it back over to Jack to discuss the financial and segment results. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Thanks, Greig. We reported operating income of $122 million this quarter or $1.77 per diluted share, a 10% increase over $1.61 per share a year ago. Reported net premiums were off 4% quarter-over-quarter including the effects of the fourth quarter retrocession agreement and foreign currency headwinds. Premiums were up 6% when adjusting for those items. Adverse currency movements reduced current period operating income by about $0.11 per diluted share compared to the prior year. Turning to our investment results, our average investment portfolio yield, excluding the spread business, was 4.78% this period, down 16 basis points versus the fourth quarter when the yield was boosted by variable items such as bond and mortgage loan prepayment. The portfolio yield was slightly above the first quarter of 2014. And our new money yield remained at roughly 4%. There was no substantial impact from mortgage loan prepayments and bond prepayments in this quarter. Our capital management strategy continues to play out well for our shareholders. We paid out over $250 million of excess capital this quarter in the form of stock buybacks and shareholder dividends, and deployed another $200 million to support the acquisition of Aurora National, which closed on April 1. Following the Aurora transaction, we estimate our current excess capital position to be around $800 million, and we'll continue to consider optimal deployment strategies. We would not expect to continue to buy back our equity shares throughout the remainder of the year at a pace similar to that of the first quarter. Now, turning to our segment results. U.S. and Latin America Traditional sub-segment reported pre-tax operating income of $20 million, well below the $48 million reported in last year's first quarter, reflecting the poor mortality that Greig mentioned. Premiums were down 2% due primarily to the effect of the retrocession transaction in the fourth quarter of 2014. Absent that, premiums would have been up 7% reflecting stable ongoing new business and the positive impact of the Voya transaction. Our Asset-Intensive business in the U.S. reported pre-tax operating income of $40 million in line with last year's $41 million. Both periods benefited from favorable net investment spreads that have been sustained despite lower rates noting the investment prepayments this quarter were modest. We believe that $40 million is a good run rate for quarterly pre-tax operating income going forward. Our financial reinsurance line reported pre-tax operating income of $12 million also in line with last year's first quarter. Given the growth in our global GFS business, we are providing Traditional and Non-Traditional breakdowns in terms of our results for our international segments, going forward. Our Canadian segment reported pre-tax operating income of $21 million, about $800,000 below the prior year quarter, primarily due to higher individual mortality claims and a relatively weaker Canadian dollar, which adversely affected the current quarter results by about $2.4 million. Segment-wide premiums increased 8% quarter-over-quarter in local currency and decreased 4% in translated U.S. dollars. The Traditional business posted pre-tax operating income of $17 million this quarter compared to $22 million in last year's first quarter, reflecting a higher frequency of mortality claims, particularly on policies under $1 million. Non-Traditional business in Canada, which includes longevity and fee-based transactions, reported an increase in pre-tax operating income to $4 million this quarter from less than $1 million a year ago, including the effects of the longevity transaction we announced in early March, which was retroactive to the beginning of this year. In our Europe, Middle East and Africa segment, pre-tax operating income increased significantly to $29 million from $14 million a year ago, due in part to the addition of transactions booked in 2014, improved mortality in the UK and favorable longevity experienced this period. Total EMEA reported premiums were 12% lower this quarter and total $300 million, including foreign currency drag of about $32 million. Traditional EMEA business reported pre-tax operating income of $10 million this quarter versus a loss of $2 million in last year's first quarter, attributable to a swing from unfavorable mortality experienced in the UK in 2014 to inline experience across the region in the current quarter. Non-Traditional EMEA business, which includes asset-intensive, longevity and fee-based transactions, performed well this quarter posting a 16% increase in pre-tax operating income to $19 million versus $16 million a year ago, reflecting favorable longevity claims experience and new transactions added in 2014 and in this quarter. Momentum is strong in the sub-segment. For risk management purposes, we executed a longevity retrocession transaction during the quarter that reduced premiums by about $22 million. Turning to Asia Pacific, results were very strong this quarter with good operating performance in Hong Kong and Southeast Asia, Japan, as well as good results in Australia. Pre-tax operating income totaled $63 million where we'll have our prior-year total of approximately $25 million. Segment-wide premiums were flat quarter-over-quarter at $382 million, but rose 10% when adjusting for the adverse currency effect of $37 million. Traditional business in Asia Pacific reported pre-tax operating income of $53 million this quarter versus $19 million a year ago. A significant portion of that increase, roughly $20 million, was due to unusually strong individual and group lump sum results in Australia this period, noting that the first quarter is typically strong there. And while we are pleased with the results this quarter, we would expect some degree of volatility from quarter-to-quarter in that operation. Beyond Australia, we had another quarter where we saw good results across the region, particularly in Hong Kong and Japan. Our Non-Traditional Asia Pacific business includes asset-intensive business, fee-based transactions and various other transactions and also performed well this quarter, increasing pre-tax operating income from $6 million to $10 million this quarter. Our Corporate segment reported a pre-tax operating loss of $6 million this quarter which was better than the expected range of roughly $8 million to $10 million of loss each quarter, primarily due to lower general expense level. We thank you and appreciate your support and interest in RGA. And with that we'll open the call for questions.

