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Reinsurance Group (RGA) Up 16% in 6 Months: What's Driving It?

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Zacks Equity Research
·4 min read
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Reinsurance Group of America, Incorporated’s RGA shares have gained 21.7% in the past six months, outperforming the industry's increase of 9%. The Zacks S&P 500 composite has increased 15.3% in the said time frame. With a market capitalization of $8.1 billion, average volume of shares traded in the last three months was 0.5 million.



Over the past 30 days, the company’s 2020 and 2021 earnings estimates have moved 21.9% and 0.6% north, respectively.

It has a decent earnings surprise history too. Its earnings beat estimates in two of the last four quarters with the trailing four-quarter average earnings surprise being 64.17%.

The company is well poised for progress, as is evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Will the Bull Run Continue?

This Zacks Rank #2 (Buy) life insurer’s adjusted operating earnings per share were solid even after absorbing the impact of COVID-19. The Zacks Consensus Estimate for 2021 earnings is pegged at $12.86, indicating a year-over-year increase of 43.8%.

The company’s performance has been improving over the past several years, attributable to premium growth at its U.S. and Latin America, Canada Operations, Europe, Middle East and Africa and Asia Pacific segments.

U.S. and Latin America Asset-Intensive continue to benefit from favorable investment spreads and equity markets whereas the EMEA Financial Solutions business is well-poised to gain from favorable longevity experience, the majority of which is believed to be COVID-19-related

It has raised its dividend at a six-year (2014-2020) CAGR of 15.2% and currently yields 2.3%.

Although the COVID-19 pandemic has weighed on the company’s life and health business due to increased claims, its longevity business is expected to act as a modest offset to excess life insurance claims.

The life insurer’s excess capital position at third-quarter end increased to $1.5 billion. Its strong business performance in the quarter absorbed the impact of COVID-19, funded organic growth, hiked dividend and also added to net excess capital position. The company’s leverage ratios remain at comfortable levels following the second-quarter senior debt issuance. The liquidity also remains strong with cash and cash equivalents of $3.3 billion.

The company expect the impacts of COVID-19 to be manageable and believes that its strong balance sheet, power of earnings engine and benefits of global diversified franchise positions it well to emerge from the pandemic and generate attractive shareholder returns over time.

Reinsurance Group has an impressive Value Score of A. Back-tested results show that stocks with a Value Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

Stocks to Consider

Investors interested in the insurance industry may look at Sun Life Financial Inc SLF, Primerica, Inc. PRI and Brown & Brown, Inc. BRO While Sun Life Financial sports a Zacks Rank #1 (Strong Buy), Primerica and Brown & Brown carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Life Financial surpassed estimates in each of the last four quarters, the average being 14.78%.

Primerica surpassed estimates in each of the last four quarters, the average being 10.04%.

Brown & Brown surpassed estimates in each of the last four quarters, the average being 13.91%.

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Sun Life Financial Inc. (SLF) : Free Stock Analysis Report
 
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
 
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
 
Primerica, Inc. (PRI) : Free Stock Analysis Report
 
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