Reinsurance Group of America, Incorporated (RGA) Q2 2015 Earnings Report, Transcript and Summary

Please stand by. We are about to begin. Good day and welcome to the Reinsurance Group of America's Second 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 and welcome to everyone joining us for RGA's second quarter 2015 conference call. With me this morning in St. Louis is Greig Woodring, our Chief Executive Officer. Greig and I will discuss the second quarter results after a quick reminder of our 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, actual results could differ materially from expected results. A list of important factors that could cause actual results to differ materially from the expected results is included in the earnings release we issued yesterday. In addition, during the course of this call, we will make comments on our pre-tax and after-tax basis for 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. Albert Greig Woodring - President, Chief Executive Officer & Director: Thank you, Jack, and good morning, everyone. Thanks for joining us. 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. Our second quarter operating EPS were $1.94 compared to $2.23 a year ago, and the comparison is difficult in several respects. We note that the year ago period included $0.11 per share benefit from the reinstatement and conversion of our reinsurance treaty in Japan. The current quarter included a higher than expected effective tax rate, the excess totaling $0.14 per share. Additionally, weaker foreign currencies had an adverse effect of about $0.08 per share. The results this quarter were slightly below our expectations, but generally reflect the broader trends that have been driving our performance more recently as their top-line growth in new business volumes have been very good. Our capital management actions have been balanced and effective and our operating global model and strategy have delivered better diversity profits by geography and product line. Plus while we have experienced some variability in our underwriting results by segment or product on a quarterly basis, our overall momentum in earnings power continues to move upward over time. In this quarter, we continue to get very strong results from most of our international businesses in spite of the obvious currency headwinds while our Global Financial Solutions businesses maintain strong momentum with notable influences to the U.S. and EMEA segments. Results in EMEA this quarter were helped by more recent transactions as well as some favorable experience on our existing longevity treaties. We remain encouraged by the outlook in that region. Asia excluding Australia also continued to have favorable underwriting results and solid new business production across the region. To strengthen those areas offset some continued volatility within our Traditional North American business. Our U.S. mortality business did have another subpar result as there was some extension of the trend of higher seasonal claims flow into April. Got back and verified that the flu and respiratory issues did have an above average adverse effect on the first quarter. We're now getting cause of death results in and the initial evidence is that this flowed into April. There has been a resulting excess of claims in older ages, particularly in some recent vintages. We saw some improvement in May and June, in fact May and June were pretty much on plan, taken together, but not enough to overcome the weakness in April. Positively we did see good mortality results on individual life in Canada. In Australia, we experienced unfavorable claims. We've a range of businesses in Australia both group and individual, and there's variability from quarter-to-quarter. We saw negative deviation in several lines in this quarter, whereas we saw positive deviation in the first quarter. Though the negative experience deviation in the second quarter was not driven by any single line and doesn't reflect any changes to the reserve assumptions or the reserves that we set up a year ago. Year to date we're slightly ahead of where we would've expected to be at this point in earnings, but there has obviously been more volatility than typical. We can certainly have variability from quarter to quarter in Australia. It's a fairly large operation for us. On the capital management front we were less aggressive this quarter in terms of share repurchases after a considerable amount of buyback activity in the first quarter. And we want to position ourselves appropriately given a continuing active pipeline of discussions concerning block acquisitions and other potential transactions. We announced one larger longevity transaction, and we executed some smaller under-the-radar transactions as well during the quarter. We continue to work on a range of potential transactions in the pipeline. We increased our dividend 12%. And our increased share repurchase authorization gives us greater flexibility as we move forward. Looking ahead we remain optimistic about the range of opportunities before us and our ability to take advantage of these. Although we are slightly behind last year's numbers through six months, the situation is not unusual given the nature of our business. We're not far from where we would've expected to be in our third quarter and fourth quarter are typically stronger periods. With that I'll turn it back over to Jack to discuss our financial and our segment results. