Reinsurance Group Hits 52-Week High on Strong Q3 Results - Analyst Blog

On Nov 3, 2014, Reinsurance Group of America Inc. (RGA) surged to a 52-week high of $85.19. The rally in the stock was propelled by strong third-quarter earnings which outpaced the Zacks Consensus Estimate by 10.5%. About 0.4 million shares exchanged hand in the last session.

 

Year to date, the stock is up 13.6%, higher than the S&P 500's increase of 10.2% over the same time frame.

 

Growth Drivers 

 

Reinsurance Group's strong third-quarter financial performance continued its track record of superior results and attractive revenue and earnings growth. 

 

Operating income of $2.31 per share surpassed the Zacks Consensus Estimate by 10.5% and improved 7.9% year over year.

 

The quarterly results were driven by strong international earnings from Europe, Middle East and Africa (EMEA) and the Asia Pacific, along with continued momentum in Global Financial Solutions.

 

Reinsurance Group total revenue of $2.72 billion increased 13.7% year over year and was above the Zacks Consensus Estimate of $2.64 billion. Total premium of $2.2 billion rose 7% year over year.

 

Investors are optimistic about the stock given that Reinsurance Group delivered a positive surprise in three out of the last four quarters, with an average beat of 6.6%.

 

Earlier during the month, the company also announced that it will be buying Aurora National Life Assurance Company, a wholly owned life insurance subsidiary of Swiss Re.

 

The deal will widen Reinsurance Group's U.S. annuities and life insurance business, since the business of Aurora which has approximately 82,000 policies in force comprises of two-thirds annuities, and one-third interest-sensitive life products. Reinsurance Group derives more than 50% of its premium from the U.S. market.

 

The company's strong balance sheet and a significant cash flow generation also make it a favored stock. 

 

Estimate Revision Shows Strength

 

Driven by optimism surrounding the stock, over the last 30 days, the Zacks Consensus Estimate for 2014 earnings per share climbed 2.1% to $8.23. 

 

Reinsurance Group carries a Zacks Rank #3 (Hold).

 

Stocks to Consider

 

Better-ranked players in the industry include Lincoln National Corp. (LNC), StanCorp Financial Group Inc. (SFG) and China Life Insurance Co. Ltd. (LFC). All these stocks carry a Zacks Rank #2 (Buy).