Reinsurance Group of America Reports First-Quarter Results; Adverse Effect of High...

Reinsurance Group of America Reports First-Quarter Results; Adverse Effect of High Claims

ST. LOUIS--(Business Wire)--
Reinsurance Group of America, Incorporated (NYSE:RGA), a leading
global provider of life reinsurance, reported net income for the first
quarter of $31.5 million, or $0.49 per diluted share, compared to
$76.3 million, or $1.19 per diluted share, in the prior-year quarter.
RGA uses a non-GAAP financial measure called operating income as a
basis for analyzing financial results. The definition of operating
income and reconciliations to GAAP net income are provided in the
following tables. Operating income decreased to $71.0 million, or
$1.10 per diluted share, from $82.1 million, or $1.28 per diluted
share in the year-ago quarter, primarily reflecting adverse claims
experience in the U.S. and UK. First-quarter net premiums rose 15
percent, to $1,298.1 million, from $1,125.5 million a year ago. Net
investment income totaled $199.5 million versus $215.7 million the
year before.

The company's conference call, previously scheduled for April 22,
will be held tomorrow, April 18, at 9 a.m. Eastern Time. Telephone
numbers and webcast information can be found later in this press
release.

A. Greig Woodring, president and chief executive officer,
commented, "The level of claims in both the U.S. and UK, our two
largest mortality markets, was well above expectations, and as such,
is not expected to continue on an ongoing basis. As we have pointed
out in the past, our business is prone to periodic mortality
fluctuations; however, when measured over longer periods of time, our
mortality experience is stable.

"The U.S. segment reported pre-tax net income totaling
$15.3 million for the quarter versus $93.2 million the year before.
The current quarter includes a $44.9 million pre-tax loss, net of
deferred acquisition costs (DAC), due to a decline in the value of
various embedded derivatives, including $32.6 million associated with
modified coinsurance and funds withheld treaty structures. The change
in value of this embedded derivative is reflected in investment
related gains (losses) before DAC offset and represents a non-cash,
unrealized change due primarily to the impact of widening credit
spreads on the investment portfolios underlying certain of our funds
withheld annuity reinsurance treaties. Additionally, the impact of
changes in risk free rates used in the present value calculations of
embedded derivatives associated with equity-indexed annuity treaties
resulted in a $14.1 million loss after DAC offset. We consider these
items to be non-operating since they are unrealized and do not affect
current cash flows, crediting rates or spread performance on the
underlying treaties.

"Pre-tax operating income decreased to $64.4 million from $93.5
million the year before. The total claim count and the level of large
claims in our traditional mortality segment were higher than expected
by approximately $50.0 million, pretax. We have performed an extensive
review of the claims and the mix of claims is consistent with prior
periods, implying no obvious change in the expected ongoing
performance of the underlying business. Rather, we view the results as
random volatility that is an expected part of our business. Net
premiums were up 8 percent to $727.1 million from $671.0 million in
the prior-year quarter.

"Europe and South Africa results were adversely affected by poor
claims experience in the UK and South Africa, with pre-tax net income
decreasing to $6.0 million from $21.1 million a year ago. Pre-tax
operating income decreased to $5.3 million versus $21.3 million last
year, when we experienced favorable mortality. This represents a
continuation of some degree of adverse mortality that began in the
second half of 2007, effectively offsetting the positive mortality
experience from the first half of 2007. On an inception-to-date basis,
the business in this segment continues to perform within our pricing
expectations. Net premiums increased 13 percent to $189.2 million.
Foreign currency exchange fluctuations favorably affected reported net
premiums and pre-tax operating income by approximately $4.2 million
and $0.7 million, respectively, due to relatively strong British pound
and euro currencies.

"Our Canada operations reported a strong quarter, with pre-tax net
income of $23.7 million compared to $15.0 million a year ago. Pre-tax
operating income more than doubled to $28.2 million from $12.5 million
a year ago, due in part to favorable claims experience. Net premiums
increased 40 percent to $139.0 million from $99.5 million in the prior
year. Net premiums and pre-tax operating income for the first quarter
of 2008 were favorably affected by currency exchange rates relative to
the prior year by approximately $19.8 million and $4.7 million,
respectively, as the Canadian dollar has strengthened significantly
since last-year's first quarter.

