Reinsurance Group of America Reports Strong Increase in First-Quarter Earnings
ST. LOUIS, Apr 24, 2003 (BUSINESS WIRE) -- Reinsurance Group of America, Incorporated (NYSE:RGA), one of North America's leading providers of life reinsurance, reported net income for the first quarter of $32.7 million, or $0.66 per diluted share, compared with net income of $27.8 million, or $0.56 per diluted share in the prior year, an 18 percent increase on a per share basis. Operating income(a) from continuing operations increased 20 percent on a per share basis and totaled $38.9 million, or $0.78 per diluted share. Operating income for the quarter excluded $5.8 million, after tax, in net capital losses and related deferred acquisition costs and a $0.4 million after-tax loss associated with the company's discontinued accident and health segment. Operating income from continuing operations in the prior year totaled $32.4 million, or $0.65 per diluted share, and excluded $2.6 million, after tax, in net capital losses and related deferred acquisition costs, a $0.7 million after-tax goodwill write-off and a $1.3 million after-tax loss associated with the company's discontinued accident and health segment.
First-quarter net premiums increased 16 percent, to $545.2 million from $469.1 million in 2002. Consolidated net investment income increased 22 percent, to $107.1 million from $88.0 million in 2002, due to a 30 percent increase in invested assets.
"Consolidated results for the quarter were strong, in terms of both top- and bottom-line performance," said A. Greig Woodring, president and chief executive officer. "The strong business volume that we experienced in the latter part of 2002 continued this quarter."
Woodring continued, "For the quarter, net premiums in the U.S. increased to $369.9 million, or 6 percent. This rate of increase is below our full-year expectation. We still anticipate our full-year growth rate to approximate 10 percent. Mortality experience for the quarter was approximately $4.0 million favorable on a pre-tax basis compared to expectation. The favorable mortality was somewhat offset by a reduction in spreads on our asset-intensive business totaling approximately $1.5 million on a pretax basis. Pre-tax operating income(a) for the quarter totaled $50.2 million compared with $40.4 million in the prior-year quarter. Pre-tax operating income excludes $7.5 million and $2.0 million in net capital losses and related deferred acquisition costs in the current and prior-period quarter, respectively. Business activity in the U.S. remains strong.
"Canada reported pre-tax operating income(a) of $10.9 million for the first quarter compared with $8.9 million in the prior year, a 22 percent increase. Operating income excludes an immaterial amount of net capital losses in both periods. Net premiums increased 4 percent for the quarter and mortality experience was slightly favorable. We are pleased with the segment's results for the quarter.
"International operations continued to grow at a strong pace, with net premiums increasing 72 percent to $126.3 million. We experienced steady growth across all our markets. Pre-tax operating income(a) for the quarter totaled $3.3 million, which excludes $0.4 million in net capital gains. This represents a 43 percent increase over prior-period pre-tax operating income of $2.3 million, excluding $0.3 million in net capital losses. Earnings were somewhat dampened by higher-than-expected claim levels in the current period. We expect expanding profits from these operations going forward as our base of business in force increases; however, results are likely to be less consistent than our more established operations in North America due to the smaller relative size of this segment's base of business."
Effective in the first quarter of 2003, the company's Other International reporting segment no longer includes the results of its Latin America business. Ongoing traditional reinsurance business originating in Latin America is now included within the U.S. segment results, since it is now managed and supported by the U.S. division's staff. The majority of this reinsurance is written in Mexico. The run- off results from reinsurance of the privatized pension program in Argentina are reflected in the Corporate segment along with an immaterial amount of direct life business written in Argentina. Prior- period amounts have been reclassified to conform to the current period presentation to enhance comparability.
Woodring concluded, "We are pleased to be off to a strong start in 2003. The results this quarter and last year demonstrate the strength of our operations and favored position within the life reinsurance market."
