Reinsurance Group Of America Reports Fourth-Quarter Results
ST. LOUIS--(BUSINESS WIRE)--Jan. 24, 2002--Reinsurance Group of America, Incorporated (NYSE:RGA - news) reported fourth-quarter operating earnings from continuing operations of $2.2 million or $0.04 per share, compared with $35.8 million or $0.72 per share the year before. Including capital gains and losses and discontinued operations, the company reported a net loss for the quarter of $28.1 million, or $0.57 per share, compared to net income of $9.2 million, or $0.19 per share, in the prior year. The net loss for the fourth quarter of 2001 includes $23.4 million, after tax, in net capital losses and a $6.9 million after-tax loss associated with an arbitration settlement in the company's discontinued accident and health segment. Fourth-quarter premiums increased 17 percent, to $482.0 million from $413.0 million in 2000.
President and Chief Executive Officer A. Greig Woodring commented, ``As we announced on January 17th, our lower earnings are a result of several factors. Consolidated operating earnings were primarily affected by reserve strengthening on our Argentine pension business and high claims levels in our U.S. segment. Additionally, a decline in yield on our investment portfolio has put modest downward pressure on our results. On a positive note, premium growth was strong, and the activity level in the market is very good.''
Woodring continued, ``For the quarter, net premiums in the U.S. increased to $356.7 million, or 15 percent, and the full-year premiums were up 18 percent from 2000 levels. We did experience adverse claims development during the quarter in our U.S. segment totaling approximately $16 million. This was not attributable to a single treaty or type of business, although the adverse claims were weighted more toward our automatic business. As we previously reported, we saw an unusually high level of claims in the quarter, including an acceleration of claims reported to us in late December. We have performed various analyses, including a review of the baseline mortality used to project earnings on the entire portfolio. After considering the fourth-quarter claims development, that review suggests that while we are meeting pricing returns, the extent to which we have added high volumes of new business over the last several years influences the timing of the earnings emergence, given that life reinsurance margins typically expand as the business matures. We have reset the U.S. segment's earnings expectations for 2002 to reflect the relative age of the overall portfolio of business.
``For the fourth quarter, Canada reported pre-tax operating income of $9.9 million compared with $13.8 million in the prior year, in which favorable mortality experience produced a very strong result. For the year, pre-tax operating income increased to $42.4 million from $41.1 million in 2000. The results for 2001 were negatively affected by a relatively weak Canadian dollar. Pre-tax operating income in Canada has nearly doubled from 1998 and we are pleased with our success in that market. For the year, mortality was within our range of expectations.
``Our operations in Asia Pacific, Europe and South Africa continue to make progress. For the quarter, these operations reported net premiums of $69.2 million, an increase of 79 percent from the prior- year quarter. On a full-year basis, net premiums increased 73 percent. Pre-tax operating income for the quarter was slightly positive due to profits in the Asia Pacific operations, which are further along in their development than Europe and South Africa.''
Commenting on Latin America, Woodring said, ``As previously announced, we increased reserves by $35 million for our Argentine pension business. We first discussed the need for these reserves as part of our third-quarter conference call. While much has happened with the Argentina economy since that time, we believe these reserves are sufficient to support the run-off of our pension business. We do not expect the economic turmoil in Argentina, including the devaluation of the Argentine peso, to have a negative economic impact on our reserve liability. We incurred capital losses during the third and fourth quarter when we liquidated Argentine investment securities. Proceeds from those sales have been invested in U.S. dollar-denominated securities. We continue to monitor the situation very closely.''
Turning to other corporate matters, Woodring said, ``We successfully raised $225 million of new capital in December in the form of trust preferred convertible securities. Additionally, we issued $200 million of 10-year senior notes, the proceeds of which were used to pay down the outstanding balance of our U.S. credit facility and repay a note with MetLife. Going into 2002, we are well positioned in terms of capital and financial flexibility.''
Woodring concluded, ``The results for the year did not meet our expectations. Ours is a long-term business that can be difficult to predict quarter-to-quarter. We have reset our earnings expectations for 2002 as a result of the analysis we completed relative to the U.S. segment mortality baseline. On a total company basis, we expect to earn within a range of $2.65 to $2.85 per share. We feel that range more accurately portrays the appropriate baseline and relative age of the business included in our current portfolio of life reinsurance risks and reflects the current interest rate environment and market conditions.''
For the year, operating earnings from continuing operations totaled $87.1 million, or $1.75 per share, compared with $127.4 million, or $2.55 per share in the prior year. Net income for the year, including discontinued operations and capital gains and losses, totaled $33.0 million, or $0.66 per share, compared with $77.7 million, or $1.56 per share, reported for the prior year. Net income for the year includes $47.2 million in after-tax net capital losses and a loss of $6.9 million, after tax, for discontinued operations. Consolidated premiums totaled $1,661.8 million, up 18 percent over the prior-year total of $1,404.1 million.
The company announced that its board of directors authorized the company to purchase up to $50 million of its shares of stock, which includes a previously authorized $25 million stock repurchase plan. The company has not purchased any shares under that plan. The board's action allows management, in its discretion, to purchase shares on the open market. No time frame or prices have been specified for the repurchase program, which is effective immediately. Repurchases may be made in the open market, through block trades or otherwise. Depending on market conditions and other factors, the repurchases may be commenced or suspended at any time and from time to time without prior notice.
