Reinsurance Group of America Reports Third Quarter Results; Anticipates Fourth Quarter Charge for Argentine Pension Business
ST. LOUIS--(BUSINESS WIRE)--Oct. 26, 2001--Reinsurance Group of America, Incorporated (NYSE:RGA), one of North America's leading providers of life reinsurance, reported operating earnings from continuing operations of $25.7 million, or $0.52 per diluted share, for the third quarter compared with $32.7 million, or $0.66 per diluted share, in the prior year. Net income for the quarter, including capital gains and losses and discontinued operations, totaled $9.0 million, or $0.18 per diluted share, compared with $29.1 million, or $0.59 per diluted share in the prior year.
Third quarter net premiums increased 23 percent, to $387.8 million from $316.1 million in 2000. Consolidated net investment income increased 10 percent, to $90.7 million from $82.1 million.
"As we announced on October 17th, the third quarter operating results include net losses associated with the terrorist attacks on September 11th," said A. Greig Woodring, president and chief executive officer. "Based on the claims development to date and analysis of our reinsurance programs, we reflected net claims of approximately $10 million, after tax, or $0.20 per share, attributable to the terrorist attacks. It will take several more months before we have seen the ultimate claims development. Our net losses are not significant to our financial position, and we will be able to meet all our obligations and remain a financially strong company. We believe the life reinsurance industry, as a whole, will do the same."
Woodring continued, "We are pleased with the premium growth for the quarter. In particular, net premiums for the U.S. segment increased to $280.0, or 21 percent, from $231.4 in the prior year quarter, driven by production in our traditional business. Pre-tax operating income for the quarter was $35.9 million compared with $51.8 million a year ago. Excluding the effect of the terrorist attacks, pre-tax operating income in the U.S. was approximately equal to the prior year, a period in which we experienced favorable mortality and very strong results.
"Premiums in Canada were essentially flat compared with a year ago. Pre-tax operating income for the quarter was at $8.8 million compared with $5.1 million in the prior year, a period in which Canada experienced unfavorable mortality results. Quote activity in the market is good and we have been very pleased with our success rate there.
"We saw a continuation of premium growth in our international segment. Net premiums for the quarter totaled $67.9 million compared with $45.0 million a year ago. The premium growth was driven primarily by our operations in Asia Pacific and other international markets, primarily the UK and South Africa. Together, those operations reported $2.2 million in pre-tax profits and have made excellent progress in their markets.
"Latin America reported a $3.4 million pre-tax operating loss due primarily to the occurrence of poor experience associated with the reinsurance of Argentina's privatized pension program. We are reviewing the recent experience of this business, and several aspects of the pension fund claims flow are not developing as was contemplated when the reinsurance programs were initially priced. We are considering a reserve addition in the fourth quarter. Any reserve addition would result in a non-cash charge to fourth quarter results, and could range from $25 million to $35 million, on a pre-tax basis. We no longer write this business and believe these additional reserves may be needed to absorb claims development associated with the run-off of the current treaties. We expect to conclude our analysis in the next several weeks. Additionally, in an effort to further reduce our exposure to what has become an extremely volatile Argentine economy, we sold a significant amount of our Argentine based bond investments during the third quarter. This action resulted in $17.7 million in realized investment losses, on a pre-tax basis."
Woodring concluded, "While disappointing, the unexpected charges this quarter and next quarter are manageable and do not alter our plans for growth in our core businesses."
For the first nine months of 2001, the company reported operating earnings from continuing operations of $84.9 million compared with the prior-year total of $91.6 million. Operating earnings per diluted share from continuing operations totaled $1.70 compared with $1.83 reported the year before. Net premiums totaled $1,179.7 million compared with $991.1 million the year before.
During the quarter, the company announced that its board of directors approved a stock repurchase plan authorizing the company to purchase up to $25 million of its shares of stock, as conditions warrant. To date, the company has not purchased any shares under this plan. The company also announced that its board of directors declared a regular quarterly dividend of $0.06 per share, payable November 27 to shareholders of record as of November 6.