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Thanks, Greig. We reported operating income of $130 million this quarter or $1.94 per diluted share. As Greig mentioned the second quarter results were below last year's quarter and slightly below our expectations for various reasons. But when you consider some of the various non-operating or unusual items, it's probably fair to say that the results were comparable with a year ago. Reported net premiums totaled $2.1 billion, down 2.5% quarter over quarter. When culling the effects of the fourth quarter retrocession agreement and foreign currency headwinds, premiums were up 8%. Turning to our investment results. Our average investment portfolio yield excluding the spread businesses was 4.88% this period, roughly 10 basis points higher than the second quarter last year and the first quarter of 2015. Our new money yield is a little less than 4%. And we benefited somewhat from some investment prepayments this quarter. We continue to move forward with our capital management strategy with an appropriate balance of deploying and returning excess capital. We're pleased to announce a 12% increase in our dividend level, as well as an increase in the share repurchase program authorization, noting that we have now – now have approximately $200 million of repurchase capacity with the increase in that authorization. We slowed the pace of buybacks in the second quarter to $24 million, following the somewhat accelerated pace in the first quarter. We deployed some capital into a couple of new transactions during the quarter. And our current excess capital position exceeds $750 million. The block transaction pipeline remains healthy, and we will continue to consider optimal deployment strategy. Now turning to our segment results. The U.S. and Latin America Traditional sub-segment reported pre-tax operating income of $79 million, below our expectations and reflecting adverse mortality claims of about $22 million and unfavorable experience in our group reinsurance business of about $8 million, both on a pre-tax base. Premiums were off 2% quarter-over-quarter, due primarily to the effect of the retrocession transaction in the fourth quarter of last year. Ignoring that, transactions premiums would have been up 8%. Our Asset-Intensive business in the U.S. reported pre-tax operating income of $56 million, up 28% over last year's $44 million level. Stronger results this period reflect a favorable spread performance and contributions from the recently acquired Aurora National business. A reasonable expected run rate for that business is now around $50 million per quarter. Our Financial Reinsurance line reported pre-tax operating income of nearly $15 million or an 8% increase over last year's result. In our Canadian Traditional business, we were pleased with the improvement in the individual mortality claims this quarter, as large claims are back within a more normal range. The favorable mortality experience was somewhat offset by an adverse foreign currency effect of $3 million and some minor negative swings in various ancillary lines. The net result was about $24 million in pre-tax operating earnings, which was below last year's $28 million level. Premiums totaled $225 million and increased 2% quarter-over-quarter in local currency, and translated U.S. dollars premiums were up 9%. The Non-Traditional business in Canada, which includes longevity and fee-based transactions, reported a modest quarter-over-quarter increase in pre-tax operating income to $3 million. Europe, Middle-East and Africa's Traditional business reported pre-tax operating income of $9 million, reflecting overall claims experience that was in line with our expectation. The prior year results were quite strong and totaled $23 million with very favorable claims experience. EMEA Traditional premiums increased 9% in local currencies, while translated currencies were 4% lower this quarter and totaled $276 million. The net adverse foreign currency effect on reported premiums was $35 million this period. Non-Traditional EMEA business, which includes asset-intensive, longevity and fee-based transactions, posted 47% increase in pre-tax operating income to $32 million, reflecting the cumulative effect of new and existing transactions as well as favorable experience in the longevity book of business. Momentum continues to be strong in this sub-segment. Turning to Asia Pacific, results in the Traditional line were mixed this quarter with very good operating performance in our Asia markets including Hong Kong, Japan, and Korea, offset by the previously noted weakness in Australia. Pre-tax operating income totaled $4 million compared to $26 million a year ago noting that the year ago period included an $11 million benefit from the conversion and reinstatement of an existing treaty in Japan. Australian operations suffered primarily from adverse morbidity claims experienced this quarter, raising a fair amount of unusually strong results posted in the first quarter of 2015. Year-to-date the results in Australia are in-line or somewhat above our expectations, only modestly above those expectations. And as we said last quarter, we continue to expect to see some degree of volatility from quarter-to-quarter going forward. Asia Pacific Traditional premiums increased 13% in local currencies quarter-over-quarter, but were flat in translated U.S. dollars at $390 million. The relatively stronger U.S. dollar resulted in a $51 million net reduction in reported premiums. Our Non-Traditional Asia Pacific business includes asset-intensive, fee-based and various other transactions and reported a small pre-tax operating gain this period. Our Corporate segment reported pre-tax operating losses of $10 million this quarter versus $14 million a year ago and was in line with a typical quarter where we have an expectation of roughly a $10 million loss. So to put the first six months into perspective when comparing to the first six months of 2014, we have given up about $0.20 per share due to the relatively stronger U.S. dollar and another $0.15 per share associated with the relatively higher effective tax rate. We are hopeful that the active financing exception legislation will be extended later this year at which time we will reduce our tax provision accordingly. And our business is such that we typically generate stronger results in the second half of the year, so we are reasonably comfortable with where we stand today in terms of our earnings level. We thank you and appreciate your support and interest in RGA. And with that, we'll open the call for questions.

