Reinsurance Group of America Reports Strong Second-Quarter Revenues and Earnings
ST. LOUIS--(BUSINESS WIRE)--July 24, 2003--Reinsurance Group of America, Incorporated (NYSE:RGA - News), one of North America's leading providers of life reinsurance, reported net income for the second quarter of $42.6 million, or $0.85 per diluted share, compared with net income of $28.1 million, or $0.56 per diluted share in the prior-year quarter, a 52 percent increase on a per share basis. Second-quarter net premiums increased 25 percent, to $582.6 million from $465.3 million in 2002. Consolidated net investment income increased 28 percent, to $115.9 million from $90.3 million in 2002, due primarily to a 38 percent increase in invested assets.
RGA analyzes its results using a non-GAAP financial measure called operating income. Management believes that operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability of the company's continuing operations by excluding from operating income the effect of net realized capital gains and losses and related deferred acquisition costs, which tend to be highly variable, and any net gain or loss from discontinued operations, which management believes are not indicative of ongoing operations. However, the definition of operating income can vary by company and is not considered a substitute in all applications for GAAP net income. Reconciliations of operating income to GAAP net income are provided within the text of this press release.
Operating income increased 21 percent on a per share basis and totaled $41.2 million, or $0.82 per diluted share. Operating income for the quarter excluded $2.4 million, after tax, in net realized capital gains and related deferred acquisition costs and a $1.0 million after-tax loss associated with the company's discontinued accident and health segment. Operating income in the prior-year quarter totaled $33.9 million, or $0.68 per diluted share, and excluded $4.9 million, after tax, in net realized capital losses and related deferred acquisition costs and a $0.9 million after-tax loss associated with the company's discontinued accident and health segment.
"Consolidated results for the quarter were strong once again, in terms of both top- and bottom-line performance," said A. Greig Woodring, president and chief executive officer. "For the quarter, net premiums in the U.S. increased by 12 percent to $379.4 million. Mortality experience was favorable when compared with expectations. Pre-tax net income for the quarter totaled $55.8 million compared with $38.5 million in the prior-year quarter. Pre-tax operating income for the quarter totaled $55.7 million compared with $43.0 million in the prior-year quarter, a 30 percent increase. Pre-tax operating income excludes approximately $0.1 million in net realized capital gains and related deferred acquisition costs in the current quarter and $4.5 million in net realized capital losses and related deferred acquisition costs in the prior-period quarter. It was a solid quarter for our U.S operations and we continue to see significant activity and momentum in the life reinsurance marketplace.
"Canada reported pre-tax net income of $13.4 million compared with $9.9 million in the prior-year quarter. Pre-tax operating income totaled $9.6 million for the second quarter compared with $10.0 million in the prior-year quarter. Claims were slightly higher than expected for the quarter. Pre-tax operating income excludes $3.8 million in net realized capital gains in the current period and approximately $0.1 million in net realized capital losses in the prior period. Net premiums increased 18 percent. On a year-to-date basis, premiums increased 11 percent. Our operations in Canada continue to be a strong and steady contributor to RGA's consolidated results.
"Other International operations, which exclude Canada, continued to grow at a strong pace, with net premiums increasing 79 percent to $149.6 million. We once again experienced steady growth across all our markets in this segment. Pre-tax net income totaled $8.4 million compared with $2.8 million in the prior-year quarter. Pre-tax operating income for the quarter totaled $8.5 million, which excludes $0.1 million in net realized capital losses. This represents a significant increase over prior-period pre-tax operating income of $2.9 million, which excluded $0.1 million in net realized capital losses. Claims for the quarter were in line with expectations. Profits from these operations continue to expand as our base of business in force increases; however, results are likely to be more volatile than our more established operations in North America due to the smaller relative size of this segment's base of business."
For the first half of 2003, net income totaled $75.3 million, or $1.51 per diluted share, compared with $55.8 million, or $1.12 per diluted share, in the year-ago period. Operating income, excluding $3.4 million, after tax, in net realized capital losses and related deferred acquisition costs and $1.4 million in after-tax losses associated with discontinued operations in 2003, increased to $80.1 million, or $1.61 per diluted share, from $66.3 million, or $1.33 per diluted share, the year before. Prior year operating income excludes $7.6 million, after tax, in net realized capital losses and related deferred acquisition costs, $2.1 million after-tax losses associated with discontinued operations and $0.8 million, after tax, of goodwill write-off. Consolidated premiums were up 21 percent, to $1,127.8 million from $934.4 million.
