RGA Posts Profit in Spite of COVID-19 Claims

Reinsurance Group of America Inc. says the impact of the COVID-19 pandemic is manageable, but material.

Executives at RGA (NYSE: RGA) spent much of 2020 saying that RGA was well-prepared to handle a pandemic like the COVID-19 pandemic.

RGA’s CEO Anna Manning emphasized Monday that RGA has been reporting profits in spite of facing “a significant level of COVID-19 mortality claim costs.”

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“While we expect our results to continue to be affected by COVID-19 in the short term, the RGA franchise has shown resilience and produced very good results in many respects,” Manning said, in a comment included in the earnings announcement. “I am proud of how our organization has performed in this challenging environment.”

Earnings

A reinsurer helps insurers manage insurance and annuity risk.

RGA is reporting $132 million in net income for the fourth quarter of 2020 on $4.1 billion in revenue, compared with $235 million on $3.8 billion in revenue for the fourth quarter of 2019.

RGA’s U.S. and Latin America business is reporting an $89 million adjusted operating income before income taxes for the latest quarter on $1.8 billion in revenue, compared with $22 million in pretax adjusted operating income on $1.8 billion in revenue for the year-earlier quarter.

Here’s what happened to the value of certain types of annuities RGA reinsures between the fourth quarter of 2019 and the latest quarter:

Deferred Fixed Annuities: $10.8 billion (down from $11.1 billion)
Indexed Annuities: $3.5 billion (down from $3.6 billion)
Variable Annuities: $3 billion (about the same)

The average rate on newly invested money was 2.79%. That was up from 2.53% in the third quarter but down from 3.7% in the fourth quarter of 2019.

COVID-19

RGA’s U.S. and Latin America business shouldered about $230 million in claim costs in the fourth quarter, and about $545 million in claim costs for all of 2020, as a result of individual life insurance claims related to COVID-19.

COVID-19 pushed the U.S. and Latin America loss ratio to 103% for the latest quarter, from 94.6% for the third quarter of 2020, and from 91.6% for the fourth quarter of 2019.

RGA’s full-year loss ratio increased to 101.2% for 2020, from 91.8% for 2019.

The company estimates that it incurs about $15 million to $25 million in mortality claim costs, before income taxes, for every 10,000 in additional U.S. COVID-19-related deaths.

RGA executives said they hope the new vaccines will reduce COVID-19 claim costs this year but are uncertain about the effects of the newly discovered COVID-19 variants.