Reinsurance Group Of America Reports 17 Percent Gain In Operating Earnings For Fourth Quarter
ST. LOUIS, January 29, 1998 – Reinsurance Group of America, Incorporated (NYSE:RGA) reported a fourth quarter operating income increase of 17 percent, to $22.5 million, or $0.88 per share, from $19.1 million, or $0.75 per share, the year before, reflecting double-digit gains in net premium, net investment income, and total revenue. Fourth quarter earnings, including realized capital gains and losses, increased 21 percent, to $0.88 per share from $0.73 in the prior year.
Fourth quarter net premiums increased 20 percent, to $230.6 million, from $192.3 million in 1996. Net investment income increased 35 percent, to $54.0 million, from $40.0 million. Total revenues increased 35 percent, to $317.8 million.
A. Greig Woodring, president and chief executive officer, remarked, "We are pleased with our fourth quarter results, which represent a continuation of the positive momentum of the first nine months of 1997. We experienced strong core earnings from our U.S. and Canadian life segments. We continue to believe that opportunities for significant growth exist in the North American marketplace. This quarter’s strong performance can be attributed in part to growing activity in our financial and non-traditional reinsurance operations. The net result for the quarter, considering all operating segments, exceeded our original expectations."
Commenting on the company’s operations outside of North America, Woodring said, "We continue to be encouraged by our prospects in international markets, where we’ve begun to establish our presence as a life reinsurer. The turmoil in Asia has had little effect on our business due to our newness in the region; in fact, we believe that the economic situation may actually present us with opportunities during the coming months. While future business levels are impossible to predict, we don’t anticipate the need to make significant changes to our strategy for those markets.
"We continue to build our Latin American operations and see increasing premium levels from the region, particularly in annuity sales by our direct writing company in Chile. Our direct writing subsidiary in Argentina posted a respectable level of new premium; however, bottom line results for the Latin American segment fell below expectations because of an unfavorable level of group life claims.
"In contrast to the other business segments, results from most of our accident and health divisions again fell short of expectations and posted another loss for the year. Based on our lack of progress with this segment, we have placed our accident and health line into runoff and will cease marketing these services. This will allow us to focus our resources on growing our life reinsurance business. We have set aside a reserve to handle runoff claims experience and have written off all intangible assets associated with this line of business."
For the year, RGA reported operating earnings of $64.8 million, or $2.53 per share, compared with $54.6 million, or $2.15 per share, in 1996. These results exclude the $10.4 million after-tax, nonoperating accident and health pool charge taken in the first quarter of 1997. Earnings for the year, including realized capital gains and losses and nonoperating charges, totaled $2.13 per share, compared to $2.17 per share in 1996.
For the year, net premiums rose 24 percent to $835.5 million and revenues increased 29 percent to $1.1 billion. Investment income totaled $188.3 million, a 38 percent increase over 1996 results.
Commenting on the company’s performance for the year, Woodring said, "1997 has been a good year for the company, with encouraging signs of growth in both traditional and new life markets. We continue to position the company to better meet our clients’ needs and have re-directed our resources to better support our global expansion in life reinsurance markets. We’ve expanded our operations to include a local presence in Malaysia as a joint venture partner in that country’s first life reinsurance company. We’ve continued to leverage knowledge and expertise across the organization, supplemented by our recent strategic alliance with TBOi, a UK-based financial services distribution consulting firm."
The board of directors declared a regular quarterly dividend of $0.06 per share, payable February 27, 1998, to shareholders of record as of February 6, 1998.
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 and the United Kingdom. Worldwide, the Company has more than $200 billion of life reinsurance in force. General American Life Insurance Company owns approximately 64 percent of RGA’s outstanding shares.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
($ in thousands, except per share data)
Three Months Ended Twelve Months Ended
(Unaudited) December 31, December 31,
1997 1996 1997 1996
Net premiums $230,610 $192,286 $835,460 $674,885
Net investment income 53,957 40,030 188,333 136,828
gains (losses) (232) (992) 334 930
Other income 33,459 4,754 47,388 17,386
Total revenue 317,794 236,078 1,071,515 830,029
Benefits and expenses:
Claims and other policy
benefits 221,700 152,851 732,103 560,445
Accident and health
pool charge --- --- 18,000 ---
and insurance expenses 41,774 42,830 176,482 136,509
Other expenses 17,532 10,680 53,058 39,845
Interest expense 1,948 1,971 7,801 6,169
Total benefits and
expenses 282,954 208,332 987,444 742,968
Income before taxes and
minority interest 34,840 27,746 84,071 87,061
Income taxes 12,197 9,847 28,750 31,687
Income before minority
interest 22,643 17,899 55,321 55,374
Minority interest 319 (560) 702 302
Net income $ 22,324 $ 18,459 $ 54,619 $ 55,072
Earnings per share information:
Basic Earnings (1) 0.88 0.73 2.15 2.18
Diluted Earnings (1) 0.88 0.73 2.13 2.17
Diluted earnings before
gains/(losses) (1) 0.88 0.75 2.13 2.15
Weighted average number of
shares outstanding (diluted)
(in thousands) 25,512 25,434 25,604 25,410
(1) All periods reflect adoption of SFAS 128.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
Twelve Months Ended
(Unaudited) December 31,
Gross life reinsurance in force (in billions)
North American business $199.4 $160.0
International business 27.9 8.3
Gross life reinsurance written (in billions)
North American business 58.1 33.8
International business 17.8 4.1
Consolidated cash and invested assets
(in millions) 3,671.4 2,285.2
Invested asset yield 7.23% 7.32%
Investment portfolio mix
Cash and short-term investments 8.58% 4.67%
Fixed maturity securities 68.86% 66.40%
Mortgage loans 4.51% 4.30%
Policy loans 13.08% 18.66%
Funds withheld at interest 4.51% 5.69%
Other invested assets 0.46% 0.28%
Book value per share outstanding $ 19.62 $ 16.71
Book value per share outstanding, before
impact of SFAS 115 16.96 15.60
Treasury stock at December 31 844,535 584,031
# # #