Reinsurance Group of America Reports Increases in Revenues and Earnings
Third-quarter net premiums increased 18 percent, to $455.7 million from $387.8 million the year before. Consolidated net investment income decreased 9 percent, to $82.5 million from $90.7 million. This decrease is primarily a result of reduced investment performance on spread-based annuity business. The reduced investment performance is largely offset by a decrease in the interest credited on the business.
"We are pleased to report a strong third quarter," said A. Greig Woodring, president and chief executive officer. "On a consolidated basis, our results exceeded our expectations on both a top and bottom line basis. Our consolidated results continue to reflect good growth in our largest segment, the U.S., augmented by strong growth in certain international markets, primarily the UK and Asia Pacific."
Woodring continued, "Net premiums for the U.S. segment increased to $318.3 million, or 14 percent, from $280.0 million in the prior-year quarter, driven by production in our traditional business. On a year- to-date basis, net premiums in the U.S. have increased 15 percent. Pre- tax operating income for the quarter was $53.5 million compared with $35.9 million a year ago. The prior-year result includes $16 million in pretax loss associated with the September 11 terrorist attacks. Mortality results were better relative to our expectations and the comparable prior-year quarter, excluding the effect of the terrorist attacks. Somewhat offsetting the good mortality was a $3.0 million pretax loss on an annuity treaty due primarily to higher than expected lapse experience.
"Premiums in Canada totaled $41.9 million, approximately 5 percent ahead of a year ago. As expected, we have experienced a slowdown in growth in the Canadian market. Pre-tax operating income for the quarter was $8.5 million compared with $8.8 million a year ago.
"Our operations in Asia Pacific, Europe and South Africa continue to grow at a strong pace. For the quarter, these operations reported net premiums of $95.0 million, an increase of 62 percent from the prior-year quarter. We continue to experience particularly strong premium growth in the UK market, where we have several large treaties in place. Pre-tax operating income for Asia Pacific, Europe and South Africa totaled $4.0 million for the quarter compared with $2.2 million a year ago.
"We continue to see diminished business levels in our Latin America operations. For the quarter, the Latin America operations reported a pre-tax operating loss of $1.2 million, as premiums diminished to less than $1.0 million. We do not expect these operations to meaningfully affect future results."
Woodring concluded, "We are encouraged by the results for the third quarter and year-to-date, particularly given the difficult economic environment. The fundamentals of our business remain intact and we are executing a business plan that we believe will further our growth in the years to come."
For the first nine months of 2002, the company reported net income of $89.4 million compared with $61.1 million in the prior year. Operating earnings from continuing operations for the first nine months of 2002 totaled $101.4 million and excluded $8.0 million, after tax, in net capital losses and related deferred acquisition costs, goodwill write-off of $0.7 million and a $3.3 million after-tax loss associated with the company's discontinued accident and health segment. Operating earnings from continuing operations in the prior year totaled $84.9 million, and excluded $23.8 million, after tax, in net capital losses and related deferred acquisition costs. Operating earnings per diluted share from continuing operations totaled $2.04 compared with $1.70 the year before. Net premiums totaled $1,390.1 million compared with $1,179.7 million the year before.
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable November 26 to shareholders of record as of November 5.
A conference call to discuss the company's third quarter results will begin at 9:00 a.m. Eastern Time on Friday October 25. Interested parties may access the call by dialing 800-967-7140 (domestic) or 719- 457-2629 (international). The access code is 771464. A live audio webcast of the conference call will be available on the company's investor relations web page at www.rgare.com. A replay of the conference call will be available at the same address for ten days following the conference call. A replay of the conference call will also be available via telephone through November 1 at 888-203-1112, access code 771464.
