Reinsurance Group of America reports a better quarter

Life reinsurance company Reinsurance Group of America reported net income for the second quarter of $110.7m, or $1.73 per diluted share, compared to $77.5m, or $1.20 per diluted share, in the same quarter last year. Operating income increased to $109.7m, or $1.71 per diluted share, from $84.6m, or $1.31 per diluted share in the year-ago quarter, a 31 percent increase on a per share basis. Second-quarter net premiums rose 12 percent, to $1,358.6m, from $1,207.6 million a year ago. Net investment income totaled $254.9m versus $274.9m the year before.

For the first half of 2008, net income totaled $142.2m or $2.22 per diluted share, compared to $153.7m, or $2.39 per diluted share, in the year-ago period. Operating income totaled $180.6m, or $2.82 per diluted share, compared to $166.7m, or $2.60 per diluted share in the prior-year period, an 8 percent increase on a per share basis. Consolidated net premiums were up 14 percent, to $2,656.6m.

A. Greig Woodring, president and chief executive officer, commented, “We reported a strong quarter with solid contributions from all our operating segments." On subprime, he said that RGA's "mortgage exposure remains modest at $256.8 million in book value, or less than 2 percent of total invested assets, with 66 percent rated “AA” or higher, including 26 percent in the “AAA” category. Approximately 13 percent of the subprime mortgage exposure, or $34.2 million, is rated below investment grade. We largely avoided investing in securities originated in the second half of 2005 and beyond, which we believe was a period of lessened underwriting quality. Unlike most companies in the financial services and life insurance sectors, our profits are primarily driven by mortality results. We do not stretch for investment yield and therefore our investment profile is conservative with 97 percent of our securities held in the investment grade categories.”

Woodring concluded, “Results were very strong during the quarter, offsetting in part the weaker first-quarter results. Our results so far this year reflect the short-term volatility that is a part of our business."

RGA has $2.2 trillion of life reinsurance in force, and assets of $22.4 billion. MetLife is the beneficial owner of 52 percent of RGA.