Reinsurance Group Of America Reports 39 Percent Gain In Third Quarter Operating Earnings
ST. LOUIS, October 29, 1998 Reinsurance Group of America, Incorporated (NYSE:RGA, RGA.A) reported operating net income increased 39 percent to $20.2 million for the third quarter, up from $14.6 million in 1997. Operating income per share increased 16 percent for the quarter, to $0.66 per share from $0.57 the year before. Per share results reflect 4.9 million additional common shares issued in June. Third quarter earnings, including realized capital gains and losses, rose 44 percent, to $20.7 million, or $0.68 per share, from $14.4 million, or $0.56 per share, the year before.
Total revenues were up 43 percent, to $355.7 million from $249.0 million the year before, reflecting strong increases in net premiums and net investment income. Net premiums rose 40 percent, to $276.4 million from $197.9 million while net investment income climbed 54 percent, to $71.7 million from $46.5 million, due largely to the companys growing asset-intensive reinsurance business and investment earnings from the stock issuance in the second quarter.
A. Greig Woodring, president and chief executive officer, commented, "RGA enjoyed another strong quarter. Our North American life reinsurance operations posted particularly noteworthy results. The U.S. Division reported a premium increase of 17 percent, and substantial new business volume. U.S. results reflect some favorable mortality experience this quarter and a 62 percent increase in investment income, primarily from our growing asset-intensive reinsurance block. Though our Canada segment reported some adverse mortality experience for the period, premium and investment income showed strong increases, resulting in a 45 percent increase in total revenue compared to the same period last year. Canadian mortality results year-to-date are in line with our expectations."
Turning to the companys operations outside of North America, Woodring said, "Our operations in Latin America and the Asia Pacific again reported results generally consistent with our expectations for the quarter. Both regions reported record levels of facultative application submissions and we are pleased by the level of ongoing activity. We have encountered several good opportunities in Taiwan and are considering opening an office in Taipei early next year. Contributions continued from our Hong Kong, Tokyo and Sydney offices at a strong pace."
He concluded, "We continue to take advantage of the many opportunities we see in our domestic and international markets. The life reinsurance business in North America benefits from industry consolidation and the trend to outsourcing mortality risk, which means more large in-force blocks are coming to the reinsurance market. We continue to develop international markets by building on a solid tradition a foundation as well as employing more advanced techniques."
Operating earnings for the nine months totaled $53.6 million, or $1.94 per share, compared with $42.3 million, or $1.65 per share, in 1997, excluding the $10.4 million after-tax, nonoperating charge taken in the first quarter of 1997. Reported net income totaled $55.8 million, or $2.01 per share, compared with $32.3 million, or $1.26 per share, in the prior year. Net premiums rose 36 percent to $822.9 million from $604.9 million, while net investment income was up 55 percent to $207.6 million from $134.4 million. Total revenues increased 40 percent to $1.05 billion from $753.7 million.
The board of directors declared a regular quarterly dividend of $0.07 per share, payable November 25, to shareholders of record as of November 4.
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, the United Kingdom and South Africa. Worldwide, the Company has more than $290 billion of life reinsurance in force. General American Life Insurance Company beneficially owns approximately 64 percent of RGA's outstanding voting shares and approximately 52 percent of all shares outstanding.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Statements of Income ($ in thousands, except per share data)
Three Months Ended Nine Months Ended (Unaudited) September 30, September 30, 1998 1997 1998 1997
Revenues: Net premiums $276,371 $197,910 $822,884 $604,850 Net investment income 71,702 46,532 207,606 134,376 Realized capital gains/(losses) 639 (353) 3,358 566 Other income 6,938 4,938 17,593 13,929 Total revenue 355,650 249,027 1,051,441 753,721
Benefits and expenses: Claims and other policy benefits 200,505 143,870 630,575 447,209 Interest credited 38,821 21,668 111,178 63,194 Accident and health pool charge --- --- --- 18,000 Policy acquisition costs and other insurance expenses 66,508 46,440 170,870 134,708 Other expenses 15,015 12,797 44,568 35,526 Interest expense 2,228 1,949 6,440 5,853 Total benefits & expenses 323,077 226,724 963,631 704,490
Income before taxes and minority interest 32,573 22,303 87,810 49,231
Income Taxes 11,765 7,797 31,563 16,553
Income before minority interest 20,808 14,506 56,247 32,678
Minority Interest 151 134 464 383
Net income $ 20,657 $ 14,372 $ 55,783 $ 32,295
Earnings per share information: Basic Earnings (1) 0.68 0.57 2.04 1.27 Diluted Earnings (1) 0.68 0.56 2.01 1.26
Diluted earnings before realized investment gains/(losses) (1) 0.66 0.57 1.94 1.24
Weighted average number of common and common equivalent shares outstanding (in thousands) 30,525 25,618 27,649 25,635
(1) All periods reflect adoption of SFAS 128.
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Business Summary
Nine Months Ended (Unaudited) September 30, 1998 1997
Gross life reinsurance in force (in billions) North American business $259.2 $179.8 International business 34.5 20.4
Gross life reinsurance written (in billions) North American business 76.5 32.5 International business 4.4 15.2
Consolidated cash and invested assets (in millions) 4,752.5 3,026.2 Invested asset yield 6.97% 7.25% Investment portfolio mix Cash and short-term investments 6.55% 3.20% Fixed maturity securities 74.66% 71.58% Mortgage loans 4.51% 5.01% Policy loans 9.92% 14.18% Funds withheld at interest 3.90% 5.54% Other invested assets 0.46% 0.49%
Book value per share outstanding (1) $ 25.99 $ 18.63 Book value per share outstanding, before impact of FAS 115 (1) 23.14 16.32
Treasury stock at September 30 805,763 758,033
(1) Shares outstanding include the 4,945,000 non-voting shares that were issued on June 10, 1998.
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For further information, contact
Jack B. Lay
Executive Vice President and
Chief Financial Officer