Reinsurance Group Stock Plunges 11.1% YTD: How Should You Play?

Core Insights - Reinsurance Group of America (RGA) shares have declined by 11.1% year-to-date, contrasting with a 2.5% decline in the industry, while the Finance sector and the S&P 500 have gained 10.6% and 9.5%, respectively [1][7] - RGA has a market capitalization of $12.6 billion, with an average trading volume of 0.4 million shares over the last three months [1] Valuation and Market Position - RGA shares are trading at a price-to-book value of 1.03X, which is lower than the industry average of 1.66X, indicating that RGA shares are relatively affordable [4] - The average target price for RGA, based on estimates from 11 analysts, is $239 per share, suggesting a potential upside of 28.3% from the last closing price [5] Financial Performance - In Q2, RGA's net investment income surged by 30.1% to $1.4 billion, with yields increasing by 66 basis points to 5.3% [7][14] - The Zacks Consensus Estimate for RGA's 2025 revenues is $23.4 billion, reflecting a year-over-year improvement of 2.5% [9] - Current-year earnings are estimated at $22.73 per share, up 0.7% from the previous year, while 2026 earnings per share and revenues are projected to increase by 9.8% and 12.5%, respectively, from 2025 estimates [9] Analyst Sentiment and Estimates - Analysts have recently lowered their earnings estimates for RGA for 2025 and 2026 by 1.5% and 0.5%, respectively, over the past 30 days [10] - The adjusted operating return on equity (ROE) for Q2 2025 has decreased by 100 basis points to 14.3%, with trailing 12-month ROE falling by 320 basis points year-over-year to 12.6% [16] Market Leadership and Growth Potential - RGA leads the reinsurance markets in the U.S., Latin America, and Canada, with a strong focus on individual mortality segments that provide stable earnings and capital generation [11][12] - The company benefits from a sizable in-force business that supports steady earnings and has seen long-term growth in net investment income, with a 17.2% compound annual growth rate (CAGR) from 2016 to 2024 [14] Challenges and Financial Health - Rising expenses from higher claims, interest credited, operating costs, and interest expenses could pressure margins [15] - Long-term debt has increased by 13.7% since the end of 2024, reaching $5.73 billion, which has pushed the total debt-to-capital ratio up by 50 basis points to 32.1 [16]