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.
Financial Update
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.