Reinsurance Group Of America, Incorporated · NYSE:RGA
Reinsurance Group Of America — Metlife — Merger or Acquisition (September 2008)
48 slides from Reinsurance Group Of America's merger presentation, Sep 5, 2008
Slide 1: RGA / MET Exchange Offer
Reinsurance Group of America ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ RGA / MET
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation contains both historical and forward-looking statements. Forward-looking statements are not based on historical facts, but rather reflect the Company’s current expectations, estimates and projections concerning future result
Slide 3: Additional Information and Where You Can Find It
Additional Information and Where You Can Find It In connection with MetLife’s proposed divestiture of its stake in RGA, on August 11, 2008, RGA filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (No. 333-152828), as amended, which includes a form of pr
Slide 4: Non-GAAP Measures
Non-GAAP Measures RGA uses a non-GAAP financial measure called “operating income” as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that operating income, on a pre-t
Slide 5: Transaction Summary
Transaction Summary ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 6: Transaction Summary
Recapitalization RGA Shareholder Vote Shares to Be Exchanged (Split - Off) Split - Off Fixed Discount Mechanism Split - Off Expiration Potential Conversion of RGA Dual Class Stock Dealer Managers Information Agent Split - Off Website Transaction Summary (1) Expiration of split-off may be extended to
Slide 7: RGA Investment Highlights
RGA Investment Highlights ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A. Greig Woodr
Slide 8: RGA Investment Highlights
RGA Investment Highlights Second largest North American life reinsurer with established and expanding global presence A leading facultative reinsurer with high degree of mortality expertise; provides competitive advantage Multiple growth opportunities stemming from on-going industry consolidation an
Slide 9: A Leading Life Reinsurer
Top Five Life Reinsurers Now Account for 76% of Market, Up From 48% in 1997 Share Market Force Reinsurance In Life Reinsurer Rank North America In 2007 Worldwide in 2006 Rank Reinsurer Gross Life Reinsurance Premiums A Leading Life Reinsurer Source: 2007 Munich American / Society of Actuaries Reinsu
Slide 10: Strong North American Market Positions and Global Expansion
Strong North American Market Positions Well Positioned in Rapidly Growing Asian Markets Continued Expansion into Europe Offers Growth Opportunities Operational Strength Leading new business market share (23%) in U.S. (1) Leading new business market share (35%) in Canada (1) Largest facultative reins
Slide 11: Expanding Global Presence
2003 Pre-tax Operating Income by Operating Segment YTD June 30, 2008 Pre-tax Operating Income by Operating Segment Expanding Global Presence Total 2003 Pre-tax Operating Income = $263M Note: Figures include results from the U.S., Canada, Asia Pacific and Europe & South Africa operating segments; exc
Slide 12: Leading Facultative Franchise
Leading Facultative Franchise Recognized facultative expertise Provide a market for non-conforming risks Significant barriers to entry Fosters closer relationships with cedants Leverage for additional business opportunities Provides some pricing power for automatic business Frequent entry point for
Slide 13: Significant Growth Opportunities
North America International Significant Growth Opportunities Expect intermediate growth of 8%-10% in traditional market going forward Limited number of competitors; good pricing environment expected to continue Little impact from start- ups Some direct companies retaining more business Highest growt
Slide 14: North America Market Continues to Grow
+8% +15% +5% +4% +2% +76% +12% +16% +1% +16% Although cession rates in the U.S. market have fallen over the past several years, RGA has continued to grow through market share increases. Life Reinsurance Inforce Life Reinsurance Inforce North America Market Continues to Grow Source: Munich American /
