Reinsurance Group of America (RGA) has been on a roll, with its shares skyrocketing 35.1% year-to-date (YTD), significantly outperforming the industry’s 21.5% growth. This impressive performance stands out against the Finance sector’s 14.3% and the Zacks S&P 500 index’s 20% returns for the same period. With a market capitalization of $14.39 billion, RGA’s trading volume in the past three months has averaged 0.3 million shares.
The driving force behind this rally is RGA’s robust momentum in several key markets, including the U.S. Traditional, Longevity/PRT, Asia Asset-Intensive, and Asia Traditional segments. These segments have witnessed remarkable growth, further bolstering RGA’s overall performance.
Adding to the positive outlook is RGA’s strong growth projections. The Zacks Consensus Estimate for Reinsurance Group’s 2024 earnings per share indicates a year-over-year increase of 9.1%. The consensus estimate for revenues is pegged at $21.85 billion, implying a year-over-year improvement of 14.7%. Looking ahead, the consensus estimate for 2025 earnings per share indicates a year-over-year increase of 3.4% from the corresponding 2024 estimates. This optimistic outlook is further supported by RGA’s impressive expected long-term earnings growth rate of 10.4%, surpassing the industry average of 4.6%. RGA has also earned a commendable Growth Score of B, signifying its strong growth prospects.
RGA’s commitment to innovation, efficiency, and shareholder returns is evident in its strong financial performance. The company’s return on invested capital has been steadily increasing, reflecting its ability to effectively utilize funds for income generation. In the trailing 12 months, RGA achieved a ROIC of 6.8%, significantly exceeding the industry average of 0.6%. This robust financial health has attracted positive attention from analysts, with each of the five analysts covering the stock raising their estimates for 2024, and four analysts doing the same for 2025 over the past 60 days. This upward trend has resulted in a 2.8% and 1.9% increase in the consensus estimate for 2024 and 2025, respectively, over the past 60 days.
While RGA’s valuation might appear expensive at first glance, a deeper analysis reveals its undervalued status compared to its industry peers. Currently, RGA trades at a price-to-book multiple of 1.46, lower than the industry average of 1.96. This suggests that RGA’s market value is not fully reflecting its inherent worth.
Looking ahead, RGA’s positive momentum is expected to continue. Its strong leadership position in the U.S. and Latin American traditional markets, combined with its successful product line expansion, puts RGA in a prime position for sustained growth. The company’s focus on longevity insurance, a market segment with strong growth potential, is expected to further contribute to its diversification and long-term earnings.
Furthermore, RGA’s strategic capital management approach, encompassing share buybacks, dividend payments, and prudent investments, is geared towards maximizing shareholder returns and creating sustainable value. The company’s commitment to technological advancements and its leading position in biometric liability reinsurance further enhance its competitive edge.
RGA’s solid financial performance, strong growth prospects, and commitment to shareholder returns make it a compelling investment option for investors seeking exposure to the life insurance sector.
