Reinsurance Group of America Reports 23 Percent Increase In Operating Earnings
Third quarter net premiums increased 7 percent, to $316.1 million from $295.1 million in 1999. Consolidated net investment income was down 10 percent, to $82.1 million from $91.7 million, primarily due to the company’s exit from funding agreement reinsurance effective at the end of September 1999.
“The third quarter operating results reflect a continuation of the earnings growth RGA has exhibited for several years,” commented A. Greig Woodring, president and chief executive officer. “Overall mortality experience continues to be generally favorable. Consolidated premium growth came from core business flow. We were awarded one large in-force transaction during the quarter, but it is not reflected in our results as sufficient treaty information was not yet available from our client. We will record this transaction once sufficient information is received and expect the transaction will represent approximately $10 billion of in-force volume and $20 to $30 million of annual premium. We continue to evaluate other opportunities for in-force transactions, the timing of which is always difficult to predict.”
Woodring continued, “The U.S. segment, led by the strength of our traditional business, contributed significantly to the improved performance. Pre-tax operating income for the quarter increased 34 percent, and premiums increased 12 percent to $231.4 million from $207.1 million in the prior year quarter. Mortality experience for the segment was favorable. The U.S. market remains quite active and competitive, particularly on automatic reinsurance of term business. We continue to pursue this segment of the market, but we do not participate if we believe pricing is too aggressive. We are able to take this position because of our strength in other areas of the market.
“Premiums in Canada declined 7 percent to $39.7 million in the current quarter versus $42.8 million in the year-ago third quarter, which was exceptionally strong. Mortality experience was unfavorable in Canada in this quarter, after that segment experienced favorable mortality in the first two quarters of this year. While the operating income was down for the quarter, year-to-date results are strong and we are pleased with that segment’s performance. “RGA’s international operations reported a modest operating profit. Premiums were similar to the prior year’s total at $45.0 million. Adjusting for the sale of our Chilean operations during the second quarter of 2000, international premiums increased 23 percent for the quarter. We continue to make progress in our international markets and are pleased with the level of activity we are seeing.”
Woodring concluded, “We are pleased with the results for the quarter, and continue to be optimistic about the growth opportunities in the life reinsurance market. Recent industry announcements regarding acquisitions lead us to believe that others share our view.”
For the first nine months of 2000, the company reported operating earnings from continuing operations of $91.6 million, an increase of 23 percent over the prior-year total of $74.3 million. Operating earnings per diluted share from continuing operations totaled $1.83, an increase of 13 percent over the $1.62 reported the year before. Net premiums totaled $991.1 million compared to $965.6 million the year before.
As previously announced, the company acquired the 60 percent interest in RGA/Swiss Financial Group, L.L.C. that it did not already own, and has changed the name to RGA Financial Group, L.L.C. The acquisition is comprised of a 40 percent interest held by an affiliate of the Swiss Reinsurance Company and a 20 percent interest from a corporation controlled by the management group of RGA/Swiss.
During the quarter, the company completed its previously announced $20 million stock buyback program. Approximately 690,000 shares were purchased. The company also announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable November 27 to shareholders of record as of November 6. A conference call to discuss the company’s third quarter results will begin at 9:00 a.m. Eastern Daylight Time on Friday October 27. Interested parties may access the call in a listen-only mode by dialing 1-800-967-7140. The access code is 573905. Participants are asked to call the assigned number approximately ten minutes before the conference call begins. Additionally, a live audio webcast of the conference call will be available on the company’s investor relations web page at www.rgare.com. A replay of the conference call will be available at the same address for ten days following the conference call.
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, Spain, Mexico, Hong Kong, Japan, Taiwan, South Africa and the United Kingdom. Worldwide, the Company has approximately $500 billion of life reinsurance in force, and assets of $5.9 billion. Metropolitan Life Insurance Company is the beneficial owner of approximately 58 percent of RGA’s outstanding shares.