A conference call to discuss the company's third quarter results will begin at 9:00 a.m. Eastern Time on Friday October 26. 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.
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, Japan, Taiwan, South Africa and the United Kingdom. Worldwide, the Company has approximately $586 billion of life reinsurance in force, and assets of $6.5 billion. Metropolitan Life Insurance Company is the beneficial owner of approximately 59 percent of RGA's outstanding shares.
Forward-Looking Statements
This news release is based on preliminary financial results, which are subject to further review and adjustment. Statements in this press release regarding the business of Reinsurance Group of America, Incorporated which are not historical facts, including, without limitation, statements and information relating to the Company's future financial performance, growth potential, increases in premiums, the effect of mortality rates and experience, claims levels, its views on the life reinsurance industry and other statements related to the Company's business are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Important factors that could cause actual results and events to differ materially from those expressed or implied by forward-looking statements include, without limitation, (1) market conditions and the timing of sales of investment securities, (2) regulatory action taken by the New York or Missouri Departments of Insurance with respect to Metropolitan Life Insurance Company ("MetLife"), General American Life Insurance Company ("General American"), or the Company or its subsidiaries, (3) changes in the credit ratings of the Company, MetLife or General American and the effect of such changes on the Company's future results of operations and financial condition, (4) material changes in mortality and claims experience, (5) competitive factors and competitors' responses to the Company's initiatives, (6) general economic conditions affecting the demand for insurance and reinsurance in the Company's current and planned markets, (7) successful execution of the Company's entry into new markets, (8) successful development and introduction of new products, (9) the stability of governments and economies in foreign markets in which we operate, (10) fluctuations in U.S. and foreign currency exchange rates, interest rates, and securities and real estate markets, (11) the success of the Company's clients, (12) changes in laws, regulations, and accounting standards applicable to the Company and its subsidiaries, and (13) other risks and uncertainties described in its Annual Report and in the Company's 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 the cautionary statements described in the periodic reports filed by the company with the Securities and Exchange Commission. For a discussion of these risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to consult the section named "Forward-Looking and Cautionary Statements" contained in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and other documents filed with the Securities and Exchange Commission, which discussions are incorporated by reference into this document.
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,
2001 2000 2001 2000
Revenues:
Net premiums $387,825 $316,116 $1,179,746 $991,059
Net investment income 90,693 82,118 251,058 238,420
Realized capital gains/
(losses), net (26,324) (2,821) (35,356) (18,345)
Other income 5,922 6,949 21,850 12,637
Total revenue 458,116 402,362 1,417,298 1,223,771
Benefits and expenses:
Claims and other policy
benefits 314,882 242,921 954,652 776,326
Interest credited 32,639 26,087 79,590 74,562
Policy acquisition costs
and other insurance
expenses 70,672 57,595 203,947 171,257
Other expenses 22,802 19,964 66,880 59,189
Interest expense 4,431 5,108 13,719 12,417
Total benefits
and expenses 445,426 351,675 1,318,788 1,093,751
Income from continuing
operations before taxes
and minority interest 12,690 50,687 98,510 130,020
Income taxes 3,705 19,011 37,369 52,743
Income from continuing
operations before minority
interest 8,985 31,676 61,141 77,277
Minority interest - 306 - 593
Net income from continuing
operations 8,985 31,370 61,141 76,684
Discontinued operations:
Loss from discontinued
operations, net of
taxes - (2,261) - (8,249)
Net income $ 8,985 $ 29,109 $ 61,141 $ 68,435
