TipRanks Smart Value #20: Value Reinforced
1
Dear Investors,
Dear Investors,
Welcome to the 20th edition of our recently launched TipRanks Smart Value Newsletter!
1
This Week’s Top Value Pick: Reinsurance Group of America (RGA)
Reinsurance Group of America (RGA) is a leading global life and health reinsurance company specializing in risk and capital solutions for insurance carriers. Its diverse portfolio spans individual and group life reinsurance, health, disability, longevity, asset-intensive, and financial reinsurance products. With operations in over 25 countries and clients in more than 80 markets, RGA is recognized for its actuarial expertise, innovation in underwriting, and strong partnerships that help insurers manage risk, optimize capital, and enhance long-term financial stability.
1
Global Ascent
Reinsurance Group of America began its journey in 1992, when it was spun off from General American Life Insurance Company as an independent entity. Headquartered in Chesterfield, Missouri, the company initially focused on traditional life reinsurance in North America. It soon broadened its scope, venturing into group coverage insurance and insuring health-related risks while laying the foundation for a diversified global platform.
During the late 1990s and early 2000s, RGA accelerated its international expansion, entering markets across Canada, Europe, Asia, and Latin America. This geographic diversification laid the foundation for the company’s global footprint, which now spans more than 20 countries. Its disciplined underwriting and financial strength allowed the company to navigate economic downturns while capitalizing on opportunities arising from regulatory shifts and evolving client needs.
As insurers faced growing demands to manage capital efficiently, RGA introduced innovative reinsurance solutions. To address evolving client needs, RGA expanded beyond traditional risk transfer by developing capital-efficient solutions. These included financial reinsurance and asset-intensive products that helped insurers manage interest rate and duration risk, while improving solvency metrics. RGA also became an early innovator in longevity reinsurance, providing insurers and pension funds with tools to mitigate rising life expectancy exposures.
Over the years, RGA’s earnings profile has benefited from the increasing demand for customized risk transfer solutions, including pension risk transfer deals, capital relief transactions, and stable value products. The company’s actuarial expertise, strong client relationships, and reputation for risk discipline have positioned it as a preferred partner among leading global insurers.
RGA’s growth has been underpinned by sound financial stewardship, robust regulatory standing, and strong credit ratings. At the end of Q1 2025, the company had $4 trillion of reinsurance in force1 and $128.2 billion in assets. Its consistent focus on client-centric innovation, risk management, and disciplined capital deployment continues to support long-term earnings growth and solidify its standing as one of the world’s premier life and health reinsurers.
With a market capitalization of nearly $13 billion and trailing twelve-month revenues of around $21 billion, RGA is ranked #196 on the 2025 Fortune 500 list – after moving up 27 spots from its 2024 ranking, breaking into the top 200 for the first time.
—
1- “In-force” insurance refers to active policies where required premiums are being paid, keeping coverage in effect. For insurers like RGA, it means the policyholder continues to pay premiums, and the insurer remains obligated to provide coverage and pay benefits until the policy matures, lapses, or is terminated.
1
Diversified Strength
Reinsurance Group of America operates a globally diversified reinsurance model, centered on two core segments: traditional reinsurance and financial solutions. This structure provides stable, recurring revenue across economic cycles and geographies by transferring insurance risks, such as mortality, morbidity, longevity, and investment income volatility, from client insurers in exchange for reinsurance premiums.
Traditional life and health reinsurance remains RGA’s largest business, covering individual and group life, disability, critical illness, long-term care, and health insurance. These contracts, structured on facultative or automatic treaty2 bases, enable RGA to assume risk from primary insurers while leveraging its actuarial and underwriting expertise. The long-term nature of these contracts provides predictable premium income and a consistent future earnings stream.
The company’s geographical and business-based operational segments include U.S. and Latin America, Canada, Europe, Middle East, and Africa (EMEA), Asia Pacific (APAC), and Corporate and other.
RGA’s financial solutions segment complements its earnings with asset-intensive and capital-driven reinsurance structures. In asset-intensive transactions, such as coinsurance3 of annuities and universal life, RGA assumes investment-backed liabilities, earning spreads through prudent asset management. These structures help insurers manage capital, smooth earnings, and optimize balance sheets under U.S. GAAP standards.
Capital solutions, including financial reinsurance and longevity reinsurance, further support clients’ regulatory and capital efficiency needs. Longevity reinsurance involves assuming risk from pension plans and annuity products and is a growing area across the U.S., Europe, and Canada. These deals, including pension risk transfer and customized arrangements for plan sponsors, generate fee-based income with low claim volatility.
RGA also participates in the stable value market, offering guaranteed investment contracts, such as stable value wraps4, to retirement plans. These products provide principal protection and steady returns, supporting diversification and consistent earnings.
