Reinsurance Group of America Reports Fourth-Quarter Results
-
Fourth-quarter earnings per diluted share: net income
$2.15 , operating income*$1.91 -
Net premiums up 13 percent to
$2.0 billion for the quarter - Full-year operating return on equity* 13 percent
- Five-year average operating return on equity* 13 percent
Quarterly Results | Year-to-Date Results | |||||||||||||||||||
($ in thousands, except per share data) |
2011 |
2010 | 2011 | 2010 | ||||||||||||||||
Net premiums | $2,034,716 | $1,801,899 | $7,335,687 | $6,659,680 | ||||||||||||||||
Net income | 158,531 | 196,712 | 599,620 | 574,402 | ||||||||||||||||
Net income per diluted share | 2.15 | 2.62 | 8.09 | 7.69 | ||||||||||||||||
Operating income* | 140,726 | 161,419 | 539,172 | 504,029 | ||||||||||||||||
Operating income per diluted share* | 1.91 | 2.15 | 7.28 | 6.75 | ||||||||||||||||
Book value per share | 83.65 | 68.71 | ||||||||||||||||||
Book value per share (excl. Accumulated Other Comprehensive Income “AOCI”)* |
61.53 |
56.34 |
||||||||||||||||||
Total assets | 32,104,032 | 29,081,908 | ||||||||||||||||||
* See ‘Use of Non-GAAP Financial Measures’ below |
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Net income for the year increased to
For the quarter, consolidated net premiums increased 13 percent to
During the fourth quarter, the company recognized additional income tax
benefits associated with unfavorable claims experience on certain
treaties, deferred tax refinements, and other items. For the entire
year, the company’s effective tax rate of approximately 28 percent was
lower than its expected rate of approximately 33 percent. The primary
reason for the lower effective rate in 2011 relates to third-quarter
adjustments of deferred tax liabilities associated with previously
enacted reductions in federal and provincial statutory tax rates in
“Our annualized operating return on equity was 13 percent for the quarter and year, and operating income per diluted share was up 8 percent year over year. Our operating return on equity has averaged 13 percent over the past five years, despite the global market and economic disruptions. RGA’s balance sheet and capitalization remain strong, as does our positioning and outlook for future global growth. We continue to be highly focused on meeting our clients’ needs in all markets.”
SEGMENT RESULTS
U.S.
The U.S. Traditional sub-segment reported pre-tax net income of
The U.S. Asset Intensive business reported pre-tax income of
The U.S. Financial Reinsurance business continued to perform well this
quarter and added
Canadian operations reported pre-tax net income of
Corporate and Other
The Corporate and Other segment reported a pre-tax net loss of
2012 Guidance
Management projects 2012 operating income per diluted share to be within
a range of
Board of Directors
The company announced that
Dividend Declaration
The board of directors declared a regular quarterly dividend of
Earnings Conference Call
A conference call to discuss fourth-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 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 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 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, operating income excludes any net gain or loss from discontinued operations and the cumulative effect of any accounting changes, which management believes are not indicative of the company’s ongoing operations. The definition of operating income can vary by company and is not considered a substitute for GAAP net income. ReconciliationstoGAAP net income are provided in thefollowing tables. Additional financial information can be found in the Quarterly Financial Supplement on RGA’s Investor Relations website at www.rgare.com in the “Quarterly Results” tab and in the “Featured Report” section.
Book value per share outstanding before 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.
Operating return on equity is a non-GAAP financial measure calculated as operating income divided by average shareholders’ equity excluding AOCI.
