Reinsurance Group Of America Reports Earnings Down In Fourth Quarter Due To Adverse Mortality; Premiums In U.S. Up 27 Percent
ST. LOUIS, January 27, 2000 – Reinsurance Group of America, Incorporated (NYSE:RGA) reported operating earnings from continuing operations of $0.59 per diluted share for the fourth quarter, down 18 percent from $0.72 per diluted share reported in the prior year. Operating earnings from continuing operations totaled $28.2 million, down 14 percent from the prior year total of $32.8 million. Net income for the quarter, including capital gains and losses and discontinued operations, totaled $15.4 million, or $0.32 per diluted share, compared to earnings of $6.3 million, or $0.14 per diluted share, the prior year.
Earnings were down in the fourth quarter primarily due to adverse mortality experience in the Company’s U.S. operating segment. As was reported earlier this month, RGA’s U.S. operating segment sustained unusually high claims levels in the last two months of the year. Although earnings were down in that segment because of that claims experience, net premium revenues for the U.S. segment increased 27 percent for the quarter, to $253.4 million from $200.3 million in the prior year.
President and Chief Executive Officer A. Greig Woodring commented, “We are obviously disappointed to close the year with a substandard result in the U.S. operating segment. It has been several years since we had a quarter affected so significantly by poor mortality experience. However, mortality experience can fluctuate over short periods of time, even on a relatively large base of business. Although we continue to analyze the claims activity of the fourth quarter, we have identified nothing that causes us to believe this is anything other than the type of aberration that can occasionally occur. We do not feel this experience is indicative of any type of ongoing shift in expected mortality levels over time.”
Woodring continued, “We are quite pleased to have the disruption associated with the sale of our parent company behind us. MetLife completed its acquisition of GenAmerica Corporation in early January, and the various rating agencies reacted immediately with respect to RGA’s ratings. Our ratings have been restored to levels that should allow us to continue operating effectively as we serve the life reinsurance markets, and our business volumes have continued to grow at attractive rates. For the year, premiums in our U.S. segment grew at a 33 percent rate, and premiums in the Canada segment increased 12 percent. Premiums in the Canada segment for the quarter totaled $42.8 million, in line with expectations, even though that premium level was well below the $69.7 million reported in the fourth quarter of 1998, when we processed two large in-force transactions that dramatically increased that quarter’s reported premiums.”
Woodring concluded, “RGA’s other international operations, which are still in their early growth stages, reported a modest operating profit for the quarter on premiums of slightly more than $50 million. These operations should grow and add to the value of the company’s portfolio of business over time. “Regarding the new year, we are looking forward to serving our markets and addressing the many opportunities we feel will be part of the operating environment going forward.”
For the year, operating earnings from continuing operations totaled $102.4 million, up 17 percent from the $87.7 million reported for 1998. That represents $2.21 per diluted share, an increase of 8 percent over $2.04 per diluted share in the prior year. Net income for the year, including discontinued operations and securities gains and losses, totaled $40.9 million, or $0.88 per diluted share, down from $62.1 million, or $1.48 per diluted share, reported for the prior year. Consolidated premiums totaled $1,315.6 million, up 29 percent over the prior year total of $1,016.4 million.
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share. The dividend is payable February 25 to shareholders of record as of February 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, Taiwan, South Africa and the United Kingdom. Worldwide, the Company has approximately $447 billion of life reinsurance in force, and assets in excess of $5.0 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 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 sections named “Cautionary Statement Regarding Forward Looking Statements" in the Company’s report on Form 10-Q for the quarter ending September 30, 1999, and “Forward-Looking and Cautionary Statements” in the Company’s Annual Report on Form 10-K for year ended December 31, 1998, 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 Twelve Months Ended
(Unaudited) December 31, December 31,
1999 1998 1999 1998
Revenues:
Net premiums $350,035 $311,068 $1,315,638 $1,016,420
Net investment income 76,049 95,600 340,280 301,780
Realized capital
gains/ (losses),
net (13,564) (266) (75,308) 3,092
Other income 15,904 6,529 26,472 23,200
Total revenue 428,424 412,931 1,607,082 1,344,492
Benefits and expenses:
Claims and other
policy benefits 290,348 245,486 1,067,111 797,901
Interest credited 25,977 42,069 153,118 153,247
Policy acquisition
costs and other
insurance expenses 63,081 57,905 218,314 188,471
Other expenses 13,285 16,845 64,447 58,021
Interest expense 4,316 2,365 11,020 8,805
Total benefits
and expenses 397,007 364,670 1,514,010 1,206,445
Income from continuing
operations before
taxes and minority
interest 31,417 48,261 93,072 138,047
Income taxes 11,893 16,776 39,059 49,055
Income from continuing
operations before
minority interest 19,524 31,485 54,013 88,992
Minority interest 167 (1,174) 968 (717)
Net income from
