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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day. Welcome to the Reinsurance Group of America Fourth Quarter 2018 Results Conference Call. 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 fourth quarter 2018 conference call. With me this morning in St. Louis 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'll be happy to take your questions.
To help you better understand RGA's business, we'll 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 revenues, premiums 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'll make comments on pre-tax 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.
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 website at rgare.com.
And now, 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've reported adjusted operating EPS of $3.46 compared to $2.60 a year ago. For the full year, our adjusted operating EPS was $12.12 versus $10.84 last year.
Looking at the quarter, our underlying business fundamentals were strong and sound as organic premium growth was very good and we were again active on the transactions front and had a strong quarter of capital deployment.
We continue to benefit from earnings diversity a strong bottom line results from EMEA, Asia and Canada offset modest shortfalls in US Traditional and Australia. The shortfall in US Traditional reflects higher Individual mortality claims, while the US Group business showed progress relative to recent quarters and achieved close to breakeven this quarter.
Reported premium growth was 12% in the quarter and estimated organic growth on a constant currency basis was 8%. For the year, we achieved organic premium growth of 7% continuing the growth momentum of recent years.
We were very active this quarter in terms of in-force transactions and deployed $160 million of capital. It was one of the more active periods for us in recent years. The deals were broad-based standing all our regions North America, Europe, and Asia and covered Asset-Intensive longevity financial reinsurance and mortality transactions. This brought full year capital deployment to $440 million, our second most active year since 2012. The pipeline for transactions business remains active.
When I think about our overall results for the full year, there were many positives. The continuing premium growth momentum in our organic business, the strong performance in our EMEA and Asia business, the level of capital deployed into in-force transactions and the growth in operating EPS of over 11%, albeit aided by a lower tax rate due to tax reform.
While we continue to see some short-term volatility, our business is in good shape. Our strong excess capital position and the ongoing capital generation power from our business allowed us to commit a total of approximately $725 million to a combination of in-force transactions and share repurchases and still end the year with approximately $1 billion in excess capital. As we look ahead, we remain optimistic about our overall prospects and specifically our ability to achieve attractive financial results.
RGA is well positioned in our markets, we have a proven strategy and a long track record of successful execution. In this macro environment with some additional uncertainty, we operate from a position of strength given the unique nature of our operating model with a focus on biometric business, diversification by product line and geography, a high-quality balance sheet and investment portfolio and less sensitivity to the financial markets. We have a disciplined focus on growing profitable business and effectively managing capital over time, and that was again demonstrated in 2018.
And with that, I'll turn it over to Todd.
Thanks, Anna. I'll provide a brief financial overview. Our adjusted return on -- our adjusted operating return on equity for the full year was 10.3%, which is within our guidance range of 10% to 12%. Our excess capital position at the end of the period was approximately $1 billion, putting us in a position to be able to continue to fund strong organic growth, execute on attractive in-force transactions and return capital to shareholders through dividends and share repurchases as appropriate.
Moving to investments. The average investment yield excluding spread business was 4.44%, up 6 basis points compared to the fourth quarter of 2017, reflecting higher variable investment income. Our new money rate was 4.10% down somewhat from last quarter. The effective tax rate on pre-tax adjusted operating income was 20.8% for the quarter. For the year, our effective tax rate was 22.5% on pre-tax adjusted operating income within our expected range of 21% to 24%.
Turning to our segment results. The US and Latin America Traditional business reported pre-tax adjusted operating income of $92.4 million, basically flat with that a year ago. Individual mortality experience was unfavorable this quarter and compares to a moderately unfavorable experience a year ago.
The US Group business bottom line was within our revised expectations and close to a breakeven result for the quarter, a sequential improvement relative to the two prior quarters. Our US Group remediation efforts are going as planned.
Reported premium growth was 8% and after adjusting for the effects of the modification of existing health treaty that we mentioned last year organic premium growth was 4%. Our Asset-Intensive business reported pre-tax adjusted operating income of $52.8 million this quarter, relatively in line with our expectations. Our financial reinsurance line reported pre-tax adjusted operating income of $19.4 million this period, down modestly from a year ago.
