Reinsurance Group of America Announces Strong Results for Continuing Operations; Charge to Discontinued Accident and Health Segment
ST. LOUIS, January 28, 1999 Reinsurance Group of America, Incorporated (NYSE:RGA, RGA.A) reported strong earnings from continuing operations as well as a significant charge associated with the companys discontinued accident and health line of business. The company also announced a three-for-two stock split on each class of common stock outstanding.
Income from continuing operations totaled $89.7 million for the year, and $32.7 million for the fourth quarter, compared to $72.6 million and $27.8 million in 1997, respectively. These amounts represent increases of 24 percent and 18 percent over the comparable prior year amounts. On a diluted per share basis, income from continuing operations increased 10 percent to $3.13 for the year. Fourth quarter income from continuing operations totaled $1.07 per share versus $1.09 per share reported in the prior year. The fourth quarter of 1997 benefited from several large transactions that werent expected to repeat. Per share results for 1998 reflect 4.9 million additional common shares issued in June.
On a post-split basis, income from continuing operations represents $2.08 per share for the year, and $0.71 for the quarter, compared to $1.89 and $0.73 in the prior year, respectively.
The company also reported a loss for the year of $27.6 million on its discontinued accident and health operations, compared to an $18.0 million loss in the prior year. Fourth quarter loss on discontinued operations totaled $26.4 million, which includes a non-cash charge of $32 million, on a pre-tax basis, to increase that segments reserves. That charge comes as a result of continued poor claims experience on that segments block of business, particularly in the latter half of the year. The additional reserves are expected to cover the ongoing run-off of business accepted from outside managed pools as well as the accident and health risks internally underwritten by the company. The nature of the underlying risks is such that the claims may take years to reach the reinsurers involved. Thus, the company expects to pay claims out of existing reserves over a number of years as the level of business diminishes.
President and Chief Executive Officer A. Greig Woodring commented, "We were pleased with both the full year and quarters results reported by segments representing RGAs continuing operations. The U.S., Canada, and Latin America segments were at or above our expectations, while the Asia Pacific segment reported mixed results. Though results in that segments Australian operations were strong, the Hong Kong operation incurred a loss as lapse rates escalated on several major treaties, reflecting the overall economic slowdown in that market."
Woodring also noted, "Our business flows and related earnings can vary significantly from quarter to quarter, as we saw in the fourth quarter of last year when several large transactions significantly drove up results. Our continuing operations, on a per share basis, have exhibited a compounded annual growth rate of about 19 percent over the past five years, and we expect to continue growing those operations in our target range of 15 to 20 percent. In 1999, the dilutive impact of the June equity offering will diminish as proceeds from that offering are further deployed. Also, we have seen and expect to continue to see a number of large blocks of business enter the reinsurance market."
Turning to discontinued operations, Woodring explained, "We took the $32 million pre-tax charge to strengthen reserves supporting the accident and health segment, which is now reported as a discontinued operation. We took that action as a result of the poor development of the entire block of business, which is currently in run-off. Premium flow for the segment this year was greater than we had expected, which together with the deteriorating claims trends, convinced us to take this action now rather than later. Along with many other reinsurers that have provided support for accident and health risks in recent years, we have experienced poor results. We dont anticipate that this segment will have a significant impact on our results going forward."
Woodring concluded, "We remain optimistic about the opportunities we continue to see in our markets, and plan to continue growing our core businesses."
For the year, including discontinued operations, reported net income totaled $62.1 million, or $1.48 per share on a post-split basis, compared to $54.6 million, or $1.42 per share the prior year. The company also reported revenues from continuing operations of $1.34 billion, up 37 percent from the prior year. For the quarter, revenues from continuing operations totaled $412.9 million, up 45 percent from the comparable quarter in 1997. Premiums for the year totaled $1.02 billion, and investment income totaled $301.8 million, representing increases of 36 percent and 61 percent, respectively. The investment income increase reflects the continued expansion of the companys asset base, primarily as a result of the addition of asset-intensive reinsurance arrangements.
In addition to the stock split, the board of directors declared a regular quarterly dividend of $0.05 per share post-split. Both the stock split and dividend are payable February 26 to shareholders of record as of February 5.
General American Life Insurance Company, the companys majority shareholder, announced today its plan to demutualize this year. General American beneficially owns approximately 64 percent of RGA's outstanding voting shares and approximately 52 percent of all shares outstanding.
