- Earnings per diluted share: operating
income* up 5 percent to $1.85, net income $1.17
- Reported net premiums increased 7
percent; up 10 percent net of foreign currency
- Approximately 1.2 million shares
repurchased for $105 million during the quarter
- Net adverse foreign currency effect of
$0.10 per diluted share
Reinsurance Group of America, Incorporated (NYSE: RGA), a
leading global provider of life reinsurance, reported operating
income* of $120.8 million, or $1.85 per diluted share, compared
with $121.8 million, or $1.77 per diluted share, in the
prior-year quarter. Net income totaled $76.5 million, or $1.17
per diluted share, compared to $125.1 million, or $1.81 per diluted
share, the year before.
Quarterly Results ($ in
thousands, except per share data) 2016
2015 Net premiums $ 2,157,005 $ 2,023,852 Net income 76,472
125,114 Net income per diluted share 1.17 1.81 Operating income*
120,750 121,778 Operating income per diluted share* 1.85 1.77 Book
value per share 104.88 107.62 Book value per share (excl.
Accumulated Other Comprehensive Income “AOCI”)* 84.11 79.26 Total
assets 52,186,624 44,666,938
* See ‘Use of Non-GAAP Financial Measures’
below
Consolidated net premiums totaled $2.2 billion this quarter, up
7 percent from last year’s first quarter. Current-period premiums
reflect net adverse foreign currency effects of approximately $70.2
million. Excluding those effects, premiums increased 10 percent
versus the prior-year quarter. Investment income decreased 2
percent to $417.3 million this period, primarily attributable to a
$51.1 million decrease in the fair value of options contracts that
are included in funds withheld at interest on the consolidated
balance sheet and support the crediting rates for equity-indexed
annuities. The average investment yield, excluding spread
businesses, was down 32 basis points to 4.46 percent from the first
quarter of 2015, and 50 basis points lower than the fourth-quarter
yield, due primarily to higher prepayment and variable investment
income in the prior periods and higher investment income associated
with a block transaction in the fourth quarter that included
investment income retroactive to the beginning of that year.
The effective tax rate on operating income was approximately 32
percent this quarter, below an expected range of 34 percent to 35
percent for the full year, due primarily to generating a
greater-than-expected portion of earnings in jurisdictions that
have lower income tax rates than the U.S. statutory rate.
Greig Woodring, chief executive officer, commented, “We are off
to a good start in 2016, with a solid first quarter. There were no
major surprises in the quarter, and we remain optimistic about our
earnings potential and returns over time. Operating earnings of
$1.85 per diluted share were up 5 percent over last year’s first
quarter and would have been up 10 percent before the sizable
negative effect of foreign currency movements totaling $0.10.”
Woodring continued, “Most relevant was the fact that our U.S.
Traditional operations reported more consistent results in the
seasonally weak first quarter following unusually high claims in
our U.S. Individual Mortality business in the year-ago period.
Results this year rebounded significantly and were more in line
with our expectations. Our Asia Pacific segment was particularly
strong, while claims flow in Canada and the U.K. was somewhat
elevated, all normal volatility that occurs from quarter to
quarter. More important, we have good balance overall, and our
global model and diversified sources of earnings continue to serve
us well.
“We repurchased 1.2 million shares in the quarter, and we
continue to pursue a balanced approach to capital management in
terms of deployment into in-force and other attractive
transactions, share repurchases and shareholder dividend increases
over time. We did not close on any major deployment transactions in
the quarter, but the activity pipeline and environment continue to
be strong.
“Looking forward, the macroeconomic environment remains
challenging for the global life insurance industry, but we continue
to see good demand from clients for our solutions. We expect to
continue to execute in both our traditional and transaction
businesses.”
SEGMENT RESULTS
U.S. and Latin America
Traditional
The U.S. and Latin America Traditional segment reported pre-tax
operating income of $53.2 million, compared with
$20.3 million in the first quarter of 2015. Mortality results
were generally in line with our expectations, whereas last year’s
first quarter was affected by a higher-than-expected number and
average size of individual mortality claims. Pre-tax net income
totaled $51.1 million for the quarter, compared with
$17.8 million in last year’s first quarter.
Traditional net premiums increased 11 percent from last year’s
first quarter to $1,234.4 million, including the effect of in-force
transactions that occurred over the past year.
Non-Traditional
The Asset-Intensive business reported pre-tax operating income
of $45.3 million compared with $40.3 million last year.