RGA manages over $105 billion in invested assets, primarily in high-quality fixed income and mortgage loans. This portfolio backs policyholder obligations and is a major driver of free cash flow and profitability. Strong underwriting, disciplined pricing, and risk management across regional segments – including the U.S. & Latin America, Canada, EMEA, and APAC – support RGA’s resilient, diversified earnings base.
—
2- Facultative reinsurance is normally purchased by ceding companies for medically impaired lives, unusual risks, or liabilities above the binding limits specified in their automatic reinsurance treaties. An automatic reinsurance treaty provides that the ceding company will cede risks to a reinsurer on specified blocks of policies where the underlying policies meet the ceding company’s underwriting criteria.
3- Coinsurance arrangement: Depending upon the terms of the contract, the reinsurer may share in the risk of loss due to mortality or morbidity, lapses, and the investment risk, if any, inherent in the underlying policy.
4- Stable value wraps are specialized financial contracts used by reinsurance companies like RGA to support stable value funds, which are popular investment options in defined contribution retirement plans such as 401(k)s.
1
Strategic Momentum
RGA is advancing a multi-faceted growth strategy anchored in product innovation, disciplined capital deployment, and global expansion. At the heart of this strategy is “Creation Re,” a client-centric framework focused on co-developing insurance solutions. This approach has led to larger, more profitable deals and a growing library of adaptable products. Since 2021, new business embedded value per transaction in Asia has tripled, reflecting stronger underwriting profitability and deal size.
RGA’s targeted offerings, such as simplified critical illness and long-term care coverage for seniors, advanced underwriting for high-net-worth clients, and digital solutions like MedScreen+, have helped it gain market share in Hong Kong. These initiatives have deepened market penetration and can be replicated across regions, creating a virtuous cycle of growth.
RGA’s biometric expertise, which leverages data analytics across mortality, morbidity, and longevity risks, remains a competitive advantage. It underpins both traditional and asset-intensive reinsurance, enabling accurate pricing and consistently favorable claims experience.
RGA recently completed a major in-force transaction with Manulife, acquiring a large block of existing policies. The deal increases assets under management, recurring premiums, and underwriting income, with limited added risk due to the block’s predictable performance. Additionally, two smaller but strategic in-force deals in Asia – likely in Japan or Hong Kong – have strengthened RGA’s presence in key growth markets.
In-force transactions provide immediate returns and are capital efficient. RGA ended the quarter with $1.9 billion in excess capital, and even after reserving funds for its deal with Equitable, retained $1.3 billion in deployable capital. In February 2025, RGA agreed to reinsure a mortality-focused block from Equitable. While the block may have been capital-inefficient under U.S. GAAP for Equitable, RGA expects to generate long-term value by leveraging its actuarial capabilities, scale efficiencies, and investment expertise. The deal is projected to deliver returns within RGA’s 13–15% ROE target, reflecting its ability to unlock value from blocks others deem burdensome.
RGA is a leading player in the UK’s pension risk transfer (PRT) market, supported by its proprietary underwriting platform for individual annuities. This technology enables precise risk assessment and pricing, helping insurers de-risk pension liabilities more effectively. With strong demand from UK pension funds and insurers, RGA anticipates continued high deal activity through 2025. In the U.S., PRT volumes softened in early 2025 amid market volatility, but RGA expects a recovery in the second half. The $50 billion U.S. PRT market is projected to more than double by 2030, driven by corporate de-risking, regulatory momentum, and increased activity from small and mid-sized plans.
The company has also expanded its traditional U.S. reinsurance business through new treaties, backed by advanced biometric underwriting. Distribution partnerships and outsourced services have extended RGA’s reach and efficiency.
In Asia, RGA signed a deal with Dai-ichi Life to reinsure ¥150 billion (about $1 billion) in statutory reserves, effective March 31, 2025. The deal supports Dai-ichi’s capital optimization while expanding RGA’s in-force portfolio.
Despite its strong execution, RGA remains mindful of key risks. Macroeconomic uncertainty could impact client demand, claims experience, or investment returns. While its Creation Re strategy helps mitigate competition, the reinsurance market remains competitive. Still, RGA’s robust pipeline across EMEA, Asia, and North America, underpinned by its proprietary solutions and long-term client partnerships, positions it well for continued, profitable growth.
1
Growth Momentum
RGA has delivered consistent long-term earnings growth, supported by strong underwriting, global scale, and favorable claims experience. Over the past five years, the company’s revenues and EPS have grown at a CAGR of 8.3% and 4.1%, respectively. Revenue growth has been driven by expansion in in-force reinsurance and innovative offerings across growth markets, while EPS growth reflects effective risk management, cost control, and prudent capital allocation.
