Reinsurance Group of America: Full Year 2024 Earnings Miss Expectations

Reinsurance Group of America (RGA), a leading global provider of life and health reinsurance, reported its full year 2024 earnings on February 6, 2025. The company's net income available to RGA shareholders totaled $717 million, or $10.73 per diluted share, compared to $902 million, or $13.44 per diluted share, in 2023. Adjusted operating income for the full year totaled $1,342 million, or $20.06 per diluted share, slightly up from $1,334 million, or $19.88 per diluted share, in 2023. However, these results missed analysts' expectations, leading to a decline in RGA's stock price.

Key Factors Contributing to the Earnings Miss

1. Lower Revenues: RGA's revenues for the full year 2024 were $17.8 billion, representing an 18.3% increase year-over-year. However, this growth rate was lower than the previous year's growth rate of 21.4%. This slower revenue growth contributed to the earnings miss.
2. Adverse Foreign Currency Fluctuations: RGA experienced an adverse net foreign currency effect of $15 million in the fourth quarter and $40 million to $50 million for the full year. These currency fluctuations negatively impacted the company's earnings.
3. Unfavorable Biometric Claims Experience: RGA faced unfavorable biometric claims experience in the fourth quarter, with a financial impact of $58 million. This unfavorable experience contributed to the earnings miss.
4. Variable Investment Income Below Plan: RGA's variable investment income was below plan, impacting overall financial results. This lower-than-expected investment income contributed to the earnings miss.



Segment Performance and Strategic Adjustments

RGA's performance in its various segments contributed to the overall earnings miss in the following ways:

1. U.S. and Latin America Traditional: While these segments showed notable improvement through successful in-force management actions, they may not have been enough to offset other challenges in the company's portfolio.
2. EMEA Financial Solutions: This segment demonstrated resilience with strong new business growth and favorable longevity experience. However, it's unclear if this segment's performance was sufficient to compensate for any shortfalls in other areas.
3. Asia: The Asia segment, particularly the Traditional business, showed strong growth, especially in Mainland China. This contributed positively to RGA's overall results. However, it's possible that other segments underperformed, leading to an overall earnings miss.

To improve future results, RGA can consider the following strategic adjustments:

1. Focus on core strengths: RGA should continue to leverage its global leadership position and strong fundamentals in traditional business segments, such as Asia Traditional.
2. Optimize in-force transactions: RGA can explore more opportunities for in-force transactions, as these have proven to be a significant driver of value and earnings growth. The company deployed a record $1.676 billion into in-force block transactions during 2024, indicating the potential for further growth in this area.
3. Diversify revenue streams: While RGA has a strong presence in traditional life and health reinsurance, the company can explore new revenue streams, such as longevity business in Europe or asset deals with biometric risk in the US.
4. Improve risk management: RGA should continue to refine its risk management strategies to mitigate unfavorable biometric claims experience and other potential headwinds.
5. Monitor foreign exchange fluctuations: Given the sensitivity of RGA's earnings run rate to foreign exchange fluctuations, the company should closely monitor currency movements and adjust its strategies accordingly.

In conclusion, Reinsurance Group of America's full year 2024 earnings missed analysts' expectations due to lower revenues, adverse foreign currency fluctuations, unfavorable biometric claims experience, and variable investment income below plan. To improve future results, RGA should focus on its core strengths, optimize in-force transactions, diversify revenue streams, improve risk management, and monitor foreign exchange fluctuations.