UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 3, 2003
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
MISSOURI 1-11848 43-1627032
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification Number)
1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (636) 736-7000
ITEM 5. OTHER EVENTS
This Current Report on Form 8-K is being filed by Reinsurance Group of
America, Incorporated ("RGA") solely to provide (i) certain historical financial
results of RGA, by segment and sub-segment, (ii) certain historical financial
information concerning RGA's consolidated stockholders' equity, (iii) certain
additional third quarter 2003 information and (iv) certain supplemental data.
The financial information provided below should be read in conjunction with and
is qualified in its entirety by reference to "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes contained in RGA's Annual Report on
Form 10-K for the year ended December 31, 2002, Quarterly Reports on Form 10-Q
for the quarters ended March 31, and June 30, 2003 and Current Report on Form
8-K which RGA filed with the Securities and Exchange Commission on August 25,
2003.
KEY COMPONENTS OF PRE-TAX OPERATING EARNINGS AND PRE-TAX OPERATING EARNINGS PER
SHARE
RGA announces its results using a non-GAAP financial measure RGA calls
"operating earnings," which RGA has previously referred to as "operating
income." Management believes that operating earnings, on a pre-tax and after-tax
basis, better measures the ongoing profitability of RGA's continuing operations
by excluding from operating income the effect of net realized capital gains and
losses and related deferred acquisition costs, which tend to be highly variable,
any net gain or loss from discontinued operations and specified other items,
which management believes are not indicative of ongoing operations. However, the
definition of operating earnings can vary by company and is not considered a
substitute in all applications for GAAP net income.
The following are the key components of RGA's consolidated pre-tax
operating earnings for the years ended December 31, 1998, 1999, 2000, 2001 and
2002 and for the nine-months ended September 30, 2002 and 2003 (amounts in
millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- -----------------
1998 1999 2000 2001 2002 2002 2003
------ ----- ------ ----- ------ ------ ------
Income from continuing operations
before income taxes............. $138.8 $92.1 $175.1 $66.2 $194.0 $144.3 $179.9
Realized investment (gains) losses. (3.1) 75.3 28.6 68.4 14.6 10.9 (0.8)
Goodwill writeoff.................. - - - - 0.8 0.8 -
Deferred acquisition cost offset .. - - - 1.3 (0.8) (0.8) (0.1)
The following are the key components of pre-tax operating earnings for
RGA's total U.S. Operations segment for the years ended December 31, 1998, 1999,
2000, 2001 and 2002 and for the nine-months ended September 30, 2002 and 2003
(amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ------------------
1998 1999 2000 2001 2002 2002 2003
------ ----- ------ ------ ------ ------ ------
Income from continuing operations
before income taxes.............. $127.8 $72.3 $167.4 $124.6 $175.8 $132.3 $143.7
Realized investment (gains) losses.. (2.4) 83.2 13.3 29.6 10.4 5.3 9.1
Deferred acquisition cost offset.... - - - 1.3 (0.8) (0.8) (0.1)
The following are the key components of pre-tax operating earnings for
RGA's U.S. traditional operations for the years ended December 31, 1998, 1999,
2000, 2001 and 2002 and for the nine-months ended September 30, 2002 and 2003
(amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ------------------
1998 1999 2000 2001 2002 2002 2003
------ ----- ------ ----- ------ ------ ------
Income from continuing operations
before income taxes............. $114.0 $109.8 $148.1 $101.1 $152.2 $120.1 $124.0
Realized investment (gains) losses. (1.7) 17.4 12.3 30.8 6.3 1.0 7.0
The following are the key components of pre-tax operating earnings for
RGA's U.S. asset-intensive operations for the years ended December 31, 1998,
1999, 2000, 2001 and 2002 and for the nine-months ended September 30, 2002 and
2003 (amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ----------------------
1998 1999 2000 2001 2002 2002 2003
------ ----- ------ ------ ----- ------ ------
Income (loss) from continuing
operations before income taxes.... $9.1 $(41.2) $11.7 $15.0 $14.3 $6.8 $10.8
Realized investment (gains) losses... (0.7) 65.8 1.0 (1.2) 4.1 4.3 2.1
Deferred acquisition cost offset..... - - - 1.3 (0.8) (0.8) (0.1)
The following are the key components of pre-tax operating earnings for
RGA's U.S. financial reinsurance operations for the years ended December 31,
1998, 1999, 2000, 2001 and 2002 and for the nine-months ended September 30, 2002
and 2003 (amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ----------------------
1998 1999 2000 2001 2002 2002 2003
------ ---- ---- ---- ---- ---- ----
