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Reinsurance Group (RGA) Q4 Earnings Miss, Revenues Top

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Reinsurance Group of America, Incorporated (RGA - Free Report) reported fourth-quarter 2021 adjusted operating loss of 56 cents per share against the Zacks Consensus Estimate of earnings of 83 cents per share. RGA had reported an operating income of $1.19 per share in the prior-year quarter. Higher COVID-19 mortality claims weighed on the performance.

Reinsurance Group of America, Incorporated Price, Consensus and EPS Surprise

Operational Update           

Reinsurance Group's operating revenues of $4.3 billion increased 5.8% year over year. The top line beat the Zacks Consensus Estimate by 2.1%.

Net premiums of $3.4 billion rose 4.5% year over year.

Investment income increased 18%, reflecting a 5% higher average asset balance and strong variable investment income. Average investment yield increased 50 bps to 4.7% primarily due to higher variable investment income.

Total benefits and expenses at Reinsurance Group increased 8.3% year over year to $4.3 billion. Higher claims and other policy benefits, policy acquisition costs and other insurance expenses, interest expense and other operating expenses resulted in a cost increase.

Quarterly Segment Update

U.S. and Latin America: Total pre-tax adjusted operating loss was $17 million against an operating income of $4 million in the year-ago quarter.

The Traditional segment reported a pre-tax adjusted operating loss of $215 million, wider than $89 million loss incurred in the year-ago quarter due to higher mortality claims owing to COVID 19.  

Net premiums rose 6.7% from the year-ago quarter to $1.7 billion.

The Asset Intensive segment’s pre-tax adjusted operating income increased 4.3% to $73 million, indicating favorable overall experience and variable investment income. The Capital Solutions business reported pre-tax adjusted operating income of $23 million, which increased 8.7% year over year.

Canada: Total pre-tax adjusted operating income decreased 21% to $34 million.

The Traditional segment’s pre-tax adjusted operating income decreased 17.7% to $29 million, due to unfavorable individual life mortality experience, including COVID-19 claim costs of $10 million.

Net premiums increased 14.1% to $324 million.

The Financial Solutions’ pre-tax adjusted operating income of $5 million declined 37.5%.

Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income was $2 million, plunging from the year-ago income of $28 million.

The pre-tax adjusted operating loss of the traditional segment was $68 million, wider than $13 million loss incurred in the year-ago quarter, attributable to higher COVID-19 claim costs in South Africa and the U.K., as well as excess mortality claims in South Africa.

Premiums decreased 1.6% year over year to $435 million.

The Financial Solutions segment delivered pre-tax adjusted operating income of $70 million, up 70.7% from the year-ago quarter, indicating a favorable longevity experience and forex.

Asia/Pacific: Total pre-tax adjusted operating income was $86 million, down 79.2% year over year.

The Traditional segment’s pre-tax adjusted operating income was $57 million, which more than doubled year over year on favorable underwriting experience.

Premiums totaled $773 million, down 1.5% from the prior-year period.

The Financial Solutions segment’s pre-tax adjusted operating income increased 26.1% to $29 million, driven by favorable experience and growth in new business. Premiums increased 30% year over year to $52 million.

Corporate and Other: Pre-tax adjusted operating loss was $41 million, wider than the loss of $24 million incurred in the prior-year period.

Full-Year Update

Adjusted operating income totaled $1.13 per share, beating the Zacks Consensus Estimate of 83 cents per share. RGA had reported an operating income of $7.54 per share in the prior-year quarter.

Operating revenues of $16 billion increased 8% year over year. The top line was almost in line with the Zacks Consensus Estimate.

Financial Update

As of Dec 31, 2021, Reinsurance Group had assets worth $92.2 billion, up 8.9% from the level at 2020 end.

As of Dec 31, 2021, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 5.4% year over year to $139.53.

Adjusted return on equity was 0.8%, reflecting a contraction of 490 basis points year over year.

Reinsurance Group exited the quarter with $1.3 billion in excess capital.

Capital Deployment

RGA deployed $106 million into in-force transactions and bought back shares worth $50 million.

The board of directors approved a dividend of 73 cents. The dividend will be paid out on Mar 1, 2022, to shareholders of record as of Feb 15.

Zacks Rank

Reinsurance Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported fourth-quarter results so far, The Travelers Companies (TRV - Free Report) and The Progressive Corporation (PGR - Free Report) beat the Zacks Consensus Estimate for earnings while Lincoln National Corporation (LNC - Free Report) missed expectations.

Travelers’ core income of $5.20 per share surpassed the Zacks Consensus Estimate of $3.86 and increased 6% year over year. Total revenues rose 7% to about $9 billion and beat the Zacks Consensus Estimate of $8.7 billion.

Travelers’ net written premiums increased 10% year over year to a record $8 billion. The combined ratio deteriorated 130 bps year over year to 88.

Progressive’s earnings per share of $1.05 beat the Zacks Consensus Estimate of 99 cents but declined 43.2% from the year-ago quarter.

Progressive’s net premiums written were $10.7 billion in the quarter, up 13% from $9.5 billion a year ago. The combined ratio deteriorated 630 bps from the prior-year quarter to 94.7.

Lincoln National’s fourth-quarter 2021 adjusted earnings of $1.56 per share missed the Zacks Consensus Estimate of $1.98 and declined from the prior-year figure of $1.78 per share. Adjusted operating revenues increased 2.4% year over year to $4.8 billion and beat the consensus mark of $4.7 billion.

Even though the ongoing pandemic is likely to continue hurting results, Lincoln National is expected to witness rising earnings per share on the back of its Spark Initiative.