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, Spain, Mexico, Hong Kong, India, Japan, Korea, Taiwan, South Africa and the United Kingdom. Worldwide, the Company has approximately $715 billion of life reinsurance in force, and assets of $7.7 billion. Metropolitan Life Insurance Company is the beneficial owner of approximately 59 percent of RGA's outstanding shares.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSThis 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 Reinsurance Group of America, Incorporated and its subsidiaries (which we refer to in the following paragraphs as "we," "us" or "our"). 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 important 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 or economic conditions that adversely affect our ability to make timely 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 our financial strength and credit ratings or those 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. or foreign currency exchange rates, interest rates, or securities and real estate markets, (7) changes in investment portfolio yields due to interest rate or credit quality changes, (8) the stability of governments and economies in the markets in which we operate, (9) adverse litigation or arbitration results, (10) the success of our clients, (11) successful execution of our entry into new markets, (12) successful development and introduction of new products, (13) regulatory action that may be taken by state Departments of Insurance with respect to us, MetLife, or General American, (14) changes in laws, regulations, and accounting standards applicable to us, our subsidiaries, or our business, and (15) other risks and uncertainties described in this document and in our other filings with the Securities and Exchange Commission.
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 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.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2002 2001 2002 2001
Revenues:
Net premiums $455,750 $387,825 $1,390,113 $1,179,746
Investment income, net
of related expenses 82,499 90,693 260,779 251,058
Realized investment gains/
(losses), net 1,066 (26,324) (10,951) (35,356)
Other revenues 10,839 5,922 27,734 21,850
Total revenues 550,154 458,116 1,667,675 1,417,298
Benefits and expenses:
Claims and other policy
benefits 342,301 314,882 1,096,797 954,652
Interest credited 22,156 32,639 79,777 79,590
Policy acquisition costs
and other insurance
expenses 96,303 70,672 252,606 203,947
Other operating expenses 26,358 22,802 67,734 66,880
Interest expense 9,006 4,431 26,475 13,719
Total benefits
and expenses 496,124 445,426 1,523,389 1,318,788
Income from continuing
operations before
income taxes 54,030 12,690 144,286 98,510
Provision for income
taxes 19,307 3,705 51,603 37,369
Income from continuing
operations 34,723 8,985 92,683 61,141
Discontinued operations:
Loss from discontinued
accident and health
operations, net of
income taxes (1,135) - (3,264) -
Net income $ 33,588 $ 8,985 $ 89,419 $ 61,141
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2002 2001 2002 2001
Earnings per share from continuing operations:
Basic earnings per share $ 0.70 $ 0.18 $ 1.88 $ 1.24
Diluted earnings per share $ 0.70 $ 0.18 $ 1.87 $ 1.22
Diluted earnings before
realized investment gains/
(losses) and related
deferred acquisition costs
and goodwill writeoff $ 0.71 $ 0.52 $ 2.04 $ 1.70
Earnings per share from net income:
Basic earnings per share $ 0.68 $ 0.18 $ 1.81 $ 1.24
Diluted earnings per share $ 0.68 $ 0.18 $ 1.80 $ 1.22
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,639 49,970 49,683 49,922
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Nine Months Ended
(Unaudited) September 30,
2002 2001
Gross life reinsurance in force (in billions)
North American business $ 584.0 $ 519.2
International business 130.8 66.6
Gross life reinsurance written (in billions)
North American business 110.4 78.1
International business 50.0 36.3
Consolidated cash and invested assets
(in millions) 5,934.0 4,931.1
Invest Asset book yield - trailing
three months excluding funds withheld 6.59% 6.99%
Investment portfolio mix
Cash and short-term investments 2.28% 4.83%
