Reinsurance Group of America, Incorporated RGA has been gaining momentum on the back of higher new business volumes, favorable longevity experience, stronger invested asset base, improved risk-free rates earned on new investments and a robust balance sheet.
The Zacks Consensus Estimate for Reinsurance Group’s 2023 earnings is pegged at $18.13 per share, indicating a 25.6% increase from the year-ago reported figure on 4.6% higher revenues of $17.54 billion. The consensus estimate for 2024 earnings is pegged at $18.26 per share, indicating 0.6% growth from the year-ago reported figure on 4.9% higher revenues of $18.41 billion.
The Zacks Consensus Estimate for 2023 and 2024 has moved 2.6% and 1.3% north, respectively, in the past 60 days, reflecting analysts’ optimism on the stock.
Earnings Surprise History
The life insurer has a solid track record of beating earnings estimates in five of the last seven quarters, while missing in two.
Zacks Rank & Price Performance
RGA currently carries a Zacks Rank #2 (Buy). The stock has gained 16.9% in the past year, outperforming the industry’s rise of 16.6%.
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Reinsurance Group shares are trading at a discount than the industry average. Its price-to-book value of 1.23X is lower than the industry average of 1.59X. Before the valuation expands, it is preferable to take a position in the stock.
RGA has an impressive Value Score of A, reflecting an attractive valuation of the stock. Value stocks have a long history of showing superior returns. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer better returns.
Solid performance at its U.S. and Latin America, Canada, Europe, Middle East and Africa (EMEA) segments is likely to drive Reinsurance Group.
The EMEA segment is well-poised to gain from higher investments supporting the annuity business and an increase in new business volumes of the closed longevity business.
The U.S. Asset-Intensive business should continue to grow from higher transaction and other fees, favorable longevity experience and equity markets as well as higher variable investment income from commercial loan prepayments.
The Canada business should continue to gain from stronger business volume under existing treaties, increased variable investment income and a higher invested asset base.
RGA’s net investment income has been improving over the years. Riding on higher average invested asset base, stronger risk-free rates earned on new investments, improved variable investment income associated with joint venture and limited partnership investments, the metric is likely to increase in the long run. An improving interest rate environment should add to the upside.
Reinsurance Group boasts a strong balance sheet with a stable capital mix.
RGA exited the first half of 2023 with excess capital of around $1.2 billion.
The life insurer has also been managing capital effectively via share buybacks, dividend payments and prudent investments. RGA’s capital deployment highlights balanced approach to capital management and ability to deploy capital into transactions and return capital through share repurchases and dividends.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Axis Capital Holdings Limited AXS, Chubb Limited CB and Cincinnati Financial Corporation CINF. While Axis Capital sports a Zacks Rank #1, Chubb and Cincinnati Financial carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 13.1%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Chubb has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 3.36%. CB has gained 15.2% In the past year.
The Zacks Consensus Estimate for CB’s 2023 and 2024 earnings per share is pegged at $18.18 and $19.86, indicating a year-over-year increase of 19.2% and 9.2%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 14%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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