Despite a decline in income, performance set a record for adjusted earnings.
Global life and health reinsurance company Reinsurance Group of America (RGA) reported third-quarter results that included a drop in net income but a record performance in adjusted operating income.
The business recorded net income available to shareholders of $156 million, or $2.33 per diluted share, a decrease from $287 million, or $4.29 per diluted share, during the same time last year.
Adjusted operating income rose to $242 million, or $3.62 per diluted share, from $372 million, or $5.57 per diluted share, the previous year. Excluding significant factors, adjusted operating income increased to $410 million, or $6.13 per diluted share, a quarterly high.
Foreign currency exchange movements had a little impact, cutting net income by $0.03 per diluted share but increasing adjusted operating income by $0.02 per share when compared to the previous year.
The company recorded a return on equity (ROE) of 7.7% for the quarter, with an adjusted operational ROE of 13.8%. Excluding significant factors, RGA’s trailing 12-month adjusted operational ROE was 15.5%, setting a quarterly record.
RGA allocated $382 million in capital to in-force block transactions and reported a $4.6 billion, or 13.9%, rise in Value of In-force Business Margins in the first nine months of 2023.
In individual life markets, RGA intends to raise its per-life retention limit on January 1, 2025, the first modification since 2008. RGA attributes this choice to significant expansion and diversity in its business, which has increased its ability to manage profits volatility from claims. The change is consistent with the newly approved Long-Duration Targeted Improvements (LDTI) accounting standard, which spreads profits volatility over the business’s existence.
RGA expects this change to result in the recapturing of previously retroceded business beginning in 2025, which will have an unfavourable impact on third-quarter consolidated pre-tax adjusted operating income of $136 million. However, the change improves the Value of In-force Business Margins by $1.5 billion, which is expected to accrue throughout the business’s remaining life. RGA predicts a beneficial impact on run rates starting in 2025, with a gradual increase over time.
RGA also conducted its annual actuarial assumption review, which resulted in a $58 million negative impact on consolidated pre-tax adjusted operating income, owing primarily to revised lapse rate assumptions in its term business in India, but partially offset by mortality improvements in the United States and Canada.
This adjustment is expected to provide a $0.1 billion favorable impact on Value of In-force Business Margins over the life of the business.
RGA’s president and CEO, Tony Cheng (shown right), stated that the quarter’s results show outstanding performance across all segments. Cheng added that the Asia Traditional and Financial Solutions businesses delivered strong results, while the US Traditional and EMEA markets performed well.
“Our balance sheet remains healthy, and we completed the quarter with roughly $0.7 billion of extra capital. “Based on favourable business conditions and RGA’s global leadership position, we are optimistic about the future and expect to continue to deliver attractive financial results over time,” he stated.
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