Market Overview

Reinsurance Group of America Reports Second-Quarter Results

Share:
  • Earnings per diluted share: $3.13 from net income, $3.10 from adjusted
    operating income*
  • ROE 20.2 percent and adjusted operating ROE* 9.9 percent for the
    trailing twelve months
  • Reported net premiums increased 5 percent in the second quarter
  • Quarterly shareholder dividend raised 20 percent to $0.60 per quarter

Reinsurance Group of America, Incorporated (NYSE:RGA), a leading global
provider of life reinsurance, reported second-quarter net income of
$204.4 million, or $3.13 per diluted share, compared with
$232.2 million, or $3.54 per diluted share, in the prior-year quarter.
Adjusted operating income* totaled $202.1 million, or $3.10 per diluted
share, compared with $193.7 million, or $2.95 per diluted share, the
year before. Net foreign currency fluctuations had a favorable effect of
$0.08 per diluted share on net income and $0.07 per diluted share on
adjusted operating income.

   
Quarterly Results Year-to-Date Results
($ in thousands, except per share data) 2018   2017 2018   2017
Net premiums $ 2,594,460 $ 2,480,451 $ 5,177,011 $ 4,846,147
Net income 204,374 232,190 304,604 377,702
Net income per diluted share 3.13 3.54 4.65 5.76
Adjusted operating income* 202,054 193,674 307,800 315,739
Adjusted operating income per diluted share* 3.10 2.95 4.70 4.81
Book value per share 135.09 123.60
Book value per share, excluding accumulated other comprehensive
income (AOCI)*
119.31 97.68
Total assets 59,766,497 58,138,072
 

* See ‘Use of Non-GAAP Financial Measures' below

 

In the second quarter, consolidated net premiums totaled $2.6 billion,
up 5 percent from last year's second quarter of $2.5 billion, with
favorable net foreign currency effects of $40.9 million. Excluding
spread-based businesses and the value of associated derivatives,
investment income increased slightly over year-ago levels. The average
investment yield, excluding spread businesses, was down 28 basis points
from the second quarter of 2017 to 4.32 percent, attributable to a lower
level of variable investment income. The average investment yield was 14
basis points lower than the first-quarter yield due primarily to a lower
level of variable investment income in the second quarter.

The effective tax rate this quarter was 17.4 percent on pre-tax income
and 19.2 percent on pre-tax adjusted operating income, lower than the
expected range of 21 to 24 percent largely due to the effective
settlement of an uncertain tax position during the quarter, and a
lower-than-expected provision for Global Intangible Low-Taxed Income.

Anna Manning, president and chief executive officer, commented, "On
balance, this was a good quarter as many of our key businesses reported
strong or in-line results. Our U.S. Individual Mortality business
bounced back this quarter as mortality experience was in line with our
expectations, while both EMEA and Asia performed very well overall.
However, we did have disappointing results from parts of our U.S. Group
business, and we will continue to take rate action in select areas as
appropriate. Consolidated premium growth of 5 percent reflected a tough
comparison with a year-ago quarter that included some catch-up premiums,
and our underlying momentum remains very good.

"After a strong first quarter, deployment into in-force and other
transactions was on the light side in terms of capital usage, but we did
close on a number of attractive transactions, and we remain optimistic
about the environment and our pipeline. As indicated at our recent
Investor Day, we were active in the quarter in regard to share
repurchases, deploying $150.0 million to repurchase approximately
991,000 shares. We ended the quarter with an excess capital position of
approximately $1.2 billion, down slightly from the previous quarter. We
continue to pursue a balanced approach to capital management through
deployment of capital into in-force and other attractive transactions,
share repurchases and shareholder dividends. Book value per share was
$135.09 including AOCI, and $119.31 excluding AOCI.

"Overall, we remain optimistic about our business prospects, and in
recognition of our ongoing earnings power, the board increased the
common stock dividend by 20 percent, marking the ninth straight year of
double-digit percentage increases."

