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Reinsurance Group (RGA) Q4 Earnings Miss Estimates, Rise Y/Y

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Reinsurance Group of America, Incorporated (RGA - Free Report) reported fourth-quarter 2022 adjusted operating income of $2.99 per share, which missed the Zacks Consensus Estimate by 14.8%. RGA had reported an operating loss of 56 cents per share in the prior-year quarter.

Net foreign currency fluctuations had an adverse effect of 22 cents per share on adjusted operating income.

Operational Update          

Reinsurance Group's operating revenues of $4.4 billion increased 2.2% year over year. The top line beat the Zacks Consensus Estimate by 1.2%.
Net premiums of $3.4 billion rose 1.1% year over year.

Investment income decreased 2.8%, reflecting lower variable investment income. Average investment yield declined 25 basis points (bps) to 4.45% primarily due to lower variable investment income.

Total benefits and expenses at Reinsurance Group decreased 4.6% year over year to $4.1 billion. Lower claims and other policy benefits, policy acquisition costs and other insurance expenses, collateral finance, and securitization expense resulted in the decline.

Quarterly Segment Update

The U.S. and Latin America: Total pre-tax adjusted operating income was $117 million against the operating loss of $117 million in the year-ago quarter.

The Traditional segment reported a pre-tax adjusted operating income of $15 million against the year-ago pre-tax adjusted operating loss of $215 million.
Net premiums rose 4.8% from the year-ago quarter to $1.8 billion.

The Asset Intensive segment’s pre-tax adjusted operating income increased 9.6% to $80 million, indicating favorable investment spreads, primarily driven by higher interest rates. The Capital Solutions business reported pre-tax adjusted operating income of $22 million, which decreased 12% year over year.

Canada: Total pre-tax adjusted operating income increased 14.7% to $39 million.

The Traditional segment’s pre-tax adjusted operating income decreased 3.4% to $28 million due to unfavorable group life and disability experience, including COVID-19 claim costs of $3 million.

Net premiums decreased 4.9% to $308 million.

The Financial Solutions’ pre-tax adjusted operating income of $11 million more than doubled year over year.

Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income was $76 million, surging from the year-ago income of $2 million.

The pre-tax adjusted operating income of the traditional segment was $13 million against the year-ago pre-tax adjusted operating loss of $68 million.

Premiums decreased 2.9% year over year to $422 million. Foreign currency exchange rates had an adverse effect on net premiums of $53 million.

The Financial Solutions segment delivered a pre-tax adjusted operating income of $63 million, down 10% from the year-ago quarter. Foreign currency exchange rates had an adverse effect of $10 million on pre-tax adjusted operating income.

Asia/Pacific: Total pre-tax adjusted operating income was $102 million, up 18.6% year over year.

The Traditional segment’s pre-tax adjusted operating income was $67 million, increasing 17.5% year over year on favorable underwriting experience, absorbing $13 million of COVID-19 claim costs.

Premiums totaled $700 million, down 9.4% from the prior-year period. Foreign currency exchange rates had an adverse effect on net premiums of $61 million.

The Financial Solutions segment’s pre-tax adjusted operating income increased 20.7% to $35 million, driven by strong new business and favorable investment spreads. Premiums increased 23.1% year over year to $64 million.

Corporate and Other: The pre-tax adjusted operating loss was $89 million, wider than the loss of $41 million incurred in the prior-year period.

Full-Year Update

Adjusted operating income totaled $14.43 per share, missing the Zacks Consensus Estimate by 3.6%. RGA had reported an operating income of $1.13 per share in the prior-year quarter.

Operating revenues of $16.7 billion increased 4.1% year over year. The top line was almost in line with the Zacks Consensus Estimate.

Financial Update

As of Dec 31, 2022, Reinsurance Group had assets worth $84.7 billion, down 8.1% from the level at 2021 end.

As of Dec 31, 2022, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 4.8% year over year to $146.22.

Adjusted return on equity was 10.3%, reflecting a year-over-year expansion of 950 bps.

Reinsurance Group exited the quarter with $1.2 billion in excess capital.

Capital Deployment

RGA deployed $80 million into in-force and other transactions, and bought back shares worth $25 million.

Effective Jan 31, 2023, the board declared a regular quarterly dividend of 80 cents per share. The dividend will be paid out on Feb 28 to shareholders of record at the close of business as of Feb 14, 2023.  

Zacks Rank

Reinsurance Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

American Financial Group, Inc. (AFG - Free Report) delivered fourth-quarter 2022 core net operating earnings per share of $2.99, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line decreased 27.4% year over year. Total operating revenues amounted to $1.9 billion in the fourth quarter, which rose 9% year over year. The improvement can be attributed to growth in P&C insurance net earned premiums. The top line beat the Zacks Consensus Estimate by 13.3%.

P&C insurance net earned premiums of $1.6 billion climbed 11.8% year over year. Net investment income decreased 19.6% year over year to $168 million. The figure was lower than our estimate of $194.5 million. On a year-over-year basis, other income of $24 million decreased 44.2% in the quarter under review. Total costs and expenses of American Financial increased 20.6% year over year to $1.6 billion, driven by higher P&C insurance losses and expenses, and expenses of managed investment entities. The figure was higher than our estimate of $1.4 billion.

Markel Corporation (MKL - Free Report) reported fourth-quarter 2022 earnings of $26.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line increased 66.5% year over year. Total operating revenues of $3.6 billion beat the Zacks Consensus Estimate by 4.6%. The top line rose 22% year over year on higher earned premiums, products revenues, services and other revenues, as well as higher net investment income.

Earned premiums increased 12.8% in the quarter. Net investment income increased 50.8% year over year to $145.1 million in the fourth quarter, driven by higher interest income on short-term investments as a result of higher short-term interest rates in 2022.

RLI Corp. (RLI - Free Report) reported fourth-quarter 2022 operating earnings of $1.53 per share, beating the Zacks Consensus Estimate by 41.7%. The bottom line improved 26.4% from the prior-year quarter. Operating revenues for the reported quarter were $329.5 million, up 19.4% year over year. The top line beat the Zacks Consensus Estimate by 0.4%.

Gross premiums written increased 14% year over year to $383.8 million. Underwriting income of $54 million increased 8.7%, primarily driven by higher profitability at its Property segment. The combined ratio deteriorated 140 bps year over year to 82.1.

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