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Reinsurance Group (RGA) Gains From Solid Segmental Growth

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Reinsurance Group of America, Incorporated (RGA - Free Report) is well-poised for growth, driven by new business growth, a higher invested asset base, favorable longevity experience and a solid cash position.

Solid premium growth at its U.S. and Latin America, Canada operations, Europe, Middle East and Africa (EMEA) and Asia Pacific segments are likely to drive the performance of Reinsurance Group.

The Asia Pacific business is likely to improve on the back of contributions from new single premium asset-intensive transactions, growth in invested asset base and organic growth in Asia. Favorable experience and strong growth in new business are also likely to boost this business segment.

The U.S. Asset-Intensive business should continue to gain from higher transaction and other fees, favorable longevity experience and equity markets as well as higher variable investment income from commercial loan prepayments.

The EMEA segment business is well poised to gain from an increase in new business activity, higher investments supporting annuity business and an increase in new business volumes of closed longevity business.

The Canada business should continue to gain from higher business volume under existing treaties, increased variable investment income and a higher invested asset base.

In February 2022, Reinsurance Group completed the longevity reinsurance transaction with NN Life, the largest life insurance company in the Netherlands, to enhance growth of the longevity business.

The life insurer boasts a strong balance sheet with a stable capital mix. It continues to hold a high level of liquidity with access to an $850 million syndicated credit facility and other sources and has an excess capital position of $1.3 billion. Leverage ratios remained consistent within their targeted ranges.

Courtesy of solid financial strength, Reinsurance Group undertakes shareholder-friendly moves. RGA increased its dividend at an eight-year (2015-2022) CAGR of 10.4%. The insurer also repurchased shares for $96 million in 2021, in addition to capital deployment to support organic new business and in-force block transactions.

Reinsurance Group’s expenses escalated over the last several years due to higher claims and other policy benefits, interest credited, operating costs and interest expense. A persistent elevation of expenses might weigh on its margins.

Other Players

Other key players in the life insurance industry include Manulife Financial Corp. (MFC - Free Report) , Voya Financial, Inc. (VOYA - Free Report) and Brighthouse Financial Inc. (BHF - Free Report) .

Manulife Financial’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 3.39%.

Manulife Financial stands to benefit from solid net fee income from higher average assets under management and administration in the Global Wealth and Asset Management business. Manulife boasts an impressive inorganic growth story with acquisitions.

Voya’s earnings surpassed estimates in two of the last four quarters and missed in the other two, the average earnings surprise being 16.6%.

Voya remains poised to gain from higher fee income from business growth, favorable equity markets and net investment spread experience. VOYA expects continued strength across diversified investment strategies and distribution channels.

The bottom line of Brighthouse surpassed earnings estimates in each of the last four quarters, the average being 77.29%.

Brighthouse remains well poised for growth, with solid performances by the Annuities, Life and Run-off segments. BHF expects a continued shift in business mix profile with the addition of higher cash flow generation and less capital-intensive business, along with the runoff of less profitable business.


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