SEGMENT RESULTS

U.S. and Latin America

Traditional

The U.S. and Latin America Traditional segment reported pre-tax income
of $72.0 million, compared with $90.6 million in the second quarter of
2017. Pre-tax adjusted operating income totaled $68.3 million for the
quarter, compared with $91.2 million in last year's second quarter.
Results for the current quarter reflected individual mortality
experience that was in line with expectations, while group experience
was unfavorable. Additionally, variable investment income was below our
average run rate in the quarter. The year-ago period reflected favorable
morality experience, offset by unfavorable group experience.

Traditional net premiums were up 3 percent from last year's second
quarter to $1,373.5 million.

Financial Solutions

The Asset-Intensive business reported pre-tax income of $60.8 million
compared with $87.0 million last year. Second-quarter pre-tax adjusted
operating income totaled $49.7 million compared with $49.9 million in
the prior-year period. Results were at the low end of our expected range
due to lower prepayment income.

The Financial Reinsurance business reported pre-tax income and pre-tax
adjusted operating income of $21.5 million, up from $20.0 million the
year before.

Canada

Traditional

The Canada Traditional segment reported pre-tax income of $21.8 million,
compared with $32.8 million the year before. Pre-tax adjusted operating
income declined to $22.2 million, from $31.2 million a year ago,
attributable to unfavorable individual mortality experience. Foreign
currency exchange rates had a favorable effect of $0.6 million on
pre-tax income and pre-tax adjusted operating income.

Reported net premiums totaled $260.8 million for the quarter, up 18
percent over $221.4 million in the year-ago period primarily due to new
business and in particular one larger transaction that drove the
increase. Net foreign currency fluctuations had a favorable effect of
$10.2 million on net premiums.

Financial Solutions

The Canada Financial Solutions business segment, which consists of
longevity and fee-based transactions, reported second-quarter pre-tax
income and pre-tax adjusted operating income of $3.5 million, compared
with $4.4 million a year ago, with both periods reflecting favorable
longevity experience. Net foreign currency fluctuations favorably
affected pre-tax income and pre-tax adjusted operating income by $0.1
million.

Europe, Middle East and Africa (EMEA)

Traditional

The EMEA Traditional segment reported pre-tax income and pre-tax
adjusted operating income of $6.5 million, compared with $11.4 million
in last year's second quarter. The current-period results reflected
unfavorable underwriting results in a couple of markets. Net foreign
currency fluctuations favorably affected pre-tax income and pre-tax
adjusted operating income by $1.0 million.

Reported net premiums increased 7 percent from the prior-year period to
$354.5 million attributable to new business. Foreign currency exchange
rates favorably affected net premiums by $18.7 million.

Financial Solutions

The EMEA Financial Solutions business segment, which consists of
longevity, asset-intensive and fee-based transactions, reported
second-quarter pre-tax income of $65.4 million, compared with $28.9
million in the year-ago period. Pre-tax adjusted operating income
totaled $59.5 million, compared with $26.5 million the year before, due
to very favorable longevity experience and continued growth in the
underlying business. Net foreign currency fluctuations favorably
affected pre-tax income by $3.3 million and pre-tax adjusted operating
income by $3.1 million.

Asia Pacific

Traditional

The Asia Pacific Traditional segment's pre-tax income and pre-tax
adjusted operating income increased to $58.9 million, up from $53.3
million in the prior-year period, due to favorable underwriting
experience in Asia, and a break-even result in Australia. Net foreign
currency fluctuations had an adverse effect of $0.1 million on pre-tax
income and pre-tax adjusted operating income.

Reported net premiums increased slightly to $538.8 million, reflecting a
continued strong level of premiums from ongoing positive momentum in
Asia offset by a reduction in Australia due to the effects of treaty
recaptures. The year-ago period included a significant level of catch-up
premiums due to timing of client reporting. Foreign currency exchange
rates had a favorable effect of $9.2 million on net premiums.