Reinsurance Group of America, Incorporated, through its subsidiaries, RGA Reinsurance Company and RGA Life Reinsurance Company of Canada, is among the largest providers of life reinsurance in North America. In addition to its North American operations, Reinsurance Group of America, Incorporated has subsidiary companies or branch offices in Argentina, Australia, Barbados, Bermuda, Chile, Hong Kong, Japan, Mexico, South Africa, Taiwan, and the United Kingdom. Worldwide, the Company has more than $330 billion of life reinsurance in force.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Reinsurance Group of America, Incorporateds business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Cautionary Statement" in the Companys Annual Report or Form 10-K for the most recently ended fiscal year.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
($ in thousands, except per share data)
Three Months Ended Twelve Months Ended
(Unaudited) December 31, December 31,
1998 1997 1998 1997
Revenues:
Net premiums $311,068 $198,533 $1,016,420 $744,768
Net investment income 95,600 53,652 301,780 187,084
Realized capital gains (266) (253) 3,092 332
Other income 6,529 32,377 23,200 46,009
Total Revenue 412,931 284,309 1,344,492 978,193
Benefits and Expenses:
Claims and other policy
benefits 245,486 163,711 797,901 569,133
Interest credited 42,069 29,117 153,247 92,311
Policy acquisition costs
and other insurance
expenses 57,905 32,703 188,471 148,128
Other expenses 16,845 13,697 58,021 47,406
Interest expense 2,365 1,948 8,805 7,801
Total Benefits
& Expenses 364,670 241,176 1,206,445 864,779
Income from continuing
operations before taxes
and minority interest 48,261 43,133 138,047 113,414
Income Taxes 16,776 15,183 49,055 40,403
Income from continuing
operations before minority
interest 31,485 27,950 88,992 73,011
Minority Interest (1,174) 151 (717) 430
Income from continuing
operations 32,659 27,799 89,709 72,581
Discontinued operations:
Loss from operations of
discontinued accident and
health operations, net of
taxes (26,362) (5,476) (27,628) (17,961)
Net income $ 6,297 $ 22,323 $ 62,081 $ 54,620
Add Five
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
($ in thousands, except per share data)
Three Months Ended Twelve Months Ended
(Unaudited) December 31, December 31,
1998 1997 1998 1997
Pre-stock split per share information
Earnings per share from income from continuing operations: Basic Earnings 1.08 1.10 3.16 2.86 Diluted Earnings 1.07 1.09 3.13 2.84
Earnings per share from net income: Basic Earnings 0.21 0.88 2.25 2.15 Diluted Earnings 0.21 0.88 2.22 2.13
Weighted average number of common and common equivalent shares outstanding (in thousands) 30,545 25,512 28,373 25,604
Post-stock split per share information
Earnings per share from income from continuing operations: Basic Earnings 0.72 0.73 2.11 1.91 Diluted Earnings 0.71 0.73 2.08 1.89
Earnings per share from net income: Basic Earnings 0.14 0.59 1.50 1.44 Diluted Earnings 0.14 0.58 1.48 1.42
Weighted average number of common and common equivalent shares outstanding (in thousands) 45,818 38,268 42,559 38,406
- more - Add Six
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Business Summary
Twelve Months Ended
(Unaudited) December 31,
1998 1997
Gross life reinsurance in force (in billions)
North American business $291.2 $199.4
International business 39.4 27.9
Gross life reinsurance written (in billions)
North American business 115.5 58.1
International business 9.5 17.8
Consolidated cash and invested assets
(in millions) 5,274.8 3,671.4
Invested asset yield 6.87% 7.23%
Investment portfolio mix
Cash and short-term investments 8.48% 8.58%
Fixed maturity securities 70.42% 68.86%
Mortgage loans 4.11% 4.51%
Policy loans 9.74% 13.08%
Funds withheld at interest 6.82% 4.51%
Other invested assets 0.43% 0.46%
Pre-stock split: Book value per share outstanding $ 24.86 $ 19.81 Book value per share outstanding, before impact of FAS 115 23.28 17.14
Treasury stock at December 31 785,513 844,535
(1) Shares outstanding include the 4,945,000 non-voting shares
that were issued on June 10, 1998.
Post-stock split: Book value per share outstanding $ 16.57 $ 13.21 Book value per share outstanding, before impact of FAS 115 15.52 11.43
Treasury stock at December 31 1,178,270 1,266,803
(1) Shares outstanding include the 7,417,500 non-voting shares
that were issued on June 10, 1998.
