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Why Is Reinsurance Group (RGA) Down 0.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Reinsurance Group (RGA - Free Report) . Shares have lost about 0.5% in that time frame, underperforming 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, Revenues Up Y/Y
Reinsurance Group reported first-quarter 2020 adjusted operating income of $1.41 per share, which missed the Zacks Consensus Estimate by 46.4%. The bottom line alsodeclined 46% from the year-ago quarter.
The company’s results were negatively impacted by foreign currency fluctuations and hindered growth in Asia. Further, the COVID-19 pandemic affected the results as well.
Operational Update
Reinsurance Group's operating revenues of $3.5 billion improved 2.3% year over year. The upside can be attributed to improved premiums and strong investment income.
Net premiums of $2.8 billion rose 3% year over year. Investment income increased 2.4% from the prior-year quarter to $594 million. However, average investment yield deteriorated 41 basis points to 4.08% owing to below-average variable investment income.
Total benefits and expenses at Reinsurance Group increased 3% year over year to $3.3 billion. Higher claims and other policy benefits, interest credited and interest expense resulted in cost escalation.
Quarterly Segment Update
U.S. and Latin America: The Traditional segment’s total pre-tax loss came in at $62 million in the first quarteragainst the prior-year quarter’s income of $12 million.
Pre-tax adjusted operating loss amounted to $55 million against the prior-year quarter’s adjusted operating income of $18 million. The downside can be attributed tolower variable investment income and adverse individual mortality experience on account of higher claims.Net premiums inched up 1% from the year-ago quarter to $1.4 billion.
Asset Intensive segment’s pre-tax adjusted operating income declined 28.3% to $43 million. Nevertheless, Capital Solutions business reported pre-tax adjusted operating income of $23 million, which improved 27.8% year over year.
Canada: The Traditional segment’s total pre-tax income decreased 54.9% year over year to $23 million.
Pre-tax adjusted operating income declined 20% year over year to $36 million, due to modestly favorable individual mortality experience. Further, forex had a favorable effect of $1 million on the metric. Net premiums increased 2% year over year to $260 million. Net foreign currency fluctuations had an adverse impact of $3 million.
Financial Solutions segment’s pre-tax income and pre-tax adjusted operating income increased 200% year over year to $3 million. 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 income and pre-tax adjusted operating income of the traditional segment was $17 million, up 6.3% year over year. The upside can be attributed to favorable underwriting experience primarily inthe U.K. Net foreign currency fluctuations had an immaterial effect on pre-tax income and pre-tax adjusted operating income. Premiums increased 7% to $390 million in the reported quarter. Foreign currency exchange rates had an adverse effect of $13 million on the metric.
Financial Solutions segment delivered pre-tax adjusted operating income of $36 million, up 2.9% from the year-ago quarter. Net foreign currency fluctuations had an adverse effect of $1 million on pre-tax income and pre-tax adjusted operating income.
Asia/Pacific: Total pre-tax income and pre-tax adjusted operating income of the traditional segment was $24 million, down 35.1% year over year. Net foreign currency fluctuations impacted results adversely by $1 million. Premiums decreased slightly from the year-ago quarter to $636 million, due to decline in premiums from Australia and limitedgrowth in Asia. Foreign currency exchange rates had an unfavorable effect of $16 million on net premiums.
Financial Solutions segment’s pre-tax adjusted operating income soared 233.3% year over year to $10 million, attributable to new business in Asia. Net premiums improved significantly to $74 million, attributable to addition of new treaties in 2019.
Corporate and Other: Pre-tax adjusted operating loss was $19 million, narrower than loss of $20 million in the prior-year period, primarily owingto reducedgeneral expenses.
Financial Update
As of Mar 31, 2020, Reinsurance Group had assets worth $75.7 billion, up 13.4% from the level at prior-year quarter end.
As of Mar 31, 2020, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, grew 4.9% year over year to $132.55.
Adjusted return on equity was 9.5%.
The company exited the quarter with $700 million in excess capital.
Capital Deployment
Reinsurance Group deployed capital of $55 million for in-force and other transactions.
The company also bought back shares worth $153 million in the quarter.
The board of directors approved a dividend of 70 cents per share, unchanged from the prior payout. The dividend will be paid out on Jun 4 to shareholders of record as of May 21.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -28.34% due to these changes.