Our Canadian Traditional segment reported pre-tax adjusted operating income of $50.3 million, up from $38.6 million in the prior year period. This quarter reflects favorable individual mortality experience and the contribution of income from two new in-force transactions written during this year. Premiums were up 12% reflecting new business and the execution of these in-force transactions.
Canada's Financial Solutions business which includes longevity and fee-based transactions reported pre-tax adjusted operating income of $1.2 million, down from a year ago with the current period results relatively in line and the prior year reflecting favorable longevity experience.
Switching to Europe, Middle East and Africa. Our Traditional business reported pre-tax adjusted operating income of $15 million, reflecting modestly favorable underwriting experience across most markets. Reported premiums were up 10%, reflecting continued strong business growth across the segment.
EMEA's Financial Solutions business which includes Asset-Intensive longevity and fee-based transactions reported pre-tax adjusted operating income of $44.2 million compared to last year's $34.5 million. This quarter's results reflected favorable longevity experience.
Turning to our Asia Pacific Traditional business. Pretax adjusted operating income totaled $33.7 million compared to $27.2 million in the prior year period. Our results this quarter in Asia excluding Australia experienced favorable underwriting margins in most countries across the region.
Australia experienced a loss in the quarter primarily reflecting some unfavorable experience in the group business. Reported Asia Pacific Traditional premiums were up 24%, primarily due to growth on new and existing treaties in Asia and some premium catch-ups. Our Asia Pacific Financial Solutions business reported pre-tax adjusted operating income of $2 million versus $0.7 million in the year ago period. The current period results were relatively in line with our expectations.
The Corporate segment reported pre-tax adjusted operating loss of $31 million, greater than the expected range due to costs related to technology and service initiatives. Going forward given the nature of this segment, we do expect some volatility from quarter-to-quarter, but on average, we expect a loss of approximately $25 million. We have historically provided intermediate guidance at this time of year.
With that in mind, we expect over the intermediate term, growth in adjusted operating income per share to be in the range of 5% to 8% and adjusted operating return on equity of 10% to 12%. Also for 2019 and thereafter we expect our effective tax rate to fall within the range of 21% to 24%.
In conclusion, the underlying fundamentals of our business were sound in 2018. The benefits of our diversified business continue to allow us to offset underperformance in particular lines of business or segments with strengths in other areas. We are extremely pleased with the higher level of capital deployment and share repurchases.
Given our strong balance sheet, excess capital position and high-quality investment portfolio, we are confident that we can continue to be successful and achieve attractive financial results even in more uncertain economic environment. We thank you and appreciate your support and interest in RGA.
And with that, we'll open the call for questions.
[Operator Instructions] And we'll take our first question from Jimmy Bhullar with JPMorgan.
Hi. Good morning. I first had a question just on your progress and repricing the group insurance block. I'm assuming you're expecting to generate a profit in 2019, but if you could just give us an idea on when you expect margin to revert to a more normal level? And what's -- that sort of, what's the rough earnings power of that business, once you get to know the margin?
Hi, Jimmy. No, our remediation efforts and repricing efforts are going as expected. For the US Group business, we're -- we have repriced approximately 75% of that business with fairly good results, and we'll be repricing the remaining part of that over the next couple of quarters or so.
We do expect the business to return to profitability in 2019, albeit we won't see really back to full margins until 2020 as all the repricing has a chance to flow through the treaties and so on. So, so far on track, and we're pleased with how it's going.
And could you quantify like how much of the business has in premiums and what normal margins would be or just give us an idea on what the normal profitability or range of profit -- sort of profit range for that business would be, so we can get an idea on how much earnings in the business have improved over the next couple of years?
