On Nov 25, we upgraded our recommendation on the shares of
Reinsurance Group of America Inc.
) to Neutral from Underperform following better-than-expected
third quarter earnings. This life insurer carries a Zacks Rank #3
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
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
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.
Some better-ranked life insurance stock includes
StanCorp Financial Group, Inc.
) with Zacks Rank #1 (Strong Buy) and
American Equity Investment Life Holding Co.
Lincoln National Corporation
) with Zacks Rank #2 (Buy).
AMER EQUITY INV (AEL): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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