Reinsurance Group of America (NYSE:RGA) Third Quarter 2024 Results

Reinsurance Group of America (NYSE:RGA) announced a record-breaking third quarter in 2024. CEO Tony Cheng reported a significant increase in adjusted operating earnings per share and a robust return on equity. The company has experienced substantial capital deployment and new business growth, particularly in Asia and the U.S. Traditional segment. Financial performance remained solid with pretax adjusted operating income and premium growth, while the company outlined optimistic projections for the upcoming quarter and beyond.

Key Takeaways

• Adjusted operating earnings per share reached a record $6.13.
• Return on equity over the past year stood at 15.5%.
• Capital deployment increased by 50% from 2023, totaling $1.4 billion.
• Significant growth in Asia, especially in Korea, China, and Hong Kong.
• U.S. premiums grew by 6.7%, with the effective tax rate at 23%.
• Anticipated recapture of retroceded business expected to generate $1.5 billion in long-term value.
• Book value per share increased to $151.79, a 10.4% compounded annual growth rate since early 2021.
• Value of in-force business margins increased by $4.6 billion or 13.9% year-to-date.

Company Outlook

RGA expressed optimism for continued growth and strong performance heading into Q4 2024. The company is confident in its strategic plans and growth opportunities, particularly in Asia.

Bearish Highlights

• The annual actuarial assumption review resulted in a $58 million unfavorable impact.
• Recapture of retroceded business is expected to initially impact income unfavorably by $136 million.

Bullish Highlights

• RGA reported a positive long-term cash flow contribution of $100 million from the actuarial assumption review.
• Favorable biometric experience observed over the past six quarters.
• Non-spread portfolio yield improved to 5.08%.

Misses

• Challenges faced in the Canadian Financial Solutions segment.

Q&A Highlights

• Excess capital remains robust, with internal and regulatory frameworks validated by third parties.
• Financial strength rating from S&P stands at AA-, competitive among peers.
• Retention rates had not been raised in 15 years, indicating a necessary adjustment.
• Management reaffirmed RGA's strong quarter and competitive position.

Conclusion

Reinsurance Group of America showcased a record quarter under CEO Tony Cheng, with adjusted operating earnings of $6.13 per share and a 15.5% return on equity. The company strategically deployed $1.4 billion in capital and experienced substantial growth, especially in Asia, indicating a positive forecast for the future.

InvestingPro Insights

InvestingPro data indicates RGA's strong performance aligns with market expectations, with a market capitalization of $14.2 billion and revenue of $21.38 billion for the last twelve months as of Q2 2024. RGA's revenue growth stands at 27.13%, supporting its optimistic outlook, particularly in Asia and the U.S. Traditional segment.

The P/E ratio of 16.52 suggests the stock might be undervalued given its strong performance and growth potential. RGA has increased dividends for 14 consecutive years, reflecting commitment to shareholder returns, with a dividend yield of 1.69% and 11.25% growth over the past year.

For more detailed insights, InvestingPro provides additional data for investors evaluating RGA's financial health and market position.

Q3 2024 Conference Call Transcript

Operator: Good morning, and welcome to the Reinsurance Group of America Third Quarter 2024 Earnings Conference Call.

Jeffrey Hopson: Thank you. I'm joined by RGA's leadership team. Please refer to the earnings release for important factors that could cause actual results to differ from expected results. Now I’ll turn the call over to Tony for his comments.

Tony Cheng: Good morning, everyone. We reported adjusted operating earnings excluding notable items of $6.13 per share, marking another record quarter for RGA. We deployed $1.4 billion of capital this year, over 50% higher than in 2023. Our internal measure, new business embedded value, exceeds last year's total. We have executed many exclusive transactions and have promising prospects in Asia and the U.S.

Overview of Global Performance

RGA achieved major wins in Asia across various markets including Korea, China, and Hong Kong. In the U.S. Traditional business, we closed a significant transaction with American National, enhancing our growth trajectory. In the UK, we continued to excel in both single retail annuities and pensions.

Financial Highlights

RGA reported $314 million in pretax adjusted operating income or $3.62 per share after tax. The value of in-force business margins increased by $4.6 billion year-to-date, largely driven by strong new business and effective balance sheet management actions. Premiums reported were up 3.2% quarter-over-quarter.

Closing Remarks

Our achievements this quarter validate our strategy and commitment to long-term shareholder value. Thank you for your continued support and confidence in RGA.

Operator: The conference has concluded. Thank you for attending today’s presentation.