Reinsurance Group Of America Reports 13 Percent Decrease In First-Quarter Operating Earnings
ST. LOUIS--(BUSINESS WIRE)--April 26, 2001--Reinsurance Group of America, Incorporated (NYSE:RGA), one of North America's leading providers of life reinsurance, reported operating earnings from continuing operations of $23.4 million for the first quarter, down 13 percent from $26.9 million in the prior year. Operating earnings from continuing operations of $0.47 per diluted share were down 13 percent from $0.54 per diluted share in the prior year. Net income for the quarter, including capital gains and losses and discontinued operations, totaled $21.6 million, or $0.43 per diluted share, compared to net income of $20.4 million, or $0.41 per diluted share in the prior year.
Operating earnings were down in the first quarter due to adverse mortality experience, primarily in the company's U.S. operating segment. As reported earlier this month, RGA's U. S. operating segment sustained unusually high claims levels. Although earnings were down in the segment because of that claims experience, net premiums for the U.S. segment increased 24 percent for the quarter, to $305.8 million from $247.4 million in the prior year.
President and Chief Executive Officer A. Greig Woodring commented, "We are obviously disappointed to begin the year with reduced operating earnings in our U.S. operating segment. Pre-tax operating earnings for that segment were $35.3 million in the first quarter compared to $36.9 million in the prior year. The first-quarter result includes approximately $9 million of claims in excess of what we expected. We experienced high claim levels on several treaties which have been on the books for years. These treaties are performing well within our range of expectations based on inception-to-date analyses. As we have consistently pointed out, our results are primarily influenced by mortality which can experience some volatility on a quarterly basis. On a longer-term basis, mortality risk is more predictable, and our historical annual results have demonstrated a more consistent pattern. Fluctuations of the type seen in the first quarter occasionally occur, however we don't expect a significant shift in future claim levels."
Woodring continued, "Canada reported a solid first quarter. Pre-tax operating earnings totaled $11.5 million versus $12.7 million in the prior year. Comparison to the prior period is influenced by the very favorable mortality experience in that segment a year ago. Net premiums in Canada increased 4 percent to $42.6 million from $41.0 million. Our Canada operation continues to be a solid performer and a market leader."
Woodring concluded, "RGA's other international operations, which include Latin America, Asia Pacific, Europe and South Africa, reported a pre-tax operating loss of $4.3 million for the quarter versus a modest loss in the prior year. Poor claims experience on our reinsurance of Argentine pension business contributed to this loss. Net premiums in our international markets were strong, with an increase of 36 percent to $56.2 million from $41.2 million in the prior year. All of these international operations are still in relatively early stages of development."
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable May 29 to shareholders of record as of May 8.
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, branch offices or representative offices in Argentina, Australia, Barbados, Hong Kong, Japan, South Africa, Spain, Taiwan, and the United Kingdom. Worldwide, the Company has over $585 billion of life reinsurance in force, and assets of $6.1 billion. Metropolitan Life Insurance Company owns approximately 59 percent of RGA's outstanding shares.
Forward-Looking Statements
This news release is based on preliminary financial results, which are subject to further review and adjustment. Statements in this press release regarding the business of Reinsurance Group of America, Incorporated which are not historical facts, including, without limitation, statements and information relating to the Company's future financial performance, growth potential, increases in premiums, the effect of mortality rates and experience, claims levels, its views on the life reinsurance industry and other statements related to the Company's business are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Important factors that could cause actual results and events to differ materially from those expressed or implied by forward-looking statements including, without limitation, (1) market conditions and the timing of sales of investment securities, (2) regulatory action taken by the New York or Missouri Departments of Insurance with respect to Metropolitan Life Insurance Company ("MetLife") or General American Life Insurance Company ("General American") or the Company or its subsidiaries, (3) changes in the credit ratings of the Company, MetLife or General American and the effect of such changes on the Company's future results of operations and financial condition, (4) material changes in mortality and claims experience, (5) competitive factors and competitors' responses to the Company's initiatives, (6) general economic conditions affecting the demand for insurance and reinsurance in the Company's current and planned markets, (7) successful execution of the Company's entry into new markets, (8) successful development and introduction of new products, (9) the stability of governments and economies in foreign markets in which we operate, (10) fluctuations in U.S. and foreign currency exchange rates, interest rates, and securities and real estate markets, (11) the success of the Company's clients, (12) changes in laws, regulations, and accounting standards applicable to the Company and its subsidiaries, and (13) other risks and uncertainties described in its Annual Report and in the Company's other filings with the Securities and Exchange Commission.