Current-period results were at the low end of an expected range due
to a combination of minor items. Overall, investment spreads were
generally consistent with expectations. First-quarter pre-tax net
losses totaled $30.8 million compared to pre-tax net income of
$42.1 million a year ago, primarily attributable to realized
losses from investment impairments, changes in the value of
embedded derivatives and equity market effects.
The Financial Reinsurance business continued to perform well,
reporting pre-tax operating income and pre-tax net income of $15.9
million, up from $12.4 million the year before, due to the ongoing
effect of strong new business produced in the second half of
2015.
Canada
Traditional
The Canada Traditional segment reported pre-tax operating income
of $19.4 million this quarter, up from $17.2 million the
year before. Mortality experience was slightly worse than expected
this year, but better than the very unfavorable experience a year
ago. The negative effect of a weaker Canadian dollar was
significant in the quarter, adversely affecting pre-tax operating
income by $3.7 million. Pre-tax net income totaled $20.1 million
compared with $22.7 million in the first quarter of 2015.
Reported net premiums increased 1 percent to $215.5 million and
increased 12 percent on an original currency basis.
Non-Traditional
The Canada Non-Traditional business segment, which consists of
longevity and fee-based transactions, reported pre-tax operating
income and pre-tax net income of $0.6 million this quarter and $4.1
million in the prior-year quarter. This year’s results reflected
unfavorable experience on longevity treaties, whereas last year’s
experience was favorable. Pre-tax operating income included an
adverse effect of $0.6 million due to a relatively weaker Canadian
dollar.
Europe, Middle East and Africa (EMEA)
Traditional
The EMEA Traditional segment reported a pre-tax operating loss
of $1.1 million versus pre-tax operating income of $10.4 million in
last year’s first quarter. Current-period results include
unfavorable claims experience, most notably in the U.K., but
consistent with seasonal volatility. First-quarter pre-tax net loss
totaled $1.1 million versus a pre-tax net income of
$10.5 million in the year-ago quarter.
Net reported premiums increased 2 percent and totaled $276.4
million, compared with $269.7 million in last year’s first quarter.
Net premiums were up 11 percent in original currencies.
Non-Traditional
The EMEA Non-Traditional business segment includes longevity,
asset-intensive and fee-based transactions. Pre-tax operating
income increased to $25.6 million compared to $18.6 million in the
year-ago period. The stronger current-period results reflect
favorable longevity experience in the U.K. Net foreign currency
fluctuations adversely affected pre-tax operating income by $2.0
million. Pre-tax net income totaled $25.4 million this quarter,
compared with $19.6 million in last year’s first quarter.
Asia Pacific
Traditional
The Asia Pacific Traditional segment reported strong pre-tax
operating income of $41.1 million, compared with the unusually
strong results of $52.6 million in the prior-year period. This
quarter’s results reflect a strong quarter in Australia, with solid
results collectively across the Asian operations, most notably
Japan. Net foreign currency exchange rate fluctuations had an
adverse effect of $2.7 million on pre-tax operating income. The
prior-year quarter was driven by unusually favorable experience in
Australia and strong results across most other geographies.
First-quarter pre-tax net income totaled $41.2 million
compared with $52.6 million in last year’s first quarter.
Reported net premiums rose 1 percent to $374.1 million from
$372.1 million in the prior-year period. Net premiums were up 6
percent in original currencies this quarter.
Non-Traditional
The Asia Pacific Non-Traditional business segment includes
asset-intensive, fee-based and other various transactions. Pre-tax
operating income in this segment totaled $7.4 million, down from
$10.1 million last year, due to adverse experience on several
treaties. Net foreign currency exchange rate fluctuations had a
favorable effect of $0.3 million on pre-tax operating income.
Pre-tax net income totaled $8.6 million this quarter and $10.1
million in the year-ago period.
Corporate and Other
The Corporate and Other segment’s pre-tax operating loss
increased to $30.3 million from $5.7 million the year before,
attributable mainly to higher operating expenses and lower
investment income. Pre-tax net losses were $23.3 million this
quarter versus $8.0 million a year ago.
Dividend Declaration
The board of directors declared a regular quarterly dividend of
$0.37, payable May 31 to shareholders of record as of May 10.
Earnings Conference Call
A conference call to discuss first-quarter results will begin at
9 a.m. Eastern Time on Friday, April 29. Interested parties may
access the call by dialing 1-877-718-5095 (domestic) or
719-325-4832 (international). The access code is 5076339. A live
audio webcast of the conference call will be available on the
company’s investor relations website at www.rgare.com. A replay of the conference call
will be available at the same address for 90 days following
the conference call. A telephonic replay also will be available
through May 7 at 888-203-1112 (domestic) or 719-457-0820
(international), access code 5076339.
