Reinsurance Group of America Reports First Quarter Results
-
Earnings per diluted share:
$2.65 from net income,$2.61 from adjusted operating income* - ROE 8.9% and adjusted operating ROE* 11.0% for the trailing twelve months
-
Deployed capital of
$100 million into in-force and other transactions and share buybacks
Quarterly Results | |||||||
($ in thousands, except per share data) | 2019 | 2018 | |||||
Net premiums | $ | 2,737,813 | $ | 2,582,551 | |||
Net income | 169,507 | 100,230 | |||||
Net income per diluted share | 2.65 | 1.52 | |||||
Adjusted operating income* | 167,155 | 105,746 | |||||
Adjusted operating income per diluted share* | 2.61 | 1.61 | |||||
Book value per share | 154.61 | 139.64 | |||||
Book value per share, excluding accumulated other comprehensive income (AOCI)* | 126.38 | 117.49 | |||||
Total assets | 66,692,481 | 60,954,823 | |||||
* See ‘Use of Non-GAAP Financial Measures’ below |
|||||||
In the first quarter, consolidated net premiums totaled
The GAAP effective tax rate this quarter was 21.7% on pre-tax income. The effective tax rate was 21.4% on pre-tax adjusted operating income for the quarter, at the lower end of the expected range.
“We executed a number of in-force and other transactions across a range
of product areas and geographies, putting to work
“We are off to a good start in 2019, and we remain optimistic about our business overall. Our organic growth opportunities remain strong, the transaction pipeline remains very active, and we expect to continue to produce attractive financial returns.”
SEGMENT RESULTS
U.S. and
Traditional
The U.S. and Latin America Traditional segment reported pre-tax income
of
Traditional net premiums were up 4% from last year’s first quarter to
Financial Solutions
The Asset-Intensive business reported pre-tax income of
The Financial Reinsurance business reported pre-tax income and pre-tax
adjusted operating income of
Traditional
The Canada Traditional segment reported pre-tax income of
Reported net premiums totaled
Financial Solutions
The Canada Financial Solutions business segment, which consists of
longevity and fee-based transactions, reported first quarter pre-tax
income and pre-tax adjusted operating income of
Traditional
The EMEA Traditional segment reported pre-tax income and pre-tax
adjusted operating income of
Reported net premiums were
Financial Solutions
The EMEA Financial Solutions business segment, which consists of
longevity, asset-intensive and fee-based transactions, reported first
quarter pre-tax income of
Traditional
The Asia Pacific Traditional segment’s pre-tax income and pre-tax
adjusted operating income totaled
Reported net premiums increased 10% to
Financial Solutions
The Asia Pacific Financial Solutions business segment, which consists of
asset-intensive and fee-based transactions, reported first quarter
pre-tax income of
Reported net premiums increased significantly to
Corporate and Other
The Corporate and Other segment’s pre-tax losses totaled
Dividend Declaration
The board of directors declared a regular dividend of
Earnings Conference Call
A conference call to discuss first quarter results will begin at
The Company has posted to its website a Quarterly Financial Supplement that includes financial information for all segments as well as information on its investment portfolio. Additionally, the Company posts periodic reports, press releases and other useful information on its Investor Relations website.
Use of Non-GAAP Financial Measures
RGA uses a non-GAAP financial measure called adjusted operating income as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that adjusted operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability and underlying trends of the Company’s continuing operations, primarily because that measure excludes substantially all of the effect of net investment related gains and losses, as well as changes in the fair value of certain embedded derivatives and related deferred acquisition costs. These items can be volatile, primarily due to the credit market and interest rate environment, and are not necessarily indicative of the performance of the Company’s underlying businesses. Additionally, adjusted operating income excludes any net gain or loss from discontinued operations, the cumulative effect of any accounting changes, uncertain tax positions and other tax related items and other items that management believes are not indicative of the Company’s ongoing operations. The definition of adjusted operating income can vary by company and is not considered a substitute for GAAP net income.
Book value per share excluding the impact of AOCI is a non-GAAP financial measure that management believes is important in evaluating the balance sheet in order to ignore the effects of unrealized amounts primarily associated with mark-to-market adjustments on investments and foreign currency translation.
