Reinsurance Group of America Reports Third-Quarter Results; Operating Earnings Per Share up 25 Percent
ST. LOUIS--(BUSINESS WIRE)--Reinsurance Group of America, Incorporated (NYSE:RGA.A - News)(NYSE:RGA.B - News), a leading global provider of life reinsurance, reported net income for the third quarter of $25.2 million, or $0.40 per diluted share, compared to $76.5 million, or $1.19 per diluted share, in the prior-year quarter. RGA uses a non-GAAP financial measure called operating income as a basis for analyzing financial results. The definition of operating income and reconciliations to GAAP net income are provided in the following tables. Operating income increased to $118.5 million, or $1.86 per diluted share, from $95.6 million, or $1.49 per diluted share in the year-ago quarter, a 25 percent increase on a per share basis, with Canada, Asia Pacific, and Europe and South Africa operations contributing to the strong performance. Third-quarter net premiums rose 6 percent, to $1,303.6 million, from $1,227.9 million a year ago. Net investment income totaled $220.2 million versus $190.5 million the year before.
Net income for the quarter included approximately $99.8 million in net investment losses, including impairments. This amount is pre-tax and before the impact of deferred acquisition costs (DAC). After tax and DAC, the losses totaled $75.4 million, or approximately 3 percent of shareholders' equity. The losses were primarily associated with RGA's investments in the financial services sector, including Lehman Brothers, American International Group (AIG), Washington Mutual, Fannie Mae, Freddie Mac and various mortgage-related structured securities. Additionally, net income included unrealized losses of $21.1 million, after taxes and DAC, due to the decline in the fair value of embedded derivatives associated with modified coinsurance and funds withheld treaties. This non-cash, unrealized loss is due to widening credit spreads on the investment portfolios underlying certain funds withheld annuity reinsurance treaties.
On a year-to-date basis for 2008, net income totaled $167.4 million or $2.62 per diluted share, compared to $230.2 million, or $3.59 per diluted share, for 2007. Operating income totaled $299.2 million, or $4.68 per diluted share, compared to $262.3 million, or $4.08 per diluted share, in the prior-year period, a 15 percent increase on a per share basis. Consolidated net premiums were up 11 percent, to $3,960.2 million from $3,561.0 million.
A. Greig Woodring, president and chief executive officer, commented, "The extraordinary events and issues affecting the global financial markets caused investment value deterioration and resultant capital losses during the third quarter. We have taken an aggressive posture in recording impairments in value of securities. In addition, we have selectively reduced exposure to distressed names through securities sales. Although the environment remains extremely volatile, we believe our portfolio is well-positioned."
RGA's investment profile includes 97 percent of its fixed maturity securities held in the investment grade categories with an average credit rating of "A+". The structured residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) portfolios continue to be highly rated with 99 percent and 84 percent of the RMBS and CMBS rated "AAA", respectively. Additionally, 8 percent of the CMBS portfolio is rated in the "AA" category. Gross pre-tax unrealized losses on securities increased to $960.6 million from $486.7million at June 30, primarily due to spread widening. Net pre-tax unrealized losses totaled $596.3 million at September 30. On an after-tax basis, gross unrealized losses represent approximately 22 percent of total shareholders' equity, excluding accumulated other comprehensive income.
RGA's subprime mortgage exposure, including funds withheld portfolios, totals $239.6million in book value, or less than 2 percent of total invested assets, with 75 percent rated "AA" or higher, including 28 percent in the "AAA" category. Approximately 9 percent of the subprime mortgage exposure, or $20.9 million, is rated below investment grade. These figures include the effect of $11.6 million, pre-tax, in write-downs during the quarter. RGA largely avoided investing in securities originated in the second half of 2005 and beyond, which RGA believes was a period of less rigorous underwriting. Exposure to "Alt-A" structured securities totaled $106.5 million, which includes $13.3 million in write-downs during the quarter. Approximately 83 percent of these securities are rated "AA" or better.
