Reinsurance Group of America Reports 24 Percent Increase In Operating Earnings For Second Quarter; 14 Percent Increase in Operating Earnings Per Share
ST. LOUIS, July 27, 2000 – Reinsurance Group of America, Incorporated (NYSE:RGA), one of North America’s leading providers of life reinsurance, reported operating earnings from continuing operations of $32.0 million for the second quarter, up 24 percent from $25.7 million in the prior year. Operating earnings from continuing operations of $0.64 per diluted share were up 14 percent from $0.56 per diluted share in the prior year. Net income for the quarter, including capital gains and losses and discontinued operations, totaled $18.9 million, or $0.38 per diluted share, compared to earnings of $20.7 million, or $0.45 per diluted share in the prior year. Earnings per diluted share for the second quarter of 2000 reflect the impact of 4.8 million new shares purchased by Metropolitan Life Insurance Company, a wholly owned subsidiary of MetLife, Inc. (NYSE:MET), in November 1999.
Second quarter net premiums increased 9 percent, to $345.4 million from $316.8 million in 1999. Premiums in North America increased 13 percent, from $262.8 million to $296.4 million. Premiums were down $9.8 million in the Latin America segment, where the company sold its Chilean operations in April. Consolidated investment income was down 6 percent to $82.3 million from $87.5 million, primarily due to the company’s exit from funding agreement reinsurance effective at the end of September 1999.
President and Chief Executive Officer A. Greig Woodring commented, “We are pleased to report solid earnings growth for the quarter, led by the strength of our North American operations. Mortality results in our North American operations were favorable, and were in line with our expectations for the international operations. On a consolidated basis, premium growth came from core business flow, since we did not process any new in-force blocks of business during the quarter. Considering these factors, premiums are in line with our expectations for all operating segments. We continue to evaluate opportunities for in-force transactions which are typically slow to develop, and the timing of which can be difficult to predict.”
Woodring continued, “Our core operations in North America continue to drive our results. Premiums in the U.S. segment for the quarter totaled $250.2 million versus $221.6 million in the prior year quarter, a 13 percent increase. Premiums in Canada were up 12 percent, to $46.1 million. Operating income in North America increased almost 20 percent for the quarter.
“RGA’s international operations reported a modest operating loss. Premiums were $49.0 million. We are pleased with the activity level in the international markets. The establishment of RGA Reinsurance UK Limited in the first quarter has led to increased activity in the UK market for us. Premiums in our Asia Pacific operations were up 39 percent and mortality was in line with expectations. We continue to make progress in these markets. As previously reported, we completed the sale of our direct Chilean operations on April 27. This sale resulted in an $8.6 million realized loss on a pre-tax basis. That loss relates primarily to the realization of accumulated foreign currency depreciation over the holding period of our net investment.”
Woodring concluded, “The improvement in the first half’s operating performance was encouraging. We continue to see favorable trends for the life reinsurance market, particularly in North America, and look forward to continued growth in the second half of 2000. Also, during May we executed a $140 million senior unsecured, revolving credit facility with a syndicate of large banks. This facility, under which we have drawn $70 million, increases our financial flexibility and will provide funds to support new business growth, primarily in our core operations.”
For the first half of 2000, the company reported operating earnings from continuing operations of $58.9 million, an increase of 23 percent over the prior-year total of $47.7 million. Operating earnings per diluted share from continuing operations totaled $1.18, an increase of 13 percent over the $1.04 reported the year before. Net premiums totaled $674.9 million compared to $670.5 million the year before.
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable August 28 to shareholders of record as of August 7.
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 over $480 billion of life reinsurance in force, and assets of $5.8 billion. Metropolitan Life Insurance Company owns 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, the effect of mortality rates and experience, claims levels, 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 Six Months Ended
(Unaudited) June 30, June 30,_
2000 1999 2000 1999
Revenues:
Net premiums $345,400 $316,765 $674,943 $670,524
Net investment income 82,292 87,491 156,302 172,534
Realized investment
gains/(losses),
net (10,892) 578 (15,524) 495
Other income 2,475 4,473 5,688 8,861
Total revenues 419,275 409,307 821,409 852,414
Benefits and expenses:
Claims and other policy
benefits 267,666 246,652 533,405 547,079
Interest credited 27,176 43,691 48,475 83,243
Policy acquisition costs
and other insurance
expenses 62,179 56,698 113,662 105,909
Other expenses 19,260 15,550 39,225 31,754
Interest expense 3,775 2,273 7,309 4,229
Total benefits
and expenses 380,056 364,864 742,076 772,214
Income from continuing
operations before taxes
and minority interest 39,219 44,443 79,333 80,200
Income taxes 18,084 18,446 33,732 32,116
Income from continuing
operations before
minority interest 21,135 25,997 45,601 48,084
Minority interest (275) 350 287 459
Net income from continuing