We'll go first to Humphrey Lee with Dowling & Partners. Humphrey Hung Fai Lee - Dowling & Partners Securities LLC: Good morning, guys. A quick question about the Australia, so you mentioned that this kind of the adverse experience were kind of across multiple lines, maybe can you give us a little bit color in terms of what specific lines were underperformed in the quarter? And then also kind of talk about the overall kind of TPD experiences in terms of – relative to your reserve assumptions? Albert Greig Woodring - President, Chief Executive Officer & Director: Humphrey, I'll take the first part and I'll let Jack talk about the reserves. Experience in the first quarter, if you remember, we talked about that as being favorable and that we viewed it as something that we were going to get back during the course of the year, because it was just too favorable, and that's sure enough was the case. And the experience comes about because of individual life, individual disability, group, both disability and TPD and group life, all up or down at any given time. There is more disability effect than anything that tends to be the more volatilized both on the individual and the group side and that was the case both in the first quarter and the second quarter. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: I think the question related to reserve levels. You recall, we setup up a significant additional reserve in the second quarter of 2013. We're comfortable with the balance sheet and the reserve levels in the Australian operation currently. As Greig indicated, some of the noise, actually in the first quarter and second quarter of this year, doesn't really relate to the stability of the reserve levels there. It relates more to the ongoing performance and variability in that performance in various other product lines. Humphrey Hung Fai Lee - Dowling & Partners Securities LLC: Okay. So, basically given the year-to-date is still kind of slightly positive, so you feel comfortable for the rest of the year kind of in line with your slightly profitable – profitable expectation for 2015? Albert Greig Woodring - President, Chief Executive Officer & Director: Yeah, we are. And unfortunately we've experienced positive volatility in the first quarters and negative volatility in the second quarters, a lot in the last, say four years or five years in that marketplace. A lot of it has to do with reporting and has to do with other things that reflect the seasonality of the business there. This happened to be somewhat extreme this year. We don't expect volatility experience to be anything like it's been in the first two quarters and expect it to go back to a little bit more subdued volatility profile. Humphrey Hung Fai Lee - Dowling & Partners Securities LLC: Okay. Thanks. And then in terms of your increased share buyback authorization, based on your prepared remarks, you talked about kind of maintaining some flexibility for potential block acquisitions or other transactions. So should we think about in terms of the pace of the buyback you're probably still going to be a little bit on the lighter side for third quarter and then if there's no transactions then you'll pick up in the fourth quarter? Or how should we think about just with that new announcement today? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Humphrey, I think the way you – this is Jack. I think the way you've expressed it is fair. It's very unlikely we would be as aggressive, for instance, as we were in the first quarter of this year in terms of buybacks. So, yeah, I would say that we'll try to pick our spot. We don't expect to be particularly aggressive. We always want to maintain capacity to be able to take advantage of opportunities to deploy into block or M&A opportunities. So, I think the way you expressed it is fair. Humphrey Hung Fai Lee - Dowling & Partners Securities LLC: Okay. Got it. Thanks.

We'll go next to Dan Bergman with UBS.