RGA maintains a strong liquidity profile, positive cash flows from operations and access to additional liquidity through its $750 million syndicated credit facility in addition to a Federal Home Loan Bank borrowing program. RGA does not issue commercial paper and its participation in securities lending programs is immaterial, with less than $20.0 million outstanding at September30. RGA's next scheduled senior debt maturity is in 2011.
Woodring continued, "Despite the very challenging financial markets, we reported a strong operating quarter. Our operating segments outside the U.S. contributed approximately $82.5 million in pre-tax operating income compared to $84.2 million for our U.S. operations, as we continue to increase our geographic diversification. Our operating income is primarily driven by how well we underwrite mortality risk and is only modestly affected by the financial markets.
"The U.S. reported a pre-tax loss of $11.3million for the quarter versus income of $66.2million the year before. The current-quarter results include approximately $68.0 million, pre-tax and after DAC, in net realized investment losses, and $32.4 million, pre-tax and after DAC, associated with the change in embedded derivatives associated with funds withheld treaties. Pre-tax operating income totaled $84.2 million compared to $89.9 million the year before, a reflection of approximately $20.0 million in adverse mortality experience in the current quarter. That level of variance is not particularly unusual for that business in any quarter. Net premiums were up 7 percent to $742.2 million from $691.9 million in the prior-year quarter. On a year-to-date basis, net premiums have increased 7 percent, at the low end of our guidance range of 7 to 9 percent.
"Our Canada operations reported another strong quarter on very favorable mortality, with pre-tax net income of $29.7 million compared to $22.8 million a year ago. Pre-tax operating income totaled $32.0million versus $20.3 million a year ago, representing a 58 percent increase. Net premiums increased 4 percent to $128.9 million from $123.7 million in the prior year. On a year-to-date basis, premiums were up 18 percent, ahead of our guidance range. The impact on the current-quarter results from currency exchange rate changes relative to the prior year was immaterial.
"Asia Pacific also reported a strong quarter with pre-tax net income of $21.2 million compared with $17.2 million in the year-ago quarter. Pre-tax operating income totaled $25.0million compared with $17.6 million a year ago. We saw strong bottom-line results driven by favorable mortality in our emerging markets, particularly Japan, South Korea and Taiwan. Net premiums totaled $254.5 million compared to $240.5 million. The prior-year amount was strong due to the timing of client reporting, which is not unusual in our business. On a year-to-date basis, net premiums have increased 23 percent. Foreign currency fluctuations positively affected net premiums and pre-tax operating income by approximately $3.0 million and $1.1million, respectively, during the quarter.
"Europe and South Africa results were strong. Pre-tax net income increased to $20.8million from $11.7 million a year ago. Pre-tax operating income increased to $25.5million versus $12.6 million last year, when we experienced high claim levels in the UK. Net premiums increased 3 percent to $176.2 million as we continue to confront a very competitive environment in the UK and a relatively weak British pound. The year-to-date increase in premiums totaled 9 percent. Foreign currency exchange fluctuations adversely affected reported net premiums and pre-tax operating income for the quarter by approximately $9.4 million and $2.0 million, respectively."
Woodring observed, "We are pleased with the operating results for the quarter. While we are unable to avoid credit losses in the current environment, we believe our exposure and level of unrealized losses are manageable and will not significantly affect our strong financial position. Our investment portfolio remains appropriate to support our various businesses. As demonstrated by our current-quarter and full-year operating results, our operations remain strong and have consistently provided for increases in retained capital and positive cash flow. We continue to be in a position to hold our investment securities until recovery, provided we are comfortable with the credit. Our operations do not rely on short-term funding or commercial paper, and therefore, to date, we have experienced no liquidity pressure, nor do we anticipate such pressure in the foreseeable future.
