Why Reinsurance Group Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of life and health reinsurer Reinsurance Group of America (NYSE: RGA  ) sank 10% today after its quarterly results disappointed Wall Street.

So what: The stock has surged over the past six months on strong top-line and bottom-line growth, but today's second-quarter results -- net loss of $49.6 million versus a profit of $141.1 million in the year-ago period -- is forcing Mr. Market to sober up a bit. While revenue is still growing at a solid rate on strong net premiums, high costs from disability coverage in Australia is becoming an increasing cause for concern among analysts.

Now what: Management said it will be extra-cautious about its Australia operations going forward. "At this time, we are suspending all quoting activity in the Australian group total and permanent disability market indefinitely and will continue to be extremely selective in other aspects of that group market until it stabilizes and the products become more sustainable," said CEO A. Greig Woodring. Of course, with all of RGA's other geographic areas -- U.S., Canada, Europe, South Africa, and Asia -- performing quite favorably, Fools might want to use the Australian weakness to buy into the stock.  

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