- more - Add Seven
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES U.S. OPERATIONS (Dollars in thousands)
FOR THE YEAR ENDED DECEMBER 31, 1998
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $714,960 $ 1,284 $ -- $716,244
Investment income,
net of related expenses 106,584 124,891 -- 231,475
Realized investment gains
/ (losses), net 1,717 654 -- 2,371
Other revenue 787 4 17,800 18,591
Total revenues 824,048 126,833 17,800 968,681
Benefits and expenses:
Claims and other policy
benefits 538,773 2,259 -- 541,032
Interest credited 44,052 107,949 -- 152,001
Policy acquisition costs
and other insurance
expenses 112,962 6,792 12,942 132,696
Interest and other
operating expenses 14,132 738 131 15,001
Total benefits and
expenses 709,919 117,738 13,073 840,730
Income before income
taxes and minority
interest $114,129 $ 9,095 $ 4,727 $127,951
FOR THE YEAR ENDED DECEMBER 31, 1997
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $554,239 $ 15 $ -- $554,254
Investment income,
net of related expenses 81,423 59,883 -- 141,306
Realized investment gains
/ (losses), net 1,816 (1,726) -- 90
Other revenue 872 -- 25,308 26,180
Total revenues 638,350 58,172 25,308 721,830
Benefits and expenses:
Claims and other policy
benefits 405,461 2,273 -- 407,734
Interest credited 42,565 48,371 -- 90,936
Policy acquisition costs and
other insurance expenses 89,557 1,548 14,368 105,473
Interest and other
operating expenses 10,919 559 114 11,592
Total benefits and
expenses 548,502 52,751 14,482 615,735
Income before income taxes
and minority interest $89,848 $ 5,421 $10,826 $106,095
- more - Add Eight
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES CANADIAN OPERATIONS (Dollars in thousands)
Twelve Months Ending
December 31,
1998 1997
Revenues:
Net premiums $144,784 $83,563
Investment income, net of related expenses 38,858 18,936
Realized investment gains / (losses), net 617 109
Other revenue 482 20,152
Total revenues 184,741 122,760
Benefits and expenses:
Claims and other policy benefits 127,821 74,972
Interest credited 1,059 1,293
Policy acquisition costs
and other insurance expenses 26,163 22,411
Other operating expenses 6,944 6,387
Total benefits and expenses 161,987 105,063
Income before income taxes
and minority interest $ 22,754 $ 17,697
- more - Add Nine
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES OTHER INTERNATIONAL (Dollars in thousands)
For the Twelve Months Ending
December 31, 1998
LATIN AMERICA Total
Rein- ASIA OTHERS Inter-
Direct surance PACIFIC MARKETS national
Revenues:
Net premiums $48,354 $50,325 $53,072 $3,641 $155,392
Investment income,
net of related expenses 13,926 3,859 2,545 479 20,809
Realized investment gains
/ (losses), net 4 -- 23 81 108
Other revenue 242 1 3,089 795 4,127
Total revenues 62,526 54,185 58,729 4,996 180,436
Benefits and expenses:
Claims and other policy
benefits 49,238 45,225 31,900 2,685 129,048
Interest credited 187 -- -- -- 187
Policy acquisition costs and
other insurance expenses 4,814 2,067 21,775 923 29,579
Interest and other operating
expenses 7,465 3,892 8,115 6,818 26,290
Total benefits and
expenses 61,704 51,184 61,790 10,426 185,104
Income (loss) before
income taxes and minority
interest $ 822 $ 3,001 $(3,061) $(5,430) $(4,668)
For the twelve months ending
December 31, 1997
LATIN AMERICA Total
Rein- ASIA OTHERS Inter-
Direct surance PACIFIC MARKETS national
Revenues:
Net premiums $56,460 $11,730 $36,591 $2,170 $106,951
Investment income, net of
related expenses 7,067 3,548 1,126 383 12,124
Realized investment gains
/ (losses), net -- -- 14 -- 14
Other revenue 185 -- -- 332 517
Total revenues 63,712 15,278 37,731 2,885 119,606
Benefits and expenses:
Claims and other policy
benefits 53,181 10,327 21,164 1,755 86,427
Interest credited 82 -- -- -- 82
Policy acquisition costs and
other insurance expenses 3,820 329 15,616 479 20,244
Other operating expenses 6,553 3,763 7,363 4,312 21,991
Total benefits and
expenses 63,636 14,419 44,143 6,546 128,744
Income (loss) before
income taxes and minority
interest $ 76 $ 859 $(6,412) $(3,661) $(9,138)
# # #