"The current environment in the financial markets places a premium on capital adequacy, stability of operations, and effective operating and financial strategies. RGA's business model is such that cash outflows are reasonably predictable and quite manageable from a liquidity perspective. And, despite reporting what we consider to be an extraordinary amount of realized capital losses for RGA, we still added to our base of retained earnings during the quarter. We feel our current capital base is adequate to support our business at current operating levels, and our credit ratings are currently stable. At the same time, we are seeing a number of new business opportunities, as primary companies look to potentially remove risk from their balance sheets through block reinsurance transactions or entire company sales. Some of these transactions could be sizable. To the extent we are successful in supporting transactions of this nature through reinsurance structures, we would likely need to add to our equity capital base. We would price any such block reinsurance opportunities for returns that would be accretive to shareholders. Despite the uncertain economic environment, we are well-positioned to generate strong operating results, and will continue to take advantage of opportunities presented by our market.
"On October 6, we announced that our board of directors has authorized and will recommend that the holders of Class A common stock and Class B common stock approve a proposal to convert Class B common stock into Class A common stock on a one-for-one basis, pursuant to the existing conversion terms contained in RGA's articles of incorporation. A special shareholders' meeting to consider the proposal is scheduled for November 25."
The company also announced that its board of directors declared a regular quarterly dividend of $0.09, payable November 28 to shareholders of record for both classes of stock as of November 7.
A conference call to discuss the company's third-quarter results will begin at 9 a.m. Eastern Time on Friday, October 24. Interested parties may access the call by dialing 877-874-1586 (domestic) or 719-325-4761 (international). The access code is 5022240. 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 beginning on Saturday, October 25, for 90 days following the conference call. A telephonic replay will also be available from October 25 through October 31 at 888-203-1112 (domestic) or 719-457-0820, access code 5022240.
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, Poland, South Africa, South Korea, Spain, Taiwan, the United Kingdom and the United States. Worldwide, the company has approximately $2.2 trillion of life reinsurance inforce, and assets of $21.8 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," vproject," "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, lapsation or claims experience, (2) changes in our financial strength and credit ratings and the effect of such changes on our future results of operations and financial condition, (3) inadequate risk analysis and underwriting, (4)general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in our current and planned markets, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) 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, (7) market or economic conditions that adversely affect our ability to make timely sales of investment securities, (8) risks inherent in our risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (9) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (10)adverse litigation or arbitration results, (11)the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (12) the stability of and actions by governments and economies in the markets in which we operate, (13)competitive factors and competitors' responses to our initiatives, (14) the success of our clients, (15) successful execution of our entry into new markets, (16) successful development and introduction of new products and distribution opportunities, (17) our ability to successfully integrate and operate reinsurance business that we acquire, (18) regulatory action that may be taken by state Departments of Insurance with respect to us or our subsidiaries, (19) our dependence on third parties, including those insurance companies and reinsurers to which we cede some reinsurance, third-party investment managers and others, (20) the threat of natural disasters, catastrophes, terrorist attacks, epidemics or pandemics anywhere in the world where we or our clients do business, (21) changes in laws, regulations, and accounting standards applicable to us, our subsidiaries, or our business, (22) the effect of our status as an insurance holding company and regulatory restrictions on our ability to pay principal of and interest on our debt obligations, and (23) 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 2007 Form 10-K and our Form 10-Q for the period ending June 30, 2008.
Operating Income
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. A reconciliation of income before income taxes of the operating segments to pre-tax operating income (loss) is presented below their GAAP income statements included in this press release.