"Asia Pacific also reported a strong quarter with pre-tax net
income of $18.6 million compared with $10.3 million in the year-ago
quarter. Pre-tax operating income totaled $18.0 million compared with
$10.4 million a year ago. Segment-wide claims experience was slightly
favorable. Net premium flow increased 29 percent, to $240.9 million
from $186.8 million. Foreign currency fluctuations favorably affected
net premiums and pre-tax operating income by approximately $22.4
million and $2.1 million, respectively, primarily due to the strength
of the Australian dollar and Japanese yen.

"Our balance sheet remains solid and our investment portfolio is
conservative. Investment-related writedowns were not significant
during the quarter at $5.2 million, pretax. Our subprime mortgage
exposure totaled $255.4 million in book value, or less than 2 percent
of total invested assets. 77 percent of those subprime-related
holdings are rated "AA" or higher, with 43 percent in the "AAA"
category. There are no subprime-related securities in the
non-investment grade category and we largely avoided investing in
securities originated in the second half of 2005 and beyond, which we
believe was a period of lessened underwriting quality.

"Net income for the quarter included $5.1 million in losses
associated with our discontinued accident and health business. We
settled the remaining largest disputed claim situation during the
quarter and are now facing no arbitrations or significant claims
disputes for the first time in years.

"Our international expansion is moving forward as planned and we
are benefiting from increased diversification of our business. During
the quarter, new business production outside of the U.S. exceeded the
U.S. production, an indication of that continued diversification."

Woodring concluded, "While we are disappointed with the poor
mortality results this quarter, prior to this quarter we had
experienced 10 consecutive quarters of expected or
better-than-expected mortality experience on a consolidated basis. We
are in a long-term business and when measured over longer periods of
time, mortality volatility is significantly reduced and mortality
rates are predictable. We expect to continue our long-term track
record of producing stable returns on our mortality business."

The company also announced that its board of directors declared a
regular quarterly dividend of $0.09, payable May 27 to shareholders of
record as of May 5.

A conference call to discuss the company's first-quarter results
will begin at 9 a.m. Eastern Time on Friday, April 18. Interested
parties may access the call by dialing 877-718-5092 (domestic) or
719-325-4760 (international). The access code is 3503284. A live audio
webcast of the conference call will be available on the company's
investor relations web page at www.rgare.com. A replay of the
conference call will be available at the same address for three months
following the conference call. A replay of the conference call will
also be available via telephone through April 29 at 888-203-1112
(domestic) or 719-457-0820, access code 3503284.

Reinsurance Group of America, Incorporated, through its various
operating subsidiaries, is among the largest global providers of life
reinsurance. Reinsurance Group of America, Incorporated has subsidiary
companies or offices in Australia, Barbados, Bermuda, Canada, China,
Germany, Hong Kong, India, Ireland, Japan, Mexico, Poland, South
Africa, South Korea, Spain, Taiwan, the United Kingdom and the United
States. Worldwide, the company has approximately $2.2 trillion of life
reinsurance in force, and assets of $21.8 billion. MetLife, Inc. is
the beneficial owner of approximately 52 percent of RGA's outstanding
shares.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, among others, statements relating to projections of the
earnings, revenues, income or loss, future financial performance and
growth potential of Reinsurance Group of America, Incorporated and its
subsidiaries (which we refer to in the following paragraphs as "we,"
"us" or "our"). The words "intend," "expect," "project," "estimate,"
"predict," "anticipate," "should," "believe," and other similar
expressions also are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance and achievements could differ
materially from those set forth in, contemplated by or underlying the
forward-looking statements.

Numerous important factors could cause actual results and events
to differ materially from those expressed or implied by
forward-looking statements including, without limitation, (1) adverse
changes in mortality, morbidity, lapsation or claims experience, (2)
changes in our financial strength and credit ratings or those of
MetLife, Inc. ("MetLife"), the beneficial owner of a majority of our
common shares, or its subsidiaries, and the effect of such changes on
our future results of operations and financial condition, (3)
inadequate risk analysis and underwriting, (4) general economic
conditions or a prolonged economic downturn affecting the demand for
insurance and reinsurance in our current and planned markets, (5) the
availability and cost of collateral necessary for regulatory reserves
and capital, (6) market or economic conditions that adversely affect
our ability to make timely sales of investment securities, (7) risks
inherent in our risk management and investment strategy, including
changes in investment portfolio yields due to interest rate or credit
quality changes, (8) fluctuations in U.S. or foreign currency exchange
rates, interest rates, or securities and real estate markets,
(9) adverse litigation or arbitration results, (10) the adequacy of
reserves, resources and accurate information relating to settlements,
awards and terminated and discontinued lines of business, (11) the
stability of and actions by governments and economies in the markets
in which we operate, (12) competitive factors and competitors'
responses to our initiatives, (13) the success of our clients, (14)
successful execution of our entry into new markets, (15) successful
development and introduction of new products and distribution
opportunities, (16) our ability to successfully integrate and operate
reinsurance business that we acquire, (17) regulatory action that may
be taken by state Departments of Insurance with respect to us,
MetLife, or its subsidiaries, (18) our dependence on third parties,
including those insurance companies and reinsurers to which we cede
some reinsurance, third-party investment managers and others, (19) the
threat of natural disasters, catastrophes, terrorist attacks,
epidemics or pandemics anywhere in the world where we or our clients
do business, (20) changes in laws, regulations, and accounting
standards applicable to us, our subsidiaries, or our business, (21)
the effect of our status as an insurance holding company and
regulatory restrictions on our ability to pay principal of and
interest on our debt obligations, and (22) other risks and
uncertainties described in this document and in our other filings with
the Securities and Exchange Commission.

