Reinsurance Group Trades at a Discount: How to Play the Stock

Reinsurance Group of America, Incorporated RGA shares are trading at a discount to the Zacks Life Insurance industry. Its forward price-to-book value of 1.2X is lower than the industry average of 1.83X, the Finance sector’s 4.05X and the Zacks S&P 500 Composite’s 7.89X. The life insurer has a Value Score of A.

The insurer has a market capitalization of $13.09 billion. The average volume of shares traded in the last three months was 0.5 million. Shares of Sun Life Financial Inc. SLF and Primerica, Inc. PRI are also trading at a multiple higher than the industry average, while Manulife Financial Corp. MFC shares are trading at a discount. 

RGA’s Price Performance

Shares of this life insurer have gained 2.4% in the past year. It, however, underperformed the industry’s growth of 13.8%, the Finance sector’s return of 15.4% and the S&P 500 composite’s appreciation of 8.1%.

Reinsurance Group’s Earnings Surprise History

Reinsurance Group has a decent earnings surprise history. Its earnings beat estimates in three of the last four quarters and missed in one, with an average surprise of 14.67%.

RGA’s Growth Projection Encourages

The Zacks Consensus Estimate for Reinsurance Group’s 2025 earnings per share indicates a year-over-year increase of 1.8%. The consensus estimate for revenues is pegged at $24.22 billion, implying a year-over-year improvement of 7.3%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.6% and 8.7%, respectively, from the corresponding 2024 estimates. 

Earnings have grown 15.3% in the past five years, better than the industry average of 7.8%. RGA has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company. 

Reinsurance Group’s Return on Invested Capital

Its return on invested capital (ROIC) has increased every year, reflecting RGA’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.3%, higher than the industry average of 0.6%.

Factors Acting in Favor of RGA

Reinsurance Group is a leader in the traditional U.S. and Latin American markets. It has successfully expanded its product line with market-leading services, capabilities, expertise and innovation. Individual mortality has matured, providing 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 is a significant source of future earnings. Reinsurance Group expects longevity insurance, projected to witness steady demand, to experience long-term growth in the Canadian market. While longevity insurance provides a diversified income source, 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. 

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.

Reinsurance Group 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.

The company’s free cash flow conversion has remained more than 85% over the last few quarters, reflecting its solid earnings.

Wealth Distribution

This global reinsurer has also been managing capital effectively via share buybacks, dividend payments and prudent investments. RGA expects to remain active in deploying capital into attractive growth opportunities in organic flow and in-force block transactions and returning excess capital to shareholders through dividends and share repurchases. 

Wrapping Up: Keep On Holding

New business volumes, favorable longevity experience, a diversified business and effective capital deployment should continue to favor RGA over the long term. The stock also has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Coupled with the positives and the affordability of the stock, it is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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