Reinsurance Group of America, Inc. (RGA) on Monday reported a 20 percent decline in profit for the fourth quarter as higher claims and other policy benefits offset an increase in revenues. However, operating earnings and revenue beat analysts' expectations. Looking ahead to fiscal year 2012, the company forecast earnings that are higher than analysts' estimates.
The Chesterfield, Missouri-based company's fourth-quarter net income was $158.35 million or $2.15 per share, down from $196.71 million or $2.62 per share in the prior-year quarter.
Operating income declined to $140.73 million or $1.91 per share from $161.42 million or $2.15 per share in the year-ago quarter. On average, 9 analysts polled by Thomson Reuters expected earnings of $1.84 per share. Analysts' estimates typically exclude special items.
However, total revenues rose 3.5 percent to $2.35 billion from $2.27 billion last year and topped analysts' consensus estimate of $2.31 billion.
Net premiums grew 13 percent to $2.03 billion, while investment income declined 14 percent from last year to $304.51 million, primarily due to a $51 million decline in the fair value of option contracts, which are included in funds withheld at interest and support equity-indexed annuities.
Greig Woodring, president and chief executive officer of Reinsurance Group, said, "Global claims experience was somewhat higher than our expectations for the quarter, reflecting higher-than-expected disability claims in Australia and U.S. group reinsurance, offset in part by strong results in most of our other markets. Our asset intensive business also performed well."
Total benefits and expenses rose to $2.13 billion from $2.00 billion in the prior-year quarter, due mainly to higher claims and other policy benefits.
For fiscal year 2011, the company's net income rose to $599.62 million or $8.09 per share from $574.40 million or $7.69 per share last year.
Operating income rose to $539.17 million or $7.28 per share from $504.03 million or $6.75 per share in the previous year. Analysts expected earnings of $7.21 per share for the year.
Revenues for the year grew 7 percent to $8.83 billion from $8.26 billion a year ago and topped analysts' consensus estimate of $8.73 billion.
Looking ahead to fiscal 2012, Reinsurance Group forecasts operating income of $6.70 to $7.30 per share. However, the company noted that if the active financing exception legislation is not extended by the Congress, its tax provision would increase by about $15 million and reduce earnings by about $0.20 per share. Analysts expect earnings of $7.02 per share.
On a U.S. dollar basis, the company expects consolidated net premiums to increase by approximately 7 to 9 percent.
Reinsurance Group said that Stanley Tulin, retired vice chairman and chief financial officer of AXA Financial Inc., was elected to the company's board of directors effective January 26, 2012. Tulin will serve as a member of the Audit and Compensation Committees. Further, the company announced that Stuart Greenbaum has retired from the board.
The company's board declared a regular quarterly dividend of $0.18, payable March 2, to shareholders of record as of February 10.
RGA closed Monday's trading at $55.97, down $0.17 or 0.30 percent on a volume of 357,384 shares.
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