Reinsurance Group of America, Incorporated (RGA - Free Report) is an insurance holding company, primarily engaged in traditional individual and group life, asset-intensive, critical illness and financial reinsurance. This Zacks Rank #2 (Buy) life insurer remains a promising stock, backed by several growth prospects. Also, the company is part of the Life Insurance industry, falling in the top 12% bracket of the Zacks Industry Rank.
The stock’s Zacks Consensus Estimate for both current and next-year earnings has been revised upward by 1.7% and 1.3% respectively over the last 60 days. This reflects analysts’ confidence in the stock.
Moreover, shares of Reinsurance Group have rallied 25.9% in a year, outperforming the industry’s growth of 4.1% and higher than the S&P 500 index’s 18.7% gain.
Let’s focus on some factors that make Reinsurance Group a stock to add for greater returns.
Solid Guidance: Reinsurance Group estimates operating income per share to grow 5-8% and operating ROE between 10% and 12% in the intermediate term, given an improving life reinsurance pricing environment, good mix of organic and transactional opportunities and a diversified earnings stream.
Improving Top line: The top line of Reinsurance Group has been increasing steadily. The same grew 27% over the last five years, riding on an expanded product portfolio with market leading services, capabilities, expertise and innovation.
Net investment income is a major component of an insurer’s top line. Having been on a consistent growth graph, the metric soared 50% in the last five years. Banking on a gradually improving rate environment, we expect this momentum to continue in the near term.
Individual mortality has matured and provides a base for stable earnings and capital generation. Significant value embedded in the in-force business is anticipated to generate predictable long-term earnings.
Strong Market Position: Reinsurance Group boasts a leadership position in the United States and the Latin American traditional market. Also, the company has expanded international operations, deriving one-third net premiums from the same.
Solid Capital Status: With excess capital of around $1.4 billion at the end of 2017, the company prides over a sturdy balance sheet. Reinsurance Group has also been effectively managing capital. The company has increased its divined more than fivefold over a decade. On an average, the company expects to deploy $300-$400 million of excess capital, annually.
Positive Earnings Surprise History: Reinsurance Group surpassed the Zacks Consensus Estimate in the last five quarters with an average beat of 8.52%.
Growth Projections: The Zacks Consensus Estimate for 2018 earnings per share is pegged at $12.50 on $12.58 billion of revenues, representing a year-over-year top and bottom-line improvement of 15.3% and 1.3%, respectively.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $13.41 on revenues of $13.21 billion, representing a year-over-year increase of nearly 7.3% and 5.1%, respectively.
Reinsurance Group has expected long-term earnings per share growth of 9%.
Underpriced: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 1.08, falling below the industry average of 3.77. The stock also carries an impressive Value Score of A. Back tested results have shown that stocks with an attractive Value Score of A or B coupled with a bullish Zacks Rank #1 (Strong Buy) or 2 makes best investment bets.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the life insurance industry can also check out Health Insurance Innovations, Inc. (HIIQ - Free Report) , Primerica, Inc. (PRI - Free Report) and American Equity Investment Life Holding Company (AEL - Free Report) .
Health Insurance Innovations operates as a cloud-based technology platform and distributor of individual and family health insurance plans and supplemental products in the United States. It pulled off an average four-quarter beat of 19.14%. The stock sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Primerica distributes financial products to middle-income households in the United States and Canada. The company delivered an average four-quarter positive surprise of 3.74%. The stock is a Zacks #1 Ranked player.
American Equity Investment develops and sells fixed index and fixed rate annuity products in the United States. The company came up with an average four-quarter positive surprise of 27.23%. The stock carries a Zacks Rank of 2.
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