24 July 2015News

Australia results drive down profits at RGA

Reinsurance Group of America (RGA), the US reinsurer with Bermuda offices, has posted a drop in profits for the second quarter of 2015 driven by higher claims in the US and Australia.

Its profits fell to $130.4 million in the second quarter, compared with $198.3 million in the second quarter of 2014.

This was driven by the higher effective tax rate, foreign currency effects and higher claims in the US and Australia, although this was partially offset by better-than-expected overall results in EMEA and Asia.

RGA’s US and Latin America traditional segment reported pre-tax operating income of $79.4 million in the second quarter of 2015, compared with $89 million in the second quarter of 2014, driven by elevated individual mortality claims.

This was partially offset by strong performance in RGA’s EMEA non-traditional segment, where pre-tax operating income increased sharply to $31.8 million from $21.6 million a year ago.

Asia Pacific’s traditional business reported pre-tax operating income of $4.3 million in the second quarter of 2015, down from $26.3 million in the same period of the prior year.

Within this, RGA’s Australia operation posted poor results in its individual and group morbidity product lines, contributing to a pre-tax operating loss of approximately $20 million in that market, said the reinsurer.

“Outside of Australia, traditional businesses performed very well, with particularly strong results from our operations in Hong Kong & Southeast Asia, Japan and South Korea,” said RGA.

Greig Woodring, president and chief executive officer, said: “The results this quarter were negatively affected by the higher tax rate and foreign currency weakness. Otherwise, the results generally reflect a continuation of recent trends of balance and diversity of earnings by geography and product line, but with some volatility in segment and business line results consistent with the nature of our business.

“Most of our international operations continued a pattern of very good results, with the EMEA segment particularly strong, but Australia had a weak quarter, a reversal of some of the experience in the first quarter. The operating income of the Australia operation is essentially in line with expectations on a year-to-date basis.”