Adjusted operating income per diluted share is a non-GAAP financial measure calculated as adjusted operating income divided by weighted average diluted shares outstanding. Adjusted operating return on equity is a non-GAAP financial measure calculated as adjusted operating income divided by average stockholders’ equity excluding AOCI. Similar to adjusted operating income, management believes these non-GAAP financial measures better reflect the ongoing profitability and underlying trends of the Company’s continuing operations, they also serve as a basis for establishing target levels and awards under RGA’s management incentive programs.
Reconciliations from GAAP net income, book value per share, net income per diluted share and average stockholders’ equity are provided in the following tables. Additional financial information can be found in the Quarterly Financial Supplement on RGA’s Investor Relations website at www.rgare.com in the “Financial Information” section.
About RGA
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including, among
others, statements relating to projections of the earnings, revenues,
income or loss, ratios, future financial performance, and growth
potential of
Numerous important factors could cause actual results and events to
differ materially from those expressed or implied by forward-looking
statements including, without limitation, (1) adverse capital and credit
market conditions and their impact on the Company’s liquidity, access to
capital, and cost of capital, (2) the impairment of other financial
institutions and its effect on the Company’s business, (3) requirements
to post collateral or make payments due to declines in market value of
assets subject to the Company’s collateral arrangements, (4) the fact
that the determination of allowances and impairments taken on the
Company’s investments is highly subjective, (5) adverse changes in
mortality, morbidity, lapsation, or claims experience, (6) changes in
the Company’s financial strength and credit ratings and the effect of
such changes on the Company’s future results of operations and financial
condition, (7) inadequate risk analysis and underwriting, (8) general
economic conditions or a prolonged economic downturn affecting the
demand for insurance and reinsurance in the Company’s current and
planned markets, (9) the availability and cost of collateral necessary
for regulatory reserves and capital, (10) market or economic conditions
that adversely affect the value of the Company’s investment securities
or result in the impairment of all or a portion of the value of certain
of the Company’s investment securities, that in turn could affect
regulatory capital, (11) market or economic conditions that adversely
affect the Company’s ability to make timely sales of investment
securities, (12) risks inherent in the Company’s risk management and
investment strategy, including changes in investment portfolio yields
due to interest rate or credit quality changes, (13) fluctuations in
U.S. or foreign currency exchange rates, interest rates, or securities
and real estate markets, (14) adverse litigation or arbitration results,
(15) the adequacy of reserves, resources, and accurate information
relating to settlements, awards, and terminated and discontinued lines
of business, (16) the stability of and actions by governments and
economies in the markets in which the Company operates, including
ongoing uncertainties regarding the amount of
Forward-looking statements should be evaluated together with the many
risks and uncertainties that affect our business, including those
mentioned in this document and described in the periodic reports we file
with the
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Reconciliation of Consolidated Net Income to Adjusted Operating Income (Dollars in thousands, except per share data) |
