A month has gone by since the last earnings report for Reinsurance Group (RGA Quick QuoteRGA - Free Report) . Shares have added about 16.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Reinsurance Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Reinsurance Group Q3 Earnings Beat, Revenues Miss

Reinsurance Group of America, Incorporated reported third-quarter 2020 adjusted operating income of $3.51 per share that beat the Zacks Consensus Estimate by 77.3%. However, the bottom line declined 12.7% from the year-ago quarter’s figure.

Net foreign currency fluctuations had a favorable effect of 8 cents on the bottom line. Reinsurance Group witnessed increased net premiums and solid results in Europe, Middle East and Africa (EMEA), Asia/Pacific, offset by soft performance at U.S. and Latin America and Canada segments.

Operational Update             

Reinsurance Group's operating revenues of $3.6 billion declined 0.05% year over year. Moreover, the top line missed the Zacks Consensus Estimate by 1.5%.

Net premiums of $2.8 billion rose 0.6% year over year. Investment income (excluding spread-based businesses and the value of associated derivatives) decreased 16% from the prior-year quarter. Average investment yield decreased 117 basis points from the prior-year period to 3.66% due to lower variable investment income and an increase in cash and cash equivalents. Total benefits and expenses at Reinsurance Group increased 2.3% year over year to $3.3 billion. Higher claims and other policy benefits, policy acquisition costs and other insurance expenses and other operating expenses resulted in cost escalation.

Quarterly Segment Update

U.S. and Latin America: Total pre-tax adjusted operating income was $123 million in the quarter under discussion, down 40.6% from the year-ago quarter. The Traditional segment reported pre-tax adjusted operating income of $22 million, down 82.1% from the year-ago period, reflecting estimated individual mortality COVID-19 claim costs of $100 million and favorable large claims experience. It was partially offset by elevated frequency of non-large claims and lower variable investment income.Net premiums rose 1% from the year-ago quarter to $1.4 billion. Asset Intensive segment’s pre-tax adjusted operating income increased 18.5% to $77 million, indicating favorable investment spreads and equity markets. Capital Solutions business reported pre-tax adjusted operating income of $24 million, which increased 26.3% year over year, attributable to new business.

Canada: Total pre-tax adjusted operating income declined 25.5% to $35 million. Traditional segment’s pre-tax adjusted operating income declined 34.1% to $29 million indicating modestly unfavorable claims experience, primarily due to the impact from COVID-19. However, forex had an immaterial effect on the metric. Net premiums decreased 6% to $254 million due to the non-recurrence of a one-time premium on an existing treaty in 2019. Foreign currency exchange rates adversely impacted net premiums by $2 million. Financial Solutions segment’s pre-tax adjusted operating income of $6 million increased by $3 million from a year ago due to a more favorable longevity experience and increased fees. Net foreign currency fluctuations had an immaterial effect on pre-tax income and pre-tax adjusted operating income.

Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income of $93 million increased 10.7% from the prior-year quarter’s figure.  
Pre-tax adjusted operating income of the traditional segment was $7 million, down 72% year over year. The results reflected unfavorable mortality experience, driven by COVID-19 claims. Net foreign currency fluctuations had a favorable effect of $2 million on pre-tax adjusted operating income. Premiums increased 3% year over year to $371 million. Foreign currency exchange rates favorably impacted net premiums by $6 million. Financial Solutions segment delivered pre-tax adjusted operating income of $86 million, up 45.8% from the year-ago quarter, indicating favorable longevity experience.  Net foreign currency fluctuations had a favorable effect of $4 million.

Asia/Pacific: Total pre-tax adjusted operating income of nearly $87 million increased 222% from the prior-year quarter. Traditional segment’s pre-tax adjusted operating income of $78 million was up 254%. Net foreign currency fluctuations had a favorable effect of $1 million on the metric. Premiums totaled $653 million, down slightly from the prior-year period. Foreign currency exchange rates had a favorable effect of $6 million on net premiums. Financial Solutions segment’s pre-tax adjusted operating income increased 80% to $9    million, attributable to growth of existing business in Asia. Net premiums increased 17% to $35 million due to the addition of new business over the last year. Foreign currency exchange rates had an immaterial effect on net premiums.

Corporate and Other: Pre-tax adjusted operating loss was $37 million, wider than $30 million in the prior-year period.

Financial Update

As of Sep 30, 2020, Reinsurance Group had assets worth $82.1 billion, up 8.4% from the level at 2019 end. As of Sep 30, 2020, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, decreased 0.5% year over year to $131.36. Adjusted return on equity was 7.4%, reflecting a contraction of 330 bps year over year. The company exited the quarter with $1.5 billion in excess capital.

Capital Deployment

The board of directors approved a dividend of 70 cents. The dividend will be paid out on Dec 3, 2020 to shareholders of record as of Nov 17.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Reinsurance Group has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Reinsurance Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.