Yes, just in rough numbers. In total, the US Group business is about $600 million in premium. Now the business that was underperforming, if you will, was the excess disability income and the excess medical care lines, which were more like 25% of that total as far as the premiums, so a smaller piece of the overall block. And when that business performs in total, I would say the margins -- it can be volatile, but it was earning $30 million to $40 million a year. So that hopefully gives you some context of where it can get back to.
Yes. And then just lastly, could you give us some color on the investment losses this quarter and what your exposure is to GE and PG&E?
Yes, so we did have some investment losses this quarter. Some of it was selling out of some of those credits that you mentioned, specifically GE. We did liquidate down our position. I think we incurred in the neighborhood of about $25 million of losses on those sales. We do have some of the Pacific Gas. I think it's about $65 million in book value, which I think the equivalent market value is about $50 million right now.
And GE, you are out of the position entirely?
I think we might have a very, very, very small piece left, but for the most part, they were out.
And our next question comes from Humphrey Lee with Dowling & Partners.
I've a question related to Australia. So obviously 2017 it was positive and turning toward the right direction, but looking at 2018, you had three quarters of losses and the other quarter being kind of breakeven. So I was just wondering what was -- what were the drivers for the underperformance in 2018? And what is your near-term expectation for the country?
Yes. So Humphrey, we were disappointed with the result for Australia this year. As you mentioned, for the full year, we did have a loss. It was primarily driven by the group business in 2018. And if you take a step back, we had been since the repricing efforts started a few years ago, that group business had been profitable over the last few years.
But this year on negative due to some higher claims experience. So the main driver of this year was the group line in Australia. For 2019, in all things being considered, sitting here today, I'd say my best guess is that we're around the breakeven result.
I guess in terms of the higher claims like what is -- what do you see or what did you see in 2018 that is the cause for that higher claims activities?
Just elevated claims experience across multiple clients. I don't think we attributed to anything real specific, just higher claims activity, which we'll keep a very close eye on as we go forward.
Got it. And then shifting gear, in EMEA, you definitely have very good performance in multiple quarters now. Like I guess, what is driving that kind of positive variance? And how sustainable is this favorable experience to go for? Like would you have to pass along some of your sort of better margins back to clients at some point? Or do you feel like you have the secret sauce to maintain that kind of strong performance going forward?
Yes. So on the longevity business in EMEA, especially in the UK has been performing very well. And there's a little bit of noise in there just due to client reporting catch-ups, just our information is only as good as what information our clients report to us.
So sometimes we have some catch-ups in particular quarters due to client reporting, but also the underlying longevity experience has been very good for us for the past several quarters, I mean they're just good performing business right now.
How competitive is that market like other than you guys? Like, who will be the main players in that particular line of business? And just how competitive it is?
Humphrey, it's Anna. It is a very competitive market. We have niches that we focus on. So we're looking for particular attributes, particular risk profiles, and we also enjoy the strength of relationships that from repeat type of transactions. But more particular to your question, yes, it is a competitive market and to your earlier question, no, we don't have to give back any margins on existing business. These are all long-term contracts.
Got it. Thank you for the color.
And we'll take our next question from Erik Bass with Autonomous Research.
Hi. Thank you. I want to follow up on Humphrey's question on Australia. And I guess, in particular, are you seeing any impact from the Royal Commission review and do you think that's having any contribution to the higher claims? Or if not, do you see any risk of that having any issues going forward?
Yes. The Royal Commission report is due out, last we had in February of this year, so fairly soon. It's hard to say that there's been any direct impact on claims activity at this point. Although, I have to believe there's been some indirect impact on the claims activity from the Royal Commission. But it's hard to really pinpoint a direct relationship right now. So again, it's one of those situations that we'll continue to stay close to and work very close with our clients and see how that develops.
Got it. But at this point, is it fair to say that when you see Australia is only mid of an earnings headwind, but there's nothing that's causing you to question reserve adequacy?
That's right. We're continuously looking at experience studies and making sure that we're comfortable with the overall balance sheet for Australia. So I think that's a good way to characterize it the way we do it right now. It is certainly an earnings drag, but we don't feel there's any balance -- significant balance sheet issues at this point.