||||||||||||||||
(Unaudited) | Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | |||||||||||||||
Diluted |
Diluted |
|||||||||||||||
Net income | $ | 169,507 | $ | 2.65 | $ | 100,230 | $ | 1.52 | ||||||||
Reconciliation to adjusted operating income: | ||||||||||||||||
Capital (gains) losses, derivatives and other, included in investment related gains/losses, net | 10,669 | 0.16 | 24,702 | 0.38 | ||||||||||||
Capital (gains) losses on funds withheld, included in investment income, net of related expenses | 4,585 | 0.07 | 8,131 | 0.12 | ||||||||||||
Embedded derivatives: | ||||||||||||||||
Included in investment related gains/losses, net | (12,695 | ) | (0.20 | ) | (22,433 | ) | (0.34 | ) | ||||||||
Included in interest credited | 1,199 | 0.02 | (22,565 | ) | (0.34 | ) | ||||||||||
DAC offset, net | (9,117 | ) | (0.14 | ) | 16,846 | 0.26 | ||||||||||
Investment (income) loss on unit-linked variable annuities | (9,750 | ) | (0.15 | ) | 2,095 | 0.03 | ||||||||||
Interest credited on unit-linked variable annuities | 9,750 | 0.15 | (2,095 | ) | (0.03 | ) | ||||||||||
Interest expense on uncertain tax positions | 2,107 | 0.03 | — | — | ||||||||||||
Non-investment derivatives | 340 | 0.01 | 60 | — | ||||||||||||
Uncertain tax positions and other tax related items | 560 | 0.01 | 775 | 0.01 | ||||||||||||
Adjusted operating income | $ | 167,155 | $ | 2.61 | $ | 105,746 | $ | 1.61 | ||||||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Reconciliation of Consolidated Effective Income Tax Rates (Dollars in thousands) |
|||||||||||
(Unaudited) | Three Months Ended March 31, 2019 | ||||||||||
Pre-tax Income | Income Taxes |
Effective Tax |
|||||||||
GAAP income | $ | 216,564 | $ | 47,057 | 21.7 | % | |||||
Reconciliation to adjusted operating income: | |||||||||||
Capital (gains) losses, derivatives and other, included in investment related gains/losses, net | 13,278 | 2,609 | |||||||||
Capital (gains) losses on funds withheld, included in investment income, net of related expenses | 5,804 | 1,219 | |||||||||
Embedded derivatives: | |||||||||||
Included in investment related gains/losses, net | (16,069 | ) | (3,374 | ) | |||||||
Included in interest credited | 1,518 | 319 | |||||||||
DAC offset, net | (11,540 | ) | (2,423 | ) | |||||||
Investment (income) loss on unit-linked variable annuities | (12,342 | ) | (2,592 | ) | |||||||
Interest credited on unit-linked variable annuities | 12,342 | 2,592 | |||||||||
Interest expense on uncertain tax positions | 2,667 | 560 | |||||||||
Non-investment derivatives | 430 | 90 | |||||||||
Uncertain tax positions and other tax related items | — | (560 | ) | ||||||||
Adjusted operating income | $ | 212,652 | $ | 45,497 | 21.4 | % | |||||
Reconciliation of Consolidated Income before Income Taxes to Pre-tax Adjusted Operating Income (Dollars in thousands) |
||||||||
(Unaudited) | Three Months Ended March 31, | |||||||
2019 | 2018 | |||||||
Income before income taxes | $ | 216,564 | $ | 137,925 | ||||
Reconciliation to pre-tax adjusted operating income: | ||||||||
Capital (gains) losses, derivatives and other, included in investment related gains/losses, net | 13,278 | 31,643 | ||||||
Capital (gains) losses on funds withheld, included in investment income, net of related expenses | 5,804 | 10,292 | ||||||
Embedded derivatives: | ||||||||
Included in investment related gains/losses, net | (16,069 | ) | (28,396 | ) | ||||
Included in interest credited | 1,518 | (28,563 | ) | |||||
DAC offset, net | (11,540 | ) | 21,324 | |||||
Investment (income) loss on unit-linked variable annuities | (12,342 | ) | 2,652 | |||||
Interest credited on unit-linked variable annuities | 12,342 | (2,652 | ) | |||||
Interest expense on uncertain tax positions | 2,667 | — | ||||||
