Reinsurance Group Poised For Growth Despite Forex Volatility

On May 19, 2016, we issued an updated research report on Reinsurance Group of America Inc. (NYSE:RGA) .

The life insurer’s first-quarter 2016 earnings missed the Zacks Consensus Estimate. However, the bottom line improved from the year-ago quarter. Adverse foreign currency movement of 10 cents per share and higher claims in the U.S. Individual Mortality Business resulted to the lower-than-expected earnings in the first quarter.

Reinsurance Group is a leader in the U.S. Latin American traditional market and has successfully expanded its product line with market leading services, capabilities, expertise and innovation. Moreover, the company’s underwriting, analytics and innovation will continue to support growth and benefit its clients.

Further, the company’s experienced and efficient management team supports its capacity and strong appetite for attractive block opportunities. Banking on this, the company expects to generate 4–6% growth in the region over the near term.

Also, the company’s niche position in the Canadian reinsurance markets, expansion of its international operations and diversified earnings stream are other positives. Moreover, the company is poised to benefit from an improving life reinsurance pricing.

Reinsurance Group has been managing capital effectively via share buybacks and dividend payments. The company displayed a well-balanced execution of its capital management strategy through share buybacks of $105 million in the first quarter of 2016 and has $300 million remaining under its authorization. On an average, the company expects to deploy $300 million to $400 million of excess capital, annually.

However, the company continues to face earnings volatility from foreign exchange fluctuation and a turnaround is not expected in the near term. In addition, management anticipates a lower portfolio yield owing to lesser payments and persistently low money rates in 2016.

Zacks Rank and Stocks to Consider

Currently, Reinsurance Group carries a Zacks Rank #3 (Hold). Some better-ranked stocks are GWG Holdings, Inc. (NASDAQ:GWGH) , Manulife Financial Corporation (NYSE:MFC) and Health Insurance Innovations, Inc. (NASDAQ:HIIQ) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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