Thanks. And then if I could just ask a bigger picture question on US Mortality trends. We've seen some conflicting data points with life expectancy declining slightly for the broader population, but there's also been some important medical advances particularly in the treatment of cancer. So as you look at your book, are you seeing any changes in claims trends? And so it would be reasonable to infer that the insured population is more exposed to the favorable rather than the unfavorable trends we're seeing?
Hi. Erik, right? So you're absolutely correct. The public data does suggest that there's a slowdown in Mortality improvements, but it points to the major part of that being driven by what we call desk of despair. So think about suicides and opioids and impacting the younger populations, which don't affect our book as much.
So from our perspective, our main causes are cancers and cardiovascular diseases. And there we remain bullish. We are bullish on long-term mortality improvements. We continue to believe that the long-term trends are going to be positive for our business.
Thanks. I mean it's bit early I realize, but are you seeing anything in the data in terms of the prescription drugs and some of the advances on cancer having any benefit on your claims there?
No, much too early for that.
Okay. Thank you.
And our next question comes from Kenneth Lee with RBC Capital Markets.
Hi. Thanks for taking my question. Wonder if you can give us a little bit more color on the unfavorable Individual Mortality within the US business whether it's in around more severity or frequency? And whether you could perhaps quantify potential impact in the quarter?
The claims in the quarters where above our expectations and we saw somewhat higher average sizes and some additional claim count. But I would say it was more a severity rather than a frequency avenge [ph] in the fourth quarter. But keep in mind, we had a very strong Q3 and for the full year, our average sizes were pretty much in line. So the way I think about the 2018 performances the miss was frequency related. And that's not unexpected given that we had that hard winter and the bad flu season.
Got you. And just one follow-up on the Australia business. Could you just remind us if there are any ongoing repricing initiatives or any kind of other efforts are ongoing to improve the profitability within that business? And is the expectation of the Australia business could return to profitability sometime next year? Thanks.
Yes. So we are continuously doing what we can to improve the profitability of the in-force block, including repricing those treaties as they come up for renewal or as we have the ability to reprice. And we're also being I would say fairly selective on new business. Our goal in Australia really is to make sure we make the in-force block as profitable as we can.
And then like as I said, be somewhat selective on new business. Can it return to profitability? We sure hope so. As I mentioned earlier, probably for 2019, breakeven result plus or minus, but then as we continue to march forward, hopefully, we'll see that profitability return.
Got it. Thank you.
And our next question comes from Ryan Krueger with KBW.
Hi. Thanks. Good morning. When you look at the US Individual Mortality results for full year 2018, can you give us a sense of how much that deferred from your typical expectation?
Yes, it's hard to put a fine point on that Ryan, but sort of full year I would say, we're about $30-ish million worse than are, but we would have expected overall.
Got it. Thanks. And then on US Asset-Intensive I think in the past you've talked about a quarterly run rate of $50 million to $55 million of earnings, but you have done some reasonably big transactions now as well to add to that. So I was hoping you could give us an update on what you'd expect in your term given those transactions?
Yes. We did have some nice transactions recently. Although I would still hold that, that run rate of $50 million to $55 million is still a pretty good number, because as we add on some of these newer blocks, you have to remember that these Asset-Intensive blocks, the in-force blocks amortize off as well. So as we're adding the newer blocks is somewhat offsetting some of the blocks that are running off.
So all-in, I'd say the $50 million to $55 million is still a good estimate and also some of the newer blocks as we've mentioned in the past -- the way US GAAP accounting works sometimes it takes a little bit to ramp up to full speed on some of the earnings.
Got it. Thank you.
And we'll take our next question from Andrew Kligerman with Credit Suisse.
Hey, good morning. Canada Traditional it looks like you put two transactions on and one which was in the fourth quarter. And I'm wondering what the impact on earnings that was? And maybe you could give us a little color on the type of deal it was?
