Reinsurer Kicks Off Life and Annuity Earnings Season

An executive at Reinsurance Group of America Inc. said today that investment losses, and concerns about investment losses, nibbled at earnings in the fourth quarter.

RGA’s investment portfolio performed well, overall, but the company lost about $25 million on the sale of its investments in GE, and it lost about $15 million of the value of a $65 million stake in Pacific Gas and Electric Company, Todd Larson, the company’s chief financial officer, said during a teleconference with securities analysts.

(Related: RGA Sees Strong Competition for Annuity Reinsurance Deals)

Changes in the value of the embedded derivatives in some coinsurance arrangements were also a negative, Larson said.

Reserves on annuities with guaranteed minimum living benefits increased, “but that was offset pretty much by hedging derivatives,” Larson said.

Earnings

RGA held the conference call to go over its fourth-quarter earnings with securities analysts.

RGA is the first U.S. company in the life and annuity sector to post its results for the quarter.

RGA is reporting $110 million in net income for the fourth quarter of 2018 on $3.3 billion in revenue and $65 billion in assets, compared with $1.2 billion in net income on $3.2 billion in revenue and $61 billion in assets for the fourth quarter of 2017.

Operating income, which excludes the effects of a one-time, $962 million Tax Cuts and Jobs Act tax gain for the fourth quarter of 2017, increased to $222 million, from $171 million.

The U.S. and Latin America traditional reinsurance unit is reporting $10 million in income before income taxes on $1.7 billion in revenue, compared with a $114 million loss before income taxes on $1.6 billion in revenue for the year-earlier quarter.

Langhorne Re

RGA has formed a joint venture with RenaissanceRe Holdings Ltd. in an effort to handle jumbo reinsurance deals.

Anna Manning, RGA’s president, said Langhorne Re is still working on getting its first transaction.

“Speed isn’t our goal with Langhorne,” Manning said. “We are keeping full standards. We are going to get our deal done, but we are not going to cut corners to get a deal done. We want good deals that fit.”

— Read Reinsurer Hungry for Big Life and Annuity Blocks, on ThinkAdvisor.

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