Hi. Thanks. Good morning. I guess, first, I was curious if you could give some thoughts around how the Aurora acquisition performed relative to your expectations? And, additionally, how we should think about how those earnings are going to be split between your segments going forward? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. This is Jack. The Aurora transaction performed very well for us, pretty much ahead of our expectation, maybe a slightly higher and the lion share of those earnings will be reflected in the U.S. Asset-Intensive business. They were in this quarter and won't be going forward. Albert Greig Woodring - President, Chief Executive Officer & Director: There's some mortality, but more of it is asset-intensive.

Great. Thanks. And then, may be just switching gears a little bit I thought you signed a number of longevity reinsurance deals in EMEA in the quarter. I just wonder if you can give us some thoughts on what drove that trend or if it was just kind of deal specific? And in terms of going forward, do you expect that Europe longevity reinsurance markets remain active? Albert Greig Woodring - President, Chief Executive Officer & Director: Yeah. We certainly expect the longevity globally to remain active, and increasingly so. These transactions very often take a long time to germinate and to reach fruition. And so it's really difficult to predict what quarter we're going to transact in. But, yeah, we have been very successful in the first part of this year. And in fact in the last several years in that line of business and experience has been – expectations are better so far.

Great. Thank you.

We'll go next to Erik Bass with Citigroup.

Hi. Thank you. I guess based on your comments it sounds like the elevated mortality claims in the U.S. you think were a carryover from the harsh winter. However I think if we look over the past couple of years it seems like U.S. mortality has generally been a little bit worse than expectations. So are there other factors that you're seeing that are affecting the performance of the block? Albert Greig Woodring - President, Chief Executive Officer & Director: Not really. The first quarters have been high and they typically reflect some amount of flu deaths and respiratory deaths. As mentioned as we have gotten some cause of death information, we saw an elevation of our respiratory deaths of from about 18% to 20% or so, something like that. And it looks like April is going to be about the same place, although those returns aren't all yet in. And if you remember we've had very good fourth quarter mortality in the last couple years. In fact I would say in 2013, our U.S. mortality overall for the year was pretty good, and last year was just a little bit bad. We had a couple bad quarters. And the fourth quarter did not make up for the poor experience totally. But that's the nature of mortality business. It can go either way, and it does. And so we're looking forward to – after some negative fluctuations, hopefully we're due for some positive fluctuations coming up here in the latter part of this year. But we don't really know that. We will be watching it very carefully for the rest of the year. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Erik, this is Jack. The only point I would add is we have seen some degree of elevated claims experience associated with advanced age cases over the last several quarters. So we continue to pry into that and analyze that to see if there's any additional information that we can glean. But that would be the only additional color I would add.

Got it. That's helpful. Thanks. So it's not something where you're seeing, like the way you had identified the older – like the 1999 through 2004 block or something like that, where there's a specific vintage of policies where there's a little bit elevated experience. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: No. That – the deaths come from different places, and it bounces around a little bit. It's hard to read one quarter. That particular generation as you know has been problematic for us for some time. It actually hasn't been that bad this year compared to other generations of our business.

Got it. And then if I can just ask one follow up on the longevity business in EMEA, is how much competition is there for that business now? And have the market dynamics changed at all due to the changes that you've seen in the annuity market in the UK? Albert Greig Woodring - President, Chief Executive Officer & Director: Yeah. There's less of the business available in the UK. There is a plenty of competition, but I would say that the supply of business available still exceeds the demand from reinsurers or the risk takers for that business to the point where we can find places where we can transact at our pricing effectively and have done so. We are looking at opportunities in other markets as well as the UK, which is still the largest longevity market in the world. But we are looking at other markets, and we expect that those markets will grow in terms of demand as well.

Got it. Thank you.