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Reconciliation of Net Income From Continuing Operations
to Operating Income
(Dollars in thousands)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
GAAP net income-continuing
operations $ 25,250 $ 80,798 $172,645 $236,772
Reconciliation to operating
income:
Capital losses and other, net
included in investment
related losses, net 64,967 6,412 66,798 16,732
Embedded Derivatives:
Included in investment
related losses, net 92,670 34,434 197,265 37,221
Included in interest
credited (28,516) -- 7,389 --
Included in policy
acquisition costs and
other insurance expenses 5,378 -- (927) --
DAC offset, net (41,207) (26,052) (143,983) (28,431)
Operating income $118,542 $ 95,592 $299,187 $262,294
- more –
Add Eight
Reconciliation of Pre-tax Net Income From Continuing Operations
to Pre-tax Operating Income
(Dollars in thousands)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Income from continuing
operations before
income taxes $ 32,546 $121,730 $260,198 $364,673
Reconciliation to pre-tax
operating income:
Capital losses and other, net
included in investment
related losses, net 99,801 9,371 102,625 25,211
Embedded Derivatives:
Included in investment
related losses, net 142,569 52,975 303,484 57,263
Included in interest
credited (43,871) -- 11,367 --
Included in policy
acquisition costs and
other insurance expenses 8,274 -- (1,426) --
DAC offset, net (63,394) (40,079) (221,512) (43,739)
Pre-tax operating income $175,925 $143,997 $454,736 $403,408
Add Nine
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2008 2007 2008 2007
Revenues:
Net premiums $1,303,590 $1,227,907 $3,960,210 $3,561,003
Investment income, net
of related expenses 220,248 190,458 674,642 681,103
Investment related
losses, net (241,307) (62,113) (403,646) (81,977)
Other revenues 27,764 22,089 81,962 61,637
Total revenues 1,310,295 1,378,341 4,313,168 4,221,766
Benefits and expenses:
Claims and other
policy benefits 1,062,948 1,006,864 3,311,287 2,890,012
Interest credited 9,293 30,475 146,190 205,193
Policy acquisition
costs and other
insurance expenses 124,836 139,081 330,370 500,078
Other operating expenses 63,886 57,284 189,223 169,325
Interest expense 9,935 9,860 54,609 53,545
Collateral finance
facility expense 6,851 13,047 21,291 38,940
Total benefits and
expenses 1,277,749 1,256,611 4,052,970 3,857,093
Income from continuing
operations before
income taxes 32,546 121,730 260,198 364,673
Provision for income
taxes 7,296 40,932 87,553 127,901
Income from continuing
operations 25,250 80,798 172,645 236,772
Discontinued operations:
Loss from discontinued
accident and health
operations, net of
income taxes (22) (4,277) (5,210) (6,524)
Net income $ 25,228 $ 76,521 $167,435 $ 230,248
Add Ten
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2008 2007 2008 2007
Earnings per share from
continuing operations:
Basic earnings per share $ 0.41 $ 1.30 $ 2.77 $ 3.83
Diluted earnings per share $ 0.40 $ 1.26 $ 2.70 $ 3.69
Diluted earnings per share from
operating income $ 1.86 $ 1.49 $ 4.68 $ 4.08
Earnings per share from net income:
Basic earnings per share $ 0.40 $ 1.23 $ 2.69 $ 3.73
Diluted earnings per share $ 0.40 $ 1.19 $ 2.62 $ 3.59
Weighted average number of
common and common equivalent
shares outstanding 63,607 64,212 63,940 64,218
Add Eleven
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Nine Months Ended
(Unaudited) September 30,
2008 2007
Gross life reinsurance in force (in billions)
U.S. $1,265.6 $1,212.8
Canada $ 231.4 $ 211.3
Europe & South Africa $ 368.9 $ 370.9
Asia Pacific $ 310.6 $ 319.7
Gross life reinsurance written (in billions)
U.S. $ 100.7 $ 120.9
Canada $ 39.1 $ 33.7
Europe & South Africa $ 59.3 $ 42.2
Asia Pacific $ 22.7 $ 27.7
Balance sheet information (in millions,
except share and per share figures)
Consolidated cash and invested assets $16,637.2 $16,312.1
Invested asset book yield – trailing
three months excluding funds withheld 6.01% 6.00%
Investment portfolio mix
Cash and short-term investments 2.68% 3.71%
Fixed maturity securities 54.83% 54.76%
Mortgage loans 4.70% 5.07%
Policy loans 6.30% 6.24%
Funds withheld at interest 28.89% 28.53%
Other invested assets 2.60% 1.69%
Collateral finance facilities $ 850.1 $ 850.3
Short-term debt $ 95.0 $ 30.7
Long-term debt $ 923.0 $ 896.0
Company-obligated mandatorily
redeemable preferred securities
of subsidiary $ 159.0 $ 158.8
Total stockholders’ equity $2,606.9 $3,040.0
Less: Accumulated other comprehensive
income “AOCI”* (222.3) 444.4
Total stockholders’ equity, before
impact of AOCI* $2,829.2 $2,595.6
Treasury shares 802,922 1,129,184
Common shares outstanding 62,325,351 61,999,089
Book value per share outstanding $ 41.83 $ 49.03
Book value per share outstanding, before
impact of AOCI* $ 45.39 $ 41.86
* Book value per share outstanding and total stockholders’ equity,
before impact of AOCI, are non-GAAP financial measures that
management believes are 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.
