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Reinsurance Group (RGA) Q3 Earnings & Revenues Miss Estimates
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Reinsurance Group of America, Incorporated (RGA - Free Report) reported third-quarter 2021 adjusted operating loss of $1.11 per share against the Zacks Consensus Estimate of earnings of $2.45 per share. The company had reported an operating income of $3.51 per share in the prior-year quarter.
Net foreign currency fluctuations had an adverse effect of 8 cents per share on adjusted operating loss year over year.
Reinsurance Group witnessed soft performance in the Asia/Pacific, U.S. and Latin America and Europe, Middle East and Africa (EMEA) segments, offset by solid results in Canada.
Reinsurance Group of America, Incorporated Price, Consensus and EPS Surprise
Reinsurance Group's operating revenues of $3.9 billion increased 11.4% year over year. The top line missed the Zacks Consensus Estimate by 4.7%.
Net premiums of $3.1 billion rose 9.5% year over year. Investment income (excluding spread-based businesses and the value of associated derivatives) increased 40% from the prior-year quarter, reflecting a 4% higher average asset balance and strong variable investment income. Average investment yield increased 129 basis points from the prior-year period to 4.95% due to higher variable investment income.
Total benefits and expenses at Reinsurance Group increased 21.4% year over year to $4.1 billion. Higher claims and other policy benefits and other operating expenses resulted in cost escalation.
Quarterly Segment Update
U.S. and Latin America: Total pre-tax adjusted operating loss was $6 million against the prior-year quarter pre-tax adjusted operating income of $123 million. The Traditional segment reported a pre-tax adjusted operating loss of $121 million against the prior-year quarter pre-tax adjusted operating income of $22 million. The results reflected COVID-19 claim costs of approximately $250 million, as well as excess individual mortality claims, believed to be directly or indirectly related to COVID-19. These were partially offset by Strong variable investment income and favorable experience in U.S. Group and Individual Health results.
Net premiums rose 9.1% from the year-ago quarter to $1.5 billion.
The Asset Intensive segment’s pre-tax adjusted operating income increased 20.8% to $93 million, indicating favorable overall experience and variable investment income that was above the average run rate. The Capital Solutions business reported pre-tax adjusted operating income of $22 million, which decreased 8.3% year over year.
Canada: Total pre-tax adjusted operating income increased 25.7% to $44 million.
The Traditional segment’s pre-tax adjusted operating income increased 51.7% to $44 million, indicating favorable experience in the Group and Creditor lines, slightly offset by COVID-19 claim costs of $5 million. Foreign currency exchange rates had a favorable effect of $3 million on pre-tax adjusted operating income.
Net premiums increased 13.8% to $289 million. Foreign currency exchange rates had a favorable effect of $16 million on net premiums.
The Financial Solutions segment broke even in the quarter compared with pre-tax adjusted operating income of $6 million in the year-ago quarter. The results reflected a modestly unfavorable experience. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating results.
Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating loss was $29 million against the prior-year quarter pre-tax adjusted operating income of $93 million.
The pre-tax adjusted operating loss of the traditional segment was $91 million against the prior-year quarter pre-tax adjusted operating income of $7 million. The results reflected approximately $80 million of COVID-19 claim costs, driven primarily by the experience in South Africa and to a lesser extent in the U.K., as well as excess mortality claims believed to be directly or indirectly related to COVID-19.
Foreign currency exchange rates had an adverse effect of $14 million on pre-tax adjusted operating loss.
Premiums increased 16.4% year over year to $432 million. Foreign currency exchange rates had a favorable effect of $22 million on net premiums.
The Financial Solutions segment delivered pre-tax adjusted operating income of $62 million, down 27.9% from the year-ago quarter, indicating a favorable longevity experience. Foreign currency exchange rates had a favorable effect of $4 million on pre-tax adjusted operating income.
Asia/Pacific: Total pre-tax adjusted operating loss was $71 million against the prior-year quarter pre-tax adjusted operating income of $87 million.
The Traditional segment’s pre-tax adjusted operating loss was $96 million against the prior-year quarter pre-tax adjusted operating income of $78 million. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating loss. The results reflected COVID-19 claims of approximately $169 million, primarily driven by experience in India.
Premiums totaled $626 million, down 4.1% from the prior-year period. Foreign currency exchange rates had a favorable effect of $6 million on net premiums.
The Financial Solutions segment’s pre-tax adjusted operating income increased nearly three-fold to $25 million. The results reflected a favorable experience and growth in new business. The net premiums increased 85.7% to $65 million. The results reflected a favorable experience and growth in new business. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating income.
Corporate and Other: Pre-tax adjusted operating loss was $27 million, narrower than $37 million in the prior-year period.
Financial Update
As of Sep 30, 2021, Reinsurance Group had assets worth $91.4 billion, up 8% from the level at 2020 end.
As of Sep 30, 2021, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 4.7% year over year to $ 137.60.
Adjusted return on equity was 2.1%, reflecting a contraction of 530 basis points year over year. The company exited the quarter with $1 billion in excess capital.
Capital Deployment
The board of directors approved a dividend of 73 cents. The dividend will be paid out on Nov 30, 2021 to shareholders of record as of Nov 16.
Zacks Rank
Reinsurance Group currently carries a Zacks Rank #5 (Strong Sell).