In Q1 2025, RGA’s revenues declined 17% year-over-year to $5.3 billion, missing estimates of $5.6 billion. The decline was driven by a 25% drop in net premiums to $4 billion, primarily due to a tough year-over-year comparison. The prior-year quarter included a one-time $1.9 billion pension risk transfer (PRT) deal, which did not recur this year. Excluding this non-recurring item, underlying net premiums rose 13%, signaling continued growth. Foreign exchange headwinds further reduced reported premiums by about $60 million.
Despite revenue pressure, adjusted EPS declined just 6% to $5.66, above consensus estimates of $5.30, mainly due to adverse currency movements. Book value per share, excluding accumulated other comprehensive income (AOCI) and embedded derivatives, rose 5.2% year-over-year to $154.60, representing a 9.8% CAGR since 2021, driven by favorable biometric claims and segmental growth. Notably, the APAC region posted 8.5% premium growth, while EMEA also contributed meaningfully. RGA’s “Creation Re” strategy has supported scaling innovation across markets.
RGA delivered strong profitability, with adjusted ROE (ex-AOCI) at 13.4%, and 15% excluding notable items. Favorable claims experience added $196 million in economic value and $58 million to the financial statement, especially in the U.S., due to lower-than-expected large claims.
Investment performance remains a strength. In Q1, new money rates (the yield that RGA earns on freshly invested premiums or assets) held steady at 6.39%, supporting returns on RGA’s long-duration liabilities. With widening credit spreads and high cash balances, the company is deploying capital into long-duration, higher-yielding assets. Private markets remain a key focus, including private credit, real estate debt, and infrastructure, offering attractive yields and capital efficiency despite slower issuance.
RGA is expected to announce its Q2 results on July 31, and analysts project that the company will report EPS of $5.5 on revenues of $5.7 billion. Management sees strong momentum from its pipeline, in-force growth, and capital-efficient solutions. Supported by biometric expertise, innovation, and disciplined risk-taking, RGA remains well-positioned for sustained earnings and capital generation in a volatile environment.
1
Value Opportunity
Reinsurance Group of America has maintained a strong and consistent commitment to shareholder returns through dividends and share repurchases. The company has paid dividends since 1993 and has raised them annually for the past 15 consecutive years. Over the last decade, RGA’s dividend has grown at a compound annual rate of 10.6%. The most recent dividend, paid in May 2025, was $0.89 per share, up about 5% year-over-year, marking the 14th straight year of dividend growth – bringing the yield to 1.8%. This consistent upward trend reflects RGA’s profitability, disciplined capital management, and earnings resilience.
While dividends remain a cornerstone of shareholder returns, RGA also performs selective stock buybacks. The company prioritizes organic growth and strategic investments but maintains repurchases as a flexible capital allocation lever. In 2024, RGA’s board authorized a $500 million share repurchase program with no expiration date. As of the end of Q1, no shares had been repurchased under this authorization, and the full amount remained available.
Despite the company’s strong business and financial position, RGA’s stock has declined by more than 10% over the past year, primarily due to earnings volatility, macroeconomic uncertainty, and temporary headwinds from one-off items. This underperformance has driven down its valuation, which now reflects significant upside potential. RGA trades at a non-GAAP trailing P/E of 8.8x and a forward P/E of 8.4x – both more than 25% below the sector median. It also trades at a discount to its sector median of over 11% and 70% based on its trailing price-to-book and price-to-cash-flow ratios, respectively.
Compared to peers like MetLife and Prudential, RGA remains undervalued across several key metrics, including trailing EV/EBITDA, non-GAAP P/E, price-to-book value, and price-to-cash-flow multiples. This discount appears to be at odds given RGA’s robust balance sheet, strong ROE, and defensive positioning in life and health reinsurance. The company’s prudent capital allocation, low payout ratio, and resilient investment income further reinforce its ability to compound value over time.
Analysts remain optimistic about RGA, forecasting an upside of around 27%, with some analysts projecting an upside as high as 48%, driven by the company’s strong financial performance and strategic positioning, and bolstered by significant corporate events that enhance liquidity. A discounted cash flow analysis further suggests RGA could be undervalued by as much as 70%, offering a compelling opportunity for value-oriented investors.11
1
Investing Takeaway
Reinsurance Group of America presents a compelling opportunity for value-focused investors. Despite recent stock pressure from temporary headwinds, the company’s fundamentals remain sound. RGA benefits from a diversified global platform, consistent earnings from in-force reinsurance, and disciplined capital deployment through dividends and selective buybacks. Its long-term orientation, actuarial expertise, and innovation in capital-efficient solutions help sustain growth while maintaining a conservative risk profile. Trading at meaningful discounts to peers across key valuation metrics, RGA’s stock appears mispriced relative to its underlying strengths. The company’s low payout ratio, strong balance sheet, and steady investment income support ongoing shareholder returns and reinvestment in high-ROE initiatives. For investors seeking a combination of resilience, income potential, and long-term value creation, RGA offers an attractive entry point into a defensive business with growing strategic relevance across global insurance markets.
