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Reinsurance Group (RGA) Q3 Earnings & Revenues Miss Estimates

Reinsurance Group (RGA) Q3 results reflect soft performance in the Asia/Pacific, U.S. and Latin America and Europe, Middle East and Africa (EMEA) segments, offset by solid results in Canada.

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This story originally appeared on Zacks

Reinsurance Group of America, Incorporated RGA reported third-quarter 2021 adjusted operating loss of $1.11 per share against the Zacks Consensus Estimate of earnings of $2.45 per share. The company had reported an operating income of $3.51 per share in the prior-year quarter.

Net foreign currency fluctuations had an adverse effect of 8 cents per share on adjusted operating loss year over year.

Reinsurance Group witnessed soft performance in the Asia/Pacific, U.S. and Latin America and Europe, Middle East and Africa (EMEA) segments, offset by solid results in Canada.

- Zacks

Reinsurance Group of America, Incorporated Price, Consensus and EPS Surprise

Operational Update            

Reinsurance Group's operating revenues of $3.9 billion increased 11.4% year over year. The top line missed the Zacks Consensus Estimate by 4.7%.

Net premiums of $3.1 billion rose 9.5% year over year. Investment income (excluding spread-based businesses and the value of associated derivatives) increased 40% from the prior-year quarter, reflecting a 4% higher average asset balance and strong variable investment income. Average investment yield increased 129 basis points from the prior-year period to 4.95% due to higher variable investment income.

Total benefits and expenses at Reinsurance Group increased 21.4% year over year to $4.1 billion. Higher claims and other policy benefits and other operating expenses resulted in cost escalation.

Quarterly Segment Update

U.S. and Latin America: Total pre-tax adjusted operating loss was $6 million against the prior-year quarter pre-tax adjusted operating income of $123 million.

The Traditional segment reported a pre-tax adjusted operating loss of $121 million against the prior-year quarter pre-tax adjusted operating income of $22 million. The results reflected COVID-19 claim costs of approximately $250 million, as well as excess individual mortality claims, believed to be directly or indirectly related to COVID-19. These were partially offset by Strong variable investment income and favorable experience in U.S. Group and Individual Health results.

Net premiums rose 9.1% from the year-ago quarter to $1.5 billion.

The Asset Intensive segment’s pre-tax adjusted operating income increased 20.8% to $93 million, indicating favorable overall experience and variable investment income that was above the average run rate. The Capital Solutions business reported pre-tax adjusted operating income of $22 million, which decreased 8.3% year over year.

Canada: Total pre-tax adjusted operating income increased 25.7% to $44 million.

The Traditional segment’s pre-tax adjusted operating income increased 51.7% to $44 million, indicating favorable experience in the Group and Creditor lines, slightly offset by COVID-19 claim costs of $5 million. Foreign currency exchange rates had a favorable effect of $3 million on pre-tax adjusted operating income.

Net premiums increased 13.8% to $289 million. Foreign currency exchange rates had a favorable effect of $16 million on net premiums.

The Financial Solutions segment broke even in the quarter compared with pre-tax adjusted operating income of $6 million in the year-ago quarter. The results reflected a modestly unfavorable experience. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating results.

Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating loss was $29 million against the prior-year quarter pre-tax adjusted operating income of $93 million.

The pre-tax adjusted operating loss of the traditional segment was $91 million against the prior-year quarter pre-tax adjusted operating income of $7 million. The results reflected approximately $80 million of COVID-19 claim costs, driven primarily by the experience in South Africa and to a lesser extent in the U.K., as well as excess mortality claims believed to be directly or indirectly related to COVID-19.

Foreign currency exchange rates had an adverse effect of $14 million on pre-tax adjusted operating loss.

Premiums increased 16.4% year over year to $432 million. Foreign currency exchange rates had a favorable effect of $22 million on net premiums.

The Financial Solutions segment delivered pre-tax adjusted operating income of $62 million, down 27.9% from the year-ago quarter, indicating a favorable longevity experience. Foreign currency exchange rates had a favorable effect of $4 million on pre-tax adjusted operating income.

Asia/Pacific: Total pre-tax adjusted operating loss was $71 million against the prior-year quarter pre-tax adjusted operating income of $87 million.

The Traditional segment’s pre-tax adjusted operating loss was $96 million against the prior-year quarter pre-tax adjusted operating income of $78 million. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating loss. The results reflected COVID-19 claims of approximately $169 million, primarily driven by experience in India.

Premiums totaled $626 million, down 4.1% from the prior-year period. Foreign currency exchange rates had a favorable effect of $6 million on net premiums.

The Financial Solutions segment’s pre-tax adjusted operating income increased nearly three-fold to $25 million. The results reflected a favorable experience and growth in new business. The net premiums increased 85.7% to $65 million. The results reflected a favorable experience and growth in new business. Foreign currency exchange rates had an immaterial effect on pre-tax adjusted operating income.

Corporate and Other: Pre-tax adjusted operating loss was $27 million, narrower than $37 million in the prior-year period.

Financial Update

As of Sep 30, 2021, Reinsurance Group had assets worth $91.4 billion, up 8% from the level at 2020 end.

As of Sep 30, 2021, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, increased 4.7% year over year to $ 137.60.

Adjusted return on equity was 2.1%, reflecting a contraction of 530 basis points year over year. The company exited the quarter with $1 billion in excess capital.

Capital Deployment

The board of directors approved a dividend of 73 cents. The dividend will be paid out on Nov 30, 2021 to shareholders of record as of Nov 16.

Zacks Rank

Reinsurance Group currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Third-quarter earnings of CNA Financial CNA, Assurant AIZ and Athene Holding ATH beat the respective Zacks Consensus Estimate.



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