Income from continuing operations
before income taxes.............. $4.7 $3.7 $7.6 $8.5 $9.3 $5.4 $8.9
The following are the key components of pre-tax operating earnings for
RGA's Canadian operations for the years ended December 31, 1998, 1999, 2000,
2001 and 2002 and for the nine-months ended September 30, 2002 and 2003 (amounts
in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -----------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ----- ----- ----- ----- ------
Income from continuing operations
before income taxes.............. $22.8 $37.9 $39.9 $51.5 $38.6 $27.5 $43.6
Realized investment (gains) losses.. (0.7) (5.9) 1.2 (9.1) 0.2 - (12.2)
The following are the key components of pre-tax operating earnings for
RGA's Asia-Pacific operations for the years ended December 31, 1998, 1999, 2000,
2001 and 2002 and for the nine-months ended September 30, 2002 and 2003 (amounts
in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- ------------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ---- ---- ---- ---- -----
Income (loss) from continuing
operations before income taxes... $(3.1) $(6.8) $1.2 $3.0 $6.3 $5.5 $12.4
Realized investment (gains) losses.. - - 0.2 (0.1) 0.3 0.1 0.6
The following are the key components of pre-tax operating earnings for
RGA's Europe and South Africa operations for the years ended December 31, 1998,
1999, 2000, 2001 and 2002 and for the nine-months ended September 30, 2002 and
2003 (amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ----------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ----- ----- ---- ---- ----
Income (loss) from continuing
operations before income taxes... $(5.0) $(3.8) $(2.4) $(1.0) $3.4 $3.2 $9.4
Realized investment (gains) losses.. (0.1) (0.1) (0.3) 0.2 (0.9) 0.3 (1.8)
The following are the key components of pre-tax operating earnings for
RGA's Corporate and Other operations for the years ended December 31, 1998,
1999, 2000, 2001 and 2002 and for the nine-months ended September 30, 2002 and
2003 (amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- -----------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ------ ------- ------ ------ ------
Loss from continuing operations
before income taxes.............. $(3.7) $(7.5) $(31.0) $(111.9) $(30.1) $(24.2) $(29.2)
Realized investment (gains) losses.. 0.1 (1.9) 14.2 47.8 4.6 5.2 3.5
Goodwill writeoff................... - - - - 0.8 0.8 -
The following are the key components of pre-tax operating earnings for
RGA's total Other International operations segment for the years ended December
31, 1998, 1999, 2000, 2001 and 2002 and for the nine-months ended September 30,
2002 and 2003 (amounts in millions):
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ---------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ------ ---- ---- ---- -----
Income (loss) from continuing
operations before income taxes... $(8.1) $(10.6) $(1.2) $2.0 $9.7 $8.7 $21.8
Realized investment (gains) losses.. (0.1) (0.1) (0.1) 0.1 (0.6) 0.4 (1.2)
The following are the key components of RGA's consolidated diluted
operating earnings per share for the years ended December 31, 1998, 1999, 2000,
2001 and 2002 and for the nine-months ended September 30, 2002 and 2003:
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- ------------------------
1998 1999 2000 2001 2002 2002 2003
----- ----- ------ ------ ------ ------ ------
Diluted earnings per share.......... $1.48 $0.88 $1.56 $0.66 $2.47 $1.80 $2.34
Realized investment (gains) losses.. (0.04) 1.07 0.43 0.93 0.22 0.17 (0.02)
Goodwill writeoff................... - - - - 0.01 0.01 -
Deferred acquisition cost offset.... - - - 0.02 (0.01) (0.01) -
Loss from discontinued operations... 0.60 0.26 0.56 0.14 0.11 0.07 0.04
For additional financial information about RGA's operational segments, see
Note 17 to RGA's financial statements for the year ended December 31, 2002
contained in the Current Report on Form 8-K filed by RGA with the Securities and
Exchange Commission on August 25, 2003.
EFFECTS OF SFAS 115 ON TOTAL STOCKHOLDERS' EQUITY
RGA has traditionally evaluated its stockholders' equity position excluding
the impact of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("SFAS 115"). This is
considered a non-GAAP measure. RGA believes it is important to evaluate its
stockholders' equity position to exclude the effect of the net unrealized gains
or losses required by SFAS 115 since the net unrealized gains or losses
primarily relate to changes in interest rates and credit spreads on investment
securities that are not permanent and can fluctuate significantly from period to
period.
At December 31, 1998, 1999, 2000, 2001 and 2002, RGA's total stockholders'
equity was $748.5 million, $732.9 million, $862.9 million, $1.0 billion and $1.2
billion, respectively. At September 30, 2002 and 2003, RGA's total stockholders'
equity was $1.2 billion and $1.4 billion, respectively.