Financial Solutions

The Asia Pacific Financial Solutions business segment, which consists of
asset-intensive and fee-based transactions, reported second-quarter
pre-tax income of $4.1 million, compared with $5.4 million in the
prior-year period. Pre-tax adjusted operating income totaled $2.9
million, compared with $2.6 million in the prior-year quarter,
attributable to new business combined with slightly better-than-expected
results from a treaty that is in runoff. Net foreign currency
fluctuations had an immaterial effect on pre-tax income. Foreign
currency exchange rates had a favorable effect of $0.1 million on
pre-tax adjusted operating income.

Corporate and Other

The Corporate and Other segment's pre-tax losses totaled $67.3 million,
compared with pre-tax operating income of $5.5 million the year before.
Pre-tax adjusted operating losses increased to $42.9 million, from
year-ago pre-tax adjusted operating losses of $9.5 million primarily due
to higher project and regulatory compliance costs. The year-ago period
benefited from a $10.0 million pre-tax release of interest on
liabilities associated with uncertain tax positions that were deemed
settled.

Dividend Declaration

The board of directors increased the quarterly dividend 20 percent, to
$0.60 from $0.50, payable August 28 to shareholders of record as of
August 7.

Earnings Conference Call

A conference call to discuss second-quarter results will begin at 11
a.m. Eastern Time on Friday, July 27. Interested parties may access the
call by dialing 877-627-6544 (domestic) or 719-325-4771 (international).
The access code is 4115359. A live audio webcast of the conference call
will be available on the Company's Investor Relations website at www.rgare.com.
A replay of the conference call will be available at the same address
for 90 days following the conference call.

The Company has posted to its website a Quarterly Financial Supplement
that includes financial information for all segments as well as
information on its investment portfolio. Additionally, the Company posts
periodic reports, press releases and other useful information on its
Investor Relations website.

Use of Non-GAAP Financial Measures

RGA uses a non-GAAP financial measure called adjusted operating income
as a basis for analyzing financial results. This measure also serves as
a basis for establishing target levels and awards under RGA's management
incentive programs. Management believes that adjusted operating income,
on a pre-tax and after-tax basis, better measures the ongoing
profitability and underlying trends of the Company's continuing
operations, primarily because that measure excludes substantially all of
the effect of net investment related gains and losses, as well as
changes in the fair value of certain embedded derivatives and related
deferred acquisition costs. These items can be volatile, primarily due
to the credit market and interest rate environment, and are not
necessarily indicative of the performance of the Company's underlying
businesses. Additionally, adjusted operating income excludes any net
gain or loss from discontinued operations, the cumulative effect of any
accounting changes, tax reform and other items that management believes
are not indicative of the Company's ongoing operations. The definition
of adjusted operating income can vary by company and is not considered a
substitute for GAAP net income.

Book value per share excluding the impact of AOCI is a non-GAAP
financial measure that management believes is important in evaluating
the balance sheet in order to ignore the effects of unrealized amounts
primarily associated with mark-to-market adjustments on investments and
foreign currency translation.

Adjusted operating income per diluted share is a non-GAAP financial
measure calculated as adjusted operating income divided by weighted
average diluted shares outstanding. Adjusted operating return on equity
is a non-GAAP financial measure calculated as adjusted operating income
divided by average stockholders' equity excluding AOCI. Similar to
adjusted operating income, management believes these non-GAAP financial
measures better reflect the ongoing profitability and underlying trends
of the Company's continuing operations, they also serve as a basis for
establishing target levels and awards under RGA's management incentive
programs.

Reconciliations from GAAP net income, book value per share, net income
per diluted share and average stockholders' equity are provided in the
following tables. Additional financial information can be found in the
Quarterly Financial Supplement on RGA's Investor Relations website at www.rgare.com
in the "Financial Information" section.

