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Why Is Reinsurance Group (RGA) Up 11.6% Since the Last Earnings Report?
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More than a month has gone by since the last earnings report for Reinsurance Group of America, Incorporated (RGA - Free Report) . Shares have added about 11.6% in that time frame, outperforming the market .
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Reinsurance Group Q3 Earnings Beat Estimates, Up Y/Y
Reinsurance Group of America, Incorporated reported third-quarter 2017 operating income of $3.44 per share. The bottom line surpassed the Zacks Consensus Estimate of $2.59 by 32.8% and improved 39.8% from the year-ago quarter.
The company’s Traditional business in the EMEA, Asia Pacific U.S. and Latin America region performed well in the quarter.
Highlights of the quarter are the strong performance of the U.S. segment, driven primarily by favorable individual mortality experience and above-average variable investment income. Earnings in the U.S. Traditional segment reached a record level.
Reinsurance Group's operating revenues of $3.1 billion climbed 11% year over year. Moreover, revenues surpassed the Zacks Consensus Estimate by 0.9%.
Net premiums of $2.5 billion rose 10.6% year over year. Investment income rose 13.7% from the prior-year quarter to $556.9 million. The average investment yield was up by 38 basis points (bps) to 4.81%, representing strong variable investment income.
Total benefits and expenses at Reinsurance Group increased 7.4% year over year to $2.8 billion. Higher claims and other policy benefits, interest credited, interest expenses, policy acquisition costs, other operating expenses as well as collateral finance and securitization expenses resulted in the overall increase in costs.
Quarterly Segment Update
U.S.and Latin America: Total pre-tax income surged 67.5% to $256.6 million in the quarter under review.
The Traditional segment reported pre-tax adjusted operating income, which surged 101.2% to $162 million, year over year. The upside was attributable to extremely favorable mortality experience and above-average variable investment income. Net premiums grew 4% from the year-ago quarter to $1.3 billion.
The Asset Intensive segment’s pre-tax adjusted operating income increased 23.7% to $72.6 million. Favorable experience on payout annuities and above-average variable investment income contributed to the upside. Financial Reinsurance business reported pre-tax adjusted operating income of $22 million compared with $14 million in the prior-year quarter owing to strong businesses volumes.
Canada: Total pre-tax operating income rose 0.2% to $31.8 million.
The Traditional segment’s pre-tax adjusted operating income fell 10.5% to $27.4 million. Net premiums were down 2.3% at $225.8 million. The decline is attributable to the consistent effects of an anticipated reduction in creditor business.
The Financial Solutions segment’s pre-tax adjusted operating income skyrocketed 275% year over year to $4.5 million on favorable longevity experience.
Asia/Pacific: Total pre-tax adjusted operating income was $26.3 million, up 19.2% from the prior-year quarter.
Pre-tax adjusted operating income of the traditional segment increased 34.3% to $26.6 million during the quarter. Premiums jumped 33% to $536.9 million on strong growth in Asia, mainly due to new and existing treaties in Hong Kong and Southeast Asia.
The Financial Solutions segment reported pre-tax adjusted operating loss of $0.2 million against pre-tax operating income of $2.3 million in the year-ago quarter.
Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income was $45.1 million, 6.2% up from the prior-year quarter.
The Traditional segment reported pre-tax operating income of about $15.4 million, up 81.2% from the prior-year quarter. Premiums improved 25% to $344.2 million, mainly owing to the impact of new treaties and growth of existing treaties.
The Financial Solutions segment’s pre-tax adjusted operating income declined 12.4% to $29.7 million due to favorable experience in the longevity businesses.
Corporate and Other: Pre-tax adjusted operating loss of $21.7 million was wider than loss of $19 million incurred in the year-ago quarter.
Financial Update
As of Sep 30, 2017, Reinsurance Group had assets worth $58.7 billion, up 7% from 2016-end.
As of Sep 30, 2017, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income (AOCI), grew 11.7% year over year to $100.54.
Dividend Update
The board of directors approved a dividend of 50 cents, which is payable on Nov 28, 2017 to shareholders on record as of Nov 7, 2017.
How Have Estimates Been Moving Since Then?
Fresh estimate followed an upward path over the past two months.
Reinsurance Group of America, Incorporated Price and Consensus
Currently, Reinsurance Group's stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.
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Why Is Reinsurance Group (RGA) Up 11.6% Since the Last Earnings Report?