Thank you. And we'll take our first question from Jimmy Bhullar with JPMorgan.

Hi, good morning. I had a couple of questions. First, can you comment on claims trends in the U.S. business through the quarter? So is there a possibility that the flu related claims, some of them flow into the second quarter as well? And then secondly on buybacks. You obviously – you bought back almost 4% of your shares outstanding in the first quarter. So just trying to get an idea on are you expecting to do more buybacks throughout the year? I realize you can't sustain this pace, but absent any deals would you remain active on buybacks? And then lastly just a question on the expected tax rate. I think it was 32.5% in the first quarter. To what extent was this influenced by like just higher proportion of earnings from foreign markets or has anything changed in terms of your expectations for the tax rate? A. Greig Woodring - President, Chief Executive Officer & Director: Yeah, Jimmy, I'll answer the first one and let Jack do the next two. The claims through the quarter were pretty strong flow all through the quarter right up to the end from the beginning to the end. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah, I think he was questioning the second quarter, it's really too early...

So like it's not something that you saw a lot in the first quarter and then, all of a sudden, died down – or early in the quarter and died down. So there's a chance that you see some flow over into the second quarter. A. Greig Woodring - President, Chief Executive Officer & Director: Yeah, it didn't die down in March, no.

Okay. A. Greig Woodring - President, Chief Executive Officer & Director: You're right.

Okay. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Jimmy, I'll take the other two questions. In terms of buybacks, yeah, we were very aggressive in the first quarter. I'm sure you're aware we've got an authorization to buy back $300 million of shares this year. And we wouldn't expect to be as aggressive going forward as the $230 million in shares we repurchased during the first quarter. Now, a lot depends, going forward, on what the other options are in terms of deployment of excess capital. And we've got an interesting pipeline. It's hard to tell what will be executed and when or even if we'll execute on some of the items in the pipeline. So we have to kind of weigh that. We were aggressive in the first quarter in part because we started the year with over a $1 billion of excess capital, and a lot of that accrued in the fourth quarter last year when we did the embedded value transaction and the retrocession transaction. So, I guess, suffice it to say, that we will be less aggressive or at least plan to be less aggressive going forward even though it's kind of hard to peg exactly what the target would be for total buybacks during the year at this point. A lot will depend on other opportunities for deployment. In terms of the tax rate, your comment is accurate. But really, the lower rate this quarter relates to a higher percentage of earnings in some of our international businesses. So that's really what drove the lower rate. So it really depends on the pattern of earnings going forward. We'd expect something, all things being equal, 33% to 34% range in terms of an effective tax rate for the year. But as I said, it remains to be seen in terms of where the results, M&A and whether the foreign operations throw off a little bit more than expected in terms of income.

Okay. And just to be clear on the buybacks. Obviously, you won't maintain the pace, but if you don't do any more deal, then it's reasonable to assume that you would do more buybacks throughout this year? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah, that's fair. I mean, if – to the extent, it looks like, we will not be executing on deals. We would likely be more aggressive on the buyback front.

Okay. Thank you.

The next question is from Erik Bass with Citigroup.

