On Sep 22, we downgraded
Reinsurance Group of America Inc.
) to Underperform from Neutral based on the disappointing second
quarter earnings results.
Why the Downgrade?
Reinsurance Group witnessed declining estimates as it reported
dismal second quarter earnings results on Jul 19. It reported
second quarter 2013 operating loss of 99 cents per share,
significantly worse than Zacks Consensus Estimate of $1.83 per
share and $1.65 per share earned in the year-ago quarter. Results
suffered due to high claims liability in the company's Australia
Following Reinsurance Group's second quarter earnings release,
the Zacks Consensus Estimate for 2013 declined 19.8% to $4.42 per
share as 3 of 9 estimates were pulled down. The Zacks Consensus
Estimate for 2014 also slipped 0.8% to $7.84 per share, as 3 of 9
estimates moved south. With the Zacks Consensus Estimates for
both 2013 and 2014 going down, the company now has a Zacks #4
Causes of Concern
Reinsurance Group has been suffering from its Australian group
business from past many years. Results reflected underperformance
from the company's Australian business, which is suffering from
high claims. Though the company has taken measures to improve the
business condition, we do not expect a reversal in the situation
any time soon.
Also weak equity markets coupled with interest rates that are
likely to remain low until 2014, are expected to put additional
pressure on Reinsurance Group's Asset Intensive business.
With a significant chunk of international business (Canada,
Europe, U.K, South Africa), Reinsurance Group's results are
exposed to foreign exchange volatility.
Other Stocks That Warrant a Look
StanCorp Financial Group, Inc.
Symetra Financial Corp.
), with Zacks Rank #1(Strong Buy) and
Genworth Financial Inc.
) with Zacks Rank #2 (Buy) are worth considering.
GENWORTH FINL (GNW): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
SYMETRA FINL CP (SYA): Free Stock Analysis
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