About RGA
Cautionary Statement 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, 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 our liquidity, access to capital,
and cost of capital, (2) the impairment of other financial institutions
and its effect on our business, (3) requirements to post collateral or
make payments due to declines in market value of assets subject to our
collateral arrangements, (4) the fact that the determination of
allowances and impairments taken on our investments is highly
subjective, (5) adverse changes in mortality, morbidity, lapsation, or
claims experience, (6) changes in our financial strength and credit
ratings and the effect of such changes on our 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 our
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 our investment securities
or result in the impairment of all or a portion of the value of certain
of our investment securities, (11) market or economic conditions that
adversely affect our ability to make timely sales of investment
securities, (12) risks inherent in our 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 we operate, 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 |
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Reconciliation of Consolidated Net Income to Operating Income |
|||||||||||||||||
(Dollars in thousands) |
|||||||||||||||||
(Unaudited) | Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
GAAP net income | $ | 158,531 | $ | 196,712 | $ | 599,620 | $ | 574,402 | |||||||||
Reconciliation to operating income: | |||||||||||||||||
Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net |
(4,904 | ) | 59,317 | (175,910 | ) | (50,810 | ) | ||||||||||
Capital (gains) losses on funds withheld: | |||||||||||||||||
Included in investment income | (126 | ) | (5,356 | ) | (3,344 | ) | (13,276 | ) | |||||||||
Included in policy acquisition costs and other insurance expenses | 31 | 515 | 617 | 1,588 | |||||||||||||
Embedded derivatives: | |||||||||||||||||
Included in investment related (gains) losses, net | 36,700 | (107,243 | ) | 202,423 | (85,467 | ) | |||||||||||
Included in interest credited | 6,169 | (16,732 | ) | 26,838 | 6,433 | ||||||||||||
Included in policy acquisition costs and other insurance expenses | 4,490 | 1,955 | 2,675 | 368 | |||||||||||||
DAC offset, net | (53,844 | ) | 32,251 | (73,984 | ) | 70,791 | |||||||||||
Gain on repurchase of collateral finance facility securities | (6,321 | ) | - | (42,617 | ) | - | |||||||||||
Loss on retirement of Preferred Income Equity Redeemable Securities ("PIERS") |
- | - | 2,854 | - | |||||||||||||
Operating income | $ | 140,726 | $ | 161,419 | $ | 539,172 | $ | 504,029 | |||||||||
Reconciliation of Consolidated Pre-tax Net Income to Pre-tax Operating Income | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
(Unaudited) | Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
Income before income taxes | $ | 220,585 | $ | 275,257 | $ | 834,380 | $ | 863,817 | |||||||||
Reconciliation to pre-tax operating income: | |||||||||||||||||
Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net |
(5,360 | ) | 91,401 | (265,607 | ) | (76,672 | ) | ||||||||||
Capital (gains) losses on funds withheld: | |||||||||||||||||
Included in investment income | (194 | ) | (8,240 | ) | (5,144 | ) | (20,424 | ) | |||||||||
Included in policy acquisition costs and other insurance expenses | 47 | 793 | 949 | 2,443 | |||||||||||||
Embedded derivatives: | |||||||||||||||||
Included in investment related (gains) losses, net | 56,461 | (164,989 | ) | 311,420 | (131,488 | ) | |||||||||||
Included in interest credited | 9,490 | (25,741 | ) | 41,289 | 9,897 | ||||||||||||
Included in policy acquisition costs and other insurance expenses | 6,908 | 3,008 | 4,115 | 566 | |||||||||||||
DAC offset, net | (82,837 | ) | 49,618 | (113,821 | ) | 108,909 | |||||||||||
Gain on repurchase of collateral finance facility securities | (9,725 | ) | - | (65,565 | ) | - | |||||||||||
Loss on retirement of PIERS | - | - | 4,391 | - | |||||||||||||
Pre-tax operating income | $ | 195,375 | $ | 221,107 | $ | 746,407 | $ | 757,048 | |||||||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES | ||||||||||||||||||||||||||
Reconciliation of Pre-tax Net Income to Pre-tax Operating Income | ||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
