Reinsurance Group of America Inc.
reported fourth quarter 2011 operating earnings of $1.91 per share,
higher than the Zacks Consensus Estimate of $1.84 per share. The
earnings outperformance can be attributed to better-than-expected
growth in net premium coupled with lower effective tax rates and
lower share count. Earnings were, however, down 11% year over
Total revenue increased 3.5% year over year to $2.35 billion,
led by increased net premiums, partly offset by lower net
investment income and higher investment related losses.
Net premiums increased 13% year over year to $2.03 billion,
primarily due to growth in life reinsurance and foreign currency
Investment income was down 14% year over year, totaling $304.5
million, yielding 5.19%, which was down 24 basis points from last
year's fourth quarter
Total expense increased 6.4% year over year to $2.1 billion due
to increase in claims and other policy benefits, higher operating
and interest expense as well as increase in collateral finance
For the full year 2011, the company reported earnings of $7.28
per share, 7 cents ahead of the Zacks Consensus Estimate of $7.21
per share. Total revenues were $8.8 billion, up 6.0% year over
reported pre-tax operating income of $120.1 million, down 9.5% year
over year. Premiums were up 9% year over year to $1.1 billion. The
asset intensive business in the U.S. was hampered by poor
performance in the equity markets during the quarter and reported a
pre-tax operating income of $13.2 million, down from $56.4 million
in the year-ago period.
The U.S. Financial Reinsurance business continued to perform
well in this quarter and added $6.8 million of pre-tax income
compared with $5.6 million last year, primarily due to higher fee
income from new business. Management expects a premium growth of
approximately 5% - 7% for the segment.
segment posted a premium increase of 9% and grossed $224.8 million
in the quarter. Pre-tax operating income increased 12% year over
year to $41 million in the quarter attributable to
better-than-expected mortality experience. Management expects a
premium growth of approximately 7% - 9% for the segment.
& South Africa
segment recorded a 38% hike in premium in the quarter to total
$356.3 million. Pre-tax operating income increased 6.3% year over
year to $38.6 million in the quarter, from $36.4 million last year,
when claims experience was particularly favorable. Management
expects premium growth of approximately 4% - 6% for the
segment reported a pre-tax operating loss of $1.2 million in sharp
contrast with operating income of $8.1 million reported in the
prior year quarter, particularly due to unfavorable disability
experience in Australia. Premiums rose 8% to $348.45 million.
Management expects premium growth of approximately 6% - 8% for the
Book value per share, a measure of net worth, increased 9.2%
year over year to $61.53 per share.
Management projects operating income per diluted share to be
within a range of $6.70 - $7.30.
Despite the global market and economic disruptions, overall
results reflect that Reinsurance Group has performed favorably well
in 2011. The company has diversified its operations and holds
a significant position in the U.S. The acquisition of ReliaStar has
further consolidated its position as a leader in the North American
market. An expanding international business also boosts long-term
The company is poised to benefit from consolidations within the
life reinsurance industry. However, headwinds such as reliance on
retrocession, increased retention and compliance with Solvency II
requirements in the European region remain a concern. Nevertheless,
a stable balance sheet and strong ratings inspire our confidence in
Reinsurance Group competes primarily with Munich Re , Swiss Re,
and General Re, a subsidiary of Berkshire Hathaway Inc. (
). The stock currently retains a Zacks # 3 Rank, which translates
into a short-term 'Hold' rating. Considering the fundamentals, we
are also maintaining our long-term "Neutral" recommendation on the
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
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REINSURANCE GRP (
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