Reinsurance Group (RGA) Rides On Steady Top-Line Improvement

Reinsurance Group of America, Incorporated (NYSE:RGA) , a provider of traditional individual and group life, asset-intensive, critical illness and financial reinsurance, has been displaying top-line growth over a considerable period of time owing to higher net premiums and investment income. This growth trajectory is anticipated to continue into the upcoming quarters as well, which in turn, will drive the company’s financial performance.

Moreover, product-line expansion with market leading services, capabilities, expertise and innovation should consistently aid the company’s top-line improvement.

Riding on the strength of rising interest rates, the company has been witnessing better investment results over the past few quarters and we expect this momentum to remain in the near term on the back of a favorable rate environment reflecting steady hikes in interest rate.

The life insurer’s international operations generate one-third of its total premiums. The company has a significant presence in Hong Kong, Japan, India, Korea and Taiwan. Notably, economic growth and demographic trends leading to a rapid flourish in the insurance market offer ample growth opportunities in these regions.

Reinsurance Group has a strong capital management policy in place that enhances its shareholder value through share buybacks and dividend hikes. Additionally, an excess capital of about $1.1 billion at third-quarter end will help the company maintain financial flexibility to pursue growth initiatives.

The stock also carries a favorable Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B, when combined with a top Zacks Rank #1 (Strong Buy) or 2 (Buy) emerge as profitable investment bets.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $12.16, representing year-over-year growth of 12.2% on 4.7% higher revenues of $12.9 billion. For 2019, the consensus mark for the bottom line stands at $13.37, translating into a 9.9% year-over-year rise as revenues improve 3.5% to $13.4 billion.

Shares of Reinsurance Group are trading at a price to book multiple of 1.07, much lower than the industry average of 1.78. Price to book value ratio is the best multiple for valuing life insurers because of large variations in their earnings results from one quarter to the next. This ratio essentially measures a life insurer’s current market value relative to what it would be worth if it chooses to shut down. Underpriced shares with solid fundamentals are rewarding picks.

Zacks Rank and Share Price Movement

Currently, the life insurer sports a Zacks Rank #1 (Strong Buy). Shares of the company have lost 7.5% year to date, noticeably narrower than the industry’s decline of 23%. We believe, the aforementioned positives will turn the stock around and drive it higher in the near term.

Other Stocks That Warrant a Look

Investors interested in other top-ranked stocks from the same space can also consider Manulife Financial Corporation (NYSE:MFC) , Primerica, Inc. (NYSE:PRI) and Genworth Financial, Inc. (NYSE:GNW) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Manulife provides financial advice, insurance and wealth and asset management solutions for individuals, groups and institutions in Asia, Canada and the United States. The company delivered positive surprises in three of the trailing four reported quarters with average beat of 6.03%.

Primerica distributes financial products to middle income households in the United States and Canada. The company pulled off positive surprises in three of the previous four reported quarters with average positive surprise of 5.19%.

Genworth Financial provides insurance and homeownership solutions in the United States and internationally. The company surpassed estimates in the preceding four reported quarters with average earnings surprise of 76.99%.

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