Here's Why You Should Buy Reinsurance Group (RGA) for Now

Here's Why You Should Buy Reinsurance Group (RGA) for Now

Reinsurance Group of America, IncorporatedRGA remains well poised for growth, banking on changing life reinsurance pricing environment and expanding business in the pension risk transfer market. The Zacks Rank #2 (Buy) life insurer holds immense potential owing to a few good growth drivers.

Growth Projections: The stock has seen the Zacks Consensus Estimate for current-year earnings per share being pegged at $11.07 and for 2018, at $10.83. The consensus mark for 2017 reflects a year-over-year increase of 13.8% though the same for 2018 declined 2.2%.

Revenues are estimated to grow 9.3% and 3.6% year over year for 2017 and 2018, respectively.

The expected long-term earnings growth is pegged at 9%.

Northbound Estimates: The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 8.6% upward and for 2018, 0.7% over the last 30 days.

Price Outperformance: Shares of Reinsurance Group have rallied 25% in a year, outperforming the S&P 500 index’s gain of 18.2% as well as industry’s gain of 24.6%.


Positive Earnings Surprise History: Reinsurance Group has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 11.77%.

VGM Score: Reinsurance Group carries a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Attractive Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 1.2, falling significantly below the industry average of 2.4. Undervalued shares with growth prospects are best investment bets. Reinsurance Group carries a Value Score of A.  

Back-tested results have shown that stocks with a Value Score of A or B when combined with a favorable Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

Growth Drivers in Place

Reinsurance Group is a leader in the U.S. and Latin American traditional market. Its Individual mortality provides a base for stable earnings and capital generation.

The company also boasts market leadership in Canada for the seventh consecutive year. Its sizable block of in-force business in the country acts as a significant source of future earnings. Reinsurance Group expects longevity insurance, which is projected to see steady demand and long-term growth in the Canadian market.

Reinsurance Group is poised to benefit from the changing life reinsurance pricing environment and business expansion in the pension risk transfer market.

A strong capital position aids the company to return value to shareholders through dividend hikes and buybacks. The 22% dividend raise in the last quarter marked the eighth consecutive double-digit percentage increase. On an average, the company expects to deploy $300-$400 million of excess capital annually.

Other Stocks to Consider

Investors interested in life insurers can also look at other top-ranked stocks like Torchmark Corporation TMK, Primerica, Inc. PRI and American Equity Investment Life Holding Company AEL, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Torchmark provides various life and health insurance products, and annuities in the United States, Canada and New Zealand. The company delivered an average four-quarter positive surprise of 2.17%. Shares of the company have rallied 20.1% in a year.

Primerica distributes financial products to middle income households in the United States and Canada.  The company pulled off an average four-quarter positive surprise of 0.96%. Shares of the company have surged 36.8% in a year.

American Equity Investment develops and sells fixed index and fixed rate annuity products in the United States. The company delivered an average four-quarter positive surprise of 24.26%. Shares of the company have soared 42.7% in a year.

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