More than a month has gone by since the last earnings report for Reinsurance Group of America, Incorporated (RGA - Free Report) . Shares have added about 11.6% in that time frame, outperforming the market .
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Reinsurance Group Q3 Earnings Beat Estimates, Up Y/Y
Reinsurance Group of America, Incorporated reported third-quarter 2017 operating income of $3.44 per share. The bottom line surpassed the Zacks Consensus Estimate of $2.59 by 32.8% and improved 39.8% from the year-ago quarter.
The company’s Traditional business in the EMEA, Asia Pacific U.S. and Latin America region performed well in the quarter.
Highlights of the quarter are the strong performance of the U.S. segment, driven primarily by favorable individual mortality experience and above-average variable investment income. Earnings in the U.S. Traditional segment reached a record level.
Reinsurance Group's operating revenues of $3.1 billion climbed 11% year over year. Moreover, revenues surpassed the Zacks Consensus Estimate by 0.9%.
Net premiums of $2.5 billion rose 10.6% year over year. Investment income rose 13.7% from the prior-year quarter to $556.9 million. The average investment yield was up by 38 basis points (bps) to 4.81%, representing strong variable investment income.
Total benefits and expenses at Reinsurance Group increased 7.4% year over year to $2.8 billion. Higher claims and other policy benefits, interest credited, interest expenses, policy acquisition costs, other operating expenses as well as collateral finance and securitization expenses resulted in the overall increase in costs.
Quarterly Segment Update
U.S.and Latin America: Total pre-tax income surged 67.5% to $256.6 million in the quarter under review.
The Traditional segment reported pre-tax adjusted operating income, which surged 101.2% to $162 million, year over year. The upside was attributable to extremely favorable mortality experience and above-average variable investment income. Net premiums grew 4% from the year-ago quarter to $1.3 billion.
The Asset Intensive segment’s pre-tax adjusted operating income increased 23.7% to $72.6 million. Favorable experience on payout annuities and above-average variable investment income contributed to the upside. Financial Reinsurance business reported pre-tax adjusted operating income of $22 million compared with $14 million in the prior-year quarter owing to strong businesses volumes.
Canada: Total pre-tax operating income rose 0.2% to $31.8 million.
The Traditional segment’s pre-tax adjusted operating income fell 10.5% to $27.4 million. Net premiums were down 2.3% at $225.8 million. The decline is attributable to the consistent effects of an anticipated reduction in creditor business.
The Financial Solutions segment’s pre-tax adjusted operating income skyrocketed 275% year over year to $4.5 million on favorable longevity experience.
Asia/Pacific: Total pre-tax adjusted operating income was $26.3 million, up 19.2% from the prior-year quarter.
Pre-tax adjusted operating income of the traditional segment increased 34.3% to $26.6 million during the quarter. Premiums jumped 33% to $536.9 million on strong growth in Asia, mainly due to new and existing treaties in Hong Kong and Southeast Asia.
The Financial Solutions segment reported pre-tax adjusted operating loss of $0.2 million against pre-tax operating income of $2.3 million in the year-ago quarter.
Europe, Middle East and Africa (EMEA): Total pre-tax adjusted operating income was $45.1 million, 6.2% up from the prior-year quarter.
The Traditional segment reported pre-tax operating income of about $15.4 million, up 81.2% from the prior-year quarter. Premiums improved 25% to $344.2 million, mainly owing to the impact of new treaties and growth of existing treaties.
The Financial Solutions segment’s pre-tax adjusted operating income declined 12.4% to $29.7 million due to favorable experience in the longevity businesses.
Corporate and Other: Pre-tax adjusted operating loss of $21.7 million was wider than loss of $19 million incurred in the year-ago quarter.
Financial Update
As of Sep 30, 2017, Reinsurance Group had assets worth $58.7 billion, up 7% from 2016-end.
As of Sep 30, 2017, Reinsurance Group’s book value per share, excluding accumulated other comprehensive income (AOCI), grew 11.7% year over year to $100.54.
Dividend Update
The board of directors approved a dividend of 50 cents, which is payable on Nov 28, 2017 to shareholders on record as of Nov 7, 2017.
How Have Estimates Been Moving Since Then?
Fresh estimate followed an upward path over the past two months.
Reinsurance Group of America, Incorporated Price and Consensus
Reinsurance Group of America, Incorporated Price and Consensus | Reinsurance Group of America, Incorporated Quote
VGM Scores
Currently, Reinsurance Group's stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.