Reinsurance Group Of America Reports Strong Fourth-Quarter Earnings; Premiums Increase 23 Percent
ST. LOUIS--(BUSINESS WIRE)--Jan. 30, 2003--Reinsurance Group of America, Incorporated (NYSE:RGA), one of North America's leading providers of life reinsurance, reported net income for the fourth quarter of $33.4 million, or $0.67 per diluted share, compared with a net loss of $28.1 million, or $0.57 per diluted share in the prior year. Operating earnings from continuing operations totaled $37.8 million, or $0.76 per diluted share and excluded $2.0 million, after tax, in net capital losses and related deferred acquisition costs and a $2.4 million after-tax loss associated with the company's discontinued accident and health segment. Operating earnings from continuing operations in the prior year totaled $2.2 million, or $0.04 per diluted share, and excluded $23.4 million, after tax, in net capital losses and related deferred acquisition costs and a $6.9 million after-tax loss associated with the company's discontinued accident and health segment. Year-ago fourth-quarter operating results were adversely affected by higher-than-normal claims levels in the U.S. segment and reserve strengthening on Argentine pension business.
Fourth-quarter net premiums increased 23 percent, to $590.6 million from $482.0 million in 2001. Consolidated net investment income increased 27 percent, to $113.7 million from $89.5 million in 2001, due to a 31 percent increase in invested assets.
"Results for the quarter were very good, in terms of both top- and bottom-line performance," said A. Greig Woodring, president and chief executive officer. "Business volume is normally strong in the fourth quarter, and the fourth quarter of 2002 was particularly strong."
Woodring continued, "For the quarter, net premiums in the U.S. increased to $401.5 million, or 13 percent, and the full-year premiums were up 14 percent from 2001 levels. Mortality for the quarter was within our range of expectations, as has been the case for the entire year. Pre-tax operating income for the quarter totaled $49.2 million compared with $35.3 million in the prior-year quarter, when we experienced adverse mortality. We executed two large fixed annuity transactions as well as several small to medium-sized in-force transactions during the quarter. The annuity transactions added $700 million of assets to our balance sheet during the quarter. Business activity in the U.S. surged as direct life insurance companies sought reinsurance solutions to manage their risk profile and the increasing pressure on their capital levels.
"For the fourth quarter, Canada reported pre-tax operating income of $11.3 million compared with $9.9 million in the prior year, a 14 percent increase. For the year, pre-tax operating income decreased to $38.8 million from $42.4 million in 2001. Mortality experience was as expected for the quarter, but somewhat higher than expected for the year. We are pleased with the segment's results for the quarter.
"Operations in Asia Pacific, Europe and South Africa continued to grow at a strong pace during the fourth quarter, with net premiums increasing 95 percent to $134.9 million. On a full-year basis, net premiums increased 80 percent to $387.0 million. That growth was fueled by production on several large treaties in the UK, in addition to strong growth across all our markets. Pre-tax operating income for the quarter was breakeven with some adverse mortality experience in selected markets. For the year, these operations contributed $9.1 million in pre-tax operating income compared with $2.1 million in the prior year. We expect profits and expanding margins from these operations going forward as our base of business in force increases."
Fourth-quarter results benefited from a lower effective tax rate as a result of reduced federal income taxes associated with the favorable resolution of certain tax positions taken by the company. The related reduction in tax liabilities amounted to $2.0 million, or $0.04 per share.
For 2002, the company reported net income of $122.8 million, or $2.47 per diluted share, compared with $33.0 million, or $0.66 per diluted share in the prior year. Operating earnings from continuing operations for 2002 totaled $139.2 million and excluded $10.0 million, after tax, in net capital losses and related deferred acquisition costs, goodwill write-off of $0.7 million and a $5.7 million after-tax loss associated with the company's discontinued accident and health segment. For 2001, operating earnings from continuing operations totaled $87.1 million and excluded $47.2 million, after tax, in net capital losses and related deferred acquisition costs and $6.9 million after-tax loss associated with the company's discontinued accident and health segment. Consolidated net premiums totaled $1,980.7 million, up 19 percent over the prior-year total of $1,661.8 million.
