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Reinsurance Group (RGA) Down 3% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Reinsurance Group of America, Incorporated (RGA - Free Report) . Shares have lost about 3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Reinsurance Group Q1 Earnings Miss Estimates, Grow Y/Y
Reinsurance Group reported first-quarter 2017 operating income of $1.86 per share. The bottom line missed the Zacks Consensus Estimate of $2.11 by 11.8% but improved 0.5% from the year-ago quarter.
The company’s Traditional business in the EMEA and Asia was strong in the quarter. Also, the U.S. and Canadian Traditional segments witnessed high seasonal individual mortality claims. The first-quarter results displayed the company’s earnings diversification, driven by the successful development of the global operating model over a considerable period of time. Moreover, the quarter experience substantial premium growth due to robust organic growth across most regions, particularly Asia and EMEA.
Reinsurance Group's operating revenues of $3 billion climbed 19.7% year over year.
Net premiums of $2.4 billion rose 9.7% year over year.
Investment income jumped 23.3% from the prior-year quarter to $514.4 million. The average investment yield was down by 5 basis points (bps) to 4.41%.
Total benefits and expenses of Reinsurance Group increased 16.5% year over year to $2.8 billion. Higher claims and other policy benefits, interest credited, policy acquisition costs and other insurance expenses, interest expenses, other operating expenses as well as collateral finance and securitization expenses resulted in the overall increase in costs.
Quarterly Segment Update
Reinsurance Group changed the name of its Non-Traditional segment to Financial Solutions in the fourth quarter of 2016.
U.S. and Latin America: Total pre-tax income skyrocketed 268.9% to $133.5 million in the quarter.
The Traditional segment reported pre-tax operating income of $28 million, down 47.4% year over year. The downside was attributable to poor claims experience due to an increase in the number of large claims. Net premiums grew 6% from the year-ago quarter to $1.3 billion.
The Financial Solutions segment’s pre-tax operating income improved 13.9% to $51.6 million. Favorable interest rate spreads and positive impact of the higher equity markets drove the upside. Financial Reinsurance business reported pre-tax operating income of $17.8 million compared with $15.9 million in the prior-year quarter.
Canada: Total pre-tax operating income rose 10.8% to $22.9 million.
The Traditional segment’s pre-tax operating income declined 13.4% to $16.8 million. Net premiums inched up 0.1% to $215.8 million. The decline can be mainly attributable to large claims owing to slightly worse-than-expected mortality experience.
The Financial Solutions segment’s pre-tax income skyrocketed 506.8% year over year to about $4 million on favorable longevity experience.
Asia Pacific: Total pre-tax operating income declined 15.1% to $41.2 million during the quarter.
The Traditional segment reported pre-tax operating income of $41.7 million, up 1.5% year over year. Premiums jumped 29.2% to $483.3 million on strong growth from new treaties across most of the region.
The Financial Solutions segment’s pre-tax operating losses of $0.5 million compared unfavorably with pre-tax operating income of $7.4 million of the year-ago quarter.
Europe, Middle East and Africa (EMEA): This region reported pre-tax operating income of $41.4 million, up 69.2% year over year.
The Traditional segment reported pre-tax operating income of about $14 million, which compared favorably with the year-ago loss of $1.1 million. The improvement was mainly due to solid overall mortality experience across the region. Premiums improved 10% to $304.7 million, mainly owing to the impact of new treaties.
The Financial Solutions segment’s pre-tax operating income grew 7.4% to $27.5 million on the back of favorable experience in longevity businesses.
Corporate and Other: Pre-tax operating loss of $26.6 million, narrower than the year-ago loss of $30.3 million.
Financial Update
As of Mar 31, 2017, Reinsurance Group had assets worth $53.8 billion, up 3.1% from year-end 2016.
