Reinsurance Group of America (RGA) Tops Q4 EPS by 27c

Reinsurance Group of America (NYSE: RGA) reported Q4 EPS of $2.84, $0.27 better than the analyst estimate of $2.57. Revenue for the quarter came in at $2.83 billion versus the consensus estimate of $2.68 billion.

Company Guidance

On an annual basis, the company provides financial guidance based upon the intermediate term rather than giving a range of annual earnings per share for an upcoming year. This better reflects the long-term nature of the business and the difficulty in predicting the timing of shorter-term or periodic events such as block transactions. The company accepts risks over very long periods of time, up to 30 years or longer in some cases. While more predictable over longer-term horizons, RGA’s business is subject to inherent short-term volatility.

Over the intermediate term, the company targets growth in operating income per share in the 5 to 8 percent range, and operating return on equity of 10 to 12 percent. It is presumed that there are no significant changes in the investment environment from current levels, and the company will deploy $300 million to $400 million of excess capital, on average, annually. These guidance ranges are based upon “normalized” results. The operating EPS target range is unchanged from a year ago, while the operating return on equity range was widened slightly from 11 to 12 percent. The wider return on equity range better reflects the potential for variability in the results due to influences from macro issues, notably foreign exchange and interest rates.

Jack B. Lay, chief financial officer, commented, “We have faced significant macro headwinds in terms of weak foreign currencies and sustained low interest rates over the past several years, and we assume this will continue to be the case for the foreseeable future. However, we believe that our EPS range is appropriate and we expect the combination of organic growth, execution of block transactions and efficient capital management to mitigate those headwinds and allow us to reach our financial targets.”

For earnings history and earnings-related data on Reinsurance Group of America (RGA) click here.

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