At December 31, 1998, 1999, 2000, 2001 and 2002, the effects of SFAS 115 on
our total stockholders' equity was $45.3 million, $(131.3) million, $(42.0)
million, $0 and $102.8 million, respectively. At September 30, 2002 and 2003,
the effects of SFAS 115 on our total stockholders' equity was $90.2 million and
$173.3 million, respectively.
CERTAIN ADDITIONAL THIRD QUARTER INFORMATION
On October 23, 2003, RGA issued a press release announcing its earnings for
the three and nine months ended September 30, 2003 and providing certain
additional information. Tables showing RGA's condensed consolidated statements
of income and the results of operations for each of the U.S., Canadian, other
international and corporate and other segments have been included in this
Current Report. See "Selected Financial Data" below. The following is additional
information related to RGA's third quarter results:
Information related to net premiums and income (loss) from continuing
operations before income taxes for each reportable segment are summarized below
(amounts in $ millions):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2002 2003 2002 2003
------ ------ -------- --------
NET PREMIUMS:
U.S.................................................. $320.3 $369.3 $1,005.5 $1,118.6
Canada............................................... 41.9 53.1 132.6 153.7
Other International.................................. 95.0 149.8 252.2 425.7
Corporate and Other.................................. (1.4) 0.8 (0.2) 2.8
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES:
U.S.................................................. $55.3 $45.3 $132.3 $143.7
Canada............................................... 8.7 19.5 27.5 43.6
Other International.................................. 4.1 9.6 8.7 21.8
Corporate and Other.................................. (14.0) (11.5) (24.2) (29.2)
For the nine months ended or at September 30, 2003, approximately 34% of
our premiums, 34% of our income from continuing operations before income taxes,
and 32% of our fixed maturity securities available for sale were denominated in
currencies other than the U.S. dollar.
Mortality experience for the quarter ended September 30, 2003 was
approximately $6.0 million unfavorable on a pre-tax basis when compared with
expectations. This differs from the first two quarters of 2003 in which RGA
experienced positive mortality variances. Mortality experience does fluctuate
from quarter to quarter. For 2003, on a year-to-date basis, U.S. mortality
experience remained favorable. In the third quarter of 2003, RGA also reflected
a $3.0 million, pretax, reduction in the reserves associated with the terrorist
attacks on September 11, 2001.
At September 30, 2003, RGA had assets of $10.5 billion, stockholders'
equity of $1.4 billion and assumed reinsurance in force of $893 billion.
The following is a summary of RGA's unaudited consolidated capitalization
as of September 30, 2003 (dollars in thousands):
LONG-TERM DEBT:
Borrowings under $175 million credit agreement.............................. $50,000
Other net borrowings........................................................ 44,650
7.25% senior notes due 2006................................................. 99,641
6.75% senior notes due 2011................................................. 199,872
-------
Total long-term debt...................................................... 394,163
5.75% Cumulative Trust Preferred Securities(2).............................. 158,262
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 10,000,000 shares
authorized; no shares issued or outstanding............................... --
Common stock, par value $.01 per share; 75,000,000 shares
authorized, 51,053,273 shares issued; 61,553,273 shares
issued as adjusted(1)..................................................... 511
Warrants(2)................................................................. 66,915
Additional paid-in capital.................................................. 613,916
Retained earnings........................................................... 588,413
Accumulated other comprehensive income...................................... 206,676
Treasury stock (1,141,138 shares, at cost).................................. (32,736)
-------
Total stockholders' equity................................................ 1,443,695
Total capitalization.................................................. $1,996,120
==========
(1) The number of issued shares of our common stock as of September 30, 2003
excludes:
- an aggregate of 4,975,455 shares of our common stock issuable under our
equity incentive plans, of which 2,891,556 shares were subject to
outstanding stock options as of September 30, 2003, at a weighted
average exercise price of $27.68 per share; and
- 5,628,600 shares of our common stock issuable upon exercise of
outstanding warrants at an exercise price of $39.98 per share, subject
to certain antidilution adjustments, which expire on December 15, 2050.
(2) The 5.75% cumulative trust preferred securities, stated liquidation amount
$50 per security, and warrants to purchase shares of our common stock at an
exercise price of $50 per warrant at maturity, subject to adjustment, were
issued as part of Trust Preferred Income Equity Redeemable Securities Units
in December 2001.
