RGA reports profit dip, despite premium growth
Reinsurance Group of America (RGA) has reported operating income of $120.8 million for the first quarter of 2016, down slightly on the $121.8 million it reported over the same period of 2015. Net income totalled $76.5 million, compared to the $125.1 million it reported in the first three months of 2015.
Consolidated net premiums totalled $2.2 billion for the quarter, up 7 percent from last year’s first quarter. Current-period premiums reflect net adverse foreign currency effects of approximately $70.2 million. Excluding those effects, premiums increased 10 percent versus the prior-year quarter.
RGA said that its investment income decreased 2 percent to $417.3 million this period, primarily attributable to a $51.1 million decrease in the fair value of options contracts that are included in funds withheld at interest on the consolidated balance sheet and support the crediting rates for equity-indexed annuities.
The average investment yield, excluding spread businesses, was down 32 basis points to 4.46 percent from the first quarter of 2015, and 50 basis points lower than the fourth-quarter yield, due primarily to higher prepayment and variable investment income in the prior periods and higher investment income associated with a block transaction in the fourth quarter that included investment income retroactive to the beginning of that year.
The effective tax rate on operating income was approximately 32 percent this quarter, below an expected range of 34 percent to 35 percent for the full year, due primarily to generating a greater-than-expected portion of earnings in jurisdictions that have lower income tax rates than the US statutory rate.
Greig Woodring, chief executive officer, said, “We are off to a good start in 2016, with a solid first quarter. There were no major surprises in the quarter, and we remain optimistic about our earnings potential and returns over time. Operating earnings of $1.85 per diluted share were up 5 percent over last year’s first quarter and would have been up 10 percent before the sizable negative effect of foreign currency movements totalling $0.10.”
Woodring added, “Most relevant was the fact that our US traditional operations reported more consistent results in the seasonally weak first quarter following unusually high claims in our US individual mortality business in the year-ago period. Results this year rebounded significantly and were more in line with our expectations. Our Asia Pacific segment was particularly strong, while claims flow in Canada and the UK was somewhat elevated, all normal volatility that occurs from quarter to quarter. More important, we have good balance overall, and our global model and diversified sources of earnings continue to serve us well.
“We repurchased 1.2 million shares in the quarter, and we continue to pursue a balanced approach to capital management in terms of deployment into in-force and other attractive transactions, share repurchases and shareholder dividend increases over time. We did not close on any major deployment transactions in the quarter, but the activity pipeline and environment continue to be strong.
“Looking forward, the macroeconomic environment remains challenging for the global life insurance industry, but we continue to see good demand from clients for our solutions. We expect to continue to execute in both our traditional and transaction businesses.”
