Reinsurance Group of America stock overview

Reinsurance Group of America (RGA) is drawing attention after recent trading left the stock at US$214.04, with returns mixed across time frames, including a gain over the past month and a decline over the past 3 months.

The recent pullback of around 0.5% on the day sits against a 30 day share price return of 2.38% and a year to date share price return of 5.21%. Longer term total shareholder returns over 3 and 5 years, at 58.48% and 86.26% respectively, point to momentum that has been stronger over multi year periods than in the past quarter.

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With RGA trading at US$214.04, annual revenue of US$24.9b and net income of US$1.2b, plus a large indicated intrinsic discount, the key question is clear: is this stock undervalued or are markets already pricing in future growth?

Most Popular Narrative: 13.8% Undervalued

Reinsurance Group of America’s most followed narrative puts fair value at $248.44 against the last close of $214.04, framing a sizeable valuation gap that hinges on long term earnings power and capital deployment.

Recent material improvements in deployable and excess capital, enabled by new in-force value credits and a strong balance sheet, provide RGA with the flexibility to pursue high-return new business, return capital to shareholders via buybacks/dividends, and deploy capital for select accretive acquisitions, all supporting future EPS and ROE uplift.

Want to see what is behind that earnings and capital story? The narrative leans on compounded revenue growth, thicker profit margins, and a reset earnings multiple. The exact mix of those assumptions might surprise you.

Result: Fair Value of $248.44 (UNDERVALUED)

However, that upside story could be challenged if earnings volatility in U.S. life and health lines persists, or if rising medical costs continue to pressure margins.

Another angle on valuation

Analysts see a 13.8% gap between RGA’s US$248.44 fair value and the US$214.04 share price. The current P/E of 11.4x sits almost exactly in line with the US Insurance industry at 11.3x and well above peers at 6.1x, while the fair ratio sits higher at 14.7x. This raises a question about whether the risk is paying up today or missing a possible rerating later.

Next Steps

Given the mix of optimism and open questions around RGA, it makes sense to review the details yourself and move quickly to form your view, starting with the 4 key rewards.

Looking for more investment ideas?

If RGA has you thinking more carefully about where your money is working hardest, do not stop here. Take a few minutes to scan wider opportunities that match your style.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.