(a) Operating income before and after tax is a non-GAAP financial measure that management believes better measures the ongoing profitability of the company's continuing operations. Management believes operating income and operating income per share are measures widely used by investors, rating agencies and securities analysts. However, the definition of operating income can vary by company and is not considered a substitute for GAAP net income. Historically, the company's operating income has differed from GAAP net income due to the exclusion of net capital gains and losses and related deferred acquisition costs and any net loss from the company's discontinued accident and health segment. Reconciliations of operating income to GAAP net income are provided within the text of this press release.
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable May 28 to shareholders of record as of May 7.
A conference call to discuss the company's first-quarter results will begin at 9:00 a.m. Eastern Time on Friday, April 25. Interested parties may access the call by dialing 800-210-9006 (domestic) or 719- 457-2621 (international). The access code is 211628. 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 May 2 at 888-203-1112 (domestic) or 719-457-0820, access code 211628.
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, offices or joint ventures in Argentina, Australia, Barbados, Hong Kong, India, Japan, Mexico, South Africa, South Korea, Spain, Taiwan and the United Kingdom. Worldwide, the company has approximately $797 billion of life reinsurance in force, and assets of $9.6 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) adverse 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") or its subsidiaries, 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 its subsidiaries, (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)
Three Months Ended
(Unaudited) March 31,
2003 2002
Revenues:
Net premiums $545,215 $469,105
Investment income, net of
related expenses 107,145 88,013
Realized investment losses, net (9,828) (3,591)
Other revenues 11,017 6,685
Total revenues 653,549 560,212
Benefits and expenses:
Claims and other policy benefits 423,605 387,726
Interest credited 40,796 27,725
Policy acquisition costs and other
insurance expenses 104,581 71,499
Other operating expenses 25,755 19,517
Interest expense 8,959 8,554
Total benefits and expenses 603,696 515,021
Income from continuing operations
before income taxes 49,853 45,191
Provision for income taxes 16,693 16,155
Income from continuing operations 33,160 29,036
Discontinued operations:
Loss from discontinued accident
and health operations, net
of income taxes (418) (1,256)
Net income $ 32,742 $ 27,780
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended
(Unaudited) March 31,
2003 2002
Earnings per share from continuing
operations:
Basic earnings per share $ 0.67 $ 0.59
Diluted earnings per share $ 0.67 $ 0.58
Diluted earnings before realized
investment losses and
goodwill write-off in 2002 $ 0.78 $ 0.65
Earnings per share from net income:
Basic earnings per share $ 0.66 $ 0.56
Diluted earnings per share $ 0.66 $ 0.56
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,731 49,750
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Three Months Ended
(Unaudited) March 31,
2003 2002
Gross life reinsurance in force (in billions)
North American business $ 627.4 $ 559.7
International business 170.0 92.2
Gross life reinsurance written (in billions)
North American business 28.4 38.6
International business 15.3 3.4
Consolidated cash and invested assets
(in millions) 7,197.3 5,557.9
Invested asset book yield - trailing
three months excluding funds withheld 6.67% 6.64%
Investment portfolio mix
Cash and short-term investments 1.90% 2.38%
Fixed maturity securities 51.09% 53.60%
Mortgage loans 3.68% 3.11%
Policy loans 11.69% 13.94%
Funds withheld at interest 29.89% 25.02%
Other invested assets 1.75% 1.95%
Book value per share outstanding $ 25.18 $ 20.17
Book value per share outstanding, before
impact of FAS 115(b) 23.42 21.10
Treasury stock 1,415,276 1,751,230
(b) Book value per share outstanding, before impact of FAS 115, is a
non-GAAP financial measure that management believes is important in