Add Twelve
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Selected Invested Asset Data
(Dollars in thousands)
The company had total cash and invested assets of $16.6 billion and
$16.8 billion at September 30, 2008 and December 31, 2007,
respectively, as illustrated below:
(Unaudited)
September 30, December 31,
Fixed maturity securities,
available-for-sale $9,121,953 $9,397,916
Mortgage loans on real estate 782,282 831,557
Policy loans 1,048,517 1,059,439
Funds withheld at interest 4,806,642 4,749,496
Short-term investments 32,520 75,062
Other invested assets 432,982 284,220
Cash and cash equivalents 412,255 404,351
Total cash and invested assets $16,637,151 $16,802,041
The tables below show the major industry types and weighted average
credit ratings, which comprise the U.S. and foreign corporate fixed
maturity holdings at September 30, 2008 and December 31, 2007:
(Unaudited)
Average
Estimated Credit
September 30, 2008 Amortized Cost Fair Value % of Total Ratings
Finance $1,433,689 $1,176,929 28.1% A-
Industrial 1,161,833 1,043,016 24.9% BBB
Foreign (1) 1,185,038 1,088,255 26.0% A
Utility 531,564 487,337 11.6% BBB
Other 437,988 394,038 9.4% BBB+
Total $4,750,112 $4,189,575 100.0% A-
Average
Estimated Credit
December 31, 2007 Amortized Cost Fair Value % of Total Ratings
Finance $1,394,562 $1,343,539 30.8% A
Industrial 1,069,727 1,060,236 24.3% BBB+
Foreign (1) 1,040,817 1,050,005 24.1% A
Utility 504,678 503,969 11.5% BBB
Other 413,977 405,871 9.3% BBB+
Total $4,423,761 $4,363,620 100.0% A-
(1) Includes U.S. dollar-denominated debt obligations of foreign
obligors and other foreign investments.
Add Thirteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Selected Invested Asset Data
(Dollars in thousands)
The quality of the company’s available-for-sale fixed maturity
securities portfolio, as measured at fair value and by the percentage
of fixed maturity securities invested in various ratings categories,
relative to the entire available-for-sale fixed maturity security
portfolio, at September 30, 2008 and December 31, 2007 was as
follows:
(Unaudited)
September 30, 2008
NAIC Rating Agency Amortized Estimated % of
Designation Designation Cost Fair Value Total
1 AAA/AA/A $7,479,538 $7,183,940 78.8%
2 BBB 1,817,281 1,632,806 17.9%
3 BB 253,665 231,706 2.5%
4 B 58,868 43,503 0.5%
5 CCC and lower 31,336 27,361 0.3%
6 In or near default 2,636 2,637 --%
Total $9,643,324 $9,121,953 100.0%
December 31, 2007
NAIC Rating Agency Amortized Estimated % of
Designation Designation Cost Fair Value Total
1 AAA/AA/A $7,022,497 $7,521,177 80.0%
2 BBB 1,628,431 1,617,983 17.2%
3 BB 201,868 198,487 2.1%
4 B 47,013 43,680 0.5%
5 CCC and lower 16,800 16,502 0.2%
6 In or near default 83 87 --%
Total $8,916,692 $9,397,916 100.0%
The following table presents the total gross unrealized losses for
fixed maturity securities and equity securities as of September 30,
2008 and December 31, 2007 where the estimated fair value had
declined and remained below amortized cost by the indicated amount:
September 30, 2008 December 31, 2007
(Unaudited) Gross Gross
Unrealized % of Unrealized % of
Losses Total Losses Total
Less than 20% $472,148 49.1% $159,563 80.5%
20% or more for less than
six months 381,221 39.7% 35,671 18.0%
20% or more for six months
or greater 107,273 11.2% 2,981 1.5%
Total $960,642 100.0% $198,215 100.0%
Add Fourteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. Operations
(Unaudited) (Dollars in thousands)
Three Months Ended September 30, 2008
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
Net premiums $ 740,502 $ 1,719 $ -- $742,221
Investment income, net
of related expenses 99,991 43,727 192 143,910
Investment related
