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Reinsurance Group (RGA) Q3 Earnings & Revenues Top Estimates

Reinsurance Group of America, Inc.RGA reported third-quarter 2018 adjusted operating income of $4.03 per share, which outperformed the Zacks Consensus Estimate of $3.21 by 25.5%. Moreover, the bottom line improved 17.2% from the year-ago quarter's figure. However, a negative impact from net foreign currency fluctuations affected the metric.

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

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

In the quarter under review, the company witnessed solid performance at its U.S. Individual Mortality business owing to a robust mortality experience and strong performances from EMEA and Asia. However, an unfavorable experience in the U.S. Group business and in Australia more than offset the strength displayed by both the abovementioned segments.

Reinsurance Group's operating revenues of $3.2 billion improved nearly 4% year over year. However, the top line beat the Zacks Consensus Estimate by 1.7%.

Net premiums of $2.6 billion rose 2.9% year over year. Investment income grew 2.8% from the prior-year quarter to $572.7 million. The average investment yield was down 24 basis points (bps) to 4.57%.

Total benefits and expenses at Reinsurance Group increased 3.6% year over year to $2.9 billion. Higher claims and other policy benefits, other operating expenses, interest credited as well as other operating costs resulted in the overall escalation in costs.

Quarterly Segment Update

U.S. and Latin America : Total pre-tax income declined nearly 18.5% to $203.4 million in the quarter under discussion.

The Traditional segment reported pre-tax adjusted operating income, which dropped 28.2% to $116.4 million year over year. This downside was attributable to a favorable claims experience in the Individual Mortality segment that came in line with expectations and a modest average variable investment income, partially offset by an unfavorable performance in Group. Net premiums rose 3% from the year-ago quarter to $1.4 billion.

The Asset Intensive segment's pre-tax adjusted operating income declined 12.1% to $63.8 million. Financial Reinsurance business reported pre-tax adjusted operating income of $21.6 million, which dipped 1.9% from $22 million in the prior-year quarter.

Canada : Total pre-tax income plunged nearly 31.5% to $22.8 million.

The Traditional segment's pre-tax adjusted operating income declined 28.8% to $19.9 million due to an unfavorable individual mortality experience because of higher level of large claims. Net premiums increased 7.8% to $243.1 million. This upside is courtesy of an in-force transaction in particular as well as new business. However, net foreign currency fluctuations had an adverse effect of $10.5 million on the metric.

The Financial Solutions segment's pre-tax adjusted operating income slumped 64.4% year over year to $1.6 million. The same was in line with expectations. But, net foreign currency fluctuations had an adverse effect of $0.1 million on the metric.

Asia/Pacific : Total pre-tax income was $62.2 million, skyrocketed 136.2% from the prior-year quarter's figure.

Pre-tax adjusted operating income of the traditional segment soared by a whopping 133.5% to $62 million during the reported quarter. Favorable underwriting experience in Asia contributed to this upside, partially offset by a loss in Australia. However, net foreign currency fluctuations had a positive impact of $1.2 million on the same.

Nevertheless, premiums rose 3% year over year to $551.7 million on new and existing treaties in Asia. This improvement was partially offset by a reduction in Australia due to the effects of treaty recaptures.

The Financial Solutions segment reported pre-tax adjusted operating income of $1.9 million, which compared favorably with the year-ago quarter's losses of $0.2 million.

Europe, Middle East and Africa (EMEA) : Total pre-tax income was $74.6 million, which soared 60.8% from the prior-year quarter's count.

The Traditional segment delivered pre-tax operating income of about $18.4 million, improving nearly 19.1% from the year-ago period. This upside was attributable to a modestly favorable experience throughout most markets. However, net foreign currency fluctuations adversely impacted the result by $0.4 million. Premiums dipped 1.1% to $340.4 million due to new business. The results witnessed an unfavorable forex impact.

The Financial Solutions segment's pre-tax adjusted operating income soared 89.9% to $56.4 million owing to a very favorable longevity experience. However, the results were hampered by net foreign currency fluctuations of $0.7 million.

Corporate and Other: Pre-tax adjusted operating loss of $18.1 million was slightly narrower than the loss of $21.7 million incurred in the prior-year period. Results in the reported quarter benefited from a higher variable investment income.

Financial Update

As of Sep 30, 2018, Reinsurance Group had assets worth $62.9 billion, up 7.3% from the level at 2017 end.

As of Sep 30, 2018, Reinsurance Group's book value per share excluding accumulated other comprehensive income, grew 22.7% year over year to $123.37.

Share Repurchase and Dividend Update

In the quarter under review, the company bought back shares worth $109 million. Also, the company deployed capital worth $190 million for in-force and other transactions.

The board of directors declared a dividend of 60 cents per share, payable Nov 27, 2018 to shareholders of record as of Nov 6, 2018.

Zacks Rank

Reinsurance Group sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Performance of Other Insurers

Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of The Progressive Corp. PGR and MGIC Investment Corp. MTG outpaced the respective Zacks Consensus Estimate, while RLI Corp.'s RLI metric missed.

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Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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