About RGA

Reinsurance Group of America, Incorporated (RGA), a Fortune 500 company,
is among the leading global providers of life reinsurance and financial
solutions, with approximately $3.3 trillion of life reinsurance in force
and assets of $59.8 billion as of June 30, 2018. Founded in 1973, RGA
today is recognized for its deep technical expertise in risk and capital
management, innovative solutions, and commitment to serving its clients.
With headquarters in St. Louis, Missouri, and operations around the
world, RGA delivers expert solutions in individual life reinsurance,
individual living benefits reinsurance, group reinsurance, health
reinsurance, facultative underwriting, product development, and
financial solutions. To learn more about RGA and its businesses, visit
the Company's website at www.rgare.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including, among
others, statements relating to projections of the earnings, revenues,
income or loss, ratios, future financial performance, and growth
potential of Reinsurance Group of America, Incorporated and its
subsidiaries (which we refer to in the previous paragraphs as "we," "us"
or "our"). The words "intend," "expect," "project," "estimate,"
"predict," "anticipate," "should," "believe," and other similar
expressions also are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance and achievements could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements.

Numerous important factors could cause actual results and events to
differ materially from those expressed or implied by forward-looking
statements including, without limitation, (1) adverse capital and credit
market conditions and their impact on the Company's liquidity, access to
capital, and cost of capital, (2) the impairment of other financial
institutions and its effect on the Company's business, (3) requirements
to post collateral or make payments due to declines in market value of
assets subject to the Company's collateral arrangements, (4) the fact
that the determination of allowances and impairments taken on the
Company's investments is highly subjective, (5) adverse changes in
mortality, morbidity, lapsation, or claims experience, (6) changes in
the Company's financial strength and credit ratings and the effect of
such changes on the Company's future results of operations and financial
condition, (7) inadequate risk analysis and underwriting, (8) general
economic conditions or a prolonged economic downturn affecting the
demand for insurance and reinsurance in the Company's current and
planned markets, (9) the availability and cost of collateral necessary
for regulatory reserves and capital, (10) market or economic conditions
that adversely affect the value of the Company's investment securities
or result in the impairment of all or a portion of the value of certain
of the Company's investment securities, that in turn could affect
regulatory capital, (11) market or economic conditions that adversely
affect the Company's ability to make timely sales of investment
securities, (12) risks inherent in the Company's risk management and
investment strategy, including changes in investment portfolio yields
due to interest rate or credit quality changes, (13) fluctuations in
U.S. or foreign currency exchange rates, interest rates, or securities
and real estate markets, (14) adverse litigation or arbitration results,
(15) the adequacy of reserves, resources, and accurate information
relating to settlements, awards, and terminated and discontinued lines
of business, (16) the stability of and actions by governments and
economies in the markets in which the Company operates, including
ongoing uncertainties regarding the amount of United States sovereign
debt and the credit ratings thereof, (17) competitive factors and
competitors' responses to the Company's initiatives, (18) the success of
the Company's clients, (19) successful execution of the Company's entry
into new markets, (20) successful development and introduction of new
products and distribution opportunities, (21) the Company's ability to
successfully integrate acquired blocks of business and entities, (22)
action by regulators who have authority over the Company's reinsurance
operations in the jurisdictions in which it operates, (23) the Company's
dependence on third parties, including those insurance companies and
reinsurers to which the Company cedes some reinsurance, third-party
investment managers, and others, (24) the threat of natural disasters,
catastrophes, terrorist attacks, epidemics, or pandemics anywhere in the
world where the Company or its clients do business, (25) interruption or
failure of the Company's telecommunication, information technology, or
other operational systems, or the Company's failure to maintain adequate
security to protect the confidentiality or privacy of personal or
sensitive data stored on such systems, (26) changes in laws,
regulations, and accounting standards applicable to the Company, its
subsidiaries, or its business, (27) the benefits or burdens associated
with the Tax Cuts and Jobs Act of 2017 may be different than expected,
(28) the effect of the Company's status as an insurance holding company
and regulatory restrictions on its ability to pay principal of and
interest on its debt obligations and (29) other risks and uncertainties
described in this document and in the Company's other filings with the
Securities and Exchange Commission.