Forward-looking statements should be evaluated together with the
many risks and uncertainties that affect our business, including those
mentioned in this document and described in the periodic reports we
file with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date on which they are
made. We do not undertake any obligations to update these
forward-looking statements, even though our situation may change in
the future. We qualify all of our forward-looking statements by these
cautionary statements.

Operating Income

RGA uses a non-GAAP financial measure called operating income as a
basis for analyzing financial results. This measure also serves as a
basis for establishing target levels and awards under RGA's management
incentive programs. Management believes that operating income, on a
pre-tax and after-tax basis, better measures the ongoing profitability
and underlying trends of the company's continuing operations,
primarily because that measure excludes the effect of net investment
related gains and losses, as well as changes in the fair value of
certain embedded derivatives and related deferred acquisition costs.
These items tend to be highly variable, primarily due to the credit
market and interest rate environment and are not necessarily
indicative of the performance of the company's underlying businesses.
Additionally, operating income excludes any net gain or loss from
discontinued operations and the cumulative effect of any accounting
changes, which management believes are not indicative of the company's
ongoing operations. The definition of operating income can vary by
company and is not considered a substitute for GAAP net income.

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Reconciliation of Net Income From Continuing Operations
to Operating Income
(Dollars in thousands)

(Unaudited) Three Months Ended
March 31,
-------------------

2008 2007
---------- --------

GAAP net income-continuing operations $ 36,589 $76,937
Capital losses and other, net 624 5,654
Embedded Derivatives:
Included in investment related (gains) losses,
net 100,633 (1,845)
Included in interest credited/policy
acquisition costs and other insurance
expenses, net 34,057 --
DAC offset, net (100,946) 1,338
-------------------

Operating income $ 70,957 $82,084
*T

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Reconciliation of Pre-tax Net Income From Continuing Operations
to Pre-tax Operating Income
(Dollars in thousands)

(Unaudited) Three Months Ended March 31, 2008

Capital Change in
Pre-tax (gains) value of Pre-tax
net losses embedded operating
income and other, derivatives, income
(loss) net net (loss)
--------- ---------- ------------ ---------
U.S. Operations:
Traditional $ 54,448 $ 2,508 $ -- $ 56,956
Asset Intensive (41,102) 1,746(1) 44,903(2) 5,547
Financial Reinsurance 1,939 1 -- 1,940
-------------------------------------------
Total U.S. 15,285 4,255 44,903 64,443
Canada Operations 23,671 4,507 -- 28,178
Europe & South Africa 6,043 (745) -- 5,298
Asia Pacific Operations 18,563 (514) -- 18,049
Corporate and Other (6,874) 371 -- (6,503)
-------------------------------------------
Consolidated $ 56,688 $ 7,874 $44,903 $109,465
===========================================

(1) Asset Intensive is net of $7,012 DAC offset.
(2) Asset Intensive is net of DAC offsets of $(162,313).

