Ryan Krueger: Got it. And then Tony, could you talk more about the Japan opportunity? It seems like things are really starting to open up there, both for you and some of your competitors in terms of in-force transactions in Japan.
Tony Cheng: Yes. No, thanks for the question. We love Japan as a market, both on the traditional and the GFS side. You will – probably, your question centers more around the GFS side. We believe we were one of the pioneers in that market on the asset intensive side, probably the first transaction, just off the top of my head, probably 7 years, 8 years ago, and incredibly well positioned, given our local brand there, right. And the transaction we won was completed, and we were very delighted to win that transaction given the relationship we have with them given the size of the transaction. I raised the comment about being the – one of the pioneers and in many of the Asian markets, this is a case where if you look back 10 years, maybe even 20 years ago, we were the only one saying these things.
And when competition comes in, it often validates or verifies to the whole market that these things are effective and efficient ways of managing capital or asset risk and so on. So, there is increased competition there. We feel very much, obviously, given Q1 that we are doing very well. We can appreciate some of the reasons given our – gosh, we started there in 1996, so nearly 30-year experience there. There were other transactions, which I won’t go into detail in Japan that we executed in Q1 that were strategic in nature also. So, we are very positive about that area of our business.
Operator: The next question comes from Nick Annitto with Wells Fargo. Please go ahead.
Nick Annitto: Hey. Thanks. Good morning. I am on for Elyse. Both of my questions center more towards Ruby Re. The first being, I guess should we think of Ruby Re and any subsequent sidecars raised as replacing any growth capital that RGA would have to raise on its own?
Todd Larson: That’s right. I think you sort of stop – we look at overall opportunities in the market from a business perspective, and something like the alternative capital or committed capital provided by a vehicle like Ruby Re helps us with the overall capital need for the growth of that business as well as hopefully leverage up the capital that we apply to the transactions, leverage those returns up over time and also give us confidence that we have got the capital to go after some of these larger transactions.
Nick Annitto: Got it. That’s helpful. And then I guess as a follow-up, I think you guys had said that the PRT in the quarter didn’t go into Ruby Re. What was the reason for that? And should we be thinking about any sort of like impacts or reasons why there should be asset intensive business that doesn’t go into Ruby Re in the future?
Todd Larson: Let’s just bring it back to – when we set up Ruby Re, we define what subject business would go into Ruby Re automatically subject to certain conditions. And the subject business is the U.S. asset and intensive business at this point.
Operator: The next question comes from Tom Gallagher with Evercore. Please go ahead.
Tom Gallagher: Good morning. A few follow-ups on that similar theme. The – just want to understand what – of the deals that were publicly announced, there were several in Q1, how many of those showed up this quarter in that $737 million of in-force transactions have deployed capital into that? Are there a bunch more that – of those that didn’t close that will show up in the deployed capital in 2Q? Can you just give a sense for what the expectation should be based on what you have announced, but maybe not yet closed heading into 2Q? Thanks.
Todd Larson: Yes. Hi Tom. Yes. So, all the announced transactions, except for the Canadian transaction, were in the $737 million capital deployment number in the first quarter.
Tony Cheng: And Tom, to add to your second comment on deals, we haven’t closed. All I could say there is the pipeline is incredibly active across the globe in all our businesses. So, we don’t sort of speculate on which deals we will be able to close. But as Todd mentioned, we spent so much energy obviously on the front end of our business, but absolutely on the capital management side and finding alternate sources of capital. So, we are very happy with our capital levels and believe we have plenty of capital to fund future growth.
Tom Gallagher: Got it. And then, Tony, suffice to say, the 933 you did last year, you probably end up exceeding that, I am guessing, just based on the Canadian deal plus the – if you book a few more that are in the pipeline, is that – would you say that’s a fair assessment?
Tony Cheng: I think yes, that would be the expectation.
Tom Gallagher: Thanks. And just from a – I just want to understand, I have your thought process behind funding all of that, or potentially funding the growth. The – you have Ruby Re, obviously, and it sounds like not much has gone into that or there is a lot of capacity there potentially to – as a source of capital. But then is there anything else we should be thinking about? Are you looking to do other fund-raising other sidecar capital on international or otherwise?
Todd Larson: Yes. So, for Ruby Re, so far as we announced, I guess it was in December last year, we put what we call seed blocks in there, some existing blocks in the retro into Ruby Re late last year. Just due to the timing process and so on, nothing so far this year, but we will be retroing some more business in there as the year goes on. And then as far as other fund-raising, as I mentioned in my comments, we do have some debt capacity at the Holdco at some of the operating company levels. As you have seen in the past, we have issued some other alternative forms of capital. We did some surplus notes back in 2021 and 2023. We have done some embedded value securitizations over the years. The most recent one in 2003, which is pretty nice, it helps us bring forward some capital and also demonstrates the value of the business that we have on our books.
