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RGA: Many insurers shopping blocks of business

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Reinsurance Group of America (NYSE:RGA) saw higher-than-expected U.S. reinsurance claims during the third quarter, lingering low interest rates, and plenty of deal proposals.

A. Greig Woodring, the president of RGA, and other RGA executives talked about those trends today during a call with analysts.

RGA is reporting $144 million in net income for the third quarter on $1.9 billion in revenue, compared with $135 million in net income on $1.8 billion in revenue for the third quarter of 2011.

Individual and group disability insurance operations in Australia did worse than expected, and 

Premiums at the “U.S. traditional” division, which handles reinsurance of products other than annuities, saw premiums increase to $1 billion, from $971 million, and operating income before income taxes fall to $73 million, from $80 million.

The claims ratio rose to 87.7 percent, from 86.9 percent.

The U.S. business involves short-term contracts, and RGA should be able to adjust prices to reflect changes in claims, executives said.

Woodring noted that low interest rates have continued to hurt the performance of some types of products, such universal life (UL) products with secondary guarantees.

Many insurers would to have RGA or other companies take the UL products off their hands, but, because of the low rates, “it’s become a more difficult situation,” Woodring said.

Overall, Woodring said, “there are a lot of blocks of business for sale…. It’s a really active time.”

Most of the available deals are in the United States or Europe, not Asia, and many involved variable annuities, Woodring said.

“If we wanted to reinsurance big variable annuity (VA) blocks, we could do that in a heartbeat,” Woodring said. “We’re not doing any new variable annuity business right now.”

RGA does have a small block of VA business that’s doing well, but the company has concerns about the volatility of VA reinsurance, Woodring said.

Woodring’s reviews of other potential opportunities:

  • RGA is interested in life insurance deals and other mortality-linked deals.
  • The company is not interested in “asset business” deals, but it does like the predictability of the fixed annuity reinsurance market. 
  • RGA is pleased with the performance of the closed blocks of long-term care insurance (LTCI) business that it reinsurers.  In the LTCI market, “we’ve picked situations we want to be in,” Woodring said. “The experience has been just fine.” The company monitors the LTCI business closely, he added.

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