The company has posted to its website a Quarterly Financial
Supplement that includes financial information for all segments as
well as information on its investment portfolio. Additionally, the
company posts periodic reports, press releases and other useful
information on its investor relations website.
Use of Non-GAAP Financial Measures
RGA uses a non-GAAP financial measure called operating income as
a basis for analyzing financial results. This measure also serves
as a basis for establishing target levels and awards under RGA’s
management incentive programs. Management believes that operating
income, on a pre-tax and after-tax basis, better measures the
ongoing profitability and underlying trends of the company’s
continuing operations, primarily because that measure excludes
substantially all of the effect of net investment related gains and
losses, as well as changes in the fair value of certain embedded
derivatives and related deferred acquisition costs. These items can
be volatile, primarily due to the credit market and interest rate
environment, and are not necessarily indicative of the performance
of the company’s underlying businesses. Additionally, operating
income excludes any net gain or loss from discontinued operations,
the cumulative effect of any accounting changes, and other items
that management believes are not indicative of the company’s
ongoing operations. The definition of operating income can vary by
company and is not considered a substitute for GAAP net income.
Reconciliations to GAAP net income are provided in the following
tables. Additional financial information can be found in the
Quarterly Financial Supplement on RGA’s Investor Relations website
at www.rgare.com in the “Quarterly
Results” tab and in the “Featured Report” section.
Book value per share before impact of AOCI is a non-GAAP
financial measure that management believes is important in
evaluating the balance sheet in order to ignore the effects of
unrealized amounts primarily associated with mark-to-market
adjustments on investments and foreign currency translation.
Operating income per diluted share is a non-GAAP financial
measure calculated as operating income divided by weighted average
diluted shares outstanding. Operating return on equity is a
non-GAAP financial measure calculated as operating income divided
by average shareholders’ equity excluding AOCI.
About RGA
Reinsurance Group of America, Incorporated is among the largest
global providers of life reinsurance, with operations in Australia,
Barbados, Bermuda, Canada, China, France, Germany, Hong Kong,
India, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands,
New Zealand, Poland, Singapore, South Africa, South Korea, Spain,
Taiwan, Turkey, the United Arab Emirates, the United Kingdom and
the United States. Worldwide, the company has approximately $3.1
trillion of life reinsurance in force, and assets of $52.2
billion.
Cautionary Statement Regarding Forward-looking
Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, among others, statements relating to projections of the
earnings, revenues, income or loss, future financial performance
and growth potential of Reinsurance Group of America, Incorporated
and its subsidiaries (which we refer to in the following paragraphs
as “we,” “us” or “our”). The words “intend,” “expect,” “project,”
“estimate,” “predict,” “anticipate,” “should,” “believe,” and other
similar expressions also are intended to identify forward-looking
statements. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results, performance and
achievements could differ materially from those set forth in,
contemplated by or underlying the forward-looking statements.
Numerous important factors could cause actual results and events
to differ materially from those expressed or implied by
forward-looking statements including, without limitation, (1)
adverse capital and credit market conditions and their impact on
the Company’s liquidity, access to capital and cost of capital, (2)
the impairment of other financial institutions and its effect on
the Company’s business, (3) requirements to post collateral or make
payments due to declines in market value of assets subject to the
Company’s collateral arrangements, (4) the fact that the
determination of allowances and impairments taken on the Company’s
investments is highly subjective, (5) adverse changes in mortality,
morbidity, lapsation or claims experience, (6) changes in the
Company’s financial strength and credit ratings and the effect of
such changes on the Company’s future results of operations and
financial condition, (7) inadequate risk analysis and underwriting,
(8) general economic conditions or a prolonged economic downturn
affecting the demand for insurance and reinsurance in the Company’s
current and planned markets, (9) the availability and cost of
collateral necessary for regulatory reserves and capital, (10)
market or economic conditions that adversely affect the value of
the Company’s investment securities or result in the impairment of
all or a portion of the value of certain of the Company’s
investment securities, that in turn could affect regulatory
capital, (11) market or economic conditions that adversely affect
the Company’s ability to make timely sales of investment
securities, (12) risks inherent in the Company’s risk management
and investment strategy, including changes in investment portfolio
yields due to interest rate or credit quality changes, (13)
fluctuations in U.S. or foreign currency exchange rates, interest
rates, or securities and real estate markets, (14) adverse