Under the terms of RGA's Flexible Stock Plan, RGA may issue up to a maximum
of 6,260,077 shares of its common stock in the form of stock options, stock
appreciation rights, restricted stock, performance shares or other stock-based
awards to its officers and key employees and those of its subsidiaries. Options
to purchase 2,804,708 shares of common stock have been granted and remain
outstanding, 1,491,358 shares of common stock have been issued pursuant to or
awarded under the plan and 1,964,011 shares of common stock are available for
future grants, as of September 30, 2003. Under the terms of the plan, the number
of authorized shares is increased each year by 5% of the number then allocated
to the plan, effective each January 1.
Under the terms of RGA's Flexible Stock Plan for Directors, RGA may issue
up to a maximum of 212,500 shares of its common stock in the form of stock
options, restricted stock, performance units or other stock-based awards only to
non-employee directors. Options to purchase 86,848 shares of common stock have
been granted and remain outstanding, 5,764 shares of common stock have been
exercised by or awarded under the plan and 119,888 shares of common stock are
available for future grants, as of September 30, 2003.
Under our Management Incentive Plan, RGA may award eligible participants up
to $2,500,000 upon the attainment of certain pre-established goals relating to
RGA's performance or that of its divisions, business units or employees. Awards
under the Management Incentive Plan may be made in cash or, pursuant to the
Executive Performance Share Plan or Flexible Stock Plan, performance shares,
restricted stock or other stock-based awards.
Under RGA's Phantom Stock Plan for Directors, RGA may grant up to 100,000
performance units to non-employee directors in lieu of retainer and meeting
fees. A performance unit is a hypothetical share of RGA's common stock based
upon the fair market value at the time of grant. RGA may, at its option, elect
to issue cash or shares of its common stock in payment for the performance units
granted under the plan. 24,195 performance units have been granted and remain
outstanding and 47,025 performance units are available for future grants, as of
September 30, 2003.
Under the terms of RGA's Executive Performance Share Plan, RGA may issue up
to 500,000 performance shares to its employees and those of its subsidiaries. A
performance share is a hypothetical share of RGA's common stock based upon the
fair market value at the time of grant. RGA may, at its option, elect to issue
cash or shares of its common stock in payment for the performance shares issued
under the plan. 124,123 performance shares have been issued and remain
outstanding and 289,720 performance shares are available for future issuance, as
of September 30, 2003.
RGA has reinsurance agreements with certain affiliates of MetLife, Inc.
Under these agreements, RGA had net premiums of approximately $115.3 million for
the first nine months of 2003. The net premiums reflect the net of business
assumed from and ceded to such affiliates of MetLife, Inc. The pre-tax income on
this business was approximately $23.9 million for the first nine months of 2003.
SUPPLEMENTAL INFORMATION
Based on a survey conducted on behalf of the Reinsurance Section of the
Society of Actuaries (the "SOA"), as of December 31, 2002, we had a 10.9% share
of the North American life reinsurance market, with approximately $624.9 billion
of life reinsurance in force, and Allianz had a 4.0% share with $231.5 billion
of life reinsurance in force. Allianz had approximately $231.4 billion of U.S.
life reinsurance in force. The survey estimated the total amount of life
reinsurance in force in North America was approximately $5.7 trillion as of that
date.
According to surveys conducted on behalf of the Reinsurance Section of
the SOA, the amount of life reinsurance in force was estimated to be
approximately $5.7 trillion as of December 31, 2002, which represented a
compound annual growth rate of approximately 19% since December 31, 1998.
According to surveys conducted on behalf of the Reinsurance Section of
the SOA, the total amount of U.S. reinsurance in force, the amount was estimated
to be approximately $2.6 trillion as of December 31, 1998, $3.1 trillion as of
December 31, 1999, $3.8 trillion as of December 31, 2000, $4.5 trillion as of
December 31, 2001 and $5.2 trillion as of December 31, 2002. According to an
A.M. Best report, the total amount of U.S. life insurance in force was estimated
to be approximately $13.0 trillion as of December 31, 1998, $14.4 trillion as of
December 31, 1999, $15.9 trillion as of December 31, 2000, $17.4 trillion as of
December 31, 2001 and $18.8 trillion as of December 31, 2002.
According to surveys conducted on behalf of the Reinsurance Section of
the SOA, with respect to U.S. ordinary recurring life reinsurance, the amount
reinsured was estimated to be approximately $679 billion as of December 31,
1998, $811 billion as of December 31, 1999, $985 billion as of December 31,
2000, $947 billion as of December 31, 2001 and $1.1 trillion as of December 31,
2002. According to a publication by the American Council of Life Insurers (the
"ACLI"), the total amount of life insurance production was estimated to be
approximately $1.3 trillion as of December 31, 1998, $1.4 trillion as of
December 31, 1999, $1.6 trillion as of December 31, 2000, $1.6 trillion as of
December 31, 2001 and $1.8 trillion as of December 31, 2002.