And we can – as we have done in the past, we can also look at some strategic retro sessions where it makes sense as well.
Tony Cheng: Yes. And Tom, I mean yes, just to add to all of that, I mean that’s why it takes the energy and the passion to find the right source of capital that meets the underlying risk return trade-off of the deal and just maximize capital efficiency for our shareholders. So – but we are very active in it. And as Todd said, there is multiple opportunities and sources that over the years, we have built up those options, and we will obviously not hesitate to deploy those options as needed.
Operator: The next question comes from Mike Ward with Citi. Please go ahead.
Mike Ward: Thanks guys. Good morning. Just hoping you could discuss the sort of the competitive landscape for whether it’s new business in PRT or Financial Solutions? Just kind of thinking how are you competing when you are sitting down with potential partners and there is competitors out there that might have things like bigger sort of Bermuda subsidiaries or more aggressive investment strategies. Clearly, you are winning new business and doing it very well. Just curious if you can help us think through this.
Tony Cheng: Yes. No. Thanks for the question. And once again, it just comes down to the breadth of our platform, the geography, the number of different types of risk types we can – we have available to take. The client base, the probably hundreds of clients we have over the globe where we have very close and intimate partnerships. So, we are really – the way we compete and as you mentioned, obviously, we are doing okay given the first quarter and last year, but we compete by not competing, right. We are really – as I have mentioned earlier, and I won’t go into all that detail again. We are really seeking those exclusivities. And we find when you do seek those exclusivities, you either, one, get the exclusivities. At times, maybe they have to call another reinsurer in to be part of it, but you are going to be in good shape.
So, it’s really leveraging off all those capabilities. You may wonder, gee, why the huge deal flow over the last year and a bit. I would say there is probably multiple reasons. But really, RGA’s edge has always been around customer focus around serving our clients, and innovating. And those things are kind of harder to do over Zoom. But once – obviously, the environment changed and we were out there being able to leverage off one of our core strengths, you will start to see some of the success that comes from that.
Mike Ward: Got it. Thanks Tony. That was all I have.
Operator: The next question comes from Wes Carmichael with Autonomous Research. Please go ahead.
Wes Carmichael: Hey. Thanks for taking the follow-up. Just one quick one on Ruby Re, is there a good rule of thumb to think about the leverage there? I think Todd, you said that there is $450 million or $500 million of equity capacity there. Is there – can you lever that 15x? I am just trying to get a sense for the size of liabilities that might fit there? Is it $6 billion, $7.5 billion or is it something north of that?
Todd Larson: To end on the underlying business and so on, I am not clear if you are asking from a liability perspective or…
Wes Carmichael: I guess where I am going is I just wanted to figure out, if you do a bunch of big PRT deals, how much do you think you could possibly use that sidecar for?
Todd Larson: Yes. I think for the current capacity, I am trying to think in my head, probably 15x is not far off.
Wes Carmichael: Okay. That’s helpful. Thanks.
Operator: The next question comes from Tom Gallagher with Evercore. Please go ahead.
Tom Gallagher: Thanks. Just a follow-up on the biometric slide, the – so the extra profit of $80 million for 1Q ‘24 that are getting deferred, when I think about GAAP versus your statutory cash flow, would you say most of that would be coming through in statutory, meaning not getting deferred the way it is under the new GAAP? And if so, are we potentially going to see a period where your GAAP earnings or your free cash flow, I should say, end up being like a very high percentage of your GAAP earnings as a result of that?
Todd Larson: Yes. So, yes, depending on the – I guess the experience is favorable or unfavorable and what type of cohorts that falls under for LDTI, some of it – for GAAP basis will be deferred, where for regulatory purposes or statutory, most of that would come through like a down, old GAAP would come through currently.
Jonathan Porter: Yes. And just to add on, Todd, to that, I mean, maybe it’s obvious, but clearly, there is also other material differences between GAAP and statutory accounting. So, there would be other drivers other than just the claims experience.
Tom Gallagher: Yes. That was another thing I was wondering because you strengthened reserves under LDTI. You did not strengthen reserves under statutory. So, there is a different basis to measure the A to A, I guess, is the way I have thought about it. So, that might be an offset. Is that a fair way to think about it?
Jonathan Porter: Yes. I mean I guess when you think about the reserves that would be released on death or claim, you are right, there could be a difference there, both plus or minus, right. I mean it depends on the – as Todd mentioned, there is – the basis is quite different. So, I don’t have a rule of thumb or a number I can point you to, but there would definitely be differences between the two.
Tom Gallagher: Okay. Thanks.