Turning to the outlook for 2003, Woodring said, "We expect operating earnings per share to be within a range of $2.95 to $3.15, reflecting consolidated premium growth of between 12 to 15 percent and expected lower investment yields." He also reported that the company will begin expensing stock option grants in 2003, which are expected to have an impact of between $0.02 and $0.03 per share. If stock options had been expensed in 2002, the earnings impact would have been approximately $0.02 per share.
Woodring concluded, "We are pleased with the results for the quarter and the year. We continue to execute a strategy that will allow us to grow, generate very good returns on capital and expand the value of our business."
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable February 25 to shareholders of record as of February 4.
A conference call to discuss the company's fourth-quarter results will begin at 9:00 a.m. Eastern Time on Friday, January 31. Interested parties may access the call by dialing 800/967-7140 (domestic) or 719/457-2629 (international). The access code is 628928. 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 10 days following the conference call. A replay of the conference call will also be available via telephone through February 7 at 888/203-1112, access code 628928.
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, Hong Kong, India, Japan, Korea, Mexico, South Africa, Spain, Taiwan and the United Kingdom. Worldwide, the company has approximately $768 billion of life reinsurance in force, and assets of $8.9 billion. MetLife, Inc. is the beneficial owner of approximately 59 percent of RGA's outstanding shares.
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) 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 Twelve Months Ended (Unaudited) December 31, December 31, 2002 2001 2002 2001 Revenues: Net premiums $590,553 $482,016 $1,980,666 $1,661,762 Investment income, net of related expenses 113,733 89,501 374,512 340,559 Realized investment losses, net (3,700) (33,075) (14,651) (68,431) Other revenues 13,702 12,544 41,436 34,394 Total revenues 714,288 550,986 2,381,963 1,968,284 Benefits and expenses: Claims and other policy benefits 442,667 422,150 1,539,464 1,376,802 Interest credited 46,938 32,122 126,715 111,712 Policy acquisition costs and other insurance expenses 138,898 100,270 391,504 304,217 Other operating Expenses 27,052 24,426 94,786 91,306 Interest expense 9,041 4,378 35,516 18,097 Total benefits and expenses 664,596 583,346 2,187,985 1,902,134 Income from continuing operations before income taxes 49,692 (32,360) 193,978 66,150 Provision (benefit) for income taxes 13,912 (11,120) 65,515 26,249 Income from continuing Operations 35,780 (21,240) 128,463 39,901 Discontinued operations: Loss from discontinued accident and health operations, net of income taxes (2,393) (6,855) (5,657) (6,855) Net income (loss) $ 33,387 $(28,095) $122,806 $ 33,046 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, 2002 2001 2002 2001 Earnings per share from continuing operations: Basic earnings per share $ 0.72 $(0.43) $ 2.60 $ 0.81 Diluted earnings per share $ 0.72 $(0.43) $ 2.59 $ 0.80 Diluted earnings before realized investment gains/ (losses) and related deferred acquisition costs and goodwill writeoff $ 0.76 $ 0.04 $ 2.80 $ 1.75 Earnings per share from net income: Basic earnings per share $ 0.68 $(0.57) $ 2.49 $ 0.67 Diluted earnings per share $ 0.67 $(0.57) $ 2.47 $ 0.66 Weighted average number of common and common equivalent shares outstanding (in thousands) 49,626 49,926 49,648 49,905 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES Condensed Consolidated Business Summary At or For the Twelve Months Ended (Unaudited) December 31, 2002 2001 Gross life