REINSURANCE GROUP OF AMERICA, INC. (RGA, Financial) filed Quarterly Report for the period ended 2009-09-30.
Reinsurance Group of America Inc. is primarily engaged in life reinsurance and international life and disability insurance on a direct and reinsurance basis. In addition the company provides reinsurance of non-traditional business including asset-intensive products and financial reinsurance. Reinsurance Group Of America, Inc. has a market cap of $3.44 billion; its shares were traded at around $47.21 with a P/E ratio of 10.3 and P/S ratio of 0.6. The dividend yield of Reinsurance Group Of America, Inc. stocks is 0.8%.
The Company recognizes in consolidated income from continuing operations, changes in the value of embedded derivatives on modified coinsurance or funds withheld treaties, equity-indexed annuity treaties (EIAs) and variable annuity products. The change in the value of embedded derivatives related to reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. The unrealized gains and losses associated with these embedded derivatives, after adjustment for deferred acquisition costs, had a favorable effect on income before income taxes of $51.8 million and $102.7 million for the third quarter and first nine months of 2009, respectively, as compared to the same periods in 2008. Changes in risk free rates used in the fair value estimates of embedded derivatives associated with EIAs affect the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with EIAs, after adjustment for deferred acquisition costs and retrocession, affected income before income taxes unfavorably by $8.1 million in the third quarter and favorably by $9.7 million in the first nine months of 2009, respectively, as compared to the same periods in 2008. The change in the Companys liability for variable annuities associated with guaranteed minimum living benefits affects the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with guaranteed minimum living benefits, after adjustment for deferred acquisition costs, affected income before income taxes favorably by $2.5 million in the third quarter and unfavorably by $63.6 million in the first nine months of 2009, respectively, as compared to the same periods in 2008.
The combined changes in these three types of embedded derivatives, after adjustment for deferred acquisition costs and retrocession, resulted in increases of approximately $46.2 million and approximately $48.8 million in consolidated income from continuing operations before income taxes in the third quarter and first nine months of 2009, respectively, as compared to the same periods in 2008. These fluctuations do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, management believes it is helpful to distinguish between the effects of changes in these embedded derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited.
Consolidated net premiums increased $101.6 million, or 7.8%, and $166.2 million, or 4.2%, for the three and nine months ended September 30, 2009, as compared to the same periods in 2008, due to growth in life reinsurance in force. Foreign currency fluctuations unfavorably affected net premiums by approximately $41.5 million and $289.4 million for the three and nine months ended September 30, 2009, as compared to the same periods in 2008. Consolidated assumed insurance in force increased to $2,274.6 billion as of September 30, 2009 from $2,176.5 billion as of September 30, 2008 due to new business production. The Company added new business production, measured by face amount of insurance in force, of $70.3 billion and $73.8 billion during the third quarter of 2009 and 2008, respectively, and $216.9 billion and $221.8 billion during the first nine months of 2009 and 2008, respectively. Management believes industry consolidation, reduced capital levels in the life insurance industry and the established practice of reinsuring mortality risks should continue to provide opportunities for growth, albeit at rates less than historically experienced.
Consolidated investment income, net of related expenses, increased $79.2 million, or 36.0%, and $132.7 million, or 19.7%, for the three and nine months ended September 30, 2009, as compared to the same periods in 2008, primarily due to market value changes related to the Companys funds withheld at interest investment associated with the reinsurance of certain equity-indexed annuity products, which are substantially offset by a corresponding change in interest credited to policyholder account balances resulting in a negligible effect on net income. The third quarter and first nine months increases in investment income also reflect a larger average invested asset base offset by a lower effective investment portfolio yield. Average invested assets at amortized cost at September 30, 2009 totaled $12.8 billion, a 10.2% increase over September 30, 2008. The average yield earned on investments, excluding funds withheld, decreased to 5.71%, for the third quarter of 2009 from 6.01% for the third quarter of 2008. The average yield earned on investments, excluding funds withheld, decreased to 5.71% for the first nine months of 2009 from 6.05% for the first nine months of 2008. The average yield will vary from quarter to quarter and year to year depending on a number of variables, including the prevailing interest rate and credit spread environment, changes in the mix of the underlying investments and cash balances, and the timing of dividends and distributions on certain investments.
modified coinsurance or funds withheld basis and guaranteed minimum living benefits of $204.2 million and a decrease in investment impairments, net of non-credit adjustments, of $71.4 million, partially offset by an increase in net hedging losses related to the liabilities associated with guaranteed minimum living benefits of $24.4 million. The improvement for the first nine months is due to favorable changes in the value of embedded derivatives associated with reinsurance treaties written on a modified coinsurance or funds withheld basis and guaranteed minimum living benefits of $585.4 million, a decrease in investment impairments, net of non-credit related adjustments, of $21.9 million partially offset by an increase in net hedging losses related to the liabilities associated with guaranteed minimum living benefits of $179.1 million. See Note 4 Investments and Note 5 Derivatives in the Notes to Condensed Consolidated Financial Statements for additional information on the impairment losses and derivatives. Investment income and investment related gains and losses are allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.
Read the The complete ReportRGA is in the portfolios of NWQ Managers of NWQ Investment Management Co, John Keeley of Keeley Fund Management.
Reinsurance Group of America Inc. is primarily engaged in life reinsurance and international life and disability insurance on a direct and reinsurance basis. In addition the company provides reinsurance of non-traditional business including asset-intensive products and financial reinsurance. Reinsurance Group Of America, Inc. has a market cap of $3.44 billion; its shares were traded at around $47.21 with a P/E ratio of 10.3 and P/S ratio of 0.6. The dividend yield of Reinsurance Group Of America, Inc. stocks is 0.8%.