evaluating the balance sheet ignoring the effect of mark-to-market
adjustments that primarily relate to changes in interest rates and
credit spreads on investment securities since they were acquired.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Three Months Ended March 31, 2003
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $368,807 $ 1,098 $ -- $369,905
Investment income,
net of related
expenses 42,701 36,334 -- 79,035
Realized investment
losses, net (5,244) (2,861) -- (8,105)
Other revenues 1,813 1,247 6,911 9,971
Total revenues 408,077 35,818 6,911 450,806
Benefits and expenses:
Claims and other
policy benefits 293,726 1,619 -- 295,345
Interest credited 15,319 25,141 -- 40,460
Policy acquisition
costs and other
insurance expenses 50,805 8,028 2,520 61,353
Other operating
expenses 8,455 1,112 1,443 11,010
Total benefits
and expenses 368,305 35,900 3,963 408,168
Income/(loss) before
income taxes $ 39,772 $ (82) $ 2,948 $ 42,638
Three Months Ended March 31, 2002
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $346,830 $ 868 $ -- $347,698
Investment income,
net of related
expenses 37,155 23,718 103 60,976
Realized investment
gains/(losses), net (2,045) 564 -- (1,481)
Other revenues 120 261 6,151 6,532
Total revenues 382,060 25,411 6,254 413,725
Benefits and expenses:
Claims and other
policy benefits 287,753 6,001 -- 293,754
Interest credited 14,032 13,693 -- 27,725
Policy acquisition
costs and other
insurance expenses 41,493 1,845 1,900 45,238
Other operating
expenses 6,418 200 1,932 8,550
Total benefits
and expenses 349,696 21,739 3,832 375,267
Income before
income taxes $ 32,364 $ 3,672 $ 2,422 $ 38,458
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Three Months Ended
March 31,
2003 2002
Revenues:
Net premiums $48,586 $46,533
Investment income, net of related expenses 19,766 15,605
Realized investment losses, net (263) (81)
Other revenues (65) (29)
Total revenues 68,024 62,028
Benefits and expenses:
Claims and other policy benefits 49,130 45,723
Interest credited 289 --
Policy acquisition costs and other
insurance expenses 5,593 5,217
Other operating expenses 2,385 2,243
Total benefits and expenses 57,397 53,183
Income before income taxes $10,627 $ 8,845
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Three Months Ended March 31, 2003
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $42,410 $83,877 $126,287
Investment income,
net of related expenses 2,727 840 3,567
Realized investment gains/
(losses), net (387) 825 438
Other revenues 200 (176) 24
Total revenues 44,950 85,366 130,316
Benefits and expenses:
Claims and other policy benefits 27,264 53,783 81,047
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 11,522 25,534 37,056
Other operating expenses 4,527 3,440 7,967
Interest expense 269 200 469
Total benefits and expenses 43,582 82,957 126,539
Income before income taxes $ 1,368 $ 2,409 $ 3,777
Three Months Ended March 31, 2002
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $33,152 $40,213 $ 73,365
Investment income,
net of related expenses 1,369 231 1,600
Realized investment losses, net (50) (295) (345)
Other revenues 696 6 702
Total revenues 35,167 40,155 75,322
Benefits and expenses:
Claims and other policy benefits 22,568 25,190 47,758
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 8,224 11,948 20,172
Other operating expenses 2,731 2,487 5,218
Interest expense 173 78 251
Total benefits and expenses 33,696 39,703 73,399
Income before income taxes $ 1,471 $ 452 $ 1,923
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CORPORATE AND OTHER
(Dollars in thousands)
Three Months Ended
March 31,
2003 2002
Revenues:
Net premiums $ 437 $ 1,509
Investment income, net of related expenses 4,777 9,832
Realized investment losses, net (1,898) (1,684)
Other revenues 1,087 (520)
Total revenues 4,403 9,137
Benefits and expenses:
Claims and other policy benefits (1,917) 491
Interest credited 47 --
Policy acquisition costs and other
insurance expenses 579 872
Other operating expenses 4,393 3,506
Interest expense 8,490 8,303
Total benefits and expenses 11,592 13,172
Loss before income taxes $ (7,189) $ (4,035)
SOURCE: Reinsurance Group of America, Incorporated
Reinsurance Group of America, Incorporated Jack B. Lay, 636/736-7439
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