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Reinsurance Group Stock Near 52-Week High: Time to Buy?

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Shares of Reinsurance Group of America (RGA - Free Report) closed at $218.29 on Wednesday, near its 52-week high of $227.87, after having gained 34.9% year to date. Shares outperformed the industry, the Finance sector as well as the Zacks S&P 500 composite index in the same time frame. 

This leading global provider of traditional life and health reinsurance and financial solutions delivered an earnings surprise in each of the last four quarters. RGA’s strong momentum in U.S. Traditional, Longevity/PRT, Asia Asset-Intensive and Asia Traditional should continue to drive its earnings. 

RGA targets earnings per share to grow at a compounded rate of 8-10% over the intermediate term and a return on equity of 12-14% over the same time frame. It has a VGM Score of A.

Reinsurance Group Outperforms Industry, Sector & S&P YTD

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RGA Trading Above 50-Day Moving Average

RGA shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of its 52-week range.  

RGA Price Movement vs. 50-Day Moving Average

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Optimistic Analyst Sentiment for RGA

Four of the five analysts covering the stock have raised estimates for 2024, and three out of five have raised the same for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 has moved 1.8% and 1.4% north, respectively, in the past 30 days.

The Zacks Consensus Estimate for 2024 implies an 8.2% year-over-year increase, while the same for 2025 suggests a 3.8% increase.

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RGA’s Success Reflects Growth Initiatives

Reinsurance Group is a leader in the U.S. and Latin American traditional markets. It has successfully expanded its product line with market-leading services, capabilities, expertise and innovation. Individual mortality has matured and provides a base for stable earnings and capital generation. Significant value embedded in the in-force business is anticipated to generate predictable long-term earnings. Product-line expansion contributes to risk diversification.

In Canada, Reinsurance Group is a market leader with solid growth and profitability. It has a sizable block of in-force business, which acts as a significant source of future earnings. Reinsurance Group expects longevity insurance, which is projected to witness steady demand, to experience long-term growth in the Canadian market. While longevity insurance provides a source of diversified income, it also acts as a hedge to a large mortality position. 

Demand for protection products among the emerging global middle class and increasing demand for retirement, senior protection and savings products among aging populations create opportunities for growth in new business. 

This global reinsurer has returned value to shareholders by increasing dividends each year since 2011, except in pandemic-hit 2020.

RGA is well capitalized and has access to multiple forms of capital. RGA expects to remain active in deploying capital in attractive growth opportunities while balancing returning excess capital to shareholders over time.

RGA continues to ramp up technological inclusion with its product. This insurer is a global biometric liability reinsurance leader. Biometrics experience, which includes mortality, morbidity and longevity, over the last five quarters was favorable.

Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.

Given a life insurer’s sensitivity to interest rates, higher interest rates remain a net positive, providing additional investment income. An interest rate cut is likely in the September FOMC, with chances of more later this year. This will limit the upside that an improving rate environment offers. Proactive management of asset-liability risks helps lock higher yields and protect against adverse interest rate shocks.

RGA’s Return on Capital

Return on equity in the trailing 12 months was 15.8%, higher than the industry average of 15.5% as well as the intermediate-term target. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

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Its return on invested capital (ROIC) has increased every year. This reflects RGA’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.8%, higher than the industry average of 0.7%.

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RGA Shares Are Affordable

The stock is undervalued compared to its industry. It is currently trading at a price-to-book multiple of 1.42, lower than the industry average of 1.87. It also has a Value Score of A.

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Shares of other reinsurers like Everest Group, Ltd. (EG - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) are also trading at a discount to the industry average.

Conclusion

New business volumes, favorable longevity experience, a diversified business and effective capital deployment should continue to favor RGA over the long term. Coupled with the positives and the affordability of the stock, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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