reinsurance in force (in billions) North American business $ 604.4 $ 523.9 International business 163.4 92.1 Gross life reinsurance written (in billions) North American business 158.2 108.1 International business 80.7 63.0 Consolidated cash and invested assets (in millions) 6,738.3 5,315.1 Invested Asset book yield - trailing three months excluding funds withheld 6.51% 6.78% Investment portfolio mix Cash and short-term investments 1.37% 6.91% Fixed maturity securities 51.61% 52.08% Mortgage loans 3.38% 3.08% Policy loans 12.48% 14.58% Funds withheld at interest 29.31% 21.50% Other invested assets 1.85% 1.85% Book value per share outstanding $ 24.72 $ 20.30 Book value per share outstanding, before impact of FAS 115 22.64 20.31 Treasury stock 1,596,629 1,526,730 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES U.S. OPERATIONS (Dollars in thousands) Three Months Ended December 31, 2002 Non-traditional Asset- Financial Total (Unaudited) Traditional Intensive Reinsurance U.S. Revenues: Net premiums $ 400,515 $ 990 $ -- $ 401,505 Investment income, net of related expenses 41,644 46,076 36 87,756 Realized investment gains/(losses), net (5,019) 120 -- (4,899) Other revenues 1,173 1,593 8,791 11,557 Total revenues 438,313 48,779 8,827 495,919 Benefits and expenses: Claims and other policy benefits 309,885 362 -- 310,247 Interest credited 14,973 30,051 -- 45,024 Policy acquisition costs and other insurance expenses 73,078 10,434 2,679 86,191 Other operating Expenses 7,449 498 2,290 10,237 Total benefits and expenses 405,385 41,345 4,969 451,699 Income before income taxes $ 32,928 $ 7,434 $ 3,858 $ 44,220 Three Months Ended December 31, 2001 Non-traditional Asset- Financial Total Traditional Intensive Reinsurance U.S. Revenues: Net premiums $ 355,569 $ 1,121 $ -- $ 356,690 Investment income, net of related expenses 37,928 28,554 12 66,494 Realized investment losses, net (13,473) (609) -- (14,082) Other revenues 1,445 659 9,741 11,845 Total revenues 381,469 29,725 9,753 420,947 Benefits and expenses: Claims and other policy benefits 285,556 563 -- 286,119 Interest credited 13,706 17,831 -- 31,537 Policy acquisition costs and other insurance expenses 59,336 8,146 4,181 71,663 Other operating expenses 8,537 173 1,781 10,491 Total benefits and expenses 367,135 26,713 5,962 399,810 Income before income taxes $ 14,334 $ 3,012 $ 3,791 $ 21,137 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES U.S. OPERATIONS (Dollars in thousands) Twelve Months Ended December 31, 2002 Non-traditional Asset- Financial Total (Unaudited) Traditional Intensive Reinsurance U.S. Revenues: Net premiums $ 1,396,005 $ 3,786 $ -- $ 1,399,791 Investment income, net of related expenses 160,945 110,019 191 271,155 Realized investment losses, net (6,129) (4,135) -- (10,264) Other revenues 2,713 7,277 26,586 36,576 Total revenues 1,553,534 116,947 26,777 1,697,258 Benefits and expenses: Claims and other policy benefits 1,091,630 17,376 -- 1,109,006 Interest credited 56,480 65,504 -- 121,984 Policy acquisition costs and other insurance expenses 224,707 18,560 8,196 251,463 Other operating Expenses 27,216 1,242 9,295 37,753 Total benefits and expenses 1,400,033 102,682 17,491 1,520,206 Income before income taxes $ 153,501 $ 14,265 $ 9,286 $ 177,052 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 revenues 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 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES CANADIAN OPERATIONS (Dollars in thousands) Three Months Ended December 31, (Unaudited) 2002 2001 Revenues: Net premiums $ 48,653 $ 46,580 Investment income, net of related expenses 18,385 16,267 Realized investment gains/(losses), net (141) 1,133 Other revenues 96 22 Total revenues 66,993 64,002 Benefits and expenses: