Reinsurance Group of America Inc. (RGA) reported second quarter 2013 operating loss of 99 cents per share, significantly worse than Zacks Consensus Estimate of operating earnings of $1.83 per share. In the year ago quarter the company had operating earnings of $1.65 per share. Results suffered from high claims liability in the company’s Australia business.
Including capital losses, derivatives and other investment related losses Reinsurance Group reported net loss of 69 cents per share, compared with net income of $1.99 per share in the year-ago quarter.
Quarterly Operational Update
Total revenue of Reinsurance Group increased 7.9% year over year to $2.53 billion in the reported quarter, driven by increase in net premiums (up 4.0% year over year), net investment income (up 35% year over year). Results were almost in line with the Zacks Consensus Estimate of $2.51 billion.
Total benefits and expenses of Reinsurance Group increased 22.2% year over year to $2.64 billion due to higher claims and other policy benefits, interest credited, other operating expenses and interest expense.
Quarterly Segment Update
U.S. Operations: Pretax operating income in the Traditional U.S. sub-segment was $89.4 million, down 7.2% year over year. Net premiums increased 4.0% year over year to $1.13 billion.
Pretax operating income in the U.S. Asset intensive business was $69.2, double the $34.6 million in the year ago quarter. The improvement came on the back of strong equity markets, which augmented earnings from variable as well as fixed annuity business.
Pretax operating income in the U.S. Financial Reinsurance business was $11.9 million, up 24.0% year over year.
Canada Operations: Pretax operating income was $31.7 million, up 4.0% year over year. Net premiums increased 8% year over year to $239.6 million.
Asia Pacific Operations: Pre-tax operating losses were $285.7 million compared with operating income of $22.7 million in the prior year quarter. Net premiums increased 3% year over year to $340.5 million. The segment suffered from increase in claims liabilities in Australian business.
Europe & South Africa Operations: Pretax operating earnings of $15.3 million were down 5.4% year over year. Net premiums increased 3.0% year over year to $319.4 million.
Corporate and Other: Pretax operating loss was $6.2 million during the reported quarter. It reported an operating loss of $3.2 million in the prior-year period.
As of Jun 30, 2013, Reinsurance Group had assets worth $38.8 billion, up 1.3% year over year.
As Jun 30, 2013, book value per share of Reinsurance Group was $16.67, down 32.0% year over year.
Share Repurchase and Dividend Update
Reinsurance Group authorized a $100 million increase to its share repurchase program authorized in Jan 2013.
Reinsurance Group increased the quarterly dividend by 25% to 30 cents per share from 24 cents. The dividend will be paid on Aug 30.
Results reflected underperformance from the company’s Australian business. Other businesses, however, performed favorably. Going forward we expect share repurchase to aid bottom-line results.
Reinsurance Group retains a Zacks Rank #3 (Hold).
StanCorp Financial Group, Inc. (SFG) with Zacks Rank #1 (Strong Buy), Symetra Financial Corp. (SYA), and Lincoln Financial Corp. (LNC) with Zacks Rank #2(Buy) are scheduled to report second quarter earnings shortly.
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