Slide 15: Strong Track Record of Growth
December 31, 1993 December 31, 2007 CAGR Strong Track Record of Growth Share Price $12.28* $52.48 10.9% Market Cap $480M $3.3B 14.8% Assets $1.2B $21.6B 22.9% Net Income $34.1M $293.8M 16.6% Premiums $380M 4.9B 20.0% Employees 198 1,066 12.8% * Split-adjusted
Slide 16: Increased Independence Post-Separation from MetLife
Increased Independence Post-Separation from MetLife Expected to eliminate overhang and increase liquidity and public float for RGA common stock Expected to result in wider following by equity research community Expected to facilitate use of RGA common stock as acquisition currency and source of capi
Slide 17: Industry-Leading Management Team
Years Experience Name Position In Industry (1) With RGA (2) Industry-Leading Management Team (1) Includes experience in life insurance and life reinsurance industries (2) Includes experience with RGA’s predecessor, the reinsurance division of General American Life Insurance Company A. Greig Woodring
Slide 18: Overview of Financial Performance
Overview of Financial Performance ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Jack B
Slide 19: Financial Highlights
Historical Performance Intermediate Goals Financial Highlights Operating EPS Growth 14% (5-year CAGR, 2003-2007) Premium Growth 13% (2007 compared to 2006) Return on Equity * 14% (2007) BV/Share Growth * 14% (5-year and 14-year CAGR) Operating EPS Growth 14% Return on Equity * 14% RGA targets debt l
Slide 20: Life Reinsurance In Force
Life Reinsurance In Force ($ in billions )
Slide 21: Consolidated Net Premiums
Consolidated Net Premiums ($ in millions)
Slide 22: Consolidated Operating Income
Consolidated Operating Income Operating Return on Equity (1) 2003…13% 2004…12% 2005…11% 2006…13% 2007…14% Operating Income ($ in millions) Operating Income Per Share (1) Operating ROE is computed excluding accumulated other comprehensive income, using quarterly average for equity amounts. See “Recon
Slide 23: Quarterly Mortality Volatility
RGA’s results can exhibit quarterly volatility in mortality experience, but when measured over longer periods of time, mortality experience is more predictable and stable. Quarterly Mortality Volatility 5 Year Average = 81.4%
Slide 24: Book Value Per Share Trend
Book Value Per Share* 5 Year Trend * Book value excludes other comprehensive income. See “Reconciliations of Non-GAAP Measures” at the end of this presentation.
Slide 25: Total Capitalization Levels
Total Capitalization Levels (Excluding Other Comprehensive Income)* ($ in millions) Debt & Hybrids/ Total Capitalization 24.4% 22.5% 31.5% 26.6% 28.9% 27.9% $2,279 $2,505 $3,039 $3,246 $3,748 $3,891 * See “Reconciliations of Non-GAAP Measures” at the end of this presentation.
Slide 26: Consolidated Asset Composition
Well-diversified fixed maturity portfolio; 97% investment grade as of June 30, 2008 Consolidated Asset Composition ($ in millions) Carrying Value Carrying Value YTD Asset Type Dec. 31, 2007 June 30, 2008 Change Fixed Maturities $ 9,398 $ 9,668 $ Mortgage Loans (33) Policy Loans 1,059 1,048 (11) Fund
Slide 27: Conclusion
Conclusion ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A. Greig Woodring (CEO)
Slide 28: RGA Investment Highlights
RGA Investment Highlights Second largest North American life reinsurer with established and expanding global presence A leading facultative reinsurer with high degree of mortality expertise; provides competitive advantage Multiple growth opportunities stemming from on- going industry consolidation a
Slide 29: Appendix
Appendix: RGA’s Operating Segments Transaction Diagram Reconciliations of Non- GAAP Measures _______________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 30: RGA's Operating Segments
RGA’s Operating Segments ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 31: U.S. Operations
U.S. Operations ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 32: Total U.S. Operations
Total U.S. Operations Pre-tax Operating Income* ($ in millions) Net Premiums ($ in millions) * See “Reconciliations of Non-GAAP Measures” at the end of this presentation.