We'll go next to Sean Dargan with Macquarie. Sean Dargan - Macquarie Capital (USA), Inc.: Yeah. Thank you and good morning. I just want to follow-up on Erik's question around U.S. mortality. I think, Greig and Jack, you both mentioned older age mortality in recent vintages. But I think some investors are concerned that maybe a by-product of investor-owned life insurance and kind of high face value, older age policies that the primary carriers were writing. Do you have a read on whether there are any similar characteristics around the old age claims you've been getting? Albert Greig Woodring - President, Chief Executive Officer & Director: Yeah. So, always difficult to do this analysis with that perspective, but older age or older attained age mortality is very consistent with the flu epidemic. In fact, if you look at when we talk about some of the newer vintages did newer issue years did actually have some higher experience this quarter than others. That's not always been the case. It was particularly in this quarter. And so it is something that has gripped our attention. Most of what we're talking about though comes after the time of the real STOLI business in the U.S. So this is more recent than that during the heart of that era. Sean Dargan - Macquarie Capital (USA), Inc.: And if you can remind us... Jack B. Lay - CFO, SEVP & Principal Accounting Officer: And, Sean... Sean Dargan - Macquarie Capital (USA), Inc.: Yeah, sorry. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Well, I was just going to – this is Jack, I was just going to comment, it's very difficult for us to tell whether the reason for the issuance of policy and whether there is – there are investors involved other than the policyholders. So it's – when you have large policies issued at advanced ages that could be issued for a variety of reasons, so it's very difficult for us to do any sort of analysis that gets I think what is the heart of your question is in terms of whether investor-owned sort of policies and related mortality is driving some of these results. Sean Dargan - Macquarie Capital (USA), Inc.: Okay, thanks. And I have one follow-up I would like to take it in different direction. We saw another acquisition from a Japanese carrier last night. Under the Abe government, corporate Japan is being pushed to increase its ROE. I was wondering if there is any view that you have towards the use of reinsurance among the Japanese primaries or if they plan on continuing reinsurance agreements as they make foreign acquisitions? Albert Greig Woodring - President, Chief Executive Officer & Director: We do believe they will continue to use reinsurance and utilize at actually perhaps increasing rates. Our business in Japan has been on a nice upward trajectory. We see companies in Japan more open to reinsurance and we are benefiting from that. So we're in on a very nice growth track in Japan and the experience has been wonderful. As you say – you're absolutely right that there is a lot of talk about the Japanese – among the Japanese companies about increasing their ROEs at above – getting into a different level of performance and that's something that reinsurance can aid in and that's part of the reason driving some of the growth we have in the Japanese market. Things do tend to move fairly slowly in Japan. A lot of what's going on in Japan as well, Sean, is the fact that their home market is not growing very much – it's not growing at all and these are fairly large companies and looking to find somewhere to deploy their capital. And so they are on an acquisition trail in recent years. So I wouldn't be surprised if that continues a bit. Sean Dargan - Macquarie Capital (USA), Inc.: Thank you.

And we'll go next to Jimmy Bhullar with JPMorgan.

Hi, good morning. I had a few questions. First on the asset-intensive business. You had a pretty strong quarter in 2Q. So just wondering how much of the upside was driven by high alternative investment income versus maybe contribution from some of the recent transactions, and how do you think about the earnings power of that business? And then secondly, maybe just talk about your decision-making – what went into your decision to raise the dividend – you raised it by a greater amount than you raised it last year and how do you think about long-term increases in the dividend rate, should it be closer to what it was in 2015 or last year why did you raise it more? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Jimmy, this is Jack. Let me respond to those questions. In terms of broadly speaking of variable investment income, we probably benefited by close to $10 million for the quarter above and beyond what would be an expected rate, so it's all...

Pre-tax, that's pre-tax? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: That's pre-tax number, that's right.

Yeah. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: And that's not unusual because you're going to have significant investments for commercial mortgage loans that prepay. But that's roughly the size. In terms of the earnings power, for the U.S. asset-intensive business, we project about a $50 million run rate right now, and it will be a little bit higher or lower every quarter but that's a pretty good baseline. In terms of the dividend, we tried to peg a double-digit increase. We think that should be attractive to investors. So we ended up at 12%. We'd like to think if we continue to generate capital in a manner in which we've experienced last several years that we hope we can continue a rate of increase every year. We certainly will consider it every year. There is no – in our case, they will be able to meet double-digit increases every year but we'd like to be able to strongly consider that year after year. So that is what kind of played into the decision to move it up via a 12% increase.

And then last. Yeah... Albert Greig Woodring - President, Chief Executive Officer & Director: Sorry, Jo (sic) [Jimmy] (31:20), I was just going to point out this is five-years in a row of double-digit increases. So, as Jack said, that did factor into our decision making.