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Reinsurance Group (RGA) Q3 Earnings & Revenues Miss Estimates
Reinsurance Group of America, Incorporated (RGA - Free Report) reported third-quarter 2021 adjusted operating loss of $1.11 per share against the Zacks Consensus Estimate of earnings of $2.45 per share. The company had reported an operating income of $3.51 per share in the prior-year quarter.
Net foreign currency fluctuations had an adverse effect of 8 cents per share on adjusted operating loss year over year.
Reinsurance Group witnessed soft performance in the Asia/Pacific, U.S. and Latin America and Europe, Middle East and Africa (EMEA) segments, offset by solid results in Canada.
Reinsurance Group of America, Incorporated Price, Consensus and EPS Surprise
Reinsurance Group of America, Incorporated price-consensus-eps-surprise-chart | Reinsurance Group of America, Incorporated Quote
Operational Update
Reinsurance Group's operating revenues of $3.9 billion increased 11.4% year over year. The top line missed the Zacks Consensus Estimate by 4.7%.
Net premiums of $3.1 billion rose 9.5% year over year. Investment income (excluding spread-based businesses and the value of associated derivatives) increased 40% from the prior-year quarter, reflecting a 4% higher average asset balance and strong variable investment income. Average investment yield increased 129 basis points from the prior-year period to 4.95% due to higher variable investment income.
Total benefits and expenses at Reinsurance Group increased 21.4% year over year to $4.1 billion. Higher claims and other policy benefits and other operating expenses resulted in cost escalation.
Quarterly Segment Update
U.S. and Latin America: Total pre-tax adjusted operating loss was $6 million against the prior-year quarter pre-tax adjusted operating income of $123 million.
The Traditional segment reported a pre-tax adjusted operating loss of $121 million against the prior-year quarter pre-tax adjusted operating income of $22 million. The results reflected COVID-19 claim costs of approximately $250 million, as well as excess individual mortality claims, believed to be directly or indirectly related to COVID-19. These were partially offset by Strong variable investment income and favorable experience in U.S. Group and Individual Health results.
Net premiums rose 9.1% from the year-ago quarter to $1.5 billion.
The Asset Intensive segment’s pre-tax adjusted operating income increased 20.8% to $93 million, indicating favorable overall experience and variable investment income that was above the average run rate. The Capital Solutions business reported pre-tax adjusted operating income of $22 million, which decreased 8.3% year over year.
Canada: Total pre-tax adjusted operating income increased 25.7% to $44 million.
The Traditional segment’s pre-tax adjusted operating income increased 51.7% to $44 million, indicating favorable experience in the Group and Creditor lines, slightly offset by COVID-19 claim costs of $5 million. Foreign currency exchange rates had a favorable effect of $3 million on pre-tax adjusted operating income.
Net premiums increased 13.8% to $289 million. Foreign currency exchange rates had a favorable effect of $16 million on net premiums.
The Financial Solutions segment broke even in the quarter compared with pre-tax adjusted operating income of $6 million in the year-ago quarter. The results reflected a modestly unfavorable experience. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating results.
Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating loss was $29 million against the prior-year quarter pre-tax adjusted operating income of $93 million.
The pre-tax adjusted operating loss of the traditional segment was $91 million against the prior-year quarter pre-tax adjusted operating income of $7 million. The results reflected approximately $80 million of COVID-19 claim costs, driven primarily by the experience in South Africa and to a lesser extent in the U.K., as well as excess mortality claims believed to be directly or indirectly related to COVID-19.
Foreign currency exchange rates had an adverse effect of $14 million on pre-tax adjusted operating loss.
Premiums increased 16.4% year over year to $432 million. Foreign currency exchange rates had a favorable effect of $22 million on net premiums.
The Financial Solutions segment delivered pre-tax adjusted operating income of $62 million, down 27.9% from the year-ago quarter, indicating a favorable longevity experience. Foreign currency exchange rates had a favorable effect of $4 million on pre-tax adjusted operating income.
Asia/Pacific: Total pre-tax adjusted operating loss was $71 million against the prior-year quarter pre-tax adjusted operating income of $87 million.
The Traditional segment’s pre-tax adjusted operating loss was $96 million against the prior-year quarter pre-tax adjusted operating income of $78 million. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating loss. The results reflected COVID-19 claims of approximately $169 million, primarily driven by experience in India.
Premiums totaled $626 million, down 4.1% from the prior-year period. Foreign currency exchange rates had a favorable effect of $6 million on net premiums.
The Financial Solutions segment’s pre-tax adjusted operating income increased nearly three-fold to $25 million. The results reflected a favorable experience and growth in new business. The net premiums increased 85.7% to $65 million. The results reflected a favorable experience and growth in new business. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating income.
Corporate and Other: Pre-tax adjusted operating loss was $27 million, narrower than $37 million in the prior-year period.
Financial Update
As of Sep 30, 2021, Reinsurance Group had assets worth $91.4 billion, up 8% from the level at 2020 end.
As of Sep 30, 2021, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 4.7% year over year to $ 137.60.
Adjusted return on equity was 2.1%, reflecting a contraction of 530 basis points year over year. The company exited the quarter with $1 billion in excess capital.
Capital Deployment
The board of directors approved a dividend of 73 cents. The dividend will be paid out on Nov 30, 2021 to shareholders of record as of Nov 16.
Zacks Rank
Reinsurance Group currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Third-quarter earnings of CNA Financial (CNA - Free Report) , Assurant (AIZ - Free Report) and Athene Holding beat the respective Zacks Consensus Estimate.