Reinsurance Group Upped to Buy - Analyst Blog

On April 1, Zacks Investment Research upgraded Reinsurance Group of America Inc. RGA to a Zacks Rank #2 (Buy).

Why the Upgrade?

Reinsurance Group has been witnessing rising earnings estimates on the back of strong fourth-quarter and full year 2013 results and rating affirmation from A.M. Best Co. This reinsurer has successfully delivered positive earnings surprises in 3 of the last 4 quarters.

Reinsurance Group reported fourth-quarter earnings of $2.17 per share which handily beat the Zacks Consensus Estimate of $1.96 per share.  Total revenue of $2.74 billion increased 1.5% year over year and was slightly ahead of the Zacks Consensus Estimate of $2.73 billion.

Reinsurance Group delivered a solid top and bottom-line performance in both its businesses – reinsurance as well as insurance in 2013. Based on its progress, over the medium term, the company now targets growth in operating income per share in the range of 5% to 8%, and growth in operating return on equity in the band of 11% to 12%.

Going into 2014, the company is expected to benefit from the overall improvement in the insurance market. The company is expanding international business along with a developing U.S.-based asset sensitive business which carries high margins.

Reinsurance Group has a well-developed reinsurance franchise in the global reinsurance market. The company also expects to benefit from an increase in interest rates anticipated this year.

Moreover, the ongoing execution of the company's capital management strategy continues to enhance key profitability and return measures. Reinsurance Group carries investment grade rating from leading rating agencies.

Following its earnings release, Reinsurance Group has been witnessing an upswing in earnings estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for 2014 moved north by 1.4% to $7.91 per share as 4 of 8 estimates were pulled up. Likewise, for 2015, the Zacks Consensus Estimate moved up by 0.8% to $8.58 per share over the same time frame as 3 of the 8 estimates were revised higher.   

Other Stocks to Consider

Other well-placed insurance stocks that warrant a look include Primerica Inc. (PI), Symetra Financial Corp. SYA and Fidelity & Guaranty Life Common FGL. All these stocks carry the same Zacks Rank as Reinsurance Group.