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 and growth potential, increase in premiums, the effect of mortality rates and experience, claims levels, opportunities related to in-force transactions, 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. 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” in the Company’s Annual Report on Form 10-K for the year ended December 31, 1999 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, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,_
2000 1999 2000 1999
Revenues:
Net premiums $316,116 $295,079 $ 991,059 $ 965,603
Net investment income 82,118 91,697 238,420 264,231
Realized capital gains/
(losses), net (2,821) (62,239) (18,345) (61,744)
Other income 6,949 1,707 12,637 10,568
Total revenue 402,362 326,244 1,223,771 1,178,658
Benefits and expenses:
Claims and other policy
benefits 242,921 229,684 776,326 776,763
Interest credited 26,087 43,898 74,562 127,141
Policy acquisition costs
and other insurance
expenses 57,595 49,324 171,257 155,233
Other expenses 19,964 19,408 59,189 51,162
Interest expense 5,108 2,475 12,417 6,704
Total benefits
and expenses 351,675 344,789 1,093,751 1,117,003
Income from continuing
operations before taxes
and minority interest 50,687 (18,545) 130,020 61,655
Income taxes 19,011 (4,950) 52,743 27,166
Income from continuing
operations before minority
interest 31,676 (13,595) 77,277 34,489
Minority interest 306 342 593 801
Net income from continuing
operations 31,370 (13,937) 76,684 33,688
Discontinued operations:
Loss from discontinued
operations, net of
taxes (2,261) (3,212) (8,249) (8,204)
Net income $ 29,109 $(17,149) $ 68,435 $ 25,484
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2000 1999 2000 1999
Earnings per share from
continuing operations:
Basic earnings per share $ 0.64 $ (0.31) $ 1.55 $ 0.74
Diluted earnings per share $ 0.63 $ (0.31) $ 1.53 $ 0.73
Diluted earnings before
realized investment gains/
(losses) $ 0.66 $ 0.58 $ 1.83 $ 1.62
Earnings per share from net
income:
Basic earnings per share $ 0.59 $ (0.38) $ 1.38 $ 0.56
Diluted earnings per share $ 0.59 $ (0.38) $ 1.37 $ 0.56
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,720 45,311 49,961 45,854
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Nine Months Ended
(Unaudited) September 30,
2000 1999
Gross life reinsurance in force (in billions)
North American business $ 441.0 $ 349.5
International business 53.3 64.1
Gross life reinsurance written (in billions)
North American business 89.0 76.4
International business 5.5 18.1
Consolidated cash and invested assets
(in millions) 4,501.5 3,870.1
Invested asset book yield –
trailing three months 7.29% 6.96%
Investment portfolio mix
Cash and short-term investments 4.66% 6.12%
Fixed maturity securities 56.54% 53.68%
Mortgage loans 2.86% 6.23%
Policy loans 14.84% 15.69%
Funds withheld at interest 20.54% 17.61%
Other invested assets 0.56% 0.67%
Book value per share outstanding $ 16.84 $ 14.33
Book value per share outstanding, before
impact of FAS 115 18.20 15.98
Treasury stock 1,794,954 1,138,595
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Nine Months Ended September 30, 2000
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $727,449 $ 1,566 $ -- $729,015
Investment income,
net of related
expenses 102,273 64,302 60 166,635
Realized investment
gains/(losses),
net (5,718) (664) -- (6,382)
Other revenue 621 201 7,730 8,552
Total revenues 824,625 65,405 7,790 897,820
Benefits and expenses:
Claims and other policy
benefits 549,921 2,918 -- 552,839
Interest credited 34,803 37,760 -- 72,563
Policy acquisition costs
and other insurance
expenses 102,498 16,765 3,500 122,763
Other operating expenses 18,931 514 1,135 20,580
Total benefits and
expenses 706,153 57,957 4,635 768,745
Income before income
taxes and minority
interest $118,472 $ 7,448 $ 3,155 $129,075
Nine Months Ended September 30, 1999
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $696,220 $ 781 $ -- $697,001
Investment income, net
of related expenses 90,511 110,471 -- 200,982
Realized investment
gains/(losses), net (14,988) (56,439) -- (71,427)
Other revenue (1,521) 801 10,142 9,422
Total revenues 770,222 55,614 10,142 835,978
Benefits and expenses:
Claims and other policy
benefits 529,317 897 -- 530,214
Interest credited 29,212 95,958 -- 125,170
Policy acquisition costs
and other insurance
expenses 106,192 2,695 7,434 116,321
Other operating expenses 16,889 583 96 17,568
Total benefits and
expenses 681,610 100,133 7,530 789,273
Income before income
taxes and minority
interest $ 88,612 $(44,519) $ 2,612 $ 46,705
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Nine Months Ended
September 30,
2000 1999
Revenues:
Net premiums $126,856 $119,636
Investment income, net of related expenses 45,609 38,125
Realized investment gains/(losses), net (810) 6,253
Other revenue 569 (24)
Total revenues 172,224 163,990
Benefits and expenses:
Claims and other policy benefits 124,787 112,890
Interest credited 635 1,356
Policy acquisition costs and other
insurance expenses 14,096 17,161
Other operating expenses 6,215 5,418
Total benefits and expenses 145,733 136,825
Income before income taxes
and minority interest $ 26,491 $ 27,165
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Nine Months Ended September 30, 2000
Total
Latin Asia Other Inter-
America Pacific Markets national
Revenues:
Net premiums $49,885 $66,384 $18,919 $135,188
Investment income,
net of related expenses 14,505 3,473 1,310 19,288
Realized investment gains
/ (losses), net (8,960) (6) 439 (8,527)
Other revenue 315 1,259 1,796 3,370
Total revenues 55,745 71,110 22,464 149,319
Benefits and expenses:
Claims and other policy
benefits 47,646 37,951 13,103 98,700
Interest credited 1,364 -- -- 1,364
Policy acquisition costs and
other insurance expenses 4,721 24,200 5,477 34,398
Other operating expenses 8,652 7,110 7,092 22,854
Interest expense -- 552 306 858
Total benefits and
expenses 62,383 69,813 25,978 158,174
Income before income taxes
and minority interest $(6,638) $ 1,297 $(3,514)$ (8,855)
Nine Months Ended September 30, 1999
Total
Latin Asia Other Inter-
America Pacific Markets national
Revenues:
Net premiums $78,480 $51,188 $19,298 $148,966
Investment income,
net of related expenses 15,731 1,612 608 17,951
Realized investment gains/
(losses), net 280 (33) 275 522
Other revenue (22) 643 420 1,041
Total revenues 94,469 53,410 20,601 168,480
Benefits and expenses:
Claims and other policy
benefits 77,741 41,242 14,676 133,659
Interest credited 616 -- -- 616
Policy acquisition costs and
other insurance expenses 4,101 14,193 3,456 21,750
Other operating expenses 7,986 5,607 5,980 19,573
Interest expense -- 355 1 356
Total benefits and
expenses 90,444 61,397 24,113 175,954
Income before income taxes
and minority interest $ 4,025 $(7,987) $(3,512)$ (7,474)