continuing operations 19,357 32,659 53,045 89,709
Discontinued operations:
Loss from
discontinued
operations,
net of taxes (3,983) (26,362) (12,187) (27,628)
Net income $ 15,374 $ 6,297 $ 40,858 $ 62,081
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
(Unaudited) December 31, December 31,
1999 1998 1999 1998
Earnings per share from
continuing operations:
Basic earnings per share $ 0.41 $ 0.72 $ 1.16 $ 2.11
Diluted earnings per share $ 0.41 $ 0.71 $ 1.15 $ 2.08
Diluted earnings before
realized investment
gains/ (losses) $ 0.59 $ 0.72 $ 2.21 $ 2.04
Earnings per share from
net income:
Basic earnings per share $ 0.33 $ 0.14 $ 0.89 $ 1.50
Diluted earnings per share $ 0.32 $ 0.14 $ 0.88 $ 1.48
Weighted average number of
common and common equivalent
shares outstanding
(in thousands) 47,483 45,818 46,246 42,559
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Twelve Months Ended
(Unaudited) December 31,
1999 1998
Gross life reinsurance in force (in billions)
North American business $ 391.5 $ 291.2
International business 55.5 39.4
Gross life reinsurance written (in billions)
North American business 130.7 115.5
International business 34.2 9.4
Consolidated cash and invested assets
(in millions) 3,873.8 5,145.5
Invested asset yield 6.88% 6.86%
Investment portfolio mix
Cash and short-term investments 6.85% 6.43%
Fixed maturity securities 48.90% 71.94%
Mortgage loans 5.56% 4.21%
Policy loans 17.21% 9.99%
Funds withheld at interest 20.80% 6.99%
Other invested assets 0.68% 0.44%
Book value per share outstanding $ 14.68 $ 16.52
Book value per share outstanding, before
impact of FAS 115 17.31 15.52
Treasury stock 1,112,820 1,178,270
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
(Unaudited)
Twelve Months Ended December 31, 1999
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $ 949,054 $ 1,380 $ -- $ 950,434
Investment income,
net of related
expenses 125,745 124,713 -- 250,458
Realized investment
gains/ (losses),
net (17,043) (65,844) -- (82,887)
Other revenue (597) 12,655 13,180 25,238
Total revenues 1,057,159 72,904 13,180 1,143,243
Benefits and expenses:
Claims and other
policy benefits 740,339 1,009 -- 741,348
Interest credited 40,240 109,644 -- 149,884
Policy acquisition
costs and other
insurance expenses 145,529 2,850 9,370 157,749
Other operating
expenses 23,002 623 100 23,725
Total benefits
and expenses 949,110 114,126 9,470 1,072,706
Income before
income taxes
and minority
interest $ 108,049 $(41,222) $ 3,710 $ 70,537
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
(Unaudited)
Twelve Months Ended December 31, 1998
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $714,876 $ 1,368 $ -- $ 716,244
Investment income,
net of related
expenses 106,664 124,808 -- 231,472
Realized investment
gains/ (losses),
net 1,716 655 -- 2,371
Other revenue 644 4 17,800 18,448
Total revenues 823,900 126,835 17,800 968,535
Benefits and expenses:
Claims and other
policy benefits 538,775 2,258 -- 541,033
Interest credited 44,053 107,948 -- 152,001
Policy acquisition
costs and other
insurance expenses 112,964 6,790 12,942 132,696
Other operating
expenses 15,904 740 132 16,776
Total benefits
and expenses 711,696 117,736 13,074 842,506
Income before
income taxes and
minority interest $112,204 $ 9,099 $ 4,726 $ 126,029
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
(Unaudited)
Twelve Months Ended
December 31,
1999 1998
Revenues:
Net premiums $162,482 $144,784
Investment income, net of related expenses 52,767 38,857
Realized investment gains/(losses), net 5,923 617
Other revenue (38) 482
Total revenues 221,134 184,740
Benefits and expenses:
Claims and other policy benefits 154,194 127,821
Interest credited 1,799 1,059
Policy acquisition costs and other
insurance expenses 19,970 26,163
Other operating expenses 7,292 6,943
Total benefits and expenses 183,255 161,986
Income before income taxes
and minority interest $ 37,879 $ 22,754
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
(Unaudited)
Twelve Months Ended December 31, 1999
Latin America Total
Rein- Asia Other Inter-
Direct surance Pacific Markets national
Revenues:
Net premiums $38,449 $65,718 $73,887 $24,668 $202,722
Investment income,
net of related expenses 17,608 6,145 2,182 775 26,710
Realized investment
gains/ (losses), net 128 (33) (3) 101 193
Other revenue (98) (126) 1,263 105 1,144
Total revenues 56,087 71,704 77,329 25,649 230,769
Benefits and expenses:
Claims and other policy
benefits 49,436 62,043 46,785 13,305 171,569
Interest credited 306 1,129 -- -- 1,435
Policy acquisition costs
and other insurance
expense 1,486 854 29,860 8,388 40,588
Other operating expenses 6,176 3,033 6,983 7,810 24,002
Interest expense -- -- 491 -- 491
Total benefits and
expenses 57,404 67,059 84,119 29,503 238,085
Income before income
taxes and minority
interest $(1,317)$ 4,645 $(6,790) $(3,854)$ (7,316)
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
(Unaudited)
Twelve Months Ended December 31, 1998
Latin America Total
Rein- Asia Other Inter-
Direct surance Pacific Markets national
Revenues:
Net premiums $48,354 $50,325 $53,072 $ 3,641 $155,392
Investment income,
net of related expenses 13,926 3,859 2,545 479 20,809
Realized investment
gains/(losses), net 4 -- 23 81 108
Other revenue 242 1 3,089 938 4,270
Total revenues 62,526 54,185 58,729 5,139 180,579
Benefits and expenses:
Claims and other policy
benefits 49,238 45,224 31,900 2,685 129,047
Interest credited 187 -- -- -- 187
Policy acquisition costs
and other insurance
expenses 4,814 2,067 21,775 923 29,579
Other operating expenses 7,466 3,892 7,660 6,540 25,558
Interest expense -- -- 454 -- 454
Total benefits and
expenses 61,705 51,183 61,789 10,148 184,825
Income before income
taxes and minority
interest $ 821 $ 3,002 $(3,060) $(5,009)$ (4,246)