Three Months Ended December 31, 2011 | ||||||||||||||||||||||||||
Pre-tax net |
Capital (gains) losses, derivatives and other, net |
Change in value of embedded derivatives, net |
Net (gain) loss on repurchase and retirement of securities |
Pre-tax operating income (loss) |
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U.S. Operations: | ||||||||||||||||||||||||||
Traditional | $ | 116,096 | $ | (29,038 | ) | $ | (1,037 | ) | $ | - | $ | 86,021 | ||||||||||||||
Asset Intensive | 13,187 | (14,585 | ) | (1 | ) | 28,574 | (2 | ) | - | 27,176 | ||||||||||||||||
Financial Reinsurance | 6,834 | 87 | - | - | 6,921 | |||||||||||||||||||||
Total U.S. | 136,117 | (43,536 | ) | 27,537 | - | 120,118 | ||||||||||||||||||||
Canada Operations | 47,544 | (6,545 | ) | - | - | 40,999 | ||||||||||||||||||||
Europe & South Africa | 41,602 | (2,951 | ) | - | - | 38,651 | ||||||||||||||||||||
Asia Pacific Operations | 4,128 | (5,309 | ) | - | - | (1,181 | ) | |||||||||||||||||||
Corporate and Other | (8,806 | ) | 15,319 | - | (9,725 | ) | (3,212 | ) | ||||||||||||||||||
Consolidated | $ | 220,585 | $ | (43,022 | ) | $ | 27,537 | $ | (9,725 | ) | $ | 195,375 | ||||||||||||||
(1) Asset Intensive is net of $(37,515) DAC offset. | ||||||||||||||||||||||||||
(2) Asset Intensive is net of $(45,322) DAC offset. | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
Three Months Ended December 31, 2010 | ||||||||||||||||||||||||||
Pre-tax net income |
Capital (gains) losses, derivatives and other, net |
Change in value of embedded derivatives, net |
Pre-tax operating income |
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U.S. Operations: | ||||||||||||||||||||||||||
Traditional | $ | 113,341 | $ | (6,246 | ) | $ | - | $ | 107,095 | |||||||||||||||||
Asset Intensive | 56,361 | 13,303 | (1 | ) | (49,683 | ) | (2 | ) | 19,981 | |||||||||||||||||
Financial Reinsurance | 5,555 | 23 | - | 5,578 | ||||||||||||||||||||||
Total U.S. | 175,257 | 7,080 | (49,683 | ) | 132,654 | |||||||||||||||||||||
Canada Operations | 36,189 | 454 | - | 36,643 | ||||||||||||||||||||||
Europe & South Africa | 35,357 | 1,030 | - | 36,387 | ||||||||||||||||||||||
Asia Pacific Operations | 10,071 | (1,949 | ) | - | 8,122 | |||||||||||||||||||||
Corporate and Other | 18,383 | (11,082 | ) | - | 7,301 | |||||||||||||||||||||
Consolidated | $ | 275,257 | $ | (4,467 | ) | $ | (49,683 | ) | $ | 221,107 | ||||||||||||||||
(1) Asset Intensive is net of $(88,421) DAC offset. | ||||||||||||||||||||||||||
(2) Asset Intensive is net of $138,039 DAC offset. | ||||||||||||||||||||||||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES | ||||||||||||||||||||||||
Reconciliation of Pre-tax Net Income to Pre-tax Operating Income | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Twelve Months Ended December 31, 2011 | ||||||||||||||||||||||||
Pre-tax net |
Capital (gains) losses, derivatives and other, net |
Change in value of embedded derivatives, net |
Net (gain) loss on repurchase and retirement of securities |
Pre-tax operating income |
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U.S. Operations: | ||||||||||||||||||||||||
Traditional | $ | 376,208 | $ | (41,799 | ) | $ | (2,412 | ) | $ | - | $ | 331,997 | ||||||||||||
Asset Intensive | 34,158 | (42,327 | ) | (1 | ) | 77,117 | (2 | ) | - | 68,948 | ||||||||||||||
Financial Reinsurance | 26,343 | 128 | - | - | 26,471 | |||||||||||||||||||
Total U.S. | 436,709 | (83,998 | ) | 74,705 | - | 427,416 | ||||||||||||||||||
Canada Operations | 166,613 | (21,798 | ) | - | - | 144,815 | ||||||||||||||||||
Europe & South Africa | 100,043 | (6,000 | ) | - | - | 94,043 | ||||||||||||||||||
Asia Pacific Operations | 67,120 | (3,056 | ) | - | - | 64,064 | ||||||||||||||||||
Corporate and Other | 63,895 | 13,348 | - | (61,174 | ) | 16,069 | ||||||||||||||||||
Consolidated | $ | 834,380 | $ | (101,504 | ) | $ | 74,705 | $ | (61,174 | ) | $ | 746,407 | ||||||||||||
(1) Asset Intensive is net of $168,298 DAC offset. | ||||||||||||||||||||||||
(2) Asset Intensive is net of $(282,119) DAC offset. | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||||||
Pre-tax net income |
Capital (gains) losses, derivatives and other, net |
Change in |
Pre-tax operating income |
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U.S. Operations: | ||||||||||||||||||||||||