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,
2001 2000 2001 2000
Earnings per share from
continuing operations:
Basic earnings per share $ 0.18 $ 0.64 $ 1.24 $ 1.55
Diluted earnings per share $ 0.18 $ 0.63 $ 1.22 $ 1.53
Diluted earnings before
realized investment gains/
(losses) $ 0.52 $ 0.66 $ 1.70 $ 1.83
Earnings per share from net
income:
Basic earnings per share $ 0.18 $ 0.59 $ 1.24 $ 1.38
Diluted earnings per share $ 0.18 $ 0.59 $ 1.22 $ 1.37
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 49,970 49,720 49,922 49,961
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Nine Months Ended
(Unaudited) September 30,
2001 2000
Gross life reinsurance in force (in billions)
North American business $ 519.2 $ 441.0
International business 66.6 53.3
Gross life reinsurance written (in billions)
North American business 78.1 89.0
International business 36.3 5.5
Consolidated cash and invested assets
(in millions) 4,931.1 4,501.5
Invested Asset book yield - trailing
three months 6.99% 7.29%
Investment portfolio mix
Cash and short-term investments 4.83% 4.66%
Fixed maturity securities 54.30% 56.54%
Mortgage loans 3.16% 2.86%
Policy loans 14.52% 14.84%
Funds withheld at interest 21.86% 20.54%
Other invested assets 1.33% 0.56%
Book value per share outstanding $ 18.57 $ 16.84
Book value per share outstanding, before
impact of FAS 115 19.14 18.20
Treasury stock 1,578,280 1,794,954
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
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 revenue 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 and minority
interest $ 87,895 $ 11,943 $ 4,736 $ 104,574
Nine Months Ended September 30, 2000
Non-traditional
Asset- Financial Total
Traditional Intensive Reinsurance U.S.
Revenues:
Net premiums $ 727,449 $ 1,566 $ -- $ 729,015
Investment income,
net of related
expenses 102,273 64,302 60 166,635
Realized investment
gains/(losses), net (5,718) (664) -- (6,382)
Other revenue 621 201 7,730 8,552
Total revenues 824,625 65,405 7,790 897,820
Benefits and expenses:
Claims and other policy
benefits 549,921 2,918 -- 552,839
Interest credited 34,803 37,760 -- 72,563
Policy acquisition
costs and other
insurance expenses 102,498 16,765 3,500 122,763
Other operating
expenses 18,931 514 1,135 20,580
Total benefits
and expenses 706,153 57,957 4,635 768,745
Income before income
taxes and minority
interest $ 118,472 $ 7,448 $ 3,155 $ 129,075
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Nine Months Ended
September 30,
2001 2000
Revenues:
Net premiums $126,689 $126,856
Investment income, net of related expenses 48,739 45,609
Realized investment gains/(losses), net 8,015 (810)
Other revenue 179 569
Total revenues 183,622 172,224
Benefits and expenses:
Claims and other policy benefits 126,259 124,787
Interest credited 248 635
Policy acquisition costs and other
insurance expenses 10,163 14,096
Other operating expenses 6,508 6,215
Total benefits and expenses 143,178 145,733
Income before income taxes
and minority interest $ 40,444 $ 26,491
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Nine Months Ended September 30, 2001
Total
Latin Asia Other Inter-
America Pacific Markets 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 revenue 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
and minority interest $(26,786) $ 2,089 $ (285)$(24,982)
Nine Months Ended September 30, 2000
Total
Latin Asia Other Inter-
America Pacific Markets national
Revenues:
Net premiums $49,885 $66,384 $18,919 $135,188
Investment income,
net of related expenses 14,505 3,473 1,310 19,288
Realized investment gains
/ (losses), net (8,960) (6) 439 (8,527)
Other revenue 315 1,259 1,796 3,370
Total revenues 55,745 71,110 22,464 149,319
Benefits and expenses:
Claims and other policy
benefits 47,646 37,951 13,103 98,700
Interest credited 1,364 -- -- 1,364
Policy acquisition costs and
other insurance expenses 4,721 24,200 5,477 34,398
Other operating expenses 8,652 7,110 7,092 22,854
Interest expense -- 552 306 858
Total benefits and
expenses 62,383 69,813 25,978 158,174
Income before income taxes
and minority interest $(6,638) $ 1,297 $(3,514)$ (8,855)
| SOURCE: | Reinsurance Group of America, Incorporated |
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| CONTACT: | Reinsurance Group of America Inc., St. Louis |
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| Jack B. Lay, 636/736-7439 | |