Woodring concluded, "We are pleased with the second-quarter results, as well as the results for the first six months of 2003. These results represent the continuation of the success we have achieved in the past and to which we look forward in the future."
The company announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable August 27 to shareholders of record as of August 6.
A conference call to discuss the company's first-quarter results will begin at 9 a.m. Eastern Time on Friday, July 25. Interested parties may access the call by dialing 800-967-7184 (domestic) or 719-457-2633 (international). The access code is 249388. 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 August 1 at 888-203-1112 (domestic) or 719-457-0820, access code 249388.
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 offices in Argentina, Australia, Barbados, Hong Kong, India, Ireland, Japan, Mexico, South Africa, South Korea, Spain, Taiwan, and the United Kingdom. Worldwide, the company has approximately $841 billion of life reinsurance in force, and assets of $10.3 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, morbidity or claims experience, (2) 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, (3) general economic conditions affecting the demand for insurance and reinsurance in our current and planned markets, (4) market or economic conditions that adversely affect our ability to make timely sales of investment securities, (5) changes in investment portfolio yields due to interest rate or credit quality changes, (6) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (7) adverse litigation or arbitration results, (8) the stability of governments and economies in the markets in which we operate, (9) competitive factors and competitors' responses to our initiatives, (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, except per share data)
Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
2003 2002 2003 2002
Revenues:
Net premiums $582,561 $465,258 $1,127,776 $934,363
Investment income, net
of related expenses 115,936 90,267 223,081 178,280
Realized investment gains/
(losses), net 4,044 (8,426) (5,784) (12,017)
Other revenues 11,834 10,210 22,851 16,895
Total revenues 714,375 557,309 1,367,924 1,117,521
Benefits and expenses:
Claims and other policy
benefits 452,632 366,770 876,237 754,496
Interest credited 43,867 29,896 84,663 57,621
Policy acquisition costs
and other insurance
expenses 114,988 84,804 219,569 156,303
Other operating expenses 26,837 21,859 52,592 41,376
Interest expense 9,042 8,915 18,001 17,469
Total benefits
and expenses 647,366 512,244 1,251,062 1,027,265
Income from continuing
operations before
income taxes 67,009 45,065 116,862 90,256
Provision for income
taxes 23,423 16,141 40,116 32,296
Income from continuing
operations 43,586 28,924 76,746 57,960
Discontinued operations:
Loss from discontinued
accident and health
operations, net of
income taxes (1,027) (873) (1,445) (2,129)
Net income $ 42,559 $ 28,051 $ 75,301 $ 55,831
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
2003 2002 2003 2002
Earnings per share from
continuing operations:
Basic earnings per share $ 0.88 $ 0.59 $ 1.55 $ 1.17
Diluted earnings per share $ 0.87 $ 0.58 $ 1.54 $ 1.17
Diluted earnings before
realized investment gains/
(losses), related deferred
acquisition costs and goodwill
write-off in 2002 $ 0.82 $ 0.68 $ 1.61 $ 1.33
Earnings per share from net
income:
Basic earnings per share $ 0.86 $ 0.57 $ 1.52 $ 1.13
Diluted earnings per share $ 0.85 $ 0.56 $ 1.51 $ 1.12
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,962 49,669 49,834 49,703
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Six Months Ended
(Unaudited) June 30,
2003 2002
Gross life reinsurance in force (in billions)
North American business $ 658.5 $ 563.8
International business 182.8 110.4
Gross life reinsurance written (in billions)
North American business 70.9 78.7
International business 31.1 29.0
Consolidated cash and invested assets
(in millions) 7,774.7 5,713.0
Invested Asset book yield - trailing
three months excluding funds withheld 6.67% 6.68%
Investment portfolio mix