Yes, Andrew, it was mortality related. So ortality block. And probably not a big impact in the fourth quarter because the effective date of actually was in the latter part of the year in the fourth quarter. So wouldn't have had a real significant impact to the earnings for the quarter.
And how about going into maybe next year? Any particular can you size it earnings wise.
No we don't normally do that. But I mean we've reasonable size transactions those should add earnings as we go into next year or into 2019.
Okay when you give the 5% to 8% guidance should I be considering the $12.16 base that you generated in 2018? Or is there another base we should be thinking about?
Well certainly that's a base to look at in. Again we're looking at earnings of our intermediate period of time not necessarily just year-over-year. And as you've seen in our business there can be some volatility quarter-to-quarter and year-to-year. So we do look at it over a longer period of time and try to look at more I'll call it normalize results but just looking at what the true earnings power is of the enterprise. And when we look at our mix of business and what we feel are some pretty good growth prospects we think and the intermediate guidance is what where we should be.
And then maybe just one last one on APAC. Your earnings seemed kind of lumpy. It came in at 36 you previously guided to 35 to 40. But you mentioned premium catch-ups. How much did that contribute to the earnings?
Yes it's hard to put an exact number on that Andrew. But there is some volatility on the premium amounts which also impacts our earnings. But it also in the earnings you've got this experience happening as well. But the best I can provide to you probably the best-run rate on a quarterly basis is excluding Australia for the near term here it's around $40 million on average.
And we'll take our next question from John Nadel with UBS.
Still I understand 5% to 8% growth is an intermediate-term and not an individual year sort of target. But if we think about the 7% premium growth I think that's for the full year 2018. And I think that's adjusting for some of the onetime items like the catch-up that was just mentioned. Is there really any reason why bottom line earnings should grow at a base that has been any slower than your premium growth rate?
Not necessarily. As I mentioned there's a few moving parts. But again that 5% to 8% we feel is what the business is capable of producing. And we will have that live in your premium number show some good growth over time as well. Then you'll also have to take into account what happens with some of the foreign currency rates in our business it's a good part of it is outside the U.S. So that some pluses and minuses. But we think at the top line growth rate and bottom line growth rate our board our business is capable of.
Okay. And then if we think about a lag effect as it relates to alternative investments maybe some limited partnership holdings from the balance sheet that sort of thing. Given the very weak 4Q what kind of an impact at this point maybe the visibility is not terrific just yet but how should we think about that as it relates to just sort of 1Q impact on investment income? I think you guys mentioned in the release that variable investment income was a little bit above your typical expectation in 4Q?
Yes. A lot of our variable income comes from our real estate JVs and some other partnerships. And we still feel there's some good runway there. So I'm not sure there's a lot more color I can add if I understand your question.
Yes I'm just thinking about the market-related impacts on limited partnerships but maybe these are a lot less equity-oriented kinds of investments is that fair?
Yes more related to investment in some underlying properties and some businesses and that type of thing and not necessarily as correlated to the Capital Markets per se.
Okay. And then if we're thinking about the 5% to 8% intermediate-term would you encourage us to Adjust for the 2018 shortfall on individual mortality results in the U.S. or would you not? I'm just sort of thinking about the fee maybe there's $30 million shortfall relative to your typical expectation in U.S. Traditional but did you offset that effectively during 2018 with some better results for example in EMEA?
Well it I'd say because remember we had some U.S. Group results that were so off our expectations for the year. We had some lines that are better than what our expectations where. Just given the nature of our business we're going to have these pluses and minuses in the various lines.
But I think given the diversity of our business I think we've shown in the past few years that when you add it all up in total we have able to show that pretty consistent growth rate. So it's sort of hard to give you all the pluses and minuses by business unit because I think they'll continue to be little bit volatile over time but in total the diversity will hang together.
Okay. And just last one really quick. Bigger picture. And I know you guys talked about the pipeline and potential deal activity being still pretty strong. Any shift in sort of the composition of what you're looking at? And if you could also sort of interject some commentary as it relates to the outlook for lying for it too?