Highlight of Business Operations:
Consolidated income from continuing operations before income taxes increased $150.0 million, or 460.9%, and $172.0 million, or 66.1%, for the three and nine months ended September 30, 2009, as compared to the same periods in 2008. These increases were primarily due to a decrease in investment impairments and a favorable change in the value of embedded derivatives within the U.S. segment due to the impact of tightening credit spreads in the U.S. debt markets. Also contributing to the favorable results were increased net premiums and investment income. The increase in the first nine months also reflects the recognition in other revenues of a gain on the repurchase of long-term debt of $38.9 million. These increases were partially offset by unfavorable foreign currency fluctuations. Foreign currency exchange fluctuations resulted in a decrease to income from continuing operations before income taxes of approximately $2.0 million and $28.3 million for the third quarter and first nine months of 2009, respectively.The Company recognizes in consolidated income from continuing operations, changes in the value of embedded derivatives on modified coinsurance or funds withheld treaties, equity-indexed annuity treaties (EIAs) and variable annuity products. The change in the value of embedded derivatives related to reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. The unrealized gains and losses associated with these embedded derivatives, after adjustment for deferred acquisition costs, had a favorable effect on income before income taxes of $51.8 million and $102.7 million for the third quarter and first nine months of 2009, respectively, as compared to the same periods in 2008. Changes in risk free rates used in the fair value estimates of embedded derivatives associated with EIAs affect the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with EIAs, after adjustment for deferred acquisition costs and retrocession, affected income before income taxes unfavorably by $8.1 million in the third quarter and favorably by $9.7 million in the first nine months of 2009, respectively, as compared to the same periods in 2008. The change in the Companys liability for variable annuities associated with guaranteed minimum living benefits affects the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with guaranteed minimum living benefits, after adjustment for deferred acquisition costs, affected income before income taxes favorably by $2.5 million in the third quarter and unfavorably by $63.6 million in the first nine months of 2009, respectively, as compared to the same periods in 2008.
The combined changes in these three types of embedded derivatives, after adjustment for deferred acquisition costs and retrocession, resulted in increases of approximately $46.2 million and approximately $48.8 million in consolidated income from continuing operations before income taxes in the third quarter and first nine months of 2009, respectively, as compared to the same periods in 2008. These fluctuations do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, management believes it is helpful to distinguish between the effects of changes in these embedded derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited.
Consolidated net premiums increased $101.6 million, or 7.8%, and $166.2 million, or 4.2%, for the three and nine months ended September 30, 2009, as compared to the same periods in 2008, due to growth in life reinsurance in force. Foreign currency fluctuations unfavorably affected net premiums by approximately $41.5 million and $289.4 million for the three and nine months ended September 30, 2009, as compared to the same periods in 2008. Consolidated assumed insurance in force increased to $2,274.6 billion as of September 30, 2009 from $2,176.5 billion as of September 30, 2008 due to new business production. The Company added new business production, measured by face amount of insurance in force, of $70.3 billion and $73.8 billion during the third quarter of 2009 and 2008, respectively, and $216.9 billion and $221.8 billion during the first nine months of 2009 and 2008, respectively. Management believes industry consolidation, reduced capital levels in the life insurance industry and the established practice of reinsuring mortality risks should continue to provide opportunities for growth, albeit at rates less than historically experienced.
Consolidated investment income, net of related expenses, increased $79.2 million, or 36.0%, and $132.7 million, or 19.7%, for the three and nine months ended September 30, 2009, as compared to the same periods in 2008, primarily due to market value changes related to the Companys funds withheld at interest investment associated with the reinsurance of certain equity-indexed annuity products, which are substantially offset by a corresponding change in interest credited to policyholder account balances resulting in a negligible effect on net income. The third quarter and first nine months increases in investment income also reflect a larger average invested asset base offset by a lower effective investment portfolio yield. Average invested assets at amortized cost at September 30, 2009 totaled $12.8 billion, a 10.2% increase over September 30, 2008. The average yield earned on investments, excluding funds withheld, decreased to 5.71%, for the third quarter of 2009 from 6.01% for the third quarter of 2008. The average yield earned on investments, excluding funds withheld, decreased to 5.71% for the first nine months of 2009 from 6.05% for the first nine months of 2008. The average yield will vary from quarter to quarter and year to year depending on a number of variables, including the prevailing interest rate and credit spread environment, changes in the mix of the underlying investments and cash balances, and the timing of dividends and distributions on certain investments.
modified coinsurance or funds withheld basis and guaranteed minimum living benefits of $204.2 million and a decrease in investment impairments, net of non-credit adjustments, of $71.4 million, partially offset by an increase in net hedging losses related to the liabilities associated with guaranteed minimum living benefits of $24.4 million. The improvement for the first nine months is due to favorable changes in the value of embedded derivatives associated with reinsurance treaties written on a modified coinsurance or funds withheld basis and guaranteed minimum living benefits of $585.4 million, a decrease in investment impairments, net of non-credit related adjustments, of $21.9 million partially offset by an increase in net hedging losses related to the liabilities associated with guaranteed minimum living benefits of $179.1 million. See Note 4 Investments and Note 5 Derivatives in the Notes to Condensed Consolidated Financial Statements for additional information on the impairment losses and derivatives. Investment income and investment related gains and losses are allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.
Read the The complete ReportRGA is in the portfolios of NWQ Managers of NWQ Investment Management Co, John Keeley of Keeley Fund Management.