Cash and short-term investments 2.30% 3.38%
Fixed maturity securities 50.69% 54.35%
Mortgage loans 4.63% 3.33%
Policy loans 10.84% 13.65%
Funds withheld at interest 30.02% 23.27%
Other invested assets 1.52% 2.02%
Book value per share outstanding $ 28.93 $ 22.04
Book value per share outstanding, before
impact of FAS 115(1) 24.74 21.90
Treasury stock 1,276,269 1,743,556
(1) 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 June 30, 2003
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $378,382 $ 1,006 $ -- $379,388
Investment income, net
of related expenses 45,175 42,204 -- 87,379
Realized investment gains/
(losses), net (714) 1,148 -- 434
Other revenues 884 1,766 6,655 9,305
Total revenues 423,727 46,124 6,655 476,506
Benefits and expenses:
Claims and other policy
benefits 297,525 1,771 -- 299,296
Interest credited 14,931 28,580 -- 43,511
Policy acquisition costs and
other insurance expenses 56,714 8,003 2,721 67,438
Other operating expenses 8,484 826 1,190 10,500
Total benefits and
expenses 377,654 39,180 3,911 420,745
Income before income
taxes $ 46,073 $ 6,944 $ 2,744 $ 55,761
Three Months Ended June 30, 2002
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $336,426 $ 1,125 $ -- $337,551
Investment income, net
of related expenses 39,454 22,730 24 62,208
Realized investment
losses, net (986) (4,524) -- (5,510)
Other revenues 686 2,908 5,704 9,298
Total revenues 375,580 22,239 5,728 403,547
Benefits and expenses:
Claims and other policy
benefits 266,112 1,715 -- 267,827
Interest credited 14,063 15,118 -- 29,181
Policy acquisition costs and
other insurance expenses 52,002 4,584 1,938 58,524
Other operating expenses 6,878 186 2,460 9,524
Total benefits and
expenses 339,055 21,603 4,398 365,056
Income before income
taxes $ 36,525 $ 636 $ 1,330 $ 38,491
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Six Months Ended June 30, 2003
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $747,189 $ 2,104 $ -- $749,293
Investment income, net
of related expenses 87,876 78,538 -- 166,414
Realized investment
losses, net (5,958) (1,713) -- (7,671)
Other revenues 2,697 3,013 13,566 19,276
Total revenues 831,804 81,942 13,566 927,312
Benefits and expenses:
Claims and other policy
benefits 591,251 3,390 -- 594,641
Interest credited 30,250 53,721 -- 83,971
Policy acquisition costs and
other insurance expenses 107,519 16,031 5,241 128,791
Other operating expenses 16,939 1,938 2,633 21,510
Total benefits and
expenses 745,959 75,080 7,874 828,913
Income before income
taxes $ 85,845 $ 6,862 $ 5,692 $ 98,399
Six Months Ended June 30, 2002
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $683,256 $ 1,993 $ -- $685,249
Investment income, net
of related expenses 76,609 46,448 127 123,184
Realized investment
losses, net (3,031) (3,960) -- (6,991)
Other revenues 806 3,169 11,855 15,830
Total revenues 757,640 47,650 11,982 817,272
Benefits and expenses:
Claims and other policy
benefits 553,866 7,716 -- 561,582
Interest credited 28,095 28,811 -- 56,906
Policy acquisition costs and
other insurance expenses 93,495 6,429 3,838 103,762
Other operating expenses 13,295 386 4,392 18,073
Total benefits and
expenses 688,751 43,342 8,230 740,323
Income before income
taxes $ 68,889 $ 4,308 $ 3,752 $ 76,949
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Three Months Ended
June 30,
2003 2002
Revenues:
Net premiums $ 52,017 $ 44,144
Investment income, net of related expenses 21,509 17,776
Realized investment gains /(losses), net 3,825 (105)
Other revenues (176) (49)
Total revenues 77,175 61,766
Benefits and expenses:
Claims and other policy benefits 56,149 45,103
Interest credited 264 388
Policy acquisition costs and other
insurance expenses 4,864 4,045
Other operating expenses 2,469 2,325
Total benefits and expenses 63,746 51,861
Income before income taxes $ 13,429 $ 9,905
Six Months Ended
June 30,
2003 2002
Revenues:
Net premiums $100,603 $ 90,677
Investment income, net of related expenses 41,275 33,381
Realized investment gains/(losses), net 3,562 (186)
Other revenues (241) (78)
Total revenues 145,199 123,794
Benefits and expenses:
Claims and other policy benefits 105,279 90,826
