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On Nov 25, we upgraded our recommendation on the shares of Reinsurance Group of America Inc. (RGA - Analyst Report) to Neutral from Underperform following better-than-expected third quarter earnings. This life insurer carries a Zacks Rank #3 (Hold).

Why the Upgrade?

Our improved outlook on the stock comes on the back of its strong third quarter results wherein the company reported operating income of $2.14 per share, significantly exceeding the Zacks Consensus Estimate of $1.82 per share. The company also performed exceedingly well year-over-year with earnings per share growth of 58.5%. Results were helped by higher revenues, along with lower share count.

Reinsurance Group witnessed an increase in estimates since third quarter earnings release. The Zacks Consensus Estimate for 2013 was up 7.7% to $4.74 per share, as 7 out of 8 estimates were raised over the last 30 days. For 2014, the same estimates went up 0.5% to $7.81 per share as 2 out of 8 estimates moved north over the same time frame.

Reinsurance Group holds a significant position in the U.S. and Canada. Further, the company is fully geared to maintain its competitive position in the in North American reinsurance market by growing Facultative Reinsurance, Automatic Reinsurance and In Force Block Reinsurance.

The company is also focusing on its underwriting standards, prompt response on quotes, competitive pricing as well as capacity and flexibility to meeting customer needs, in an attempt to preserve its position.

Additionally, the company is growing its international operations to reap the benefits of diversification.

Reinsurance Group is also poised to benefit from the changing industry trends. As a result of consolidations in recent years within the life reinsurance industry, there are fewer competitors. As a consequence, we believe that the life reinsurance pricing environment will remain attractive for the company.

However, some of the headwinds faced by the company include low interest rates, significant exposure to foreign exchange and an underperforming Australian business.

Nevertheless a disciplined capital management strategy will continue to boost bottom-line earnings.

Other Stocks

Some better–ranked life insurance stock includes StanCorp Financial Group, Inc. (SFG - Analyst Report) with Zacks Rank #1 (Strong Buy) and American Equity Investment Life Holding Co. (AEL - Snapshot Report) and Lincoln National Corporation (LNC - Analyst Report) with Zacks Rank #2 (Buy).

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