losses, net (62,065) (132,280) (136) (194,481)
Other revenues (42) 15,051 3,644 18,653
Total revenues 778,386 (71,783) 3,700 710,303
Benefits and expenses:
Claims and other
policy benefits 632,258 2,040 -- 634,298
Interest credited 15,221 (6,005) -- 9,216
Policy acquisition costs
and other insurance
expenses 107,199 (45,043) 252 62,408
Other operating expenses 12,756 2,167 747 15,670
Total benefits
and expenses 767,434 (46,841) 999 721,592
Income (loss) before
income taxes $ 10,952 $ (24,942) $ 2,701 $(11,289)
Reconciliation to pre-tax
operating income:
Capital losses (gains) and
other, net included
in investment related
losses, net $ 62,065 $ (10,289) $ 136 $ 51,912
Embedded Derivatives:
Included in investment
related losses, net -- 142,569 -- 142,569
Included in interest
credited -- (43,871) -- (43,871)
Included in policy
acquisition costs and
other insurance
expenses -- 8,274 -- 8,274
DAC offset, net -- (63,394) -- (63,394)
Pre-tax operating income $ 73,017 $ 8,347 $ 2,837 $ 84,201
Add Fifteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. Operations
(Unaudited) (Dollars in thousands)
Three Months Ended September 30, 2007
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
Net premiums $ 690,388 $ 1,555 $ -- $691,943
Investment income, net
of related expenses 89,221 28,870 (9) 118,082
Investment related
losses, net (5,457) (58,384) (2) (63,843)
Other revenues 242 11,095 7,205 18,542
Total revenues 774,394 (16,864) 7,194 764,724
Benefits and expenses:
Claims and other
policy benefits 572,871 2,280 -- 575,151
Interest credited 14,845 15,457 -- 30,302
Policy acquisition costs
and other insurance
expenses 99,759 (22,880) 1,831 78,710
Other operating expenses 11,631 1,757 1,021 14,409
Total benefits
and expenses 699,106 (3,386) 2,852 698,572
Income (loss) before
income taxes $ 75,288 $ (13,478) $ 4,342 $ 66,152
Reconciliation to pre-tax
operating income:
Capital losses and
other, net included
in investment related
losses, net $ 5,457 $ 5,409 $ 2 $ 10,868
Embedded Derivatives:
Included in investment
related losses, net -- 52,975 -- 52,975
DAC offset, net -- (40,079) -- (40,079)
Pre-tax operating income $ 80,745 $ 4,827 $ 4,344 $ 89,916
Add Sixteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. Operations
(Unaudited) (Dollars in thousands)
Nine Months Ended September 30, 2008
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
Net premiums $2,218,726 $ 4,974 $ -- $2,223,700
Investment income, net
of related expenses 294,884 149,678 588 445,150
Investment related
losses, net (65,210) (290,878) (139) (356,227)
Other revenues 570 40,757 10,702 52,029
Total revenues 2,448,970 (95,469) 11,151 2,364,652
Benefits and expenses:
Claims and other
policy benefits 1,908,418 3,090 -- 1,911,508
Interest credited 44,935 100,958 -- 145,893
Policy acquisition costs
and other insurance
expenses 296,480 (149,707) 700 147,473
Other operating expenses 38,115 6,341 2,160 46,616
Total benefits
and expenses 2,287,948 (39,318) 2,860 2,251,490
Income (loss) before
income taxes $ 161,022 $ (56,151) $ 8,291 $ 113,162
Reconciliation to pre-tax
operating income:
Capital losses (gains) and
other, net included
in investment related
losses, net $ 65,210 $ (12,606) $ 139 $ 52,743
Embedded Derivatives:
Included in investment
related losses, net -- 303,484 -- 303,484
Included in interest
credited -- 11,367 -- 11,367
Included in policy
acquisition costs
and other insurance
expenses -- (1,426) -- (1,426)
DAC offset, net -- (221,512) -- (221,512)
Pre-tax operating income $ 226,232 $ 23,156 $ 8,430 $ 257,818
Add Seventeen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. Operations
(Unaudited) (Dollars in thousands)
Nine Months Ended September 30, 2007