litigation or arbitration results, (15) the adequacy of reserves,
resources and accurate information relating to settlements, awards
and terminated and discontinued lines of business, (16) the
stability of and actions by governments and economies in the
markets in which the Company operates, including ongoing
uncertainties regarding the amount of United States sovereign debt
and the credit ratings thereof, (17) competitive factors and
competitors’ responses to the Company’s initiatives, (18) the
success of the Company’s clients, (19) successful execution of the
Company’s entry into new markets, (20) successful development and
introduction of new products and distribution opportunities, (21)
the Company’s ability to successfully integrate acquired blocks of
business and entities, (22) action by regulators who have authority
over the Company’s reinsurance operations in the jurisdictions in
which it operates, (23) the Company’s dependence on third parties,
including those insurance companies and reinsurers to which the
Company cedes some reinsurance, third-party investment managers and
others, (24) the threat of natural disasters, catastrophes,
terrorist attacks, epidemics or pandemics anywhere in the world
where the Company or its clients do business, (25) interruption or
failure of the Company’s telecommunication, information technology
or other operational systems, or the Company’s failure to maintain
adequate security to protect the confidentiality or privacy of
personal or sensitive data stored on such systems, (26) changes in
laws, regulations, and accounting standards applicable to the
Company, its subsidiaries, or its business, (27) the effect of the
Company’s status as an insurance holding company and regulatory
restrictions on its ability to pay principal of and interest on its
debt obligations, and (28) other risks and uncertainties described
in this document and in the Company’s other filings with the
SEC.
Forward-looking statements should be evaluated together with the
many risks and uncertainties that affect our business, including
those mentioned in this document and described in the periodic
reports we file with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date on which they
are made. We do not undertake any obligations to update these
forward-looking statements, even though our situation may change in
the future. We qualify all of our forward-looking statements by
these cautionary statements. For a discussion of the risks and
uncertainties that could cause actual results to differ materially
from those contained in the forward-looking statements, you are
advised to review the risk factors in our Annual Report on Form
10-K for the year ended December 31, 2015.
REINSURANCE GROUP OF AMERICA,
INCORPORATED AND SUBSIDIARIES Reconciliation of Consolidated Net
Income to Operating Income (Dollars in thousands)
(Unaudited) Three Months EndedMarch 31, 2016 2015
GAAP net income $ 76,472 $ 125,114 Reconciliation to operating
income: Capital (gains) losses, derivatives and other, included in
investment related (gains) losses, net (21,727 ) (14,585 ) Capital
(gains) losses on funds withheld, included in investment income
(3,239 ) (7,412 ) Embedded derivatives: Included in investment
related (gains) losses, net 100,873 17,847 Included in interest
credited 18,947 6,703 DAC offset, net (50,036 ) (5,819 ) Investment
income on unit-linked variable annuities (265 ) — Interest credited
on unit-linked variable annuities 265 — Non-investment derivatives
(540 ) (70 ) Operating income $ 120,750 $ 121,778
Reconciliation of Consolidated Pre-tax Net
Income to Pre-tax Operating Income (Dollars in thousands)
(Unaudited) Three Months EndedMarch 31, 2016 2015
Income before income taxes $ 107,580 $ 184,125 Reconciliation to
pre-tax operating income: Capital (gains) losses, derivatives and
other, included in investment related (gains) losses, net (31,968 )
(20,946 ) Capital (gains) losses on funds withheld, included in
investment income (4,983 ) (11,402 ) Embedded derivatives: Included
in investment related (gains) losses, net 155,189 27,458 Included
in interest credited 29,149 10,313 DAC offset, net (76,978 ) (8,951
) Investment income on unit-linked variable annuities (408 ) —
Interest credited on unit-linked variable annuities 408 —
Non-investment derivatives (831 ) (108 ) Pre-tax operating income $
177,158 $ 180,489 REINSURANCE
GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Reconciliation of
Pre-tax Net Income to Pre-tax Operating Income (Dollars in
thousands) (Unaudited) Three Months Ended March 31, 2016
Pre-tax net
income (loss)
Capital
(gains) losses,
derivatives
and other, net
Change in
value of
embedded
derivatives, net
Pre-tax
operating
income (loss)
U.S. and Latin America Operations: Traditional $ 51,098 $ 65 $
2,035 $ 53,198 Non-Traditional: Asset Intensive (30,830 ) (16,082 )
(1)
92,180
(2)
45,268 Financial Reinsurance 15,934 —
—
15,934 Total U.S. and Latin America 36,202 (16,017 )
94,215 114,400 Canada Operations Traditional 20,095 (731 ) — 19,364
Canada Operations Non-Traditional 592 — — 592
Canada Operations 20,687 (731 ) — 19,956 EMEA Traditional
(1,116 ) (5 ) — (1,121 ) EMEA Non-Traditional 25,424 187
— 25,611 EMEA Operations 24,308 182 — 24,490
Asia Pacific Traditional 41,160 (16 ) — 41,144 Asia Pacific
Non-Traditional 8,553 (1,111 ) — 7,442 Asia
Pacific Operations 49,713 (1,127 ) — 48,586 Corporate and Other
(23,330 ) (6,944 )
—
(30,274 ) Consolidated $ 107,580 $ (24,637 ) $ 94,215
$ 177,158
(1) Asset Intensive is net of $13,145 DAC
offset.
