Reinsurance Group of America has had an impressive run over the past six months as its shares have beaten the S&P 500 by 5.7%. The stock now trades at $245.08, marking a 21.9% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is there a buying opportunity in Reinsurance Group of America, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Reinsurance Group of America Will Underperform?

We’re glad investors have benefited from the price increase, but we’re passing on Reinsurance Group of America for now. Here are three reasons why there are better opportunities than RGA, plus one stock we’d rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Reinsurance Group of America’s net premiums earned has grown at a 1.3% annualized rate over the last two years, much worse than the broader insurance industry and slower than its total revenue.

2. Growing BVPS Reflects Strong Asset Base

We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.

Although Reinsurance Group of America’s BVPS increased by a meager 1.2% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at an impressive 19.1% annual clip over the past two years (from $147.89 to $209.73 per share).

3. BVPS Projections Show Stormy Skies Ahead

The key to book value per share (BVPS) growth is an insurer’s ability to earn underwriting profits while generating strong returns on its float - Warren Buffet’s secret sauce.

Over the next 12 months, Consensus estimates call for Reinsurance Group of America’s BVPS to shrink by 8.2% to $171.89, a sour projection.

Final Judgment

Reinsurance Group of America falls short of our quality standards. With its shares topping the market in recent months, the stock trades at 1.1× forward P/B (or $245.08 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.

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