Updated Research Report on Reinsurance Group - Analyst Blog

On May 9, we issued an updated research report on Reinsurance Group of America Inc. RGA. First-quarter 2014 operating income of $1.61 per share missed the the Zacks Consensus Estimate of $1.97 and decreased 2.4% year over year. High claim costs in its U.S. and Canadian business were responsible for the decline. 

 

The company expects business in the U.S. to remain under pressure given a competitive life insurance market. Moreover, low interest rates, significant exposure to foreign exchange and an underperforming Australian business would also not favor the company.

 

Reinsurance Group has witnessed declining estimates since the first-quarter earnings release. After 6 out of 8 downward estimate revisions over the last 30 days, the Zacks Consensus Estimate for 2014 is pegged at $7.75 per share, up 2.4% year over year. The Zacks Consensus Estimate for 2015 is $8.52 per share, down 0.8% year over year, after 2 downward revisions out of 8 estimates over the same time frame.

 

Nevertheless, Reinsurance Group is focusing on its underwriting standards, prompt response on quotes, competitive pricing as well as capacity and flexibility to meet 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 consolidation in recent years within the life reinsurance industry, there are fewer competitors. Accordingly, we believe that the life reinsurance pricing environment will remain attractive for the company.

 

Also a disciplined capital management strategy will continue to boost earnings. 

 

Reinsurance Group carries a Zacks Rank #4 (Sell). 

 

Other Stocks 

 

Some better-ranked stocks - Symetra Financial Corp. SYA with a Zacks Rank #1 (Strong Buy), and Protective Life Corp. PL and Sun Life Financial Inc. SLF with a Zacks Rank #2 (Buy) are worth considering.