Non-investment derivatives | 430 | 76 | ||||||
Pre-tax adjusted operating income | $ | 212,652 | $ | 144,301 | ||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Reconciliation of Pre-tax Income to Pre-tax Adjusted Operating Income (Dollars in thousands) |
||||||||||||||||||||
(Unaudited) | Three Months Ended March 31, 2019 | |||||||||||||||||||
Pre-tax income (loss) |
Capital
(gains) losses, derivatives and other, net |
Change in
value of embedded derivatives, net |
Pre-tax adjusted operating income (loss) |
|||||||||||||||||
U.S. and Latin America: | ||||||||||||||||||||
Traditional | $ | 11,654 | $ | (3 | ) | $ | 6,475 | $ | 18,126 | |||||||||||
Financial Solutions: | ||||||||||||||||||||
Asset-Intensive | 64,958 | (3,109 | ) | (1) | (2,269 | ) | (2) | 59,580 | ||||||||||||
Financial Reinsurance | 18,319 | — | — | 18,319 | ||||||||||||||||
Total U.S. and Latin America | 94,931 | (3,112 | ) | 4,206 | 96,025 | |||||||||||||||
Canada Traditional | 50,279 | (5,667 | ) | — | 44,612 | |||||||||||||||
Canada Financial Solutions | 1,348 | — | — | 1,348 | ||||||||||||||||
Total Canada | 51,627 | (5,667 | ) | — | 45,960 | |||||||||||||||
EMEA Traditional | 15,424 | — | — | 15,424 | ||||||||||||||||
EMEA Financial Solutions | 38,390 | (3,294 | ) | — | 35,096 | |||||||||||||||
Total EMEA | 53,814 | (3,294 | ) | — | 50,520 | |||||||||||||||
Asia Pacific Traditional | 36,624 | (4 | ) | — | 36,620 | |||||||||||||||
Asia Pacific Financial Solutions | 6,083 | (2,748 | ) | — | 3,335 | |||||||||||||||
Total Asia Pacific | 42,707 | (2,752 | ) | — | 39,955 | |||||||||||||||
Corporate and Other | (26,515 | ) | 6,707 | — | (19,808 | ) | ||||||||||||||
Consolidated | $ | 216,564 | $ | (8,118 | ) | $ | 4,206 | $ | 212,652 | |||||||||||
(1) Asset-Intensive is net of $(30,297) DAC offset. |
||||||||||||||||||||
(2) Asset-Intensive is net of $18,757 DAC offset. |
||||||||||||||||||||
(Unaudited) | Three Months Ended March 31, 2018 | |||||||||||||||||||
Pre-tax income (loss) |
Capital
(gains) losses, derivatives and other, net |
Change in
value of embedded derivatives, net |
Pre-tax adjusted
operating income (loss) |
|||||||||||||||||
U.S. and Latin America: | ||||||||||||||||||||
Traditional | $ | 2,892 | $ | 10 | $ | (1,693 | ) | $ | 1,209 | |||||||||||
Financial Solutions: | ||||||||||||||||||||
Asset-Intensive | 47,262 | 41,631 | (1) | (39,231 | ) | (2) | 49,662 | |||||||||||||
Financial Reinsurance | 20,159 | — | — | 20,159 | ||||||||||||||||
Total U.S. and Latin America | 70,313 | 41,641 | (40,924 | ) | 71,030 | |||||||||||||||
Canada Traditional | 23,707 | 1,850 | — | 25,557 | ||||||||||||||||
Canada Financial Solutions | 3,191 | — | — | 3,191 | ||||||||||||||||
Total Canada | 26,898 | 1,850 | — | 28,748 | ||||||||||||||||
EMEA Traditional | 15,421 | (9 | ) | — | 15,412 | |||||||||||||||
EMEA Financial Solutions | 39,164 | (3,276 | ) | — | 35,888 | |||||||||||||||
Total EMEA | 54,585 | (3,285 | ) | — | 51,300 | |||||||||||||||
Asia Pacific Traditional | 22,887 | (5 | ) | — | 22,882 | |||||||||||||||
Asia Pacific Financial Solutions | 4,021 | (2,743 | ) | — | 1,278 | |||||||||||||||
Total Asia Pacific | 26,908 | (2,748 | ) | — | 24,160 | |||||||||||||||
Corporate and Other | (40,779 | ) | 9,842 | — | (30,937 | ) | ||||||||||||||
Consolidated | $ | 137,925 | $ | 47,300 | $ | (40,924 | ) | $ | 144,301 | |||||||||||
(1) Asset-Intensive is net of $5,289 DAC offset. |
||||||||||||||||||||
(2) Asset-Intensive is net of $16,035 DAC offset. |
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Per Share and Shares Data (In thousands, except per share data) |
||||||||
(Unaudited) | Three Months Ended March 31, | |||||||
2019 | 2018 | |||||||
Earnings per share from net income: | ||||||||
Basic earnings per share | $ | 2.70 | $ | 1.55 | ||||
