We are reiterating our Neutral recommendation on the shares of
Reinsurance Group of America
) prior to its third quarter earnings release, scheduled on October
Reinsurance Group holds a significant position in the U.S. and
Canada. It has fully geared itself to maintain its competitive
position in the in North American reinsurance market by growing
Facultative Reinsurance, Automatic Reinsurance and In Force Block
It 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.
The acquisition of ReliaStar's group life and health reinsurance
business in 2010 has helped it to penetrate deeper in the North
Reinsurance Group is aggressively growing its international
operations to reap the benefits of diversification. Management eyes
key Asian markets, particularly India and China, which represent
long-term significant opportunities given the low reinsurance
penetration in these markets.
Approximately 46% of the total company's premium comes from its
international operations, up from 43% last year. Going forward,
management continues to see significant market opportunities in
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
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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 existing life
reinsurers, particularly for those with a significant market
presence (RGA controlling approximately 19.4% of market share in
North America ranks second only to Swiss Re holding 21.4% on the
basis of individual life reinsurance in force) and strong ratings.
Some of the negatives include weak equity markets coupled with
interest rates, which is expected to remain low in 2012, and put
additional pressure on Reinsurance Group's Asset Intensive
business. Moreover, management's conservative positioning of the
investment portfolio is expected to exert pressure on yield.
Reinsurance Group competes primarily with Munich Re, Swiss Re,
General Re, a subsidiary of
Berkshire Hathaway Inc.
). Reinsurance Group currently retains a Zacks # 4 Rank, which
translates into a short-term Sell rating.