Forward-looking statements should be evaluated together with the many risks and uncertainties that affect our business, including those mentioned in this document and the cautionary statements described in the periodic reports filed by the company with the Securities and Exchange Commission. For a discussion of these risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to consult the section named "Forward-Looking and Cautionary Statements" contained in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and other documents filed with the Securities and Exchange Commission, which discussions are incorporated by reference into this document.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands)
Three Months Ended
(Unaudited) March 31,
2001 2000
Revenues:
Net premiums $404,585 $329,543
Net investment income 84,089 74,010
Realized capital losses, net (1,506) (4,632)
Other revenue 6,487 3,213
Total revenue 493,655 402,134
Benefits and expenses:
Claims and other policy benefits 337,566 265,739
Interest credited 27,404 21,299
Policy acquisition costs and other
insurance expenses 65,833 51,483
Other expenses 22,259 19,965
Interest expense 4,911 3,534
Total benefits and expenses 457,973 362,020
Income from continuing operations
before taxes and minority interest 35,682 40,114
Income taxes 14,040 15,648
Income from continuing operations
before minority interest 21,642 24,466
Minority interest - 562
Net income from continuing operations 21,642 23,904
Discontinued operations:
Loss from discontinued operations,
net of taxes - (3,482)
Net income $ 21,642 $ 20,422
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended
(Unaudited) March 31,
2001 2000
Earnings per share from continuing operations:
Basic earnings per share $ 0.44 $ 0.48
Diluted earnings per share $ 0.43 $ 0.48
Diluted earnings before realized
investment losses $ 0.47 $ 0.54
Earnings per share from net income:
Basic earnings per share $ 0.44 $ 0.41
Diluted earnings per share $ 0.43 $ 0.41
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,886 50,135
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Three Months Ended
(Unaudited) March 31,
2001 2000
Gross life reinsurance in force (in billions)
North American business $ 507.3 $ 410.0
International business 78.4 52.8
Gross life reinsurance written (in billions)
North American business 19.4 25.5
International business 2.2 1.5
Consolidated cash and invested assets
(in millions) 4,665.0 4,111.1
Invested asset yield 7.25% 7.36%
Investment portfolio mix
Cash and short-term investments 3.25% 4.08%
Fixed maturity securities 57.94% 52.76%
Mortgage loans 2.77% 5.37%
Policy loans 15.16% 16.06%
Funds withheld at interest 20.37% 21.04%
Other invested assets 0.51% 0.69%
Book value per share outstanding $ 17.83 $ 16.16
Book value per share outstanding,
before impact of FAS 115 18.46 17.63
Treasury stock 1,662,082 1,183,920
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Three Months Ended March 31, 2001
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $305,489 $ 298 $ -- $305,787
Investment income,
net of related
expenses 36,701 23,159 199 60,059
Realized investment
gains/ (losses),
net (4,568) 234 -- (4,334)
Other revenue 118 (718) 6,216 5,616
Total revenues 337,740 22,973 6,415 367,128
Benefits and expenses:
Claims and other
policy benefits 249,430 3,081 -- 252,511
Interest credited 12,616 14,388 -- 27,004
Policy acquisition
costs and other
insurance expenses 42,496 3,102 2,854 48,452
Other operating
expenses 6,692 129 2,068 8,889
Total benefits
and expenses 311,234 20,700 4,922 336,856
Income before income
taxes and minority
interest $ 26,506 $ 2,273 $ 1,493 $ 30,272
Three Months Ended March 31, 2000
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $246,742 $ 618 $ -- $ 247,360
Investment income,
net of related
expenses 33,111 17,435 -- 50,546
Realized investment gains/
(losses), net ( 2,819) (84) -- (2,903)
Other revenue 293 (44) 1,702 1,951
Total revenues 277,327 17,925 1,702 296,954
Benefits and expenses:
Claims and other
policy benefits 199,559 108 -- 199,667
Interest credited 11,426 9,381 -- 20,807
Policy acquisition
costs and other
insurance expenses 28,681 6,317 1,124 36,122
Other operating
expenses 6,223 139 19 6,381
Total benefits
and expenses 245,889 15,945 1,143 262,977
Income before income
taxes and minority
interest $ 31,438 $ 1,980 $ 559 $ 33,977
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Three Months Ended
March 31,
2001 2000
Revenues:
Net premiums $ 42,566 $ 41,027
Investment income, net of related expenses 15,646 14,983
Realized investment gains/(losses), net 5,614 (446)
Other revenue 247 70
Total revenues 64,073 55,634
Benefits and expenses:
Claims and other policy benefits 41,207 37,263
Interest credited 107 345
Policy acquisition costs and other
insurance expenses 3,486 3,646
Other operating expenses 2,124 2,150
Total benefits and expenses 46,924 43,404
Income before income taxes
and minority interest $ 17,149 $ 12,230
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Three Months Ended March 31, 2001
Total
Latin Asia Other Inter-
America Pacific Markets national
Revenues:
Net premiums $14,098 $28,887 $13,247 $56,232
Investment income,
net of related expenses 2,879 1,035 655 4,569
Realized investment gains
/ (losses), net (388) 85 (36) (339)
Other revenue 91 725 (4) 812
Total revenues 16,680 30,732 13,862 61,274
Benefits and expenses:
Claims and other policy
benefits 14,336 19,502 10,010 43,848
Interest credited 293 -- -- 293
Policy acquisition costs and
other insurance expenses 2,274 8,312 3,309 13,895
Other operating expenses 2,126 2,858 2,480 7,464
Interest expense -- 270 145 415
Total benefits and
expenses 19,029 30,942 15,944 65,915
Income before income taxes
and minority interest $(2,349) $ (210) $(2,082) $(4,641)
Three Months Ended March 31, 2000
Total
Latin Asia Other Inter-
America Pacific Markets national
Revenues:
Net premiums $16,653 $19,077 $ 5,426 $41,156
Investment income,
net of related expenses 5,670 954 218 6,842
Realized investment gains
/ (losses), net (236) 17 264 45
Other revenue 173 84 934 1,191
Total revenues 22,260 20,132 6,842 49,234
Benefits and expenses:
Claims and other policy
benefits 14,033 11,519 3,257 28,809
Interest credited 147 -- -- 147
Policy acquisition costs and
other insurance expenses 2,962 6,738 2,015 11,715
Other operating expenses 3,262 2,473 2,511 8,246
Interest expense -- 120 -- 120
Total benefits and
expenses 20,404 20,850 7,783 49,037
Income before income taxes
and minority interest $ 1,856 $( 718) $( 941) $ 197
| SOURCE: | Reinsurance Group of America, Incorporated |
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| CONTACT: | Reinsurance Group of America, Incorporated |
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| Jack B. Lay, 636/736-7439 | |