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
Net premiums $2,078,560 $ 4,779 $ -- $2,083,339
Investment income, net
of related expenses 261,300 214,141 110 475,551
Investment related
losses, net (10,292) (64,599) (9) (74,900)
Other revenues 648 28,209 18,940 47,797
Total revenues 2,330,216 182,530 19,041 2,531,787
Benefits and expenses:
Claims and other
policy benefits 1,710,076 6,250 1 1,716,327
Interest credited 43,694 159,939 -- 203,633
Policy acquisition costs
and other insurance
expenses 300,946 16,163 6,026 323,135
Other operating expenses 35,103 5,083 2,962 43,148
Total benefits
and expenses 2,089,819 187,435 8,989 2,286,243
Income (loss) before
income taxes $ 240,397 $ (4,905) $ 10,052 $ 245,544
Reconciliation to pre-tax
operating income:
Capital losses and
other, net included
in investment related
losses, net $ 10,292 $ 7,336 $ 9 $ 17,637
Embedded Derivatives:
Included in investment
related losses, net -- 57,263 -- 57,263
DAC offset, net -- (43,739) -- (43,739)
Pre-tax operating income $ 250,689 $ 15,955 $ 10,061 $276,705
Add Eighteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Canada Operations
(Dollars in thousands)
Three Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 128,930 $ 123,676
Investment income, net of related expenses 35,836 31,057
Investment related gains (losses), net (1,183) 2,713
Other revenues 4,289 1
Total revenues 167,872 157,447
Benefits and expenses:
Claims and other policy benefits 104,339 106,416
Interest credited 77 170
Policy acquisition costs and other
insurance expenses 27,591 23,118
Other operating expenses 6,132 4,945
Total benefits and expenses 138,139 134,649
Income before income taxes $ 29,733 $ 22,798
Reconciliation to pre-tax operating income:
Capital losses (gains) and
other, net included in investment
related gains (losses), net $ 2,246 $ (2,480)
Pre-tax operating income $ 31,979 $ 20,318
Nine Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 407,452 $ 345,748
Investment income, net of related expenses 107,561 89,852
Investment related gains (losses), net (1,264) 7,145
Other revenues 17,506 180
Total revenues 531,255 442,925
Benefits and expenses:
Claims and other policy benefits 353,756 303,231
Interest credited 297 541
Policy acquisition costs and other
insurance expenses 79,543 62,937
Other operating expenses 17,477 14,182
Total benefits and expenses 451,073 380,891
Income before income taxes $ 80,182 $ 62,034
Reconciliation to pre-tax operating income:
Capital losses (gains) and
other, net included in investment
related gains (losses), net $ 3,727 $ (6,648)
Pre-tax operating income $ 83,909 $ 55,386
Add Nineteen
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Europe & South Africa
(Dollars in thousands)
Three Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 176,184 $ 170,774
Investment income, net of related expenses 9,065 5,569
Investment related losses, net (4,703) (863)
Other revenues 33 (43)
Total revenues 180,579 175,437
Benefits and expenses:
Claims and other policy benefits 122,521 127,281
Interest credited -- 3
Policy acquisition costs and other
insurance expenses 21,559 22,592
Other operating expenses 15,708 13,872
Total benefits and expenses 159,788 163,748
Income before income taxes $ 20,791 $ 11,689
Reconciliation to pre-tax operating income:
Capital losses and
other, net included in investment
related losses, net $ 4,703 $ 863
Pre-tax operating income $ 25,494 $ 12,552
Nine Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 550,870 $ 503,366
Investment income, net of related expenses 25,394 18,446
Investment related losses, net (4,089) (1,717)
Other revenues 161 61
Total revenues 572,336 520,156
Benefits and expenses:
Claims and other policy benefits 425,516 370,263