Okay so I'll take the first question on deal pipeline. No we're not seeing a shift we're seeing a pretty steady pipeline and what is particularly pleasing for us to see is that that the yields are going across regions across the risks and across sizes is. For example be seeing good deal flow in the U.S. Asset-Intensive business.
We expect longevity deals will remain active. And also seeing some Asset-Intensive and Financial Reinsurance deals from Asia. So I expect that overall 2018 from a pipeline perspective will look very similar to oh I'm sorry did I say 2008? 2019 will look very similar to 2018. And on the Langhorne question?
Langhorne we continue to deal-ready with Langhorne. We're continuously looking at transactions. Unfortunately we haven't executed on one yet but I think it's just a matter of time before Langhorne will get its first transaction. And as you know we'll both get a return on the capital that we invest in Langhorne as well as some ongoing fees from sourcing the transactions as well as helping oversee the vehicles itself.
Yes. I would just add that speed isn't our goal with Langhorne. It really isn't. We are keeping full standards. We are going to get our deal done. But we are not going to cut corners to get a deal done. So we want good deals that fit. That's our objective and that's what we are working very hard towards.
And we'll take our next question from Dan Bergman with Citi.
To start just following up on the deal activity question. It sounds like the pipeline is quite strong. But I want to see if there's any update or change level of completion for block deals you're seeing? And any particular areas or products that have been especially competitive lately?
Yes. So you're not going to be surprised by my answer. Competition is about the same as in prior periods and that is it's pretty strong. It remains strong. But we have seen raise a few new entrants but we have also seen a few leave. So overall I would say roughly the same number of competitors but that this rent on the edges. And those competitors are both of the established re-insurers and some of these new re-insurers. I'm sorry and the second part of your question was?
I mean just in terms of thinking between different geographies or products if there's any kind of differential in terms particularly competitive areas or maybe less competitive at the moment?
Well I think size is one of the factors that I would say that the larger deals have fewer competitors but it's pretty competitive at those larger deals. The midsize at deals the level of competition hasn't really changed all that much over the course of the last number of quarters.
Got it. And then just shifting gears to follow up on the EPS growth guidance. Understanding that it's a medium-term expectation. I was just wondering is the 5% to 8% factor impact of your recent capital deployment which was pretty elevated in 2018 and heavily weighted to the back half of the year. Or could it kind of short-term growth be stronger just given the as that recent capital deployment comes into the earnings base? So any thoughts around how to think about that would be helpful.
Yes it really does consider the ongoing capital that level of capital deployment into the deals. You're right we were a little bit higher than normal in 2018 and towards the second part of the year but it does consider our deployment of capital into those transactions.
[Operator Instructions] Our next question comes from Tom Gallagher with Evercore.
Few questions. First is just on the net income volatility can you give further color what drove that? Was there breakage in terms of the variable annuity block in terms of hedging or just some further clarity on that?
Yes Tom. Yes this as you mentioned this quarter there was some volatility or disconnect between net income and operating income. I would say part of it was unrealized capital losses. We had some as I mentioned earlier there were some sales due to some credit concerns and then we also had some repositioning of some of our newer Asset-Intensive transactions that we brought on that we realized some capital losses.
And then we had a small amount of impairments for the quarter I think it was around $18 million in impairments this quarter. And then the second component is the embedded derivatives on our mod coinsurance or modified coinsurance treaties that was a negative for the quarter.
And then the third probably material piece is what you relate mentioned is the increase in the reserves on the embedded GMxB living benefit reserve. But that was offset pretty much by hedging derivatives. So there wasn't really any disconnect between the liability on the GMxB and the hedges worked pretty well against those and there was not any disconnect there.
And would you say on the net income was that would that have been a better barometer of the capital you generated in the quarter or was there some noise in the net income line was the capital generation in the quarter better than implied by your net income performance?
