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Reinsurance Group Poised for Growth Despite High Expenses

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On Aug 30, 2016, we issued an updated research report on Reinsurance Group of America Inc. (RGA - Free Report) .

Reinsurance Group remains focused on boosting its Canadian market to drive long-term growth in longevity insurance. In fact, the insurer has maintained its leading market share in the region for the seventh consecutive year. The company is expected to register 5–8% premium growth and 8–10% earning increase from the Canadian market by 2016.

The insurer boasts a strong international presence as well. The company derives 33% of its net premiums from international operations. With significant presence in Hong Kong, Japan, India Korea and Taiwan, the company experienced favorable claims from the regions, which in turn, contributed to the bottom line. Reinsurance Group eyes pre-tax operating income growth rate of 15–20% and premium growth rate of 10–15% from international operations in 2016.

A sustained solid operational performance has been supporting Reinsurance Group’s capital position. The company has excess capital of $1 billion, which supports its financial flexibility. Of this excess capital, the insurer expects to deploy $300 million to $400 million on an average, annually. This has paved the way for effective capital deployment, thereby enhancing shareholders' value. The insurer has $280 million remaining under its share repurchase authorization, while its board of directors has approved an 11% increase in its dividend.

Based on the positives, the Zacks Consensus Estimate has been revised upward in the last 30 days.

However, Reinsurance Group’s escalating expenses are likely to weigh on margin expansion.

Additionally, volatility in forex may impact the company’s bottom line. Moreover, underperformance in Australia Business due to increasing competition and evolving capital requirements are other headwinds.

Zacks Rank and Stocks to Consider

Presently, Reinsurance Group carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the life insurance sector are Health Insurance Innovations, Inc. , Genworth Financial, Inc. (GNW - Free Report) and Sun Life Financial Inc. (SLF - Free Report) . While Health Insurance Innovations sports a Zacks Rank #1 (Strong Buy), Genworth Financial and Sun Life Financial hold a Zacks Rank #2 (Buy).

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