Okay. And then, lastly, on share buybacks, you mentioned you might be a little later in the third quarter depending on deal activity and maybe little faster in the fourth quarter. But assuming there aren't any major deals, do you expect to complete the program this year or would you carry some of it over to next year as well? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Jimmy, it's hard to say. When you try to compare buybacks against the backdrop of other opportunities to deploy into the business it's always hard to make that call because even if we don't close any significant deals this year, there is always some degree of discussion and negotiation underway. And we always want to maintain some degree of capital to be able to take advantage of some of those opportunities. So, I wouldn't say it's a high probability that we will use the entire additional authorization, but it does give us flexibility, and I think that's about all I can say on the subject.

Okay. Thank you.

We'll go next to Ryan Krueger with KBW. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Hey, thanks. Good morning. First one was, just back to EMEA Non-Traditional earnings, we are very strong in the quarter. Can you help us to think about what the run rate expectation is in that business going forward? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: First of all, you're right. The Non-Traditional has been an area of opportunity for us in EMEA, because of Solvency II, because of capital and realignment concerns among the EMEA companies. And so we've been there with solutions for those companies and helping out in the marketplace. It's always difficult to get. First of all, you can't predict when and how much in the way of new transactions are going to occur on this. This is much like an acquisition pipeline. It is unpredictable and in both size and timing. But as you put a block of business on it that generates a stream of income for the future, sometimes that future might be short term say 3 to 5 years, and sometimes it might be longer term 5 to 10 years. But the run rate now is building slowly. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Okay. And then on the – I guess the block acquisition pipeline. At least from the public reports, it seems like there is a lot of activity going on right now. Do you feel like the activity kind of behind the scenes has picked up this year? And are you relatively optimistic that you'll get some transactions done over the next six months or so? Albert Greig Woodring - President, Chief Executive Officer & Director: Well we're always optimistic; we're working on a lot of things. I don't know that – the acquisition activity is certainly not less than the last couple years. I don't know that it's orders of magnitude more, but it's keeping us very busy. These acquisitions very often take a long time too. So announced? Yeah, we would be optimistic we could announce something this year. We don't know that for a fact. And it could well be that we lose out on several of the ones that we have our eyes on. On the other hand closing transactions this year is – time is running out for closing anything large. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Got it. Okay. And then just one last one kind of along the lines of Sean's question. We've seen Non-Traditional capital from private equity and pension funds come into the U.S. life market over the last few years. And now you've had multiple Japanese companies buy U.S. companies. Just curious, Greig, how do you view this overall impact in the U.S. life insurance industry as we go forward, maybe if at all? Albert Greig Woodring - President, Chief Executive Officer & Director: Well the Non-Traditional players have taken the bulk of the asset-intensive transactions. We've been I think fortunate and skilled at finding transactions that we could execute on and that have worked out very well for us. But we by no means have cornered the market here. We are watching others take more transactions than we take. And a lot of that has to do with their structure or their investment philosophy and things like that. So we've managed to survive and even thrive in that environment. In terms of Japanese buying, or others buying U.S. companies, I don't know that that has affected us very much, because we don't really have too many opportunities to buy or a desire to buy and operate any direct writing companies. We are more in the business on the acquisition side of buying closed blocks. Or if we buy a company, it's to shut it down, not to – a company that's going to be shutdown, not to operate anything. We are first and foremost in the reinsurance business. And our clients are direct writers, and we want to keep those lines in the U.S. very bright and clear. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: I was thinking more in terms of Japanese companies owning U.S. companies and running them with a lower return hurdle, given lower cost of capital in Japan. Albert Greig Woodring - President, Chief Executive Officer & Director: Well if they do that, first of all I will be a little bit surprised. But if they do that then there are still ways we can help them improve their ROEs, improve their business development. And we have very good relationships with the Japanese. And we'd like to think that we have a good dialogue with them at all times. Ryan J. Krueger - Keefe, Bruyette & Woods, Inc.: Okay. Thanks. Appreciate it.

