RGA records $1bn gain from US tax reform in Q4

Reinsurance Group of America (RGA) recognised a net income of approximately $1.0 billion during the fourth quarter as a result of the US Tax Reform.

The Tax Cut and Jobs Act of 2017 (US Tax Reform) was enacted on December 22, 2017, reducing the statutory federal income tax rate from 35 percent to 21 percent, effective January 1, 2018.

The estimated impact on RGA’s results primarily relates to the rate change on the company’s net deferred tax liabilities existing at the date of enactment.

The estimated gains from the tax reform boosted RGA’s fourth quarter 2017 net income to $1.22 billion compared with $190.1 million in the prior-year quarter.

“US Tax Reform resulted in a one-time increase to our net income and stockholders' equity in the quarter,” said CEO Anna Manning. “More importantly, we expect ongoing benefits from this legislation because of a lower effective tax rate for RGA and a more level playing field, as compared with our global competitors,” Manning added.

Adjusted operating income remained broadly unchanged at $170.9 million in the fourth quarter compared with $171.3 million in the same period of 2016. Net premiums were $2.51 billion in the fourth quarter compared to $2.50 billion in the same period of 2016.

“In the quarter, we continued to benefit from good earnings diversity, as strong results in the EMEA region and Canada, offset modest weakness in US and Asia Traditional business,” Manning commented. “Corporate expenses were elevated this quarter due to the write-off of certain capitalized project costs and accelerated pension benefits that together reduced pre-tax adjusted operating income by approximately $30 million. Premiums were up slightly in the quarter, negatively affected by certain treaty recaptures in Australia and the modification of a large health treaty in the US and Latin America segment. Underlying momentum remained favorable overall,” she said.

“We closed a number of in-force and other transactions during the quarter, bringing total deployment for the year to approximately $225 million,” Manning added. “We ended the year with an excess capital position of approximately $1.4 billion.”

For the full year 2017, RGA reported a net income of $1.82 billion compared to $701.4 million in 2016. Net premiums grew to $9.84 billion from $9.25 billion over the period.

RGA is a global provider of life reinsurance and financial solutions with approximately $3.3 trillion of life reinsurance in force and assets of $60.5 billion as of Dec. 31, 2017.

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