Interest credited -- 1,019
Policy acquisition costs and other
insurance expenses 54,815 65,781
Other operating expenses 48,130 38,434
Total benefits and expenses 528,461 475,497
Income before income taxes $ 43,875 $ 44,659
Reconciliation to pre-tax operating income:
Capital losses and other, net included
in investment related losses, net $ 4,089 $ 1,717
Pre-tax operating income $ 47,964 $ 46,376
Add Twenty
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Asia Pacific
(Dollars in thousands)
Three Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 254,497 $ 240,476
Investment income, net of related expenses 12,272 9,134
Investment related losses, net (3,821) (367)
Other revenues 2,811 2,105
Total revenues 265,759 251,348
Benefits and expenses:
Claims and other policy benefits 201,707 197,827
Policy acquisition costs and other
insurance expenses 25,053 22,833
Other operating expenses 17,774 13,448
Total benefits and expenses 244,534 234,108
Income before income taxes $ 21,225 $ 17,240
Reconciliation to pre-tax operating income:
Capital losses and
other, net included in investment
related losses, net $ 3,821 $ 367
Pre-tax operating income $ 25,046 $ 17,607
Nine Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 773,148 $ 626,285
Investment income, net of related expenses 36,083 26,407
Investment related losses, net (4,817) (937)
Other revenues 7,214 6,515
Total revenues 811,628 658,270
Benefits and expenses:
Claims and other policy benefits 620,387 499,974
Policy acquisition costs and other
insurance expenses 81,520 75,620
Other operating expenses 48,677 39,495
Total benefits and expenses 750,584 615,089
Income before income taxes $ 61,044 $ 43,181
Reconciliation to pre-tax operating income:
Capital losses and
other, net included in investment
related losses, net $ 4,817 $ 937
Pre-tax operating income $ 65,861 $ 44,118
Add Twenty One
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Corporate and Other
(Dollars in thousands)
Three Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 1,758 $ 1,038
Investment income, net of related expenses 19,165 26,616
Investment related gains (losses), net (37,119) 247
Other revenues 1,978 1,484
Total revenues (14,218) 29,385
Benefits and expenses:
Claims and other policy benefits 83 189
Policy acquisition costs and other
insurance expenses (11,775) (8,172)
Other operating expenses 8,602 10,610
Interest expense 9,935 9,860
Collateral finance facility expense 6,851 13,047
Total benefits and expenses 13,696 25,534
Income (loss) before income taxes $ (27,914) $ 3,851
Reconciliation to pre-tax operating income:
Capital losses (gains)and
other, net included in investment
related gains (losses), net $ 37,119 $ (247)
Pre-tax operating income $ 9,205 $ 3,604
Nine Months Ended
(Unaudited) September 30,
2008 2007
Revenues:
Net premiums $ 5,040 $ 2,265
Investment income, net of related expenses 60,454 70,847
Investment related losses, net (37,249) (11,568)
Other revenues 5,052 7,084
Total revenues 33,297 68,628
Benefits and expenses:
Claims and other policy benefits 120 217
Policy acquisition costs and other
insurance expenses (32,981) (27,395)
Other operating expenses 28,323 34,066
Interest expense 54,609 53,545
Collateral finance facility expense 21,291 38,940
Total benefits and expenses 71,362 99,373
Loss before income taxes $ (38,065) $ (30,745)
Reconciliation to pre-tax operating income:
Capital losses and
other, net included in investment
related losses, net $ 37,249 $ 11,568
Pre-tax operating loss $ (816) $ (19,177)
SOURCE: Reinsurance Group of America, Incorporated
Reinsurance Group of America, Incorporated Jack B. Lay Senior Executive Vice President and Chief Financial Officer 636-736-7000