It has been about a month since the last earnings report for Reinsurance Group (RGA Quick QuoteRGA - Free Report) . Shares have lost about 1.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Reinsurance Group due for a breakout? 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 drivers.

Reinsurance Group Q1 Earnings Miss

Reinsurance Group of America reported first-quarter 2019 adjusted operating income of $2.61 per share, which missed the Zacks Consensus Estimate of $2.68 by 2.6%. Net foreign currency fluctuations had an adverse impact of 11 cents on the bottom line. However, the bottom line improved 62.1% from the year-ago quarter’s figure.

The company witnessed strong momentum in terms of organic growth and in-force transactions. The company continued to benefit from earnings diversity that comes with having a global operating platform. Strong results in Asia and Canada offset some modest weakness in other regions.

Reinsurance Group's operating revenues of $3.4 billion improved 10.1% year over year. Moreover, the top line beat the Zacks Consensus Estimate by 4.7%.

Net premiums of $2.7 billion rose 6% year over year. Investment income increased 12.3% from the prior-year quarter to $579.9 million on asset growth. Average investment yield improved 3 basis points to 4.49%.
Total benefits and expenses at Reinsurance Group increased 5.5% year over year to $3.2 billion. Higher interest expense and operating costs resulted in cost escalation.

Quarterly Segment Update

U.S. and Latin America: Total pre-tax income increased 35.2% to $96 million in the quarter under discussion.

The Traditional segment reported pre-tax adjusted operating income of $18.1 million, a significant increase from $1.2 million in the year-ago quarter. Net premiums rose 4% from the year-ago quarter to $1.4 billion owing to higher sales volume.

Asset Intensive segment’s pre-tax adjusted operating income improved 19.9% to $59.6 million. Financial Reinsurance business reported pre-tax adjusted operating income of $18.3 million, which decreased 9.4% year over year.

Canada: Total pre-tax income climbed 59.9% to $46.8 million.
Traditional segment’s pre-tax adjusted operating income surged 74.2% to $44.6 million on the back of favorable individual mortality experience. However, forex had an adverse effect of $2.4 million on the metric. Net premiums increased slightly to $255.3 million. However, net foreign currency fluctuations had a negative effect of $12.7 million.

Financial Solutions segment’s pre-tax adjusted operating income slumped 59.3% year over year to $1.3 million attributable to slightly unfavorable longevity experience while net foreign currency volatility had an adverse effect of $0.1 million.

Europe, Middle East and Africa (EMEA): Total pre-tax income of $50.5 million declined 1.5% from the prior-year quarter’s figure.

Pre-tax adjusted operating income of the traditional segment was $15.4 million, flat year over year. Net foreign currency fluctuations had a negative impact of $1.7 million. Premiums declined 3.1% year over year to $363.9 million. Foreign currency exchange rates had an adverse effect of $32.6 million on the metric.

The Financial Solutions segment delivered pre-tax adjusted operating income of $35.1 million, down 2.2% from the year-ago quarter and matched expectations. However, net foreign currency fluctuations had an adverse impact of $2.6 million on the metric.

Asia/Pacific: Total pre-tax income of nearly $40 million increased 65.4% from the prior-year quarter.

Traditional segment’s pre-tax adjusted operating income of about 36.6 million improved 59.8% from the year-ago period on favorable overall experience in Asia, partially offset by a loss in Australia. Net foreign currency fluctuations adversely impacted the result by $2.2 million.

Premiums increased 10% to $646.7 million, reflecting continued growth in Asia, offset by a reduction in Australia. The results witnessed an unfavorable forex impact of $27.2 million.

The Financial Solutions segment’s pre-tax adjusted operating income surged 153.8% to $3.3 million owing to better-than-expected results from a treaty that is in runoff as well as new treaties effective this quarter.

Corporate and Other: Pre-tax adjusted operating loss was $19.8 million against income of $30.9 million in the prior-year period.

Financial Update

As of Mar 31, 2019, Reinsurance Group had assets worth $66.7 billion, up 6.8% from the level at 2018 end.

As of Mar 31, 2019, Reinsurance Group’s book value per share excluding accumulated other comprehensive income, grew 7.6% year over year to $126.38

Adjusted return on equity was 11%.
The company exited the quarter with $0.9 billion in excess capital.

Share Repurchase and Dividend Update

Reinsurance Group deployed capital of $100 million into in-force and other transactions and share buybacks.

In the quarter under review, the company bought back shares worth $50 million.

The board of directors cleared a dividend of 60 cents per share, payable on May 6, 2019 to shareholders of record as of May 9, 2019.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Reinsurance Group has an average Growth Score of C, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Reinsurance Group has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.