Forward-looking statements should be evaluated together with the many
risks and uncertainties that affect our business, including those
mentioned in this document and described in the periodic reports we file
with the Securities and Exchange Commission. These forward-looking
statements speak only as of the date on which they are made. We do not
undertake any obligations to update these forward-looking statements,
even though our situation may change in the future. We qualify all of
our forward-looking statements by these cautionary statements. For a
discussion of the risks and uncertainties that could cause actual
results to differ materially from those contained in the forward-looking
statements, you are advised to see Item 1A - "Risk Factors" in the 2017
Annual Report.

 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Consolidated Net Income to Adjusted Operating
Income

(Dollars in thousands, except per share data)

 
(Unaudited) Three Months Ended June 30,
2018   2017
 

Diluted
Earnings Per
Share

 

Diluted
Earnings Per
Share

Net income $ 204,374 $ 3.13 $ 232,190 $ 3.54
Reconciliation to adjusted operating income:
Capital (gains) losses, derivatives and other, included in
investment related gains/losses, net
29,195 0.45 (25,420 ) (0.40 )
Capital (gains) losses on funds withheld, included in investment
income, net of related expenses
(10,349 ) (0.16 ) (2,771 ) (0.04 )
Embedded derivatives:
Included in investment related gains/losses, net (19,062 ) (0.29 ) (10,054 ) (0.15 )
Included in interest credited 447 0.01 (4,771 ) (0.07 )
DAC offset, net 1,386 0.02 4,462 0.07
Investment (income) loss on unit-linked variable annuities (3,260 ) (0.05 ) 189
Interest credited on unit-linked variable annuities 3,260 0.05 (189 )
Non-investment derivatives 377 0.01 38
Effects of the Tax Cut and Jobs Act of 2017 (4,314 ) (0.07 )    
Adjusted operating income $ 202,054   $ 3.10   $ 193,674   $ 2.95  
 
(Unaudited) Six Months Ended June 30,
2018 2017

Diluted
Earnings Per
Share

Diluted
Earnings Per
Share

Net income $ 304,604 $ 4.65 $ 377,702 $ 5.76
Reconciliation to adjusted operating income:
Capital (gains) losses, derivatives and other, included in
investment related gains/losses, net
53,897 0.81 (5,167 ) (0.08 )
Capital (gains) losses on funds withheld, included in investment
income, net of related expenses
(2,218 ) (0.03 ) (3,196 ) (0.05 )
Embedded derivatives:
Included in investment related gains/losses, net (41,495 ) (0.63 ) (69,246 ) (1.06 )
Included in interest credited (22,118 ) (0.34 ) (22,944 ) (0.35 )
DAC offset, net 18,232 0.28 38,483 0.59
Investment (income) loss on unit-linked variable annuities (1,165 ) (0.02 ) (2,484 ) (0.04 )
Interest credited on unit-linked variable annuities 1,165 0.02 2,484 0.04
Non-investment derivatives 437 0.01 107
Effects of the Tax Cut and Jobs Act of 2017 (3,539 ) (0.05 )    
Adjusted operating income $ 307,800   $ 4.70   $ 315,739   $ 4.81  
 
 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Consolidated Effective Income Tax Rates

(Dollars in thousands)

