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Reinsurance Group (RGA) Q1 Earnings Miss, Revenues Beat

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Reinsurance Group of America, Incorporated (RGA - Free Report) reported first-quarter 2021 adjusted operating loss of $1.19 per share against the Zacks Consensus Estimate of earnings of 7 cents. In the year-ago quarter, the company had reported income of $1.41 per share. Results suffered due to the adverse impact of significant level of COVID-19 mortality claims.

Net foreign currency fluctuations had a favorable effect of 1 cent on adjusted operating income.

Reinsurance Group's operating revenues of $3.8 billion beat the Zacks Consensus Estimate of $3.7 billion. The top line also improved 9.4% year over year.

Net premiums of $2.9 billion rose 3% year over year. Investment income, net of related expenses, increased 36.7% from the prior-year quarter to $812 million. Average investment yield was up 1590 basis points to 5.67% driven by strong variable investment income from limited partnership investments.

Total benefits and expenses at Reinsurance Group increased 19.2% year over year to $3.9 billion on higher claims and other policy benefits and policy acquisition costs and other insurance expenses.

Quarterly Segment Update

U.S. and Latin America: Total pre-tax loss was $27 million in the quarter against income of $11 million in the year-ago quarter. The Traditional segment reported pre-tax adjusted operating loss of $344 million, wider than the year-ago loss of $55 million due to the negative impact from individual mortality estimated COVID-19-related claim costs of approximately $358 million. Net premiums rose 3.4% from the year-ago quarter to $1.4 billion.

Asset Intensive segment’s pre-tax adjusted operating income improved about 14% to $49 million. Capital Solutions business reported pre-tax adjusted operating income of $23 million, flat year over year.

Canada: Total pre-tax income decreased 25.6% to $29 million.

Traditional segment’s pre-tax adjusted operating income decreased 36.1% year over year to $23 million, reflecting $26 million of COVID-19 claim costs. Net premiums increased 7.7% to $280 million.

Financial Solutions segment’s pre-tax adjusted operating income doubled year over year to $6 million, attributable to favorable longevity experience.

Europe, Middle East and Africa (EMEA): Total pre-tax loss was $26 million against the prior-year quarter’s income of $53 million.

Pre-tax adjusted operating loss of the traditional segment was $68 million against pre-tax adjusted operating income of $17 million in the year-ago quarter, reflecting $98 million of COVID-19 claim costs and unfavorable forex. Premiums increased 12.3% to $48 million in the quarter due to favorable foreign currency exchange.

Financial Solutions segment delivered pre-tax adjusted operating income of $42 million, up 16.7% from the year-ago quarter, reflecting lower than expected COVID-19 impact on longevity experience due to longer reporting lags and favorable forex.

Asia/Pacific: Total pre-tax income of $60 million increased 76.5% from the prior-year quarter.

Traditional segment’s pre-tax adjusted operating income of $41 million was up 70.8% attributable to favorable forex and underwriting experience in Asia, and Australia. Premiums decreased 4.2% to $609 million, reflecting 31% decline in Australia operations.

Financial Solutions segment’s pre-tax adjusted operating income increased 90% to $19 million, driven by organic growth and favorable experience on existing treaties. Net premiums decreased 28.4% to $53 million.

Corporate and Other: Pre-tax adjusted operating income of $94 million, rebounding from the year-ago loss of $19 million in the prior-year period.

Financial Update

As of Mar 31, 2021, Reinsurance Group had assets worth $84.8 billion, up 12.1% from the level at 2020 end.

As of Mar 31, 2021, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 0.8% year over year to $133.67.

Adjusted return on equity was 3.7%. The company exited the quarter with $1.2 billion in excess capital.

Capital Deployment

The board of directors approved a dividend of 70 cents per share to be paid out on Jun 1 to shareholders of record as of May 19.

Zacks Rank

Reinsurance Group currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

First-quarter earnings of Lincoln Financial (LNC - Free Report) and Manulife Financial (MFC - Free Report) beat the Zacks Consensus Estimate while that of American Equity Investment (AEL - Free Report) missed estimates.

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