An A.M. Best article dated September 2002 estimated the aggregate net
premiums generated by life reinsurers in 2001 as approximately $35.5 billion
worldwide. Based on its net premiums, RGA would have had a 4.7% share of the
global market.
The SOA surveys indicate that the authors obtained information from
participating or responding companies and do not guarantee the accuracy and
completeness of their information. Additionally, the surveys do not survey all
reinsurance companies, but RGA believes most of its principal competitors are
included. While RGA believes these surveys to be generally reliable, RGA has not
independently verified their data.
The ACLI indicated that it obtains information from various sources,
including participating or responding companies and that the ACLI does not
guarantee the accuracy and completeness of the information. The ACLI does not
survey all life insurance companies, although RGA believes that most of the
principal life insurers are included. While RGA believes the information is
generally reliable, RGA has not independently verified the data.
While RGA believes information published by A.M. Best is generally
reliable, RGA has not independently verified the data. A.M. Best does not
guarantee the accuracy and completeness of the information.
RGA believes that some of the factors affecting the direct insurance
market include consolidation; focus on distribution and asset management and
outsourcing mortality to reinsurers; slower growth; the entrance of new
competitors; the establishment of alternative means of distribution; and recent
capital pressures, including investment losses and reserve increases. RGA
believes some of the factors affecting the life reinsurance market include a
strong trend of outsourcing mortality risk to reinsurers; the creation of
opportunities as a result of merger and acquisition activity in the life
insurance industry; consolidation among life reinsurers; and low reinsurance
penetration in select international markets.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains a number of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 relating to,
among others, matters relating to future or anticipated events. The words
"intend," "expect," "project," "estimate," "predict," "anticipate," "should,"
"believe" and other similar expressions also are intended to identify
forward-looking statements.
These 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.
Important factors that could cause actual results to differ materially from
estimates or forecasts contained in the forward-looking statements include,
among others:
- adverse changes in mortality, morbidity and claims experience;
- risks related to RGA being controlled by MetLife, Inc.;
- the effect of RGA's status as a holding company and regulatory
restrictions on its ability to pay principal of and interest on its debt
obligations;
- changes in the financial strength, claims payment ability and credit
ratings of RGA and its subsidiaries or those of MetLife or its
subsidiaries, and the effect of such changes on RGA's future results of
operations and financial condition;
- market or economic conditions that adversely affect RGA's ability to
make timely sales of investment securities in response to policyholder
withdrawals, recaptures of reinsurance treaties or other events;
- regulatory action that may be taken by State Departments of Insurance
with respect to RGA, MetLife or its or our subsidiaries;
- risks inherent in RGA's risk management and investment strategy,
including changes in investment portfolio yields or values due to
interest rate or credit quality changes;
- the effect of changes in tax laws or a prolonged economic downturn in
the demand for insurance products;
- fluctuations in U.S. or foreign currency exchange rates, interest rates
or securities and real estate markets;
- competitive factors and competitors' responses to RGA's initiatives;
- RGA's dependence on third parties, including insurance companies from
which it assumes business and reinsurers to which it cedes some
reinsurance, third-party investment managers and others;
- inadequate risk analysis and underwriting;
- the adequacy of resources relating to settlements, awards and
discontinued lines of business;
- general economic conditions affecting the demand for insurance and
reinsurance in RGA's current and planned markets;
- the stability of governments and economies in the markets in which RGA
operates;
- adverse litigation or arbitration results;
- the success of RGA's clients;
- successful execution of RGA's entry into new markets;
- successful development and introduction of new product and distribution
opportunities;
- changes in laws, regulations and accounting standards applicable to
RGA, its subsidiaries or its business;
- RGA's ability to successfully integrate and operate reinsurance business
that it acquires, including, without limitation, the business that it
has agreed to acquire from Allianz Life Insurance Company of North
America; and
- other risks and uncertainties described under the "Risk Factors"
captions in RGA's preliminary prospectus supplement dated November 3,
2003 and in the attached prospectus dated October 16, 2003 and in RGA's
other filings with the Securities and Exchange Commission.
If one or more of these risks or uncertainties materializes, or if
underlying assumptions prove incorrect, actual outcomes may vary materially from
those indicated.
Investors should not place undue reliance on those statements, which speak
only as of the date on which they are made. RGA may not update these
forward-looking statements, even though its situation may change in the future.
