Reinsurance Group of America (RGA) saw its fourth-quarter 2017 net income spike to over $1.2 billion, driven largely by a tax benefit as a result of the U.S. tax reform, which the reinsurer says creates a more level playing field.
RGA’s Q4 net income increased from $190 million in 2016 to more than $1.2 billion last year, driven largely by an estimated $1 billion tax benefit as a result of the U.S. tax reform, which reduced the statutory federal income tax rate from 35% to 21%.
Anna Manning, President and Chief Executive Officer (CEO), RGA, commented; “U.S. Tax Reform and a number of unusual items contributed to a noisy fourth quarter, but if you strip away the noise, it was a solid quarter, capping off an excellent year.
“U.S. Tax Reform resulted in a one-time increase to our net income and stockholders’ equity in the quarter. More importantly, we expect ongoing benefits from this legislation because of a lower effective tax rate for RGA and a more level playing field, as compared with our global competitors.”
Largely as a result of the U.S. tax reform, RGA explains that the effective tax rate on pre-tax net income was 376.3% for Q4, and 59.5% for the full-year 2017. The reinsurer states that the effective tax rate was roughly 30.4% on pre-tax adjusted operating income for Q4.
Furthermore, RGA’s effective tax rate on pre-tax adjusted operating income was below the expected effective rate of 33% to 34%, due to the recognized income tax benefits associated with an adjustment to prior-period tax accruals, and the tax treatment of uncertain tax positions related to foreign jurisdictions, explains RGA.
Adding that for the for full-year 2017, the effective tax rate was 31.4% on pre-tax adjusted operating income.
“Looking forward, we remain optimistic about the future and our business prospects. RGA is well positioned in its markets, we have a proven strategy, and a long track record of successful execution. We anticipate ongoing change in the life insurance industry, and RGA continues to innovate and add to its capabilities in order to help our clients successfully address these industry challenges and opportunities,” said Manning.