(Unaudited) Three Months Ended March 31, 2007

Capital Change in
Pre-tax (gains) value of Pre-tax
net losses embedded operating
income and other, derivatives, income
(loss) net net (loss)
--------- ---------- ------------ ---------
U.S. Operations:
Traditional $ 86,011 $ 338 $ -- $ 86,349
Asset Intensive 4,462 734(1) (731)(2) 4,465
Financial Reinsurance 2,704 -- -- 2,704
-------------------------------------------
Total U.S. 93,177 1,072 (731) 93,518
Canada Operations 15,034 (2,526) -- 12,508
Europe & South Africa 21,124 224 -- 21,348
Asia Pacific Operations 10,332 71 -- 10,403
Corporate & Other (20,437) 9,852 -- (10,585)
-------------------------------------------
Consolidated $119,230 $ 8,693 $ (731) $127,192
===========================================

(1) Asset Intensive is net of $(49) DAC offset.
(2) Asset Intensive is net of DAC offsets of $2,107.
*T

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
----------- -----------

Revenues:
Net premiums $1,298,065 $1,125,450
Investment income, net of related expenses 199,526 215,743
Investment related losses, net (155,260) (5,646)
Other revenues 17,936 19,102
-----------------------
Total revenues 1,360,267 1,354,649

Benefits and expenses:
Claims and other policy benefits 1,119,512 902,810
Interest credited 73,897 61,066
Policy acquisition costs and other insurance
expenses 16,262 182,981
Other operating expenses 63,340 55,422
Interest expense 23,094 20,453
Collateral finance facilities expense 7,474 12,687
-----------------------
Total benefits and expenses 1,303,579 1,235,419
-----------------------

Income from continuing operations before
income taxes 56,688 119,230

Provision for income taxes 20,099 42,293
-----------------------

Income from continuing operations 36,589 76,937

Discontinued operations:
Loss from discontinued accident and
health operations, net of income taxes (5,084) (685)
-----------------------

Net income $ 31,505 $ 76,252
=======================
*T

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
---------- ---------

Earnings per share from continuing operations:
Basic earnings per share $ 0.59 $ 1.25
Diluted earnings per share $ 0.57 $ 1.20

Diluted earnings per share from operating income $ 1.10 $ 1.28

Earnings per share from net income:
Basic earnings per share $ 0.51 $ 1.24
Diluted earnings per share $ 0.49 $ 1.19

Weighted average number of common and common
equivalent shares outstanding 64,230 63,895
*T

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary

At or For the
Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
------------ ------------

Gross life reinsurance in force (in
billions)
U.S. $ 1,247.0 $ 1,178.5
Canada $ 221.2 $ 164.1
Europe & South Africa $ 383.0 $ 349.7
Asia Pacific $ 351.6 $ 273.1

Gross life reinsurance written (in billions)
U.S. $ 34.7 $ 40.2
Canada $ 12.9 $ 9.8
Europe & South Africa $ 18.5 $ 8.1
Asia Pacific $ 10.3 $ 3.7

Balance sheet information (in millions,
except share and per share figures)

Consolidated cash and invested assets $ 16,629.9 $ 15,523.8
Invested asset book yield - trailing
three months excluding funds withheld 6.06% 5.93%

Investment portfolio mix
Cash and short-term investments 2.11% 3.31%
Fixed maturity securities 56.45% 56.30%
Mortgage loans 4.89% 4.84%
Policy loans 6.25% 6.54%
Funds withheld at interest 27.97% 27.46%
Other invested assets 2.33% 1.55%

Collateral finance facilities $ 850.2 $ 850.4
Short-term debt $ -- $ 29.5
Long-term debt $ 925.9 $ 944.1
Company-obligated mandatorily redeemable
preferred securities of subsidiary $ 158.9 $ 158.7

Total stockholders' equity $ 3,058.9 $ 2,889.3
Less: Accumulated other comprehensive income
"AOCI" (a) 362.7 452.1
----------- -----------
Total stockholders' equity, before impact of
AOCI (a) $ 2,696.2 $ 2,437.2

Treasury shares 893,575 1,403,514
Common shares outstanding 62,234,698 61,724,759
Book value per share outstanding $ 49.15 $ 46.81
Book value per share outstanding, before
impact of AOCI (a) $ 43.32 $ 39.49

(a) Book value per share outstanding and total stockholders' equity,
before impact of AOCI, are non-GAAP financial measures that
management believes are important in evaluating the balance sheet in
order to ignore the effects of unrealized amounts primarily
associated with mark-to-market adjustments on investments and foreign
currency translation.
*T

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. Operations
(Dollars in thousands)