We'll go next to Steven Schwartz with Raymond James & Associates. Steven D. Schwartz - Raymond James & Associates, Inc.: Hey, good morning, guys. Back to the question of Japan actually, earlier question. Greig you're talking about the pipeline being good, but I did note in the quarter, Asia-Pacific assumed new production was down a lot year-over-year, down and obviously it has something to do with yen as well I would imagine in currency. But also down significantly from the March quarter. I know that's a sloppy number, but is there any take away from that? Albert Greig Woodring - President, Chief Executive Officer & Director: No, I think we think of Asia being a growth engine for us. And I don't off the top of my head here have the actual growth rate in Asia directly. But we've seen good growth and especially good growth in the bottom line, overall that business has been chugging along. And we've been producing a substantial contribution to RGA and it's growing at a nice clip, and the bigger it gets the more noticeable it gets. We have survived a first two quarters of pretty poor U.S. mortality, especially the first quarter, first four months were not good at all. And we are a little bit behind where we would like to be, but we're expecting that by the end of the year, we're going to be exactly, where we originally set out to be that. We see a lot of positives and a lot of trends that look positive in our results so far through the first six months in spite of the fact that, it isn't overall where we wanted to be. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. And then, some number of questions for Jack. Jack, assuming the AFEs in past, in the third quarter, what kind of tax rate should we be thinking about? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: You said, assuming that it is not past in the third quarter? Steven D. Schwartz - Raymond James & Associates, Inc.: Right. Let's assume that it goes down to the wire like it always seems to do in the fourth quarter. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah, Steven that's a very difficult question to answer because, the AFE calculation involves changes in regulatory reserve levels, which can be affected in some of our international operations by the prevailing investment rate and that sort of thing. So, it's – I really – I'm reluctant to kind of go out on a limb and guess what the impact would be that – AFE impact to-date this year has costs us about, maybe this is a good example. It costs us about $0.20 per share. And last year at this point, it had cost us about $0.05 per share. So, that gives you a feel for just the relative volatility of various bases of business around the world can have a reasonably dramatic effect on AFE. Now, thankfully, we – all indications are that the extension will be passed and we'll be able to reverse that, that $0.20 per share that I indicated earlier. But in terms of what it does to the investment, I'm sorry the effective tax rate, it's very hard to predict. Steven D. Schwartz - Raymond James & Associates, Inc.: Is the indication, Jack that it will reverse in this three months period? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Well, that's where I have been – I have been told there is a fair probability that the legislation could be passed in the third quarter. Now, I believe it when I see it, but I think there is an even stronger probability that it will be passed in either the third quarter or the fourth quarter of this year. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. All right. Great. And then couple of more, Aurora, could you remind us how much that added to reserves in asset intensive? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: I think the – I'm going from memory maybe $200 million or so. Steven D. Schwartz - Raymond James & Associates, Inc.: $200 million, okay. And... Jack B. Lay - CFO, SEVP & Principal Accounting Officer: I don't have it in front of me, Steven, my apologies. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: But I'll see if I can rustle that up pretty quickly here though as we're on the line. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. And then, last one, maybe you said this and I missed it, but did you put a number on the adverse mortality effect in the U.S.in Trad for the quarter? Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Yeah. It was over $20 million, just a little over $20 million. Steven D. Schwartz - Raymond James & Associates, Inc.: Okay. All right. Thanks a lot, guys. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: And Steven let me – I've got my hands on a little better information, I was off on the Aurora – that's probably close to $2 billion in terms of impact on asset levels and reserves. Steven D. Schwartz - Raymond James & Associates, Inc.: $2 billion, okay. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: $2 billion U.S., that's right. Steven D. Schwartz - Raymond James & Associates, Inc.: All right. Great. Thank you.

And we have no other questions at this time. Jack B. Lay - CFO, SEVP & Principal Accounting Officer: Okay. Well, if there're no other questions, we will end the second quarter earnings release conference call. Thanks to everybody who participated. And to the extent any other questions come up, feel free to give us a call here in St. Louis. With that, we'll end the call. Thank you.

This does conclude today's conference. We thank you for your participation.