 
(Unaudited) Three Months Ended June 30, 2018
Pre-tax Income   Income Taxes  

Effective Tax
Rate

GAAP income $ 247,288 $ 42,914 17.4 %
Reconciliation to adjusted operating income:
Capital (gains) losses, derivatives and other, included in
investment related gains/losses, net
37,221 8,026
Capital (gains) losses on funds withheld, included in investment
income, net of related expenses
(13,100 ) (2,751 )
Embedded derivatives:
Included in investment related gains/losses, net (24,129 ) (5,067 )
Included in interest credited 565 118
DAC offset, net 1,755 369
Investment (income) loss on unit-linked variable annuities (4,127 ) (867 )
Interest credited on unit-linked variable annuities 4,127 867
Non-investment derivatives 477 100
Effects of the Tax Cut and Jobs Act of 2017   4,314  
Adjusted operating income $ 250,077   $ 48,023   19.2 %
 
   

Reconciliation of Consolidated Income before Income Taxes to
Pre-tax Adjusted Operating Income

(Dollars in thousands)

 
(Unaudited) Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Income before income taxes $ 247,288 $ 339,315 $ 385,213 $ 547,159
Reconciliation to pre-tax adjusted operating income:
Capital (gains) losses, derivatives and other, included in
investment related gains/losses, net
37,221 (38,098 ) 68,864 (4,826 )
Capital (gains) losses on funds withheld, included in investment
income, net of related expenses
(13,100 ) (4,263 ) (2,808 ) (4,917 )
Embedded derivatives:
Included in investment related gains/losses, net (24,129 ) (15,468 ) (52,525 ) (106,533 )
Included in interest credited 565 (7,340 ) (27,998 ) (35,298 )
DAC offset, net 1,755 6,865 23,079 59,205
Investment (income) loss on unit-linked variable annuities (4,127 ) 291 (1,475 ) (3,822 )
Interest credited on unit-linked variable annuities 4,127 (291 ) 1,475 3,822
Non-investment derivatives 477   58   553   164  
Pre-tax adjusted operating income $ 250,077   $ 281,069   $ 394,378   $ 454,954  
 
 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Pre-tax Income to Pre-tax Adjusted Operating
Income

(Dollars in thousands)

 
(Unaudited) Three Months Ended June 30, 2018

Pre-tax income
(loss)

 

Capital
(gains) losses,
derivatives
and other, net

 

Change in
value of
embedded
derivatives, net

 

Pre-tax adjusted
operating
income (loss)

U.S. and Latin America:
Traditional $ 71,978 $ 41 $ (3,766 ) $ 68,253
Financial Solutions:
Asset-Intensive 60,840 12,548 (1) (23,649 ) (2) 49,739
Financial Reinsurance 21,548       21,548  
Total U.S. and Latin America 154,366 12,589 (27,415 ) 139,540
Canada Traditional 21,805 357 22,162
Canada Financial Solutions 3,544       3,544  
Total Canada 25,349 357 25,706
EMEA Traditional 6,468 6,468
EMEA Financial Solutions 65,369   (5,871 )   59,498  
Total EMEA 71,837 (5,871 ) 65,966
Asia Pacific Traditional 58,862 58,862
Asia Pacific Financial Solutions 4,138   (1,274 )   2,864  
Total Asia Pacific 63,000 (1,274 ) 61,726
Corporate and Other (67,264 ) 24,403     (42,861 )
Consolidated $ 247,288   $ 30,204   $ (27,415 ) $ 250,077  
(1) Asset-Intensive is net of $5,606 DAC offset.
(2) Asset-Intensive is net of $(3,851) DAC offset.
 