(Unaudited) Three Months Ended March 31, 2008
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
----------- ---------- ----------- ----------
Net premiums $725,393 $ 1,663 $ -- $ 727,056
Investment income, net
of related expenses 97,431 25,031 40 122,502
Investment related
losses, net (2,508) (149,554) (1) (152,063)
Other revenues 60 11,495 2,744 14,299
---------------------------------------------
Total revenues 820,376 (111,365) 2,783 711,794
Benefits and expenses:
Claims and other policy
benefits 651,850 185 -- 652,035
Interest credited 14,790 58,968 -- 73,758
Policy acquisition costs
and other insurance
expenses 86,050 (131,750) 198 (45,502)
Other operating expenses 13,238 2,334 646 16,218
---------------------------------------------
Total benefits and
expenses 765,928 (70,263) 844 696,509
Income (loss) before
income taxes $ 54,448 $ (41,102) $1,939 $ 15,285
=========== ========== =========== ==========

(Unaudited) Three Months Ended March 31, 2007
Asset- Financial Total
Revenues: Traditional Intensive Reinsurance U.S.
----------- ---------- ----------- ----------
Net premiums $669,419 $ 1,626 $ -- $ 671,045
Investment income, net
of related expenses 84,928 67,952 20 152,900
Investment related gains
(losses), net (338) 2,055 -- 1,717
Other revenues 106 7,424 5,889 13,419
---------------------------------------------
Total revenues 754,115 79,057 5,909 839,081
Benefits and expenses:
Claims and other policy
benefits 542,586 4,523 1 547,110
Interest credited 14,270 46,158 -- 60,428
Policy acquisition costs
and other insurance
expenses 99,380 22,293 2,194 123,867
Other operating expenses 11,868 1,621 1,010 14,499
---------------------------------------------
Total benefits and
expenses 668,104 74,595 3,205 745,904
Income before income
taxes $ 86,011 $ 4,462 $2,704 $ 93,177
=========== ========== =========== ==========
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Canada Operations
(Dollars in thousands)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
--------- ---------
Revenues:
Net premiums $138,992 $ 99,492
Investment income, net of related expenses 36,033 26,432
Investment related gains (losses), net (4,085) 2,784
Other revenues 13 86
--------- ---------
Total revenues 170,953 128,794

Benefits and expenses:
Claims and other policy benefits 115,271 91,148
Interest credited 139 186
Policy acquisition costs and other insurance
expenses 26,426 18,476
Other operating expenses 5,446 3,950
--------- ---------
Total benefits and expenses 147,282 113,760

Income before income taxes $ 23,671 $ 15,034
========= =========

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Europe & South Africa
(Dollars in thousands)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
--------- ---------
Revenues:
Net premiums $189,196 $167,796
Investment income, net of related expenses 7,551 5,774
Investment related gains (losses), net 745 (224)
Other revenues 60 131
--------- ---------
Total revenues 197,552 173,477

Benefits and expenses:
Claims and other policy benefits 158,535 114,154
Interest credited - 452
Policy acquisition costs and other insurance
expenses 17,230 26,060
Other operating expenses 15,744 11,687
--------- ---------
Total benefits and expenses 191,509 152,353

Income before income taxes $ 6,043 $ 21,124
========= =========

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Asia Pacific
(Dollars in thousands)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
--------- ---------
Revenues:
Net premiums $240,935 $186,838
Investment income, net of related expenses 11,414 8,663
Investment related gains (losses), net 514 (71)
Other revenues 2,552 1,827
--------- ---------
Total revenues 255,415 197,257

Benefits and expenses:
Claims and other policy benefits 193,669 150,483
Policy acquisition costs and other insurance
expenses 28,081 24,614
Other operating expenses 15,102 11,828
--------- ---------
Total benefits and expenses 236,852 186,925

Income before income taxes $ 18,563 $ 10,332
========= =========

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Corporate and Other
(Dollars in thousands)

Three Months Ended
(Unaudited) March 31,
----------------------------------------------------------------------
2008 2007
--------- ---------
Revenues:
Net premiums $ 1,886 $ 279
Investment income, net of related expenses 22,026 21,974
Investment related losses, net (371) (9,852)
Other revenues 1,012 3,639
--------- ---------
Total revenues 24,553 16,040

Benefits and expenses:
Claims and other policy benefits 2 (85)
Interest credited -- --
Policy acquisition costs and other insurance
expenses (9,973) (10,036)
Other operating expenses 10,830 13,458
Interest expense 23,094 20,453
Collateral finance facilities expense 7,474 12,687
--------- ---------
Total benefits and expenses 31,427 36,477

Income (loss) before income taxes $ (6,874) $(20,437)
========= =========
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Reinsurance Group of America, Incorporated
Jack B. Lay, 636-736-7000
Senior Executive Vice President
and Chief Financial Officer

Copyright Business Wire 2008