operations 21,410 25,647 45,314 47,625
Discontinued operations:
Loss from
discontinued
operations,
net of taxes (2,506) (4,971) (5,988) (4,992)
Net income $ 18,904 $ 20,676 $ 39,326 $ 42,633
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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 Six Months Ended
(Unaudited) June 30, June 30,
2000 1999 2000 1999
Earnings per share from
continuing operations:
Basic earnings per share $ 0.43 $ 0.57 $ 0.91 $ 1.05
Diluted earnings per share $ 0.43 $ 0.56 $ 0.90 $ 1.04
Diluted earnings before
realized investment gains/
(losses) $ 0.64 $ 0.56 $ 1.18 $ 1.04
Earnings per share from net
income:
Basic earnings per share $ 0.38 $ 0.46 $ 0.79 $ 0.94
Diluted earnings per share $ 0.38 $ 0.45 $ 0.79 $ 0.93
Weighted average number of
common and common equivalent
shares outstanding
(in thousands) 50,043 45,861 50,085 45,874
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Six Months Ended
(Unaudited) June 30,
2000 1999
Gross life reinsurance in force (in billions)
North American business $ 431.7 $ 336.6
International business 53.0 54.0
Gross life reinsurance written (in billions)
North American business 58.5 56.4
International business 2.6 14.5
Consolidated cash and invested assets
(in millions) 4,429.9 5,463.3
Invested asset book yield
trailing three months 7.36% 6.70%
Investment portfolio mix
Cash and short-term investments 4.79% 4.98%
Fixed maturity securities 56.26% 70.91%
Mortgage loans 2.90% 4.39%
Policy loans 15.08% 9.51%
Funds withheld at interest 20.45% 9.83%
Other invested assets 0.52% 0.38%
Book value per share outstanding $ 15.80 $ 15.38
Book value per share outstanding, before
impact of FAS 115 17.79 16.37
Treasury stock 1,718,120 1,141,944
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Six Months Ended June 30, 2000
Non-traditional
Asset- Financial Total
(Unaudited) Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $ 496,528 $ 1,044 $ -- $ 497,572
Investment income,
net of related
expenses 70,441 36,700 -- 107,141
Realized investment
(losses), net (4,414) (85) -- (4,499)
Other revenue (77) 399 3,240 3,562
Total revenues 562,478 38,058 3,240 603,776
Benefits and
expenses:
Claims and other
policy benefits 383,357 742 -- 384,099
Interest credited 22,905 23,064 -- 45,969
Policy acquisition
costs and other
insurance expenses 70,315 9,799 1,961 82,075
Other operating
expenses 12,442 277 37 12,756
Total benefits
and expenses 489,019 33,882 1,998 524,899
Income before
income
taxes and
minority
interest $ 73,459 $ 4,176 $ 1,242 $ 78,877
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Six Months Ended June 30, 1999
Non-traditional
Asset- Financial Total
(Unaudited) Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $489,095 $ 843 $ -- $ 489,938
Investment income,
net of related
expenses 59,833 73,620 -- 133,453
Realized investment
(losses), net (5,575) (3,374) -- (8,949)
Other revenue 5 819 6,896 7,720
Total revenues 543,358 71,908 6,896 622,162
Benefits and expenses:
Claims and other
policy benefits 375,682 730 -- 376,412
Interest credited 19,460 62,639 -- 82,099
Policy acquisition
costs and other
insurance expenses 75,147 1,968 5,063 82,178
Other operating
expenses 10,474 352 58 10,884
Total benefits
and expenses 480,763 65,689 5,121 551,573
Income before
income taxes
and minority
interest $ 62,595 $ 6,219 $ 1,775 $ 70,589
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Six Months Ended
June 30,
(Unaudited) 2000 1999
Revenues:
Net premiums $ 87,173 $ 76,873
Investment income, net of related expenses 30,284 23,972
Realized investment gains/(losses), net (647) 6,253
Other revenue 127 (62)
Total revenues 116,937 107,036
Benefits and expenses:
Claims and other policy benefits 79,965 75,818
Interest credited 494 905
Policy acquisition costs and other
insurance expenses 10,780 9,719
Other operating expenses 4,168 3,426
Total benefits and expenses 95,407 89,868
Income before income taxes
and minority interest $ 21,530 $ 17,168
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Six Months Ended June 30, 2000
Latin America Total
Rein- Asia Other Inter-
(Unaudited) Direct surance Pacific Markets national
Revenues:
Net premiums $19,670 $18,592 $41,203 $10,733 $ 90,198
Investment income,
net of related
expenses 9,229 3,395 2,051 691 15,366
Realized investment
gains/(losses), net (8,503) (415) 19 318 (8,581)
Other revenue 138 15 741 1,102 1,996
Total revenues 20,534 21,587 44,014 12,844 98,979
Benefits and expenses:
Claims and other
policy benefits 22,525 14,549 24,638 7,629 69,341
Interest credited 417 1,595 -- -- 2,012
Policy acquisition
costs and other
insurance expenses 2,289 1,576 14,668 2,274 20,807
Other operating
expenses 4,793 1,542 4,754 4,777 15,866
Interest expense -- -- 297 -- 297
Total benefits and
expenses 30,024 19,262 44,357 14,680 108,323
Income/(loss) before
income taxes and
minority interest $(9,490)$ 2,325 $ (343) $(1,836)$ (9,344)
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Six Months Ended June 30, 1999
Latin America Total
Rein- Asia Other Inter-
(Unaudited) Direct surance Pacific Markets national
Revenues:
Net premiums $22,267 $37,974 $32,321 $11,150 $103,712
Investment income,
net of related
expenses 6,674 1,235 1,356 528 9,793
Realized investment
gains/(losses), net 12 268 (33) 120 367
Other revenue 78 -- 386 612 1,076
Total revenues 29,031 39,477 34,030 12,410 114,948
Benefits and expenses:
Claims and other
policy benefits 23,128 35,128 27,164 9,429 94,849
Interest credited 240 -- -- -- 240
Policy acquisition
costs and other
insurance expenses 2,074 658 10,444 835 14,011
Other operating
expenses 3,206 2,177 3,960 3,379 12,722
Interest expense -- -- 232 -- 232
Total benefits and
expenses 28,648 37,963 41,800 13,643 122,054
Income/(loss) before
income taxes and
minority interest $ 383 $ 1,514 $(7,770) $(1,233)$ (7,106)