 
(Unaudited) Three Months Ended June 30, 2017
Pre-tax income  

Capital
(gains) losses,
derivatives
and other, net

 

Change in
value of
embedded
derivatives, net

 

Pre-tax adjusted
operating
income (loss)

U.S. and Latin America:
Traditional $ 90,594 $ (1 ) $ 654 $ 91,247
Financial Solutions:
Asset-Intensive 87,002 (24,642 ) (1) (12,469 ) (2) 49,891
Financial Reinsurance 19,983       19,983  
Total U.S. and Latin America 197,579 (24,643 ) (11,815 ) 161,121
Canada Traditional 32,836 (1,648 ) 31,188
Canada Financial Solutions 4,425       4,425  
Total Canada 37,261 (1,648 ) 35,613
EMEA Traditional 11,354 11,354
EMEA Financial Solutions 28,905   (2,374 )   26,531  
Total EMEA 40,259 (2,374 ) 37,885
Asia Pacific Traditional 53,322 53,322
Asia Pacific Financial Solutions 5,377   (2,750 )   2,627  
Total Asia Pacific 58,699 (2,750 ) 55,949
Corporate and Other 5,517   (15,016 )   (9,499 )
Consolidated $ 339,315   $ (46,431 ) $ (11,815 ) $ 281,069  
(1) Asset-Intensive is net of $(4,128) DAC offset.
(2) Asset-Intensive is net of $10,993 DAC offset.
 
 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Pre-tax Income to Pre-tax Adjusted Operating
Income

(Dollars in thousands)

 
(Unaudited) Six Months Ended June 30, 2018

Pre-tax income
(loss)

 

Capital
(gains) losses,
derivatives
and other, net

 

Change in
value of
embedded
derivatives, net

 

Pre-tax adjusted
operating
income (loss)

U.S. and Latin America:
Traditional $ 74,870 $ 51 $ (5,459 ) $ 69,462
Financial Solutions:
Asset-Intensive 108,102 54,179 (1) (62,880 ) (2) 99,401
Financial Reinsurance 41,707       41,707  
Total U.S. and Latin America 224,679 54,230 (68,339 ) 210,570
Canada Traditional 45,512 2,207 47,719
Canada Financial Solutions 6,735       6,735  
Total Canada 52,247 2,207 54,454
EMEA Traditional 21,889 (9 ) 21,880
EMEA Financial Solutions 104,533   (9,147 )   95,386  
Total EMEA 126,422 (9,156 ) 117,266
Asia Pacific Traditional 81,749 (5 ) 81,744
Asia Pacific Financial Solutions 8,159   (4,017 )   4,142  
Total Asia Pacific 89,908 (4,022 ) 85,886
Corporate and Other (108,043 ) 34,245     (73,798 )
Consolidated $ 385,213   $ 77,504   $ (68,339 ) $ 394,378  
(1) Asset-Intensive is net of $10,895 DAC offset.
(2) Asset-Intensive is net of $12,184 DAC offset.
 
 
(Unaudited) Six Months Ended June 30, 2017

Pre-tax income
(loss)

 

Capital
(gains) losses,
derivatives
and other, net

Change in
value of
embedded
derivatives, net

Pre-tax adjusted
operating
income (loss)

U.S. and Latin America:
Traditional $ 120,554 $ (1 ) $ (1,310 ) $ 119,243
Financial Solutions:
Asset-Intensive 172,772 34,828 (1) (106,072 ) (2) 101,528
Financial Reinsurance 37,799       37,799  
Total U.S. and Latin America 331,125 34,827 (107,382 ) 258,570
Canada Traditional 52,164 (4,210 ) 47,954
Canada Financial Solutions 8,017       8,017  
Total Canada 60,181 (4,210 ) 55,971
EMEA Traditional 25,330 (7 ) 25,323
EMEA Financial Solutions 60,823   (6,817 )   54,006  
Total EMEA 86,153 (6,824 ) 79,329
Asia Pacific Traditional 95,010 95,010
Asia Pacific Financial Solutions 11,249   (9,074 )   2,175  
Total Asia Pacific 106,259 (9,074 ) 97,185
Corporate and Other (36,559 ) 458     (36,101 )
Consolidated $ 547,159   $ 15,177   $ (107,382 ) $ 454,954  
(1) Asset-Intensive is net of $24,756 DAC offset.
(2) Asset-Intensive is net of $34,449 DAC offset.
 