Claims and other policy benefits 49,294 46,540 Interest credited 337 51 Policy acquisition costs and other insurance expenses 3,994 3,938 Other operating expenses 2,165 2,401 Total benefits and expenses 55,790 52,930 Income before income taxes $ 11,203 $ 11,072 Twelve Months Ended December 31, 2002 2001 Revenues: Net premiums $181,224 $173,269 Investment income, net of related expenses 70,518 65,006 Realized investment gains/(losses), net (163) 9,148 Other revenues 136 201 Total revenues 251,715 247,624 Benefits and expenses: Claims and other policy benefits 186,398 172,799 Interest credited 1,070 299 Policy acquisition costs and other insurance expenses 16,136 14,101 Other operating expenses 9,480 8,909 Total benefits and expenses 213,084 196,108 Income before income taxes $ 38,631 $ 51,516 REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES OTHER INTERNATIONAL (Dollars in thousands) Three Months Ended December 31, 2002 Europe Total Latin Asia & South Inter- (Unaudited) America Pacific Africa national Revenues: Net premiums $ 5,510 $62,366 $72,519 $140,395 Investment income, net of related expenses 552 2,183 418 3,153 Realized investment gains/ (losses), net (133) (143) 1,182 906 Other revenues 84 657 1,288 2,029 Total revenues 6,013 65,063 75,407 146,483 Benefits and expenses: Claims and other policy benefits 477 46,957 35,692 83,126 Interest credited 1,577 -- -- 1,577 Policy acquisition costs and other insurance expenses 2,106 12,400 34,207 48,713 Other operating expenses 1,213 4,641 5,166 11,020 Interest expense -- 229 181 410 Total benefits and expenses 5,373 64,227 75,246 144,846 Income before income taxes $ 640 $ 836 $ 161 $ 1,637 Three Months Ended December 31, 2001 Europe Total Latin Asia & South Inter- America Pacific Africa national Revenues: Net premiums $ 9,502 $ 33,928 $35,316 $ 78,746 Investment income, net of related expenses 3,692 656 426 4,774 Realized investment gains/ (losses), net (12,051) 37 (76) (12,090) Other revenues 250 669 (325) 594 Total revenues 1,393 35,290 35,341 72,024 Benefits and expenses: Claims and other policy benefits 44,821 21,343 23,327 89,491 Interest credited 534 -- -- 534 Policy acquisition costs and other insurance expenses 5,618 9,753 9,298 24,669 Other operating expenses 2,731 3,092 3,184 9,007 Interest expense -- 184 210 394 Total benefits and expenses 53,704 34,372 36,019 124,095 Income (loss) before income taxes $(52,311) $ 918 $ (678)$(52,071) REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES OTHER INTERNATIONAL (Dollars in thousands) Twelve Months Ended December 31, 2002 Europe Total Latin Asia & South Inter- (Unaudited) America Pacific Africa national Revenues: Net premiums $ 12,608 $160,197 $226,846 $399,651 Investment income, net of related expenses 4,201 7,059 1,009 12,269 Realized investment gains/ (losses), net (4,087) (268) 894 (3,461) Other revenues 251 2,363 2,064 4,678 Total revenues 12,973 169,351 230,813 413,137 Benefits and expenses: Claims and other policy benefits 2,279 110,806 130,975 244,060 Interest credited 3,661 -- -- 3,661 Policy acquisition costs and other insurance expenses 4,545 36,660 82,700 123,905 Other operating expenses 5,992 14,727 13,049 33,768 Interest expense -- 842 680 1,522 Total benefits and expenses 16,477 163,035 227,404 406,916 Income (loss) before income taxes $ (3,504)$ 6,316 $ 3,409 $ 6,221 Twelve Months Ended December 31, 2001 Europe Total Latin Asia & South Inter- America Pacific Africa 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 revenues 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)
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CONTACT: | Reinsurance Group of America, Incorporated |
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Jack B. Lay, 636/736-7439 | |