Reinsurance Group of America Inc. (RGA - Analyst Report) reported first quarter 2013 operating earnings of $1.65 per share, exceeding the Zacks Consensus Estimate of $1.61 per share. Results were also ahead of the year-ago earnings by 8.6%.
The earnings beat came on the back of strong performance in the U.S., and Europe & South Africa segments.
Including capital losses, derivatives and other investment related losses of $31.4 million, capital gains on funds withheld of $1.3 million, embedded derivatives of $104.6 million, DAC offset of $42 million and gain on repurchase of collateral finance facility securities of $30.2 million, Reinsurance Group reported net income of $2.49 per share, up 49.1% year over year.
Quarterly Operational Update
Total revenue of Reinsurance Group increased 13.4% year over year to $2.6 billion in the reported quarter, driven by increase in net premiums (up 6.2% year over year), net investment income (up 24.7% year over year) and investment related gains (up 116.8% year over year to $94.4 million). Results also exceeded the Zacks Consensus Estimate of $2.4 billion.
Total benefits and expenses of Reinsurance Group increased 9.9% year over year to $2.3 billion due to higher claims and other policy benefits (up 6.9% year over year), interest credited (up 42.5% year over year), policy acquisition costs and other insurance expenses (up 16.2% year over year), other operating expenses (up 8.5% year over year) and interest expense (up 22.1% year over year).
Quarterly Segment Update
U.S. Operations : Pretax operating income in the Traditional U.S. sub-segment was $69.5 million, up 10% year over year. Net premiums increased 2.4% year over year to $1.05 billion.
Pretax operating income in the U.S. Asset intensive business was $45.6 million, up 86.1% year over year. The improvement came on the back of strong equity markets, which augmented the equity-indexed and variable annuity blocks.
Pretax operating income in the U.S. Financial Reinsurance business was $8 million, up 23.1% year over year.
Canada Operations: Pretax operating income was $32.9 million, down 29.6% year over year. Net premiums increased 12% year over year to $243.3 million, including a $1.6 million adverse foreign currency effect.
Asia Pacific Operations: Pretax operating income was $19.4 million, down 27.9% year over year, including an adverse impact of $1.8 million from foreign currency fluctuations. Net premiums increased 12% year over year to $363.3 million including an $8.1 million adverse foreign currency impact.
Europe & South Africa Operations: Pretax operating earnings of $15.6 million were up 239.1% year over year. Net premiums increased 11% year over year to $323.9 million including an adverse effect of $9.9 million from foreign currency fluctuations.
Corporate and Other: Pretax operating loss was $8.1 million during the reported quarter. It reported an operating loss of $6.8 million in the prior-year period.
As of Mar 31, 2013, Reinsurance Group had assets worth $40.2 billion, up 24.5% year over year from $32.3 billion.
As of Mar 31, 2013, book value per share of Reinsurance Group was $94.34, up 17.3% year over year.
Share Repurchase Update
Reinsurance Group purchased approximately 0.8 million shares for $47.6 million. In April it purchased 0.9 million shares for $52.4 million.
Reinsurance Group authorized a $100 million increase to the $200 million share repurchase program authorized in Jan 2013. Reinsurance Group has purchased $100 million worth of shares under this program till date.
Management declared a quarterly dividend of 24 cents payable May 31 to shareholders of record as of May 10. This represented a 33.3% hike over the last paid dividend.
Performance of Another Insurer
StanCorp Financial Group Inc. reported first quarter 2013 operating earnings of $1.07 per share, which exceeded the Zacks Consensus Estimate by 33.8%. Results were also 35.4% higher than 79 cents earned in the prior year quarter.
Reinsurance Group currently carries Zacks Rank #3 (Hold). Among others in the industry, Protective Life Corporation with Zacks Rank #1 (Strong Buy) is expected to report its first quarter 2013 results on May 6. Lincoln National Corporation (LNC - Analyst Report) with Zacks Rank # 2 (Buy) is expected to report its first quarter 2013 results on May 1.