Well unfortunately those things like the embedded derivatives and the GMxB change do go through income into retained earnings although they can turn around pretty quickly as well. So they did impact capital for the quarter but those can certainly turn around.
Got you. And then just a quick one on long-term care. I know your vintages and the quality of your long-term care book is really different than others in the industry but just curious on how that performance looked this quarter?
Yes so as you mentioned advantage of long-term care of the newer variety. And I would characterized performance of that long-term care block not only for the quarter but for the year right around our expectations.
Okay. And then some reinsurance competitors of yours have been pretty significant repricing of an in-force blocks of which has led our knock-on effect and primary companies to recapture them in some instances. I think last we discussed it with you have not been doing that but just wanted to see an update on where you stand on this trend whether that's something you're considering and is that and if you're not doing that is that more of an opportunity for you?
The update is that we remain our strategy isn't to pursue those broad-based rate increases that you just described and the recapture activity that goes with that. What we do is very consistent with how we think about our long-term business and the relationship with our clients is will look at the global relationship with clients broad-based and long term.
When and where we see in balances in those relationships we'll sit down with clients and we work with them to try and bring those back in line. I think yes that that approach can offer opportunities for us. Certainly in terms of the strengthening of the relationship I think that being pretty important and how we've looked at this market.
So Anna nothing meaningful from a pricing standpoint is that a fair way to characterize it?
Nothing material from a repricing standpoint.
[Operator Instructions] We'll take our next question from Alex Scott with Goldman Sachs.
I Just had a few kind of just housekeeping items I guess the net investment income just when I think about it relative to our estimates and I think about it relative to kind of the normalization for VII that you guys calling out last quarter. It looked a bit low quarter-over-quarter particularly since some excess capital has been deployed. Just wondering if you could comment anything there that maybe that when you I look at consolidated net investment income and what we should expect kind of had been in 2019?
And I think the way I look at it Alex is that if you look at our what we call the corporate outside the Asset-Intensive block because Asset-Intensive block is pretty well asset-liability matched and those household together as a spread business. But if you look at the core traditional block I'd say that the investment income was up about 5% which we would expect.
I think if you look at it all in there can be some volatility to due to some of the accounting items that flow through there. Like it could be some of best way to describe it some not derivative activity but just some of the way the accounting works and some of the assets.
Okay and then in the I just the corporate loss you call it out some of the investing that you're do in I think RGAx or So can you help us think about like how that will drain kind of into 2019? And will there be a continued investment whether it's digital or otherwise that will impact things there compared to I think 20% our 25%?
Yes at a higher level for the Corporate segment there's going to be some volatility. I mean that segment probably quarter-to-quarter but as I look out over 2019 I would say on average we expect a loss of about $25 million a quarter in the corporate segment.
And as you mentioned there are some activities in their one of which is the RGAx activity we will happen some revenue to offset that investment over time as well. So it's a little bit hard to predict but my best estimate is again there's going to be some volatility around it but on average $25 million loss rate for quarter is a good estimate for you to work with.
Okay so maybe last one for me. There's been a couple of notable deals that kind of come in the life insurance pays in the U.S. recently that maybe included a little bit more interest sensitive universal life. Is there any reason that you guys stay out of this transaction? I mean how do you beat the pricing environment for those type of closed block deals?
We haven't been successful in those type of products U.S. A type of products compared we are successful in those products is re-insuring the mortality risk and living the policyholder behavior risks or leaving the investment risk with the sailing.
That's part of our in-force block strategy is to look for those opportunities partner maybe with others who might not have the same an appetite or would be open to splitting that type of risks and re-insuring the mortality with us and retaining the other parts of the risks. So I would say that that's not at the top of our list in terms of risk return propositions that we have been successful in terms of being able to execute.
[Operator Instructions] And it appears we have no further questions in the queue at this time. I'd like to turn it back to our presenters for any additional or closing remarks.
Okay well thank you everyone for participating on our call today and continued support for RGA. Thank you very much.
And this concludes today's conference. Thank you for your participation. You may now disconnect.