The company also announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable February 26 to shareholders of record as of February 5.
A conference call to discuss the company's fourth quarter results will begin at 9:00 a.m. Eastern Standard Time on Friday January 25. Interested parties may access the call by dialing 800-967-7134 (domestic) or 719-457-2625 (international). The access code is 522486. A live audio webcast of the conference call will be available on the company's website at www.rgare.com. A replay of the conference call will be available on the company's website for 10 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 $616 billion of life reinsurance in force, and assets of $6.9 billion. MetLife is the beneficial owner of approximately 58 percent of RGA's outstanding shares.
Statements in this press release regarding our business which are not historical facts, including, without limitation, statements and information relating to our future financial performance, growth rates and potential, increases in premiums, the effect of mortality rates and experience, claims levels, our views on the life reinsurance industry and other statements related to our business are ``forward-looking statements'' within the meaning of the Private Securities Litigation Reform Act of 1995. The words ``intend,'' ``expect,'' ``project,'' ``estimate,'' ``predict,'' ``anticipate,'' ``should,'' ``believe,'' and other similar expressions also are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
Numerous factors could cause actual results and events to differ materially from those expressed or implied by forward-looking statements including, without limitation, (1) material changes in mortality and claims experience, (2) market conditions and the timing of sales of investment securities, (3) competitive factors and competitors' responses to our initiatives, (4) general economic conditions affecting the demand for insurance and reinsurance in our current and planned markets, (5) changes in the financial strength and credit ratings of RGA and its subsidiaries and of Metropolitan Life Insurance Company (``MetLife''), General American Life Insurance Company (``General American''), and their respective affiliates, and the effect of such changes on our future results of operations and financial condition, (6) fluctuations in U.S. and foreign currency exchange rates, interest rates, and securities and real estate markets, (7) the stability of governments and economies in the markets in which we operate, (8) the success of our clients, (9) successful execution of our entry into new markets, (10) successful development and introduction of new products, (11) regulatory action that may be taken by state Departments of Insurance with respect to MetLife, General American, or RGA and its subsidiaries, (12) changes in laws, regulations, and accounting standards applicable to us and our subsidiaries, and (13) other risks and uncertainties described in our Annual Report and in our other filings with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on the forward- looking statements, which speak only as of the date on which they are made. We do not undertake any obligations to update these forward- looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.
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 we file 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
sections named ``Risk Factors'' and ``Cautionary Statement Regarding
Forward- Looking Statements'' contained in our prospectus dated
December 3, 2001, filed with our prospectus supplements, each dated
December 12, 2001, and filed with the Securities and Exchange
Commission, which discussions are incorporated by reference into this
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, 2001 2000 2001 2000 Revenues: Net premiums $482,016 $413,007 $1,661,762 $1,404,066 Investment income, net of related expenses 89,501 88,085 340,559 326,505 Realized investment gains/(losses), net (33,075) (10,306) (68,431) (28,651) Other revenue 12,544 11,178 34,394 23,815 Total revenues 550,986 501,964 1,968,284 1,725,735 Benefits and expenses: Claims and other policy benefits 422,150 327,222 1,376,802 1,103,548 Interest credited 32,122 30,220 111,712 104,782 Policy acquisition costs and other insurance expenses 100,270 72,285 304,217 243,542 Other operating expenses 24,426 21,427 91,306 81,209 Interest expense 4,378 5,179 18,097 17,596 Total benefits and expenses 583,346 456,333 1,902,134 1,550,677 Income (loss) from continuing operations before taxes (32,360) 45,631 66,150 175,058 Provision (benefit) for income taxes (11,120) 16,528 26,249 69,271 Net income (loss) from continuing operations (21,240) 29,103 39,901 105,787 Discontinued operations: Loss from discontinued operations, net of income taxes (6,855) (19,869) (6,855) (28,118) Net income (loss) $(28,095) $ 9,234 $ 33,046 $ 77,669 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, 2001 2000 2001 2000 Earnings (loss) per share from continuing operations: Basic earnings per share $ (0.43) $ 0.59 $ .81 $ 2.14 Diluted earnings per share $ (0.43) $ 0.58 $ .80 $ 2.12 Diluted earnings before realized investment gains/ (losses) $ 0.04 $ 0.72 $ 1.75 $ 2.55 Earnings (loss) per share from net income: Basic earnings per share $ (0.57) $ 0.19 $ .67 $ 1.57 Diluted earnings per share $ (0.57) $ 0.19 $ .66 $ 1.56 Weighted average number of common and common equivalent shares outstanding (in thousands) 49,926 49,802 49,905 49,920 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Business Summary At or For the Twelve Months Ended (Unaudited) December 31, 2001 2000 Gross life reinsurance in force (in billions) North American business $ 523.9 $ 467.0 International business 92.1 78.9 Gross life reinsurance written (in billions) North American business 108.1 129.5 International business 63.0 31.6 Consolidated cash and invested assets (in millions) 5,315.1 4,631.0 Invested Asset book yield - trailing three months 6.78% 7.30% Investment portfolio mix Cash and short-term investments 6.91% 3.01% Fixed maturity securities 52.08% 58.15% Mortgage loans 3.08% 2.77% Policy loans 14.58% 15.26% Funds withheld at interest 21.50% 20.26% Other invested assets 1.85% 0.55% Book value per share outstanding $ 20.30 $ 17.51 Book value per share outstanding, before impact of FAS 115 20.31 18.36 Treasury stock 1,526,730 1,759,715 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES U.S. OPERATIONS (Dollars in thousands) Twelve Months Ended December 31, 2001 Non-traditional Asset- Financial Total Traditional Intensive Reinsurance U.S. Revenues: Net premiums $1,219,674 $ 3,248 $ -- $1,222,922 Investment income, net of related expenses 150,262 93,252 474 243,988 Realized investment gains/(losses), net (29,933) 1,193 -- (28,740) Other revenue 2,232 2,379 25,958 30,569 Total revenues 1,342,235 100,072 26,432 1,468,739 Benefits and expenses: Claims and other policy benefits 976,740 4,658 -- 981,398 Interest credited 51,596 58,087 -- 109,683 Policy acquisition costs and other insurance expenses 181,307 21,632 9,925 212,864 Other operating expenses 30,363 740 7,980 39,083 Total benefits and expenses 1,240,006 85,117 17,905 1,343,028 Income before income taxes $ 102,229 $ 14,955 $ 8,527 $ 125,711 Twelve Months Ended December 31, 2000 Non-traditional Asset- Financial Total Traditional Intensive Reinsurance U.S. Revenues: Net premiums $1,036,656 $ 2,216 $ -- $1,038,872 Investment income, net of related expenses 139,688 89,001 (37) 228,652 Realized investment gains/(losses), net (12,206) (1,066) -- (13,272) Other revenue 321 686 16,370 17,377 Total revenues 1,164,459 90,837 16,333 1,271,629 Benefits and expenses: Claims and other policy benefits 793,494 (95) -- 793,399 Interest credited 47,445 55,006 -- 102,451 Policy acquisition costs and other insurance expenses 150,347 23,446 5,457 179,250 Other operating expenses 25,244 802 3,274 29,320 Total benefits and expenses 1,016,530 79,159 8,731 1,104,420 Income before income taxes $147,929 $ 11,678 $ 7,602 $ 167,209 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES CANADIAN OPERATIONS (Dollars in thousands) Twelve Months Ended December 31, 2001 2000 Revenues: Net premiums $173,269 $176,326 Investment income, net of related expenses 65,006 61,950 Realized investment gains/(losses), net 9,148 (1,291) Other revenue 201 318 Total revenues 247,624 237,303 Benefits and expenses: Claims and other policy benefits 172,799 171,417 Interest credited 299 763 Policy acquisition costs and other insurance expenses 14,101 16,563 Other operating expenses 8,909 8,702 Total benefits and expenses 196,108 197,445 Income before income taxes $ 51,516 $ 39,858 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES OTHER INTERNATIONAL (Dollars in thousands) Twelve Months Ended December 31, 2001 Total Latin Asia Other Inter- America Pacific Markets national Revenues: Net premiums $ 51,069 $119,702 $94,800 $265,571 Investment income, net of related expenses 14,684 3,935 1,536 20,155 Realized investment gains /(losses), net (32,619) 113 (137) (32,643) Other revenue 547 2,903 256 3,706 Total revenues 33,681 126,653 96,455 256,789 Benefits and expenses: Claims and other policy benefits 87,581 75,595 59,429 222,605 Interest credited 1,730 -- -- 1,730 Policy acquisition costs and other insurance expenses 14,395 36,103 26,753 77,251 Other operating expenses 9,072 11,081 10,555 30,708 Interest expense -- 867 681 1,548 Total benefits and expenses 112,778 123,646 97,418 333,842 Income (loss) before income taxes $(79,097) $ 3,007 $ (963) $(77,053) Twelve Months Ended December 31, 2000 Total Latin Asia Other Inter- America Pacific Markets national Revenues: Net premiums $ 64,897 $ 94,282 $29,690 $188,869 Investment income, net of related expenses 19,782 4,628 2,056 26,466 Realized investment gains/ (losses), net (9,099) (191) 365 (8,925) Other revenue 364 2,266 3,177 5,807 Total revenues 75,944 100,985 35,288 212,217 Benefits and expenses: Claims and other policy benefits 62,205 56,377 20,151 138,733 Interest credited 1,568 -- -- 1,568 Policy acquisition costs and other insurance expenses 7,772 32,484 7,473 47,729 Other operating expenses 10,647 9,939 9,542 30,128 Interest expense -- 980 502 1,482 Total benefits and expenses 82,192 99,780 37,668 219,640 Income (loss) before income taxes $ (6,248) $ 1,205 $(2,380) $ (7,423)
SOURCE: Reinsurance Group of America, Incorporated
Reinsurance Group of America Incorporated Jack B. Lay, 636/736-7439