(2) Asset Intensive is net of $(90,123)
DAC offset.
(Unaudited) Three Months Ended March 31, 2015
Pre-tax net
income (loss)
Capital
(gains) losses,
derivatives
and other, net
Change in
value of
embedded
derivatives, net
Pre-tax
operating
income (loss)
U.S. and Latin America Operations: Traditional $ 17,843 $ 1 $ 2,472
$ 20,316 Non-Traditional: Asset Intensive 42,140 (23,392 )
(1)
21,586
(2)
40,334 Financial Reinsurance 12,365 — — 12,365
Total U.S. and Latin America 72,348 (23,391 ) 24,058 73,015
Canada Operations Traditional 22,727 (5,554 ) — 17,173 Canada
Operations Non-Traditional 4,131 — — 4,131
Canada Operations 26,858 (5,554 ) — 21,304 EMEA Traditional
10,482 (49 ) — 10,433 EMEA Non-Traditional 19,634 (999 ) —
18,635 EMEA Operations 30,116 (1,048 ) — 29,068 Asia
Pacific Traditional 52,648 — — 52,648 Asia Pacific Non-Traditional
10,145 (21 ) — 10,124 Asia Pacific Operations
62,793 (21 ) — 62,772 Corporate and Other (7,990 ) 2,320 —
(5,670 ) Consolidated $ 184,125 $ (27,694 ) $ 24,058
$ 180,489
(1) Asset Intensive is net of $4,762 DAC
offset.
(2) Asset Intensive is net of $(13,713)
DAC offset.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND
SUBSIDIARIES Per Share and Shares Data (In thousands, except per
share data) (Unaudited) Three Months EndedMarch 31, 2016
2015 Diluted earnings per share from operating income
$ 1.85 $ 1.77 Earnings per share from net income: Basic earnings
per share $ 1.18 $ 1.84 Diluted earnings per share $ 1.17 $ 1.81
Weighted average number of common and common equivalent shares
outstanding 65,217 68,942 (Unaudited) At or
for the Three Months
Ended March 31,
2016 2015 Treasury shares 15,073 12,669 Common shares
outstanding 64,065 66,439 Book value per share outstanding $ 104.88
$ 107.62 Book value per share outstanding, before impact of AOCI $
84.11 $ 79.26 REINSURANCE GROUP OF AMERICA,
INCORPORATED AND SUBSIDIARIES Condensed Consolidated Statements of
Income (Dollars in thousands) (Unaudited) Three Months
EndedMarch 31, 2016 2015 Revenues: Net premiums $
2,157,005 $ 2,023,852 Investment income, net of related expenses
417,266 426,891 Investment related gains (losses), net:
Other-than-temporary impairments on fixed maturity securities
(33,817 ) (2,527 ) Other investment related gains (losses), net
(87,069 ) 10,110 Total investment related gains (losses),
net (120,886 ) 7,583 Other revenue 59,183 62,287
Total revenues 2,512,568 2,520,613 Benefits and
expenses: Claims and other policy benefits 1,886,764 1,775,451
Interest credited 87,905 120,678 Policy acquisition costs and other
insurance expenses 233,763 277,043 Other operating expenses 157,424
121,618 Interest expense 32,807 35,627 Collateral finance and
securitization expense 6,325 6,071 Total benefits and
expenses 2,404,988 2,336,488 Income before income
taxes 107,580 184,125 Provision for income taxes 31,108
59,011 Net income $ 76,472 $ 125,114
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428006902/en/
Reinsurance Group of America, IncorporatedJeff Hopson,
636-736-7000Senior Vice President - Investor Relations
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