Hi. Thank you. Yes, firstly, just a follow-up on that last comment. Should we read anything into kind of how aggressive you were on buybacks this quarter and to your expectation for finding block deals near term? And maybe on your excess capital, I think you'd cited sort of $800 million of excess capital. I think you've also indicated you typically like to hold sort of $300 million to $500 million of excess capital. But to the extent, there were block opportunities available, I guess, how much of that $800 million would you be comfortable using? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Well, Erik, we'd be comfortable using the lion's share of that $800 million. In other words, we have a fairly predictable capital generation stream. So, to the extent, we had opportunities and we're looking at businesses that met our return requirements we'd be comfortable deploying a considerable amount of that $800 million. But over time, you had it right. Our target is $300 million to $500 million in terms of excess capital. Back to your earlier question, I don't think you can read anything into the aggressive nature of the buybacks in the first quarter vis-à-vis our other opportunities because of what I mentioned earlier, we started the year with a very significant amount of excess capital.

Got it. And then maybe on Canada. I think in your comments, you indicated that you think most of the elevated claims this quarter were more related to seasonal factors. But obviously, you've seen some adverse experience over the past couple of quarters. So, I guess, how are you thinking about kind of the benefits ratio or earnings run rate for this business for the remainder of the year? And any kind of update on your thinking about what has been the driver of sort of elevated large claims over the past year or so? A. Greig Woodring - President, Chief Executive Officer & Director: Yeah. Erik, we – in North America, both the U.S. and Canada we don't really have cause of death information at this point. We'll get that over the course of probably the next six months or so. So all we can say is that the advanced stages of deaths and other things are sort of consistent, the frequency elevation is consistent with a lot of flu claims. But we really don't know at this point. In terms of Canada, I think the first quarter was very consistent with first quarter last year in total. And we would expect that claims in Canada are going to run similar to the claims flow last year. The elevated claims is not from – large claims is not really a lot of numbers. So it's always hard to get a read on that, and it can bounce around a bit. But we are – after several quarters that have been fairly consistent, we're beginning to think that the Canadian flow before that was probably just a good fluctuation. And that last year's level is pretty close to where it should be.

Got it. Thank you. That's helpful.

Next will be Sean Dargan with Macquarie. Sean Dargan - Macquarie Capital (USA), Inc.: Thank you. I wanted to drill down a little bit more on Asia Pacific. You said that the results were unusually good and also that the first quarter is typically seasonably strong in Australia in the Traditional business. I was wondering if you could quantify the contribution to the total $52.6 million from Australia. And then also just to clarify, is the total and permanent disability considered a Traditional product? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: This is Jack. I'll take the first part of that question. The Australia results were roughly $20 million or so pre-tax beyond what we would have expected for the first quarter. And while we don't want to get into what's the actual plan for Australia for the entire year, it is – we do have a positive plan. In other words, we do expect positive results there, but only modestly positive. A. Greig Woodring - President, Chief Executive Officer & Director: TPD business is not the source of the upside. It's not a source of downside either, but it's not a source of upside for the quarter. Sean Dargan - Macquarie Capital (USA), Inc.: Okay. You've given us some guidance range of how to think of a quarterly run rate in other businesses. Is there a number you can give us for Asia Pac Traditional? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Oh, in terms of a run rate... Sean Dargan - Macquarie Capital (USA), Inc.: Yes. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: ...for the year? Sean Dargan - Macquarie Capital (USA), Inc.: Yeah. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Probably – I think a good estimate is maybe $60 million-ish for the year pre-tax. Sean Dargan - Macquarie Capital (USA), Inc.: That include – that's total Asia Pac? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Right. Sean Dargan - Macquarie Capital (USA), Inc.: Okay. And then just a question about how to think of the CDC data, a lot of investors saw the monthly trends and the elevated deaths relative to the first quarter of last year. Can you just remind us what the correlation of your results to CDC data is and is there a certain standard deviation at which it becomes meaningful? A. Greig Woodring - President, Chief Executive Officer & Director: It's always hard to pick, Sean. Sometimes it's correlated. Sometimes it's not correlated. So I guess that means it's generally unpredictable but when you have something that's a pervasive effect, then it becomes a little bit more predictable but it's really hard to take a subset of population especially something as different as insurance populations are compare it to the CDC data and draw hard and fast conclusions from it. Sean Dargan - Macquarie Capital (USA), Inc.: Okay. Thank you.