Diluted earnings per share | $ | 2.65 | $ | 1.52 | ||||
Diluted earnings per share from adjusted operating income | $ | 2.61 | $ | 1.61 | ||||
Weighted average number of common and common equivalent shares outstanding | 64,027 | 65,872 | ||||||
(Unaudited) | At March 31, | |||||||
2019 | 2018 | |||||||
Treasury shares | 16,594 | 14,625 | ||||||
Common shares outstanding | 62,544 | 64,513 | ||||||
Book value per share outstanding | $ | 154.61 | $ | 139.64 | ||||
Book value per share outstanding, before impact of AOCI | $ | 126.38 | $ | 117.49 | ||||
Reconciliation of Book Value Per Share to Book Value Per Share Excluding AOCI |
||||||||
(Unaudited) | At March 31, | |||||||
2019 | 2018 | |||||||
Book value per share outstanding | $ | 154.61 | $ | 139.64 | ||||
Less effect of AOCI: | ||||||||
Accumulated currency translation adjustments | (2.36 | ) | (1.36 | ) | ||||
Unrealized appreciation of securities | 31.41 | 24.29 | ||||||
Pension and postretirement benefits | (0.82 | ) | (0.78 | ) | ||||
Book value per share outstanding, before impact of AOCI | $ | 126.38 | $ | 117.49 | ||||
Reconciliation of Stockholders' Average Equity to Stockholders' Average Equity Excluding AOCI (Dollars in thousands) |
|||||||
(Unaudited) | |||||||
Trailing Twelve Months Ended March 31, 2019: | Average Equity | ||||||
Stockholders' average equity |
$ |
8,861,989 |
|||||
Less effect of AOCI: | |||||||
Accumulated currency translation adjustments |
|
(133,001 |
) | ||||
Unrealized appreciation of securities |
|
1,313,655 |
|||||
Pension and postretirement benefits |
|
(50,874 |
) | ||||
Stockholders' average equity, excluding AOCI |
$ |
7,732,209 |
|||||
|
|||||||
Reconciliation of Trailing Twelve Months of Consolidated Net Income to Adjusted Operating Income and Related Return on Equity (Dollars in thousands) |
|||||||
(Unaudited) |
Return on Equity |
||||||
Trailing Twelve Months Ended March 31, 2019: | Income | ||||||
Net Income | $ | 785,119 |
8.9 |
% | |||
Reconciliation to adjusted operating income: | |||||||
Capital (gains) losses, derivatives and other, net |
|
103,403 |
|||||
Change in fair value of embedded derivatives |
|
41,934 |
|||||
Deferred acquisition cost offset, net |
|
(17,691 |
) | ||||
Statutory tax rate changes and subsequent effects |
|
(62,388 |
) | ||||
Adjusted operating income | $ | 850,377 | 11.0 | % | |||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Statements of Income (Dollars in thousands) |
||||||||
(Unaudited) | Three Months Ended March 31, | |||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Net premiums | $ | 2,737,813 | $ | 2,582,551 | ||||
Investment income, net of related expenses | 579,877 | 516,329 | ||||||
Investment related gains (losses), net: | ||||||||
Other-than-temporary impairments on fixed maturity securities | (9,453 | ) | — | |||||
Other investment related gains (losses), net | 17,241 | (470 | ) | |||||
Total investment related gains (losses), net | 7,788 | (470 | ) | |||||
Other revenue | 94,553 | 75,297 | ||||||
Total revenues | 3,420,031 | 3,173,707 | ||||||
Benefits and expenses: | ||||||||
Claims and other policy benefits | 2,508,324 | 2,362,101 | ||||||
Interest credited | 133,189 | 80,449 | ||||||
Policy acquisition costs and other insurance expenses | 311,881 | 356,902 | ||||||
Other operating expenses | 201,483 | 191,274 | ||||||
Interest expense | 40,173 | 37,454 | ||||||
Collateral finance and securitization expense | 8,417 | 7,602 | ||||||
Total benefits and expenses | 3,203,467 | 3,035,782 | ||||||
Income before income taxes | 216,564 | 137,925 | ||||||
Provision for income taxes | 47,057 | 37,695 | ||||||
Net income | $ | 169,507 | $ | 100,230 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190429005767/en/
Source:
Investor Contact
Jeff Hopson
Senior Vice President -
Investor Relations
(636) 736-7000