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Reinsurance Group (RGA) Q3 Earnings Beat Estimates, Up Y/Y

Reinsurance Group of America, Inc. RGA reported third-quarter 2017 operating income of $3.44 per share. The bottom line surpassed the Zacks Consensus Estimate of $2.59 by 32.8% and improved 39.8% from the year-ago quarter.

The company’s Traditional business in the EMEA, Asia Pacific U.S. and Latin America region performed well in the quarter.

Highlights of the quarter are the strong performance of the U.S. segment, driven primarily by favorable individual mortality experience and above-average variable investment income. Earnings in the U.S. Traditional segment reached a record level.

Reinsurance Group's operating revenues of $3.1 billion climbed 11% year over year. Moreover, revenues surpassed the Zacks Consensus Estimate by 0.9%. 

Net premiums of $2.5 billion rose 10.6% year over year. Investment income rose 13.7% from the prior-year quarter to $556.9 million. The average investment yield was up by 38 basis points (bps) to 4.81%, representing strong variable investment income.

Total benefits and expenses at Reinsurance Group increased 7.4% year over year to $2.8 billion. Higher claims and other policy benefits, interest credited, interest expenses, policy acquisition costs, other operating expenses as well as collateral finance and securitization expenses resulted in the overall increase in costs.

Quarterly Segment Update

U.S.and Latin America: Total pre-tax income surged 67.5% to $256.6 million in the quarter under review.

The Traditional segment reported pre-tax adjusted operating income, which surged 101.2% to $162 million, year over year. The upside was attributable to extremely favorable mortality experience and above-average variable investment income. Net premiums grew 4% from the year-ago quarter to $1.3 billion.

The Asset Intensive segment’s pre-tax adjusted operating income increased 23.7% to $72.6 million. Favorable experience on payout annuities and above-average variable investment income contributed to the upside. Financial Reinsurance business reported pre-tax adjusted operating income of $22 million compared with $14 million in the prior-year quarter owing to strong businesses volumes.

Canada: Total pre-tax operating income rose 0.2% to $31.8 million.

The Traditional segment’s pre-tax adjusted operating income fell 10.5% to $27.4 million. Net premiums were down 2.3% at $225.8 million. The decline is attributable to the consistent effects of an anticipated reduction in creditor business.

The Financial Solutions segment’s pre-tax adjusted operating income skyrocketed 275% year over year to $4.5 million on favorable longevity experience.

Asia/Pacific: Total pre-tax adjusted operating income was $26.3 million, up 19.2% from the prior-year quarter.

Pre-tax adjusted operating income of the traditional segment increased 34.3% to $26.6 million during the quarter. Premiums jumped 33% to $536.9 million on strong growth in Asia, mainly due to new and existing treaties in Hong Kong and Southeast Asia.

The Financial Solutions segment reported pre-tax adjusted operating loss of $0.2 million against pre-tax operating income of $2.3 million in the year-ago quarter.

Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income was $45.1 million, 6.2% up from the prior-year quarter.

The Traditional segment reported pre-tax operating income of about $15.4 million, up 81.2% from the prior-year quarter. Premiums improved 25% to $344.2 million, mainly owing to the impact of new treaties and growth of existing treaties.   

The Financial Solutions segment’s pre-tax adjusted operating income declined 12.4% to $29.7 million due to favorable experience in the longevity businesses.

Corporate and Other: Pre-tax adjusted operating loss of $21.7 million was wider than loss of $19 million incurred in the year-ago quarter.

Financial Update

As of Sep 30, 2017, Reinsurance Group had assets worth $58.7 billion, up 7% from 2016-end.

As of Sep 30, 2017, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income (AOCI), grew 11.7% year over year to $100.54.

Dividend Update

The board of directors approved a dividend of 50 cents, which is payable on Nov 28, 2017 to shareholders on record as of Nov 7, 2017.

Zacks Rank

Reinsurance Group of America carries a Zacks Rank #2 (Buy). You can seehttps://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link"> the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported third-quarter earnings so far, the bottom line at The Progressive Corp. PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI beat their respective Zacks Consensus Estimate.

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Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report
 
RLI Corp. (RLI): Free Stock Analysis Report
 
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
 
Progressive Corporation (The) (PGR): Free Stock Analysis Report
 
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