The next question is from Humphrey Lee with Dowling & Partners. Humphrey A. Lee - Dowling & Partners: Good morning. I just want to follow up on the overall U.S. mortality. Is there like a – what is the distribution between the RGA's legacy business versus the kind of the Voya acquired block and the Aurora block in terms of performance? A. Greig Woodring - President, Chief Executive Officer & Director: Actually the excess mortality was split evenly over all of our segments, say, the 9904 block, the blocks before that and the blocks after that and they all were just about the same. Humphrey A. Lee - Dowling & Partners: Okay. Got it. And then in terms of the Canada performance, you mentioned that there is still not really a particular trend that you can point to, but is there any sense of, kind of, I guess general kind of across vintages? And then also kind of across counterparties (25:40) or the type of products? A. Greig Woodring - President, Chief Executive Officer & Director: No, we've looked very carefully at individual clients, individual eras. It really is a large case phenomenon, that large death claims basically rose to a new level last year from a very modest level. And there's not a lot of claims there. So it isn't anything you can draw statistically relevant conclusions about in any of the subsegments or individual cells at this point. And we've looked and continue to look in our Canadian business at things like that. But at this point, are pretty much reaching the conclusion that it's just sort of spread across the business. Humphrey A. Lee - Dowling & Partners: Okay. Thank you. And then lastly on – thank you for kind of breaking down the Traditional and Non-Traditional business in the international segments. Looking at the results in Canada and Asia Pacific, there seems to be some one-off transactions that helped the bottom line. Other than in Canada for the longevities transaction, any kind of statistically kind of like the one-off transactions that helped the numbers in the quarter? And how should we think about your run rate earnings based on the book of business that you have right now? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah, Humphrey, let me take the first part of that. This is Jack. No, there weren't any particular transactions, significant transactions that kind of skewed the results to any meaningful degree in most of the segments, a little bit more so in Canada just because we don't have much in the Non-Traditional segment. But if you look at some of the others, EMEA, we announced some transactions last year that had some impact. But in terms of relatively new transactions this quarter, there were really none that disproportionately had an impact on the Non-Traditional business. Humphrey A. Lee - Dowling & Partners: So, basically, the earnings power of this quarter would be a decent run rate? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. It is. Now, there's more volatility in that sub-segment, just because it's not as large. But, no, I think that's safe to say. Humphrey A. Lee - Dowling & Partners: Okay. Thank you.

Our next question is from Ryan Krueger with KBW. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Hey, thanks. Good morning. Jack, I wanted to follow up on your response to Sean's question, because perhaps I misheard you. But did you say $60 million for full year Asia Pacific Traditional earnings? Because I think you did $53 million in the quarter. So I just wanted to follow up on that. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. That's right. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: So that would suggest very minimal earnings for the next three quarters of the year in that business. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: No, I'm not trying to project – I'm not necessarily trying to project for the year. $60 million to $70 million is a reasonable projection. Perhaps $60 million to $80 million for the total Traditional portion of that segment. But we did have significant upside as we mentioned in the first quarter. So we're certainly not guiding to try to indicate that that's a run rate in terms of what... Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: The $60 million to $80 million would have been what you expected coming into the year but then this was much better than expected. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Correct. Correct. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Okay. Got it. Got it. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: And we stated that in the release. It was unusually strong in terms of Asia Pacific in the first quarter. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Understood. And then, can you remind us how much earnings you expect the Aurora deal to generate and if it will be immediate or if there will be some sort of ramp-up period. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Aurora likely would be in the $30 million range annually, and there'll be a little bit of a ramp-up. I think we've mentioned that there was no impact in the first quarter, but it is effective as of the beginning of the second quarter. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Okay. And then that'll be split partially in asset-intensive and partially in life. Is that correct? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: That's right. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Okay. All right. Thank you.