RGA qualifies all of its forward-looking statements by these cautionary
statements.
SELECTED FINANCIAL DATA
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
----------------------- -------------------------
2003 2002 2003 2002
-------- -------- ---------- ----------
Revenues:
Net premiums $572,970 $455,750 $1,700,746 $1,390,113
Investment income, net
of related expenses 122,153 82,499 345,234 260,779
Realized investment
gains/ (losses), net 6,560 1,066 776 (10,951)
Other revenues 10,819 10,839 33,670 27,734
-------- -------- ---------- ----------
Total revenues 712,502 550,154 2,080,426 1,667,675
Benefits and expenses:
Claims and other policy
benefits 457,844 342,301 1,334,081 1,096,797
Interest credited 46,251 22,156 130,914 79,777
Policy acquisition costs
and other insurance
expenses 111,334 96,303 330,903 252,606
Other operating expenses 24,683 26,358 77,275 67,734
Interest expense 9,383 9,006 27,384 26,475
-------- -------- ---------- ----------
Total benefits
and expenses 649,495 496,124 1,900,557 1,523,389
-------- -------- ---------- ----------
Income from continuing
operations before
income taxes 63,007 54,030 179,869 144,286
Provision for
income taxes 20,783 19,307 60,899 51,603
-------- -------- ---------- ----------
Income from
continuing operations 42,224 34,723 118,970 92,683
Discontinued operations:
Loss from discontinued
accident and health
operations, net of
income taxes (473) (1,135) (1,918) (3,264)
-------- -------- ---------- ----------
Net income $ 41,751 $ 33,588 $ 117,052 $ 89,419
======== ======== ========== ==========
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
----------------------- -----------------------
2003 2002 2003 2002
-------- --------- --------- --------
Earnings per share from continuing operations:
Basic earnings per share $ 0.85 $ 0.70 $ 2.39 $ 1.88
Diluted earnings per share $ 0.84 $ 0.70 $ 2.38 $ 1.87
Earnings per share from net income:
Basic earnings per share $ 0.84 $ 0.68 $ 2.36 $ 1.81
Diluted earnings per share $ 0.83 $ 0.68 $ 2.34 $ 1.80
Weighted average number of common
and common equivalent shares
outstanding (in thousands) 50,267 49,639 49,943 49,683
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Business Summary
At or For the
Nine Months Ended
(Unaudited) September 30,
--------------------------
2003 2002
--------- ---------
Gross life reinsurance in force (in billions)
North American business $674.0 $584.0
International business 219.0 130.8
Gross life reinsurance written (in billions)
North American business 103.5 110.4
International business 65.7 50.0
Consolidated cash and invested assets
(in millions) 7,925.0 5,934.0
Invested Asset book yield - trailing
three months excluding funds withheld 6.66% 6.59%
Investment portfolio mix
Cash and short-term investments 2.26% 2.28%
Fixed maturity securities 49.13% 56.43%
Mortgage loans 5.48% 3.35%
Policy loans 10.73% 13.14%
Funds withheld at interest 30.68% 22.78%
Other invested assets 1.72% 2.02%
Book value per share outstanding $28.92 $23.91
Treasury stock 1,141,138 1,686,313
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Three Months Ended September 30, 2003
Non-traditional
Asset- Total
Traditional Intensive Financial U.S.
----------- --------- ----------- ---------
Revenues:
Net premiums $ 368,171 $ 1,093 $ -- $ 369,264
Investment income, net
of related expenses 47,370 44,385 97 91,852
Realized investment
losses, net (1,059) (367) -- (1,426)
Other revenues 489 2,022 6,613 9,124
--------- --------- --------- ---------
Total revenues 414,971 47,133 6,710 468,814
Benefits and expenses:
Claims and other
policy benefits 297,654 776 -- 298,430
Interest credited 14,919 30,703 -- 45,622
Policy acquisition
costs and other
insurance expenses 56,738 10,861 2,206 69,805
Other operating
expenses 7,515 891 1,248 9,654
--------- --------- --------- ---------
Total benefits
and expenses 376,826 43,231 3,454 423,511
Income before
income taxes $ 38,145 $ 3,902 $ 3,256 $ 45,303
========= ========= ========= =========
Three Months Ended September 30, 2002
Non-traditional
Asset- Total
Traditional Intensive Financial U.S.
