RGA results ‘below expectations’
Reinsurance Group of America (RGA) has posted a disappointing set of results for the first quarter of 2014, which its chief executive admitted were below expectations.
Profits fell to $125.1 million in the first quarter of 2015, compared with $136.7 million in the first quarter of 2014. RGA said this was driven by higher than expected mortality claims in North America and unfavourable currency movements.
The US and Latin America traditional segment reported pre-tax operating income of $20.3 million, compared with $48.2 million in the first quarter of 2014.
The dampener on profits was partially offset by favourable results in RGA’s Asia-Pacific region. Asia Pacific’s traditional business posted a pre-tax operating income of $52.6 million, a significant increase over the prior-year result of $18.7 million.
According to RGA, performance was strong across Asia-Pacific operations, including operations in Australia, Hong Kong & Southeast Asia, and Japan.
Greig Woodring, president and chief executive officer, said: “Our operating results improved versus a year ago, but were somewhat below our expectations, and reflect some elevated volatility in our segment results, with the US traditional business being unusually weak, and our Asia Pacific results unusually strong.
“On a positive note, we continue to have good balance overall, as our global model and diversified sources of earnings again served us well. Mortality claims in North America were considerably higher than expected, similar to last year, but to a greater extent. The strong international results continued the recent trends, in spite of material currency headwinds, due to broadly favourable results across Asia Pacific and materially favourable results in Australia.”
He added while there is typically a seasonal effect on first-quarter results, the impact in North America was more extreme this year than in recent years.
“In the US, the higher claims this quarter were broad-based, with an influence from both frequency (claim count) and severity (average claim size), while last year there was a concentration in large claims in our facultative book,” he said.
“Some industry data would point to the severe winter weather and flu season as likely influences, but we do not yet have enough supporting information relative to this quarter’s claims flow to determine their precise effects. As we have emphasised in the past, we generally expect short-term claims volatility to moderate over time, and we have not changed our intermediate-term expectations.”
