Release Details

ST. LOUIS, Jul 25, 2011 (BUSINESS WIRE) -- Reinsurance Group of America, Incorporated (NYSE:RGA), a leading global provider of life reinsurance, reported second-quarter net income of $132.9 million, or $1.78 per diluted share, compared to $127.0 million, or $1.70 per diluted share in the prior-year quarter. Operating income* totaled $128.0 million, or $1.72 per diluted share, compared to $121.9 million, or $1.63 per diluted share in the year-ago quarter.

For the first half of 2011, net income increased to $293.7 million, or $3.96 per diluted share, from $249.5 million, or $3.34 per diluted share, in the year-ago period. Operating income* totaled $246.8 million, or $3.33 per diluted share, compared with $214.9 million, or $2.88 per diluted share, in the prior-year period.

For the quarter, consolidated net premiums increased 13 percent to $1,788.7 million from $1,582.0 million in the prior-year period. Net of the effects of changes in foreign currency exchange rates, net premiums increased 8 percent. Investment income rose 16 percent to $337.4 million from $291.7 million in the year-earlier quarter, including $19.9 million associated with an increase in the fair value of option contracts supporting equity-indexed annuities. The increase associated with these options contracts was largely offset by an increase in interest credited expense. Investment income was up 9 percent net of the effect of these option contracts. Average invested assets, excluding funds withheld, increased approximately $2.0 billion to $17.4 billion and average yields decreased 16 basis points to 5.35 percent quarter over quarter. The average investment yield in the first quarter of 2011 was also 5.35 percent. Net foreign currency fluctuations contributed $3.8 million, after taxes, to operating income, or $0.05 per diluted share.

A. Greig Woodring, president and chief executive officer, commented, "Consolidated results were generally in line with our expectations, with strong contributions from our Canadian operations and some unfavorable claims experience in our international operations. Consolidated premium growth of 8 percent on an original currency basis was slightly below our expectations for the quarter. Capital, liquidity and investment positions remain strong and appropriately positioned. In May, we issued $400 million of senior notes and expect to use $200 million to fund the payment of senior notes that mature in December. We are committed to managing an efficient capital base. As with the past several quarters, investment impairments were not significant.

"Mortality experience can be volatile over short-term, quarterly periods due to normal statistical fluctuations, but evens out over longer-term horizons. Results this quarter reinforce the diversification benefits achieved through our geographic expansion. We generated an annualized operating return on equity of 12 percent this quarter, and 13 percent over the last 12 months. We continue to invest actively in business opportunities and are well-positioned to serve our clients in all major life reinsurance markets across the globe.

"We are also pleased to announce that the board of directors raised the quarterly dividend 50 percent to $0.18 per share from $0.12 per share."

SEGMENT RESULTS

U.S.

The U.S. Traditional sub-segment reported pre-tax net income of $93.5 million for the quarter, compared with $98.8 million last year. Pre-tax operating income decreased to $93.3 million from $96.1 million in 2010. Income was adversely affected by higher-than-expected group disability claims, which are prone to quarterly volatility. We believe the current quarter experience reflects normal volatility. Segment-wide claims experience was in line with expectations with our large U.S. individual mortality block performing well. Net premiums were up 4 percent to $973.8 million from $933.2 million in the prior-year quarter.

The U.S. Asset Intensive business reported pre-tax income of $15.6 million compared with $17.6 million a year ago, including changes in the fair values of various free-standing and embedded derivatives. On an operating income basis, excluding the impact of those derivatives, pre-tax operating income increased to $20.0 million from $15.8 million a year ago, attributable primarily to improved spread-related performance associated with equity-indexed annuities.

The U.S. Financial Reinsurance business performed well this quarter and contributed $7.0 million of pre-tax income contrasted with $4.4 million last year, primarily due to increased fees from new business written in the second half of 2010 and first quarter of 2011.

Canada

Canadian operations reported pre-tax net income of $44.0 million compared with $33.7 million in the second quarter of 2010. Pre-tax operating income increased 27 percent to $41.9 million from $32.9 million in the prior-year period, reflecting better-than-expected mortality experience.