   

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Per Share and Shares Data

(In thousands, except per share data)

 
(Unaudited) Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Earnings per share from net income:
Basic earnings per share $ 3.19 $ 3.60 $ 4.74 $ 5.86
Diluted earnings per share $ 3.13 $ 3.54 $ 4.65 $ 5.76
 
Diluted earnings per share from adjusted operating income $ 3.10 $ 2.95 $ 4.70 $ 4.81
Weighted average number of common and common equivalent shares
outstanding
65,250 65,608 65,555 65,605
 
(Unaudited) At June 30,
2018 2017
Treasury shares 15,466 14,646
Common shares outstanding 63,672 64,492
Book value per share outstanding $ 135.09 $ 123.60
Book value per share outstanding, before impact of AOCI $ 119.31 $ 97.68
Reconciliation of Book Value Per Share to Book Value Per Share
Excluding AOCI
 
(Unaudited) At June 30,
2018 2017
Book value per share outstanding $ 135.09 $ 123.60
Less effect of AOCI:
Accumulated currency translation adjustments (2.23 ) (2.34 )
Unrealized appreciation of securities 18.82 28.91
Pension and postretirement benefits (0.81 ) (0.65 )
Book value per share outstanding, before impact of AOCI $ 119.31   $ 97.68  
 
     

Reconciliation of Stockholders' Average Equity to Stockholders'
Average Equity Excluding AOCI

(Dollars in thousands)

 
(Unaudited)
Trailing Twelve Months: June 30, 2018
Stockholders' average equity $ 8,649,554
Less effect of AOCI:
Accumulated currency translation adjustments (114,338 )
Unrealized appreciation of securities 1,720,286
Pension and postretirement benefits (47,018 )
Stockholders' average equity, excluding AOCI $ 7,090,624  
 
       

Reconciliation of Trailing Twelve Months of Consolidated Net
Income to Adjusted Operating Income and

Related Return on Equity

(Dollars in thousands)

 
(Unaudited)

Return on
Equity

Trailing Twelve Months: Income
Net Income $ 1,749,083 20.2 %
Reconciliation to adjusted operating income:
Capital gains (losses), derivatives and other, net 60,754
Change in fair value of embedded derivatives (112,571 )
Deferred acquisition cost offset, net 50,131
Statutory tax rate changes and subsequent effects (1,042,650 )
Adjusted operating income $ 704,747   9.9 %
 
   

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollars in thousands)

 
(Unaudited) Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Revenues:
Net premiums $ 2,594,460 $ 2,480,451 $ 5,177,011 $ 4,846,147
Investment income, net of related expenses 528,061 518,538 1,044,390 1,032,902
Investment related gains (losses), net:
Other-than-temporary impairments on fixed maturity securities (3,350 ) (3,401 ) (3,350 ) (20,590 )
Other investment related gains (losses), net (7,222 ) 59,696   (7,692 ) 137,408  
Total investment related gains (losses), net (10,572 ) 56,295 (11,042 ) 116,818
Other revenue 83,959   73,992   159,256   142,149  
Total revenues 3,195,908   3,129,276   6,369,615   6,138,016  
Benefits and expenses:
Claims and other policy benefits 2,279,593 2,164,363 4,641,694 4,270,508
Interest credited 109,327 115,285 189,776 222,969
Policy acquisition costs and other insurance expenses 320,276 319,832 677,178 699,221
Other operating expenses 194,959 154,356 386,233 312,862
Interest expense 37,025 29,352 74,479 71,754
Collateral finance and securitization expense 7,440   6,773   15,042   13,543  
Total benefits and expenses 2,948,620   2,789,961   5,984,402   5,590,857  
Income before income taxes 247,288 339,315 385,213 547,159
Provision for income taxes 42,914   107,125   80,609   169,457  
Net income $ 204,374   $ 232,190   $ 304,604   $ 377,702  
 

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