Traditional | $ | 390,055 | $ | (24,824 | ) | $ | - | $ | 365,231 | |||||||||||||||
Asset Intensive | 131,878 | (34,881 | ) | (1 | ) | (30,711 | ) | (2 | ) | 66,286 | ||||||||||||||
Financial Reinsurance | 17,457 | 86 | - | 17,543 | ||||||||||||||||||||
Total U.S. | 539,390 | (59,619 | ) | (30,711 | ) | 449,060 | ||||||||||||||||||
Canada Operations | 122,378 | (8,747 | ) | - | 113,631 | |||||||||||||||||||
Europe & South Africa | 85,834 | (2,584 | ) | - | 83,250 | |||||||||||||||||||
Asia Pacific Operations | 88,760 | (5,000 | ) | - | 83,760 | |||||||||||||||||||
Corporate and Other | 27,455 | (108 | ) | - | 27,347 | |||||||||||||||||||
Consolidated | $ | 863,817 | $ | (76,058 | ) | $ | (30,711 | ) | $ | 757,048 | ||||||||||||||
(1) Asset Intensive is net of $18,595 DAC offset. | ||||||||||||||||||||||||
(2) Asset Intensive is net of $90,314 DAC offset. | ||||||||||||||||||||||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES | |||||||||||||
Per Share and Shares Data | |||||||||||||
(In thousands, except per share data) | |||||||||||||
(Unaudited) | Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | ||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Diluted earnings per share from operating income | $ | 1.91 | $ | 2.15 | $ | 7.28 | $ | 6.75 | |||||
Earnings per share from net income: | |||||||||||||
Basic earnings per share | $ | 2.16 | $ | 2.68 | $ | 8.15 | $ | 7.85 | |||||
Diluted earnings per share | $ | 2.15 | $ | 2.62 | $ | 8.09 | $ | 7.69 | |||||
Weighted average number of common and common | |||||||||||||
equivalent shares outstanding | 73,812 | 75,052 | 74,108 | 74,694 | |||||||||
(Unaudited) |
|
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At December 31, |
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2011 | 2010 | ||||||||||||
Treasury shares | 5,770 | - | |||||||||||
Common shares outstanding | 73,368 | 73,363 | |||||||||||
Book value per share outstanding | $ |
83.65 |
$ | 68.71 | |||||||||
Book value per share outstanding, before impact of AOCI | $ | 61.53 | $ | 56.34 | |||||||||
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES | ||||||||||||||||||
Condensed Consolidated Statements of Income | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
(Unaudited) | Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | |||||||||||||||||
Revenues: | 2011 | 2010 | 2011 | 2010 | ||||||||||||||
Net premiums | $ | 2,034,716 | $ | 1,801,899 | $ | 7,335,687 | $ | 6,659,680 | ||||||||||
Investment income, net of related expenses | 304,511 | 355,227 | 1,281,197 | 1,238,660 | ||||||||||||||
Investment related gains (losses), net: | ||||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (11,824 | ) | (16,097 | ) | (30,873 | ) | (31,920 | ) | ||||||||||
Other-than-temporary impairments on fixed maturity securities | ||||||||||||||||||
transferred to (from) accumulated other comprehensive income | 543 | (186 | ) | 3,924 | 2,045 | |||||||||||||
Other investment related gains (losses), net | (36,183 | ) | 90,916 | (9,107 | ) | 241,905 | ||||||||||||
Total investment related gains (losses), net | (47,464 | ) | 74,633 | (36,056 | ) | 212,030 | ||||||||||||
Other revenue | 56,456 | 42,370 | 248,710 | 151,360 | ||||||||||||||
Total revenues | 2,348,219 | 2,274,129 | 8,829,538 | 8,261,730 | ||||||||||||||
Benefits and expenses: | ||||||||||||||||||
Claims and other policy benefits | 1,720,573 | 1,470,845 | 6,224,800 | 5,547,155 | ||||||||||||||
Interest credited | 78,884 | 79,103 | 316,394 | 309,982 | ||||||||||||||
Policy acquisition costs and other insurance expenses | 177,932 | 319,444 | 919,595 | 1,079,953 | ||||||||||||||
Other operating expenses | 122,000 | 102,216 | 419,340 | 361,971 | ||||||||||||||
Interest expense | 25,226 | 25,215 | 102,638 | 90,996 | ||||||||||||||
Collateral finance facility expense | 3,019 | 2,049 | 12,391 | 7,856 | ||||||||||||||
Total benefits and expenses | 2,127,634 | 1,998,872 | 7,995,158 | 7,397,913 | ||||||||||||||
Income before income taxes | 220,585 | 275,257 | 834,380 | 863,817 | ||||||||||||||
Income tax expense | 62,054 | 78,545 | 234,760 | 289,415 | ||||||||||||||
Net income | $ | 158,531 | $ | 196,712 | $ | 599,620 | $ | 574,402 |
Source:
Reinsurance Group of America, Incorporated
John W. Hayden,
636-736-7000
Senior Vice President, Controller and Investor
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