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Reinsurance Group Shares Plunge 39.9% in a Year: Here's Why

Zacks Equity Research

Shares of Reinsurance Group of America, Incorporated RGA have lost 39.9% compared with the industry's decline of 29.9% in a year’s time.


This Zacks Rank #3 (Hold) insurer has been witnessing escalating expenses owing to higher claims and other policy benefits, interest credited, operating costs and interest expense. In 2019, total expenses increased 9.4% year over year to $13.2 billion.

The current interest rate environment continues to put downward pressure on the company’s investment yield. In 2019, the decrease in income was primarily due to interest rate movements. A continued low interest rate environment is expected to put downward pressure on this yield in future reporting periods.

Notably, Reinsurance Group's debt-to-equity ratio is 25.7%, which compares unfavorably with the industry average of 13.3% for the past year. A high debt-to-equity ratio implies that the company is funding most of its ventures with debt.

Reinsurance Group’s return on equity of 7.8% compares unfavorably with the industry average of 15.1%, which indicates the company’s relative inefficiency in managing shareholders’ funds and generating profit.

Reinsurance Group has been exposed to foreign currency risk, as its operations span Europe, the Middle East and Africa and the Asia Pacific. The U.S. dollar value of its net investments in foreign operations, foreign currency transaction settlements and the periodic conversion of the foreign-denominated earnings to U.S. dollars are subject to adverse foreign exchange rate movements.

Negative Estimate Revisions and Lackluster Momentum Score

The Zacks Consensus Estimate for current-year earnings has been revised downward by 3.3% in the past 30 days to $13.61.

The company’s Momentum Score of C further highlights its short-term unattractiveness.

It has an unfavorable Growth Score of D, which indicates lower growth prospects of the company.

The stock has a VGM Score of C, which makes it unattractive.
 

Stocks to Consider

A few better-ranked stocks in the life insurance sector are American Equity Investment Life Holding Company AEL, Primerica, Inc. PRI and FGL Holdings FG. While American Equity Investment sports a Zacks Rank #1 (Strong Buy), Primerica and FGL Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Equity Investment and Primerica outpaced estimates in each of the last four quarters, the positive surprise being 53.38% and 3.69% on average, respectively.

FGL Holdings surpassed estimates in three of the last four quarters, the positive surprise being 15.73%, on average.

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American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
 
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
 
Primerica, Inc. (PRI) : Free Stock Analysis Report
 
FGL Holdings (FG) : Free Stock Analysis Report
 
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