Interest credited 552 388
Policy acquisition costs and other
insurance expenses 10,457 9,262
Other operating expenses 4,855 4,568
Total benefits and expenses 121,143 105,044
Income before income taxes $ 24,056 $ 18,750
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Three Months Ended June 30, 2003
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $66,165 $83,450 $149,615
Investment income,
net of related expenses 2,421 639 3,060
Realized investment gains
/ (losses), net (131) 23 (108)
Other revenues 707 299 1,006
Total revenues 69,162 84,411 153,573
Benefits and expenses:
Claims and other policy benefits 47,190 47,450 94,640
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 13,006 28,689 41,695
Other operating expenses 4,189 4,106 8,295
Interest expense 250 264 514
Total benefits and expenses 64,635 80,509 145,144
Income before income taxes $ 4,527 $ 3,902 $ 8,429
Three Months Ended June 30, 2002
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $ 31,840 $51,942 $ 83,782
Investment income,
net of related expenses 1,785 17 1,802
Realized investment losses, net (123) (1) (124)
Other revenues 579 330 909
Total revenues 34,081 52,288 86,369
Benefits and expenses:
Claims and other policy benefits 21,592 33,006 54,598
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 5,792 16,332 22,124
Other operating expenses 3,546 2,862 6,408
Interest expense 215 273 488
Total benefits and expenses 31,145 52,473 83,618
Income / (loss) before
income taxes $ 2,936 $ (185) $ 2,751
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Six Months Ended June 30, 2003
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $108,575 $167,327 $275,902
Investment income,
net of related expenses 5,148 1,479 6,627
Realized investment gains
/ (losses), net (518) 848 330
Other revenues 907 123 1,030
Total revenues 114,112 169,777 283,889
Benefits and expenses:
Claims and other policy benefits 74,454 101,233 175,687
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 24,528 54,223 78,751
Other operating expenses 8,716 7,546 16,262
Interest expense 519 464 983
Total benefits and expenses 108,217 163,466 271,683
Income before income taxes $ 5,895 $ 6,311 $ 12,206
Six Months Ended June 30, 2002
Europe Total
Asia & South Inter-
Pacific Africa national
Revenues:
Net premiums $64,992 $92,155 $157,147
Investment income,
net of related expenses 3,154 248 3,402
Realized investment losses, net (173) (296) (469)
Other revenues 1,275 336 1,611
Total revenues 69,248 92,443 161,691
Benefits and expenses:
Claims and other policy benefits 44,160 58,196 102,356
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 14,016 28,280 42,296
Other operating expenses 6,277 5,349 11,626
Interest expense 388 351 739
Total benefits and expenses 64,841 92,176 157,017
Income before income taxes $ 4,407 $ 267 $ 4,674
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CORPORATE AND OTHER
(Dollars in thousands)
Three Months Ended
June 30,
2003 2002
Revenues:
Net premiums $ 1,541 $ (219)
Investment income, net of related expenses 3,988 8,481
Realized investment losses, net (107) (2,687)
Other revenues 1,699 52
Total revenues 7,121 5,627
Benefits and expenses:
Claims and other policy benefits 2,547 (758)
Interest credited 92 327
Policy acquisition costs and other
insurance expenses 991 111
Other operating expenses 5,573 3,602
Interest expense 8,528 8,427
Total benefits and expenses 17,731 11,709
Loss before income taxes $(10,610) $ (6,082)
Six Months Ended
June 30,
2003 2002
Revenues:
Net premiums $ 1,978 $ 1,290
Investment income, net of related expenses 8,765 18,313
Realized investment losses, net (2,005) (4,371)
Other revenues 2,786 (468)
Total revenues 11,524 14,764
Benefits and expenses:
Claims and other policy benefits 630 (268)
Interest credited 139 327
Policy acquisition costs and other
insurance expenses 1,570 983
Other operating expenses 9,966 7,109
Interest expense 17,018 16,730
Total benefits and expenses 29,323 24,881
Loss before income taxes $(17,799) $(10,117)
SOURCE: Reinsurance Group of America, Incorporated
Contact:
Reinsurance Group of America, Incorporated
Jack B. Lay, 636-736-7439