Reinsurance Group of America Inc.
) reported second quarter 2012 operating earnings of $1.66 per
share, lagging the Zacks Consensus Estimate by 12 cents but up 3.5%
year over year. The earnings miss was the result of an adverse
foreign exchange movement along with higher effective tax rates and
lower share count.
Total revenue increased 7.8% year over year to $2.38 billion led by
increased net premiums and lower investment related losses, offset
by lower net investment income.
Net premiums increased 9.1% year over year to $1.95 billion.
Investment income was down 3% year over year, totaling $328.3
million, primarily due to a decline in fair value of option
contracts. A low interest rate environment continues to drain
income from investments.
Total benefits and expenses increased 7.1% year over year to
$2.16 billion owing to an increase in claims and other policy
benefits, and higher operating expenses, partly offset by lower
interest expense and decline in collateral finance facility
US Operations Traditional sub segment
reported pre-tax operating income of $95.5 million, up 5% year over
year. Premiums were up 11% year over year to $1.08 billion.
The Asset Intensive business, another sub-segment of the U.S.
operations, was adversely affected by a muted performance in the
equity markets during the quarter and reported a pre-tax operating
income of $16.6 million, down 19% year over year.
The U.S. Financial Reinsurance business
, another sub-segment, continued to perform well and reported
operating income of $9.6 million, up 37% year over year.
The Canada segment posted a 5% year-over-year increase in premiums
to $221.2 million. Pre-tax operating income decreased 27%
year over year to $30.5 million, primarily due to less favorable
mortality experience compared to the prior-year quarter.
The Europe & South Africa segment
recorded a 10% hike in premium in the quarter to $310.1 million.
However, pre-tax operating income decreased significantly by 36%
year over year to $18.4 million, primarily due to
segment reported a pre-tax operating profit of $22.7 million, up
nearly fivefold year over year, led by favorable mortality
experience and a high fee income from financial reinsurance
transaction. Premiums rose 5% to $331.9 million.
Adjusted book value per share, a measure of net worth, increased
12.3% year over year to $60.34 per share.
The company declared a 33% increase in quarterly dividend to 22
cents per share, which will be paid on August 31, 2012.
In the absence of any update on 2012 outlook, we believe that the
earlier earnings per share guidance range of $6.70 - $7.30
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
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REINSURANCE GRP (RGA): Free Stock Analysis
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Reinsurance Group competes primarily with, a subsidiary of
Berkshire Hathaway Inc. (
) and Munich Re, Swiss Re, General Re. The stock currently retains
a Zacks # 2 Rank, which translates into a short-term Buy rating.
Considering the fundamentals, we are maintaining our long-term
Neutral recommendation on the shares.