VGM Scores
At this time, Reinsurance Group has a nice Growth Score of B, a grade with the same score on the momentum front. 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Reinsurance Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Reinsurance Group (RGA) Down 0.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Reinsurance Group (RGA - Free Report) . Shares have lost about 0.5% in that time frame, underperforming 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, Revenues Up Y/Y
Reinsurance Group reported first-quarter 2020 adjusted operating income of $1.41 per share, which missed the Zacks Consensus Estimate by 46.4%. The bottom line alsodeclined 46% from the year-ago quarter.
The company’s results were negatively impacted by foreign currency fluctuations and hindered growth in Asia. Further, the COVID-19 pandemic affected the results as well.
Operational Update
Reinsurance Group's operating revenues of $3.5 billion improved 2.3% year over year. The upside can be attributed to improved premiums and strong investment income.
Net premiums of $2.8 billion rose 3% year over year. Investment income increased 2.4% from the prior-year quarter to $594 million. However, average investment yield deteriorated 41 basis points to 4.08% owing to below-average variable investment income.
Total benefits and expenses at Reinsurance Group increased 3% year over year to $3.3 billion. Higher claims and other policy benefits, interest credited and interest expense resulted in cost escalation.
Quarterly Segment Update
U.S. and Latin America: The Traditional segment’s total pre-tax loss came in at $62 million in the first quarteragainst the prior-year quarter’s income of $12 million.
Pre-tax adjusted operating loss amounted to $55 million against the prior-year quarter’s adjusted operating income of $18 million. The downside can be attributed tolower variable investment income and adverse individual mortality experience on account of higher claims.Net premiums inched up 1% from the year-ago quarter to $1.4 billion.
Asset Intensive segment’s pre-tax adjusted operating income declined 28.3% to $43 million. Nevertheless, Capital Solutions business reported pre-tax adjusted operating income of $23 million, which improved 27.8% year over year.
Canada: The Traditional segment’s total pre-tax income decreased 54.9% year over year to $23 million.
Pre-tax adjusted operating income declined 20% year over year to $36 million, due to modestly favorable individual mortality experience. Further, forex had a favorable effect of $1 million on the metric. Net premiums increased 2% year over year to $260 million. Net foreign currency fluctuations had an adverse impact of $3 million.
Financial Solutions segment’s pre-tax income and pre-tax adjusted operating income increased 200% year over year to $3 million. 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 income and pre-tax adjusted operating income of the traditional segment was $17 million, up 6.3% year over year. The upside can be attributed to favorable underwriting experience primarily inthe U.K. Net foreign currency fluctuations had an immaterial effect on pre-tax income and pre-tax adjusted operating income. Premiums increased 7% to $390 million in the reported quarter. Foreign currency exchange rates had an adverse effect of $13 million on the metric.
Financial Solutions segment delivered pre-tax adjusted operating income of $36 million, up 2.9% from the year-ago quarter. Net foreign currency fluctuations had an adverse effect of $1 million on pre-tax income and pre-tax adjusted operating income.
Asia/Pacific: Total pre-tax income and pre-tax adjusted operating income of the traditional segment was $24 million, down 35.1% year over year. Net foreign currency fluctuations impacted results adversely by $1 million. Premiums decreased slightly from the year-ago quarter to $636 million, due to decline in premiums from Australia and limitedgrowth in Asia. Foreign currency exchange rates had an unfavorable effect of $16 million on net premiums.
Financial Solutions segment’s pre-tax adjusted operating income soared 233.3% year over year to $10 million, attributable to new business in Asia. Net premiums improved significantly to $74 million, attributable to addition of new treaties in 2019.
Corporate and Other: Pre-tax adjusted operating loss was $19 million, narrower than loss of $20 million in the prior-year period, primarily owingto reducedgeneral expenses.
Financial Update
As of Mar 31, 2020, Reinsurance Group had assets worth $75.7 billion, up 13.4% from the level at prior-year quarter end.
As of Mar 31, 2020, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income, grew 4.9% year over year to $132.55.
Adjusted return on equity was 9.5%.
The company exited the quarter with $700 million in excess capital.
Capital Deployment
Reinsurance Group deployed capital of $55 million for in-force and other transactions.
The company also bought back shares worth $153 million in the quarter.
The board of directors approved a dividend of 70 cents per share, unchanged from the prior payout. The dividend will be paid out on Jun 4 to shareholders of record as of May 21.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -28.34% due to these changes.
VGM Scores
At this time, Reinsurance Group has a nice Growth Score of B, a grade with the same score on the momentum front. 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Reinsurance Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.