Reinsurance Group Upped to Neutral - Analyst Blog
November 25 2013 - 5:05PM
Zacks
On Nov 25, we upgraded our recommendation on the shares of
Reinsurance Group of America Inc. (RGA) to Neutral
from Underperform following better-than-expected third quarter
earnings. This life insurer carries a Zacks Rank #3 (Hold).
Why the Upgrade?
Our improved outlook on the stock comes on the back of its strong
third quarter results wherein the company reported operating income
of $2.14 per share, significantly exceeding the Zacks Consensus
Estimate of $1.82 per share. The company also performed exceedingly
well year-over-year with earnings per share growth of 58.5%.
Results were helped by higher revenues, along with lower share
count.
Reinsurance Group witnessed an increase in estimates since third
quarter earnings release. The Zacks Consensus Estimate for 2013 was
up 7.7% to $4.74 per share, as 7 out of 8 estimates were raised
over the last 30 days. For 2014, the same estimates went up 0.5% to
$7.81 per share as 2 out of 8 estimates moved north over the same
time frame.
Reinsurance Group holds a significant position in the U.S. and
Canada. Further, the company is fully geared to maintain its
competitive position in the in North American reinsurance market by
growing Facultative Reinsurance, Automatic Reinsurance and In Force
Block Reinsurance.
The company is also focusing on its underwriting standards, prompt
response on quotes, competitive pricing as well as capacity and
flexibility to meeting customer needs, in an attempt to preserve
its position.
Additionally, the company is growing its international operations
to reap the benefits of diversification.
Reinsurance Group is also poised to benefit from the changing
industry trends. As a result of consolidations in recent years
within the life reinsurance industry, there are fewer competitors.
As a consequence, we believe that the life reinsurance pricing
environment will remain attractive for the company.
However, some of the headwinds faced by the company include low
interest rates, significant exposure to foreign exchange and an
underperforming Australian business.
Nevertheless a disciplined capital management strategy will
continue to boost bottom-line earnings.
Other Stocks
Some better–ranked life insurance stock includes StanCorp
Financial Group, Inc. (SFG) with Zacks Rank #1 (Strong
Buy) and American Equity Investment Life Holding
Co. (AEL) and Lincoln National
Corporation (LNC) with Zacks Rank #2 (Buy).
AMER EQUITY INV (AEL): Free Stock Analysis Report
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
REINSURANCE GRP (RGA): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
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