----------- --------- ---------- --------
Revenues:
Net premiums $319,485 $ 803 $ -- $320,288
Investment income, net
of related expenses 43,430 17,495 28 60,953
Realized investment
gains / (losses), net 1,880 (295) -- 1,585
Other revenues 740 2,515 5,940 9,195
-------- -------- -------- --------
Total revenues 365,535 20,518 5,968 392,021
Benefits and expenses:
Claims and other
policy benefits 231,890 9,298 -- 241,188
Interest credited 13,422 6,642 -- 20,064
Policy acquisition
costs and other
insurance expenses 60,265 1,697 1,679 63,641
Other operating
expenses 8,850 358 2,613 11,821
-------- -------- -------- --------
Total benefits
and expenses 314,427 17,995 4,292 336,714
Income before
income taxes $ 51,108 $ 2,523 $ 1,676 $ 55,307
======== ======== ======== ========
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
U.S. OPERATIONS
(Dollars in thousands)
Nine Months Ended September 30, 2003
Non-traditional
Asset- Total
Traditional Intensive Financial U.S.
----------- ----------- ----------- -----------
Revenues:
Net premiums $ 1,115,360 $ 3,197 $ -- $ 1,118,557
Investment income, net
of related expenses 135,246 122,923 97 258,266
Realized investment
losses, net (7,017) (2,080) -- (9,097)
Other revenues 3,186 5,035 20,179 28,400
----------- ----------- ----------- -----------
Total revenues 1,246,775 129,075 20,276 1,396,126
Benefits and expenses:
Claims and other
policy benefits 888,905 4,166 -- 893,071
Interest credited 45,169 84,424 -- 129,593
Policy acquisition
costs and other
insurance expenses 164,257 26,892 7,447 198,596
Other operating
expenses 24,454 2,829 3,881 31,164
----------- ----------- ----------- -----------
Total benefits
and expenses 1,122,785 118,311 11,328 1,252,424
Income before
income taxes $ 123,990 $ 10,764 $ 8,948 $ 143,702
=========== =========== =========== ===========
Nine Months Ended September 30, 2002
Non-traditional
Asset- Total
Traditional Intensive Financial U.S.
----------- ----------- ----------- -----------
Revenues:
Net premiums $ 1,002,741 $ 2,796 $ -- $ 1,005,537
Investment income, net
of related expenses 120,039 63,943 155 184,137
Realized investment
losses, net (1,151) (4,255) -- (5,406)
Other revenues 1,546 5,684 17,795 25,025
----------- ----------- ----------- -----------
Total revenues 1,123,175 68,168 17,950 1,209,293
Benefits and expenses:
Claims and other
policy benefits 785,756 17,014 -- 802,770
Interest credited 41,517 35,453 -- 76,970
Policy acquisition
costs and other
insurance expenses 153,760 8,126 5,517 167,403
Other operating
expenses 22,145 744 7,005 29,894
----------- ----------- ----------- -----------
Total benefits
and expenses 1,003,178 61,337 12,522 1,077,037
Income before
income taxes $ 119,997 $ 6,831 $ 5,428 $ 132,256
=========== =========== =========== ===========
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CANADIAN OPERATIONS
(Dollars in thousands)
Three Months Ended
September 30,
2003 2002
------- -------
Revenues:
Net premiums $53,144 $41,894
Investment income, net of related expenses 22,244 18,752
Realized investment gains, net 8,596 164
Other revenues 50 118
------- -------
Total revenues 84,034 60,928
Benefits and expenses:
Claims and other policy benefits 56,132 46,278
Interest credited 536 345
Policy acquisition costs and other
insurance expenses 5,257 2,880
Other operating expenses 2,580 2,747
------- -------
Total benefits and expenses 64,505 52,250
Income before income taxes $19,529 $ 8,678
======= =======
Nine Months Ended
September 30,
2003 2002
--------- ---------
Revenues:
Net premiums $ 153,747 $ 132,571
Investment income, net of related expenses 63,519 52,133
Realized investment gains/(losses), net 12,158 (22)
Other revenues (191) 40
--------- ---------
Total revenues 229,233 184,722
Benefits and expenses:
Claims and other policy benefits 161,411 137,104
Interest credited 1,089 733
Policy acquisition costs and other
insurance expenses 15,714 12,142
Other operating expenses 7,434 7,315
--------- ---------
Total benefits and expenses 185,648 157,294
Income before income taxes $ 43,585 $ 27,428
========= =========
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Three Months Ended September 30, 2003
Europe Total
Asia & South Inter-
Pacific Africa national
--------- --------- ---------
Revenues:
Net premiums $ 57,261 $ 92,502 $ 149,763
Investment income,
net of related expenses 3,050 1,329 4,379
Realized investment gains/
(losses), net (104) 1,040 936