In addition, a stronger Canadian dollar relative to the second quarter of 2010 benefited pre-tax operating income by approximately $3.0 million. Premiums increased 18 percent to $209.7 million from $177.1 million last year. On a Canadian dollar basis, net premiums were up 11 percent.

Asia Pacific

Asia Pacific reported pre-tax net income of $7.9 million compared with $23.8 million in the second quarter of 2010. Pre-tax operating income decreased to $8.2 million from $21.7 million a year ago. Adverse mortality experience in Australia, and to a lesser extent in Japan, hampered results. Foreign currency fluctuations added $0.6 million to the current period pre-tax operating result. Premiums increased 23 percent to $316.4 million from $256.9 million in the prior year. On a local currency basis, premiums were up 8 percent.

Europe & South Africa

Europe & South Africa pre-tax net income decreased to $16.2 million from $22.3 million in the year-ago quarter. Pre-tax operating income decreased to $15.5 million from $21.0 million last year primarily due to adverse mortality experience in the UK compared to favorable UK mortality experience a year ago. Adverse results in the UK were mostly offset by favorable results in other European markets and South Africa. Foreign currency fluctuations increased pre-tax operating income by $1.7 million. Net premiums totaled $283.0 million, up 35 percent from $209.9 million in the prior-year quarter. On a local currency basis, net premiums were up 23 percent this quarter.

Corporate and Other

Corporate and Other reported pre-tax net income of $16.1 million and pre-tax operating income of $7.4 million for the quarter. In the year-ago quarter, this segment reported a pre-tax net loss of $2.5 million and a pre-tax operating loss of $1.5 million. Current quarter results reflect higher investment income and investment related gains.

Dividend Declaration

The board of directors increased the quarterly dividend 50 percent, to $0.18 from $0.12, payable August 23 to shareholders of record as of August 4.

Earnings Conference Call

A conference call to discuss second-quarter results will begin at 9 a.m. Eastern Time on Tuesday, July 26. Interested parties may access the call by dialing 877-741-4253 (domestic) or 719-325-4784 (international). The access code is 8927514. A live audio webcast of the conference call will be available on the company's investor relations website at http://www.rgare.com. A replay of the conference call will be available at the same address for 90 days following the conference call. A telephonic replay will also be available through August 3 at 888-203-1112 (domestic) or 719-457-0820 (international), access code 8927514.

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. Reconciliationsto GAAP 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 http://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

Reinsurance Group of America, Incorporated is among the largest global providers of life reinsurance with subsidiary companies or offices in Australia, Barbados, Bermuda, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Mexico, the Netherlands, Poland, South Africa, South Korea, Spain, Taiwan, the United Kingdom and the United States. Worldwide, the company has approximately $2.7 trillion of life reinsurance in force, and assets of $30.7 billion.

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 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) 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 the failure or the perceived risk of failure to raise the statutory debt limit of the United States, (17) competitive factors and competitors' responses to our initiatives, (18) the success of our clients, (19) successful execution of our entry into new markets, (20) successful development and introduction of new products and distribution opportunities, (21) our ability to successfully integrate and operate reinsurance business that we acquire, (22) action by regulators who have authority over our reinsurance operations in the jurisdictions in which we operate, (23) our dependence on third parties, including those insurance companies and reinsurers to which we cede some reinsurance, third-party investment managers, and others, (24) the threat of natural disasters, catastrophes, terrorist attacks, epidemics, or pandemics anywhere in the world where we or our clients do business, (25) changes in laws, regulations, and accounting standards applicable to us, our subsidiaries, or our business, (26) the effect of our status as an insurance holding company and regulatory restrictions on our ability to pay principal and interest on our debt obligations, and (27) 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. These forward-looking statements 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. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to review the risk factors in our 2010 Form 10-K.

SOURCE: Reinsurance Group of America, Incorporated

Reinsurance Group of America, Incorporated
John W. Hayden, 636-736-7000
Senior Vice President - Controller and Investor Relations