Slide 33: U.S. Traditional Operations
Approach to the Market Facultative Excellence Overview U.S. Traditional Operations RGA’s goal is to be among those 3-5 with very favorable terms Automatic reinsurance programs are placed with 3-5 reinsurers RGA’s differentiator is our facultative services Companies cannot access these services unles
Slide 34: Asset Intensive and Financial Reinsurance
Asset Intensive Financial Reinsurance U.S. Asset Intensive and Financial Reinsurance Sub-segments Primarily annuities and COLI/BOLI; a spread business Some volatility in operating income due to treatment of realized gains/losses for funds withheld treaties RGA shares in asset risk for general accoun
Slide 35: Canada Operations
Canada Operations ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 36: Canada Operations
Overview Premiums Pre-tax Operating Income* Canada Operations Established in 1992 Traditional individual life reinsurance, including preferred classes; some creditor business Most of the life insurance companies in Canada are clients A market leader; primary competitors are Munich Re and Swiss Re St
Slide 37: International Operations
International Operations ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 38: International Operations Overview
International Operations Overview Have demonstrated success Built green-field operations across the globe; centrally managed by dedicated team in Toronto Developed divisional infrastructure and culture Established as a leading reinsurer in key markets Focused on multi-nationals and larger local comp
Slide 39: Europe & South Africa Operations
Overview Markets and Date of Entry Net Premiums Pre-tax Operating Income* Europe & South Africa Operations Spain 1995 England 1999 South Africa 1999 India 2002 Ireland 2003 Poland 2006 Germany 2006 France 2007 Italy 2007 UK market has fueled past growth; 12%- 15% premium growth expected going forwar
Slide 40: Asia Pacific Operations
Overview Markets and Date of Entry Net Premiums Pre-tax Operating Income* Asia Pacific Operations Hong Kong 1994 Japan 1995 Australia/New Zealand 1996 Malaysia 1997 Taiwan 1999 South Korea 2002 China 2005 $ in millions $ in millions Strong results in 2006, 2007 and first half of 2008 lead by Austral
Slide 41: Transaction Diagram
Transaction Diagram ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 42: Transaction Diagram: Step 1 Recapitalization of RGA Stock
Status Quo Step 1: Recapitalization of RGA Stock RGA Other MET Businesses MET Existing MET Shareholders Existing RGA Shareholders RGA Other MET Businesses MET Existing MET Shareholders Existing RGA Shareholders Transaction Diagram RGA recapitalizes its single class of stock into two classes of stock
Slide 43: Transaction Diagram: Step 2 Split-Off (Exchange Offer)
Step 2: Split-Off (Exchange Offer) RGA Other MET Businesses MET Existing MET Shareholders Existing RGA Shareholders Transaction Diagram (Cont’d) MET splits-off all of its RGA Class B shares in exchange for MET shares RGA Class B shares offered at a 10% discount subject to a limit of 1.3071 shares of
Slide 44: Reconciliations of Non-GAAP Measures
Reconciliations of Non- GAAP Measures ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Slide 45: Financial Performance
Financial Performance (1) Net of DAC offset 14.8 11.1 23.4 24.6 16.8 21.0 7.7 Pre-tax Operating Income 47.5 0.9 37.5 (2.8) (0.5) 2.0 (12.9) Change in MV of Embedded Derivatives(1) (1.5) 1.6 8.2 7.2 1.0 7.3 1.4 Realized Capital (Gains) / Losses (1) (31.2) 8.6 (22.3) 20.2 16.3 11.7 19.2 GAAP Pre-Tax I
Slide 46: Financial Performance
Financial Performance (1) Net of DAC offset 278.8 259.4 544.0 451.4 345.2 341.9 253.4 Pre-tax Operating Income 47.5 0.9 46.5 (2.8) (0.5) 2.0 (12.9) Change in MV of Embedded Derivatives(1) 3.6 15.6 22.6 2.8 (10.6) (29.3) (5.3) Realized Capital (Gains) / Losses(1) 227.7 242.9 474.9 451.4 356.3 369.2 2
Slide 47: Financial Performance
Financial Performance Pre-Tax Operating Earnings YTD ($ in millions) Book Value per Share Reconciliation 2Q08 1Q08 4Q07 3Q07 2Q07 1Q07 4Q06 3Q06 2Q06 1Q06 4Q05 Book value per share 49.13 $ 49.15 $ 51.42 $ 49.03 $ 46.69 $ 46.81 $ 45.85 $ 45.22 $ 40.30 $ 40.62 $ 41.38 $ Less: effect of FAS 115 0.76 2.
Slide 48: Reinsurance Group of America
Reinsurance Group of America ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ RGA / MET