Other revenues (11) (105) (116)
--------- --------- ---------
Total revenues 60,196 94,766 154,962
Benefits and expenses:
Claims and other policy
benefits 41,101 60,435 101,536
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 8,873 27,293 36,166
Other operating expenses 3,370 3,682 7,052
Interest expense 323 258 581
--------- --------- ---------
Total benefits and
expenses 53,667 91,668 145,335
Income before income taxes $ 6,529 $ 3,098 $ 9,627
========= ========= =========
Three Months Ended September 30, 2002
Europe Total
Asia & South Inter-
Pacific Africa national
------- ------- --------
Revenues:
Net premiums $32,839 $62,172 $95,011
Investment income,
net of related expenses 1,722 343 2,065
Realized investment gains, net 48 8 56
Other revenues 431 440 871
------- ------- -------
Total revenues 35,040 62,963 98,003
Benefits and expenses:
Claims and other policy
benefits 19,689 37,087 56,776
Interest credited -- -- --
Policy acquisition costs and
other insurance expenses 10,244 20,213 30,457
Other operating expenses 3,809 2,534 6,343
Interest expense 225 148 373
------- ------- -------
Total benefits and
expenses 33,967 59,982 93,949
Income before income taxes $ 1,073 $ 2,981 $ 4,054
======= ======= =======
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
OTHER INTERNATIONAL
(Dollars in thousands)
Nine Months Ended September 30, 2003
Europe Total
Asia & South Inter-
Pacific Africa national
--------- --------- ---------
Revenues:
Net premiums $ 165,836 $ 259,829 $ 425,665
Investment income,
net of related expenses 8,198 2,808 11,006
Realized investment gains/
(losses), net (622) 1,888 1,266
Other revenues 896 18 914
--------- --------- ---------
Total revenues 174,308 264,543 438,851
Benefits and expenses:
Claims and other policy
benefits 115,555 161,668 277,223
Policy acquisition costs and
other insurance expenses 33,401 81,516 114,917
Other operating expenses 12,086 11,228 23,314
Interest expense 842 722 1,564
--------- --------- ---------
Total benefits and
expenses 161,884 255,134 417,018
Income before income taxes $ 12,424 $ 9,409 $ 21,833
========= ========= =========
Nine Months Ended September 30, 2002
Europe Total
Asia & South Inter-
Pacific Africa national
--------- --------- ---------
Revenues:
Net premiums $ 97,831 $ 154,327 $ 252,158
Investment income,
net of related expenses 4,876 591 5,467
Realized investment
losses, net (125) (288) (413)
Other revenues 1,706 776 2,482
--------- --------- ---------
Total revenues 104,288 155,406 259,694
Benefits and expenses:
Claims and other policy
benefits 63,849 95,283 159,132
Policy acquisition costs and
other insurance expenses 24,260 48,493 72,753
Other operating expenses 10,086 7,883 17,969
Interest expense 613 499 1,112
--------- --------- ---------
Total benefits and
expenses 98,808 152,158 250,966
Income before income taxes $ 5,480 $ 3,248 $ 8,728
========= ========= =========
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CORPORATE AND OTHER
(Dollars in thousands)
Three Months Ended
September 30,
2003 2002
-------- --------
Revenues:
Net premiums $ 799 $ (1,443)
Investment income, net of related expenses 3,678 729
Realized investment losses, net (1,546) (739)
Other revenues 1,761 655
-------- --------
Total revenues 4,692 (798)
Benefits and expenses:
Claims and other policy benefits 1,746 (1,941)
Interest credited 93 1,747
Policy acquisition costs and other
insurance expenses 106 (675)
Other operating expenses 5,397 5,447
Interest expense 8,802 8,633
-------- --------
Total benefits and expenses 16,144 13,211
Loss before income taxes $(11,452) $(14,009)
======== ========
Nine Months Ended
September 30,
2003 2002
-------- --------
Revenues:
Net premiums $ 2,777 $ (153)
Investment income, net of related expenses 12,443 19,042
Realized investment losses, net (3,551) (5,110)
Other revenues 4,547 187
-------- --------
Total revenues 16,216 13,966
Benefits and expenses:
Claims and other policy benefits 2,376 (2,209)
Interest credited 232 2,074
Policy acquisition costs and other
insurance expenses 1,676 308
Other operating expenses 15,363 12,556
Interest expense 25,820 25,363
-------- --------
Total benefits and expenses 45,467 38,092
Loss before income taxes $(29,251) $(24,126)
======== ========
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
Date: November 3, 2003 By: /s/ Jack B. Lay
-----------------------------
Jack B. Lay
Executive Vice President and Chief
Financial Officer