Next, we'll go to Steven Schwartz with Raymond James. Steven D. Schwartz - Raymond James & Associates, Inc.: Yeah. Hi. Ryan just asked a bunch, but I do have one question. Back in Australia, historically, the guidance had been following the big reserve increases that breakeven, that basically, deficiency reserve was taken. Is that gone now, Jack? And we're actually seeing earnings coming out of there and should continue to see earnings coming out of there? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Steven, just want to make sure I understand the question, when you say is that gone, what exactly do you mean? Steven D. Schwartz - Raymond James & Associates, Inc.: I guess I'm not exactly sure how the accounting would work. But are we past the period of time, I guess, where you expect earnings to be breakeven? And what's changed, I guess, is a better way of putting it? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. We expect better than a breakeven result. But we still don't expect profitability up to the level you would have seen from the Australia operation two or three years ago. So we do expect a positive result. But it's still – I'd characterize it as relatively modest. We still expect some volatility. And I'll remind you that the group claims IBNR that we set up a couple of years ago, a lot of that still exist because it's a long tail business. So that situation is still playing out. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. All right. That's all I have. Like I said, Ryan asked the others. Thanks.

And we'll go next to Scott Frost with Merrill Lynch.

Hi. Thanks for taking my question. This is regarding the 6.75% hybrids that I think flow to LIBOR plus 2.66% in December to call date. Could you maybe remind us of the NRSRO treatment of that from a capital perspective? And I have a follow-up. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Well, we think of it more in terms of – each of the rating agencies has a different capital treatment of that security.

Right. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: It's a little more benign...

What Moody's bucket is it in? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: I think it's in bucket B.

Okay. And is it within the S&P – in S&P, how do they let you treat it? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. S&P as long as we're within the 15% or so cap treats it as equivalent to equity capital.

Is that where you are now? I'm assuming, yes. Is that... Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. That's right.

Okay. And how should we think of this in terms of how attractive this instrument is in your overall capital structure? How do you view that? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Well, I guess, I would say, it is attractive. Hybrid securities are part of our permanent capitalization. At least that's the way we think of it now. If you're asking what are we going to do with that security in December that really remains to be seen at this point. But I will say hybrids, we view them to be a permanent part of our capital.

Okay. All right. Thank you.

At this time, we have one question remaining in the queue. We'll take our next question from Dan Bergman with UBS.

Hi, good morning. There's been some recent press reports about a couple of sizable life blocks potentially coming to the market. The big picture, I just wanted to see if there's any additional color you could provide on the block acquisition pipeline and level of activity in the market. And whether you've seen any change recently? And related to that, how you would characterize, I guess, the sweet spot or target size for individual deals you might look to pursue in terms of capital deployed? Thanks. A. Greig Woodring - President, Chief Executive Officer & Director: Yeah. I would say, Dan, our pipelines this year are pretty similar to what they were last year. We never know when things are going to break through to be executed. But we actually look at things that run a range from small to large. And while we don't always do headline deals, we are consistently doing transactions of a small nature in virtually every year. So we would expect that there'll be a lot of that. With the coming Solvency II capital regime in Europe, there's a little bit more activity on that front perhaps than last year and that's increasing. So we really don't know what we're going to do this year but we're pretty optimistic given where things are today. That's all we can say about it because we really don't know anymore.

That is very helpful. Thanks. Switching gears, I believe you said that the consolidated premium growth was 6% backing out the impact of FX and the retrocession deal. Is that a reasonable estimate for kind of the current overall organic premium growth rate, or are there other adjustments we should be thinking about? And any sense in general about how organic premium growth kind of backing out the FX drag should trend from here? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: This is Jack. It is a pretty good run rate in terms of how we view as we entered the year kind of our expectations in terms of top-line growth rate. I'll remind you that can be significantly influenced by any kind of block deals that come our way. But I think that's – all things equal, that's a reasonable run rate in terms of expectations.

Okay. Great. Thank you.

It appears there are no further questions at this time. I'd like to turn the conference back to today's speakers for any additional or closing remarks. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Well, thanks to everyone who joined us today. To the extent any other questions come up, feel free to give us a call. And with that we'll end the first quarter earnings release conference call. Thanks again.