Life reinsurer, Reinsurance Group of America, Incorporated (RGA), saw its net income fall by $44 million in the second-quarter of 2020 to $158 million, as the firm reports global COVID-19 claims, including IBNR, of an estimated $300 million.
Net income fell from the $202 million posted in Q2 2019 and for the half-year, declined from $372 million in 2019 to $70 million in H1 2020.
At the same time, consolidated net premiums increased by 1% year-on-year in Q2 to approximately $2.8 billion, with adverse net foreign currency effects of $45 million. For the first six months of the year, net premiums reached $5.6 billion for RGA in 2020, compared with $5.5 billion a year earlier.
When compared with Q2 2019, and excluding spread-based businesses as well as the value of associated derivatives, investment income fell by 1% and the average investment yield declined by 31 basis points.
RGA’s President and Chief Executive Officer (CEO), Anna Manning, said: “We would like to express our heartfelt sympathy to all who are suffering from the devastating effects of the pandemic. The health and safety of RGA’s employees and their families continue to be a top priority.
“We did experience a material level of excess mortality claims in the U.S. that we believe to be COVID-19 related; however, COVID-19 claims from the rest of the world were relatively modest. While our operating results were negatively impacted by the various effects of COVID-19, most of our segments reported results that were in line with or better than expectations. Our morbidity experience in all key markets was favorable and our Global Financial Solutions results were very strong. We were pleased with the resilience of our business in this challenging environment.”
As noted by Manning, an unfavourable mortality experience was experienced in the U.S. as a result of the pandemic, leading the company’s U.S. and Latin America Traditional unit to report a pre-tax loss of $158 million. The Financial Solutions arm of this segment reported pre-tax income of $93 million in Q2 2020, compared with $72 million a year earlier.
In Canada Traditional, RGA has reported pre-tax income of $44 million, which is only slightly down on the $46 million posted a year earlier. The Financial Solutions unit reported income of $4 million, which is line with last year.
Turning to RGA’s Europe, Middle East and Africa (EMEA) Traditional unit, and pre-tax income reached $16 million in Q2 2020, which is unchanged from Q2 2019. The Financial Solutions arm of this segment recorded pre-tax income of $98 million, compared with $52 million a year earlier.
In Asia Pacific Traditional, RGA has announced pre-tax income of $26 million in Q2 2020 against just $2 million a year earlier. Furthermore, RGA’s Corporate and Other business saw net income improve to $1 million, compared with a loss of $41 million a year earlier.
“During the quarter we took measured and proactive action to raise additional capital to further strengthen our balance sheet, and we ended the quarter with excess capital of approximately $1.4 billion. With our strong balance sheet and diversified global platform, we believe that our global business is well positioned to successfully manage through this period of uncertainty,” said Manning.