As of Mar 31, 2017, Reinsurance Group’s book value per share, excluding Accumulated Other Comprehensive Income (AOCI), grew 12.6% year over year to $94.72.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Reinsurance Group of America, Incorporated Price and Consensus
At this time, Reinsurance Group's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of this revision is net zero. The stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Reinsurance Group (RGA) Down 3% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Reinsurance Group of America, Incorporated (RGA - Free Report) . Shares have lost about 3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Reinsurance Group Q1 Earnings Miss Estimates, Grow Y/Y
Reinsurance Group reported first-quarter 2017 operating income of $1.86 per share. The bottom line missed the Zacks Consensus Estimate of $2.11 by 11.8% but improved 0.5% from the year-ago quarter.
The company’s Traditional business in the EMEA and Asia was strong in the quarter. Also, the U.S. and Canadian Traditional segments witnessed high seasonal individual mortality claims. The first-quarter results displayed the company’s earnings diversification, driven by the successful development of the global operating model over a considerable period of time. Moreover, the quarter experience substantial premium growth due to robust organic growth across most regions, particularly Asia and EMEA.
Reinsurance Group's operating revenues of $3 billion climbed 19.7% year over year.
Net premiums of $2.4 billion rose 9.7% year over year.
Investment income jumped 23.3% from the prior-year quarter to $514.4 million. The average investment yield was down by 5 basis points (bps) to 4.41%.
Total benefits and expenses of Reinsurance Group increased 16.5% year over year to $2.8 billion. Higher claims and other policy benefits, interest credited, policy acquisition costs and other insurance expenses, interest expenses, other operating expenses as well as collateral finance and securitization expenses resulted in the overall increase in costs.
Quarterly Segment Update
Reinsurance Group changed the name of its Non-Traditional segment to Financial Solutions in the fourth quarter of 2016.
U.S. and Latin America: Total pre-tax income skyrocketed 268.9% to $133.5 million in the quarter.
The Traditional segment reported pre-tax operating income of $28 million, down 47.4% year over year. The downside was attributable to poor claims experience due to an increase in the number of large claims. Net premiums grew 6% from the year-ago quarter to $1.3 billion.
The Financial Solutions segment’s pre-tax operating income improved 13.9% to $51.6 million. Favorable interest rate spreads and positive impact of the higher equity markets drove the upside. Financial Reinsurance business reported pre-tax operating income of $17.8 million compared with $15.9 million in the prior-year quarter.
Canada: Total pre-tax operating income rose 10.8% to $22.9 million.
The Traditional segment’s pre-tax operating income declined 13.4% to $16.8 million. Net premiums inched up 0.1% to $215.8 million. The decline can be mainly attributable to large claims owing to slightly worse-than-expected mortality experience.
The Financial Solutions segment’s pre-tax income skyrocketed 506.8% year over year to about $4 million on favorable longevity experience.
Asia Pacific: Total pre-tax operating income declined 15.1% to $41.2 million during the quarter.
The Traditional segment reported pre-tax operating income of $41.7 million, up 1.5% year over year. Premiums jumped 29.2% to $483.3 million on strong growth from new treaties across most of the region.
The Financial Solutions segment’s pre-tax operating losses of $0.5 million compared unfavorably with pre-tax operating income of $7.4 million of the year-ago quarter.
Europe, Middle East and Africa (EMEA): This region reported pre-tax operating income of $41.4 million, up 69.2% year over year.
The Traditional segment reported pre-tax operating income of about $14 million, which compared favorably with the year-ago loss of $1.1 million. The improvement was mainly due to solid overall mortality experience across the region. Premiums improved 10% to $304.7 million, mainly owing to the impact of new treaties.
The Financial Solutions segment’s pre-tax operating income grew 7.4% to $27.5 million on the back of favorable experience in longevity businesses.
Corporate and Other: Pre-tax operating loss of $26.6 million, narrower than the year-ago loss of $30.3 million.
Financial Update
As of Mar 31, 2017, Reinsurance Group had assets worth $53.8 billion, up 3.1% from year-end 2016.
As of Mar 31, 2017, Reinsurance Group’s book value per share, excluding Accumulated Other Comprehensive Income (AOCI), grew 12.6% year over year to $94.72.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Reinsurance Group of America, Incorporated Price and Consensus
Reinsurance Group of America, Incorporated Price and Consensus | Reinsurance Group of America, Incorporated Quote
VGM Scores
At this time, Reinsurance Group's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of this revision is net zero. The stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.