Reinsurance Group of America Inc.RGA reported second-quarter 2016 operating income of $2.80 per share, which beat the Zacks Consensus Estimate of $2.29 by 22.7%. The bottom line improved 44% from the year-ago quarter.
The quarter witnessed improvement in Canada due to favorable mortality, continued momentum in U.S. Asset-Intensive business and solid performance in the Asia Pacific. However, adverse forex was a drag on the bottom line by 4 cents.
Reinsurance Group's total revenue of $3 billion increased 15% year over year.
Net premiums of $2.3 billion improved 10% year over year on organic growth and in-force transactions.
Investment income decreased 12.6% from the prior-year quarter to $507.7 million. The average investment yield was down 17 basis points to 4.71%.
Total benefits and expenses of Reinsurance Group increased 12.5% year over year to $2.7 billion, owing to higher claims, interest credited, policy acquisition costs and other insurance expenses as well as other operating expenses.
Quarterly Segment Update
U.S. and Latin America : Total pre-tax income increased 44% to $220.4 million in the quarter.
The Traditional segment reported pre-tax operating income of $111.4 million, up 35% year over year. The increase was backed by higher-than-normal variable investment income, the additive impact of in-force transactions and a favorable mortality experience. Net premiums increased 12% from the year-ago quarter to $1.3 billion.
The Non-Traditional segment's pre-tax operating income increased 68% to $94 million on favorable investment spreads and the impact of a recently added in-force block. Financial Reinsurance business reported pre-tax operating income of $14.9 million compared with $14.6 million in the prior-year quarter.
Canada : Total pre-tax operating income increased 76% to $45.5 million.
The Traditional segment's pre-tax operating income increased 91% to $43.3 million on favorable mortality experience. Net premiums increased 7% to $240.1 million.
The Non-Traditional segment's premiums decreased 32% to $2.1 million year over year.
Asia Pacific : Total pre-tax operating income surged to $34.4 million during the quarter from $2.9 million in the year-ago quarter.
The Traditional segment reported a pre-tax income of $34.5 million, up from $4.3 million earned in the year-ago quarter. The improvement was fueled by a strong operational performance in Asia and Australia. Premiums were up 16% to $454.6 million.
The Non-Traditional segment's pre-tax loss was $0.1 million, narrower than $1.4 million incurred in the year-ago quarter.
Europe, Middle East and Africa (EMEA ): The EMEA region reported pre-tax operating income of approximately $34.3 million, down 15.5% year over year.
The Traditional segment reported pre-tax income of $6.8 million, down 26% year on year mainly due to an unfavorable claims experience, most notably in the U.K. Premiums were up 4% to $286.9 million.
The Non-Traditional segment's pre-tax operating income declined 12% to $27.5 million.
Corporate and Other : Pre-tax operating income was $18.8 million, rebounding from the year-ago loss of $8.7 million.
As of Jun 30, 2016, Reinsurance Group had assets worth $53.9 billion, up 13.7% from 2015 end.
As of Jun 30, 2016, Reinsurance Group's book value per share excluding Accumulated Other Comprehensive Income (AOCI) was $87.33, up 8.7% year over year.
Dividend and Share Repurchase Update
The company's board of directors increased the quarterly dividend by 11% to 41 cents, payable on Aug 30 to shareholders of record as of Aug 9.
The company repurchased 0.1 million shares in the second quarter.
REINSURANCE GRP Price, Consensus and EPS Surprise
Reinsurance Group has a Zacks Rank #3 (Hold).
Performance of Other Insurers
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report