Fixed maturity securities 56.43% 54.30%
Mortgage loans 3.35% 3.16%
Policy loans 13.14% 14.52%
Funds withheld at interest 22.78% 21.86%
Other invested assets 2.02% 1.33%
Book value per share outstanding $ 23.91 $ 18.57
Book value per share outstanding, before
impact of FAS 115 22.09 19.14
Treasury stock 1,686,313 1,578,280
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Nine Months Ended September 30, 2002
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $ 995,490 $ 2,796 $ -- $ 998,286
Investment income, net
of related expenses 119,301 63,943 155 183,399
Realized investment
gains/(losses), net (1,110) (4,255) -- (5,365)
Other revenues 1,540 5,684 17,795 25,019
Total revenues 1,115,221 68,168 17,950 1,201,339
Benefits and expenses:
Claims and other policy
benefits 781,745 17,014 -- 798,759
Interest credited 41,507 35,453 -- 76,960
Policy acquisition costs
and other insurance
expenses 151,629 8,126 5,517 165,272
Other operating
expenses 19,767 744 7,005 27,516
Total benefits and
expenses 994,648 61,337 12,522 1,068,507
Income before
income taxes $ 120,573 $ 6,831 $ 5,428 $ 132,832
Nine Months Ended September 30, 2001
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $ 864,105 $ 2,127 $ -- $ 866,232
Investment income, net
of related expenses 112,334 64,698 462 177,494
Realized investment
gains/(losses), net (16,460) 1,802 -- (14,658)
Other revenues 787 1,720 16,217 18,724
Total revenues 960,766 70,347 16,679 1,047,792
Benefits and expenses:
Claims and other policy
benefits 691,184 4,095 -- 695,279
Interest credited 37,890 40,256 -- 78,146
Policy acquisition costs
and other insurance
expenses 121,971 13,486 5,744 141,201
Other operating
expenses 21,826 567 6,199 28,592
Total benefits and
expenses 872,871 58,404 11,943 943,218
Income before income
taxes $ 87,895 $ 11,943 $ 4,736 $ 104,574
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Nine Months Ended
September 30,
2002 2001
Revenues:
Net premiums $132,571 $126,689
Investment income, net of related expenses 52,133 48,739
Realized investment gains/(losses), net (22) 8,015
Other revenues 40 179
Total revenues 184,722 183,622
Benefits and expenses:
Claims and other policy benefits 137,104 126,259
Interest credited 733 248
Policy acquisition costs and other
insurance expenses 12,142 10,163
Other operating expenses 7,315 6,508
Total benefits and expenses 157,294 143,178
Income before income taxes $ 27,428 $ 40,444
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Nine Months Ended September 30, 2002
Europe Total
Latin Asia & South Inter-
America Pacific Africa national
Revenues:
Net premiums $ 7,098 $97,831 $154,327 $259,256
Investment income,
net of related expenses 3,649 4,876 591 9,116
Realized investment gains
/ (losses), net (3,954) (125) (288) (4,367)
Other revenues 167 1,706 776 2,649
Total revenues 6,960 104,288 155,406 266,654
Benefits and expenses:
Claims and other policy
benefits 1,802 63,849 95,283 160,934
Interest credited 2,084 -- -- 2,084
Policy acquisition costs and
other insurance expenses 2,439 24,260 48,493 75,192
Other operating expenses 4,779 10,086 7,883 22,748
Interest expense -- 613 499 1,112
Total benefits and
expenses 11,104 98,808 152,158 262,070
Income before income taxes $(4,144) $5,480 $ 3,248 $ 4,584
Nine Months Ended September 30, 2001
Europe Total
Latin Asia & South Inter-
America Pacific Africa national
Revenues:
Net premiums $41,567 $85,774 $59,484 $186,825
Investment income,
net of related expenses 10,992 3,279 1,110 15,381
Realized investment gains
/ (losses), net (20,568) 76 (61) (20,553)
Other revenues 297 2,234 581 3,112
Total revenues 32,288 91,363 61,114 184,765
Benefits and expenses:
Claims and other policy
benefits 42,760 54,252 36,102 133,114
Interest credited 1,196 -- -- 1,196
Policy acquisition costs and
other insurance expenses 8,777 26,350 17,455 52,582
Other operating expenses 6,341 7,989 7,371 21,701
Interest expense -- 683 471 1,154
Total benefits and
expenses 59,074 89,274 61,399 209,747
Income before income taxes $(26,786) $ 2,089 $ (285) $(24,982)
SOURCE: Reinsurance Group of America, Incorporated
CONTACT: Reinsurance Group of America, Incorporated
Jack B. Lay, 636/736-7439
www.rgare.com
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