Reinsurance Group's Organic Growth Impresses, High Costs Ail
Reinsurance Group of America, Incorporated RGA has successfully developed a robust product and service portfolio over a considerable period of time, which has helped the company cater to evolving demands of its clients.
Reinsurance Group boasts an industry-leading position in the United States and Latin American traditional market. A continued product line expansion through market-leading services, capabilities, expertise and innovation will continue to help the company maintain this strong position in the future. Plus, the expansion would facilitate risk diversification going forward.
The life insurer is likely to keep benefiting from a mix of organic and transactional opportunities to boost the company’s overall results as well as amp up its growth.
Additionally, the company remains optimistic, pertaining to the benefits it can derive from an improving life reinsurance pricing environment.
Notably, the company projects operating income per share to grow in the range of 5-8% and the operating return on equity (ROE) to range between 10% and 12%.
It is important to note that Reinsurance Group expects to witness improved net investment income owing to gradual rise in rate environment in the near term.
This apart, Reinsurance Group has carved a niche in the Canadian market, enjoying solid growth and profitability. The company anticipates longevity insurance — a source of diversified income — to experience a steady graph of growth and demand in the Canadian market.
Interestingly, Reinsurance Group has been displaying effective capital management through share buybacks and dividend payments. Also, a substantial amount of excess capital has enabled the company to maintain financial flexibility, which in turn will allow it to continue with a healthy capital management. This will further help the life insurer boost profitability. On an average, the company expects to deploy $300-$400 million of excess capital, annually.
However, escalating expenses weighing on margin expansion remain a headwind.
Some Stocks that Warrant a Look
Some stocks from the insurance industry that warrant a look are look at CNO Financial Group, Inc. CNO, Cincinnati Financial Corporation CINF and Mercury General Corporation MCY.
CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company has seen upward estimate revisions in the last few weeks.
Cincinnati Financial deals in property and casualty insurance business in the United States. Notably, the company has seen positive estimate revisions in the last few weeks.
Mercury General engages in writing personal automobile insurance in the United States. The company has experienced upward estimate revisions in the last few weeks.
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