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Why Reinsurance Group Shares Pulnged

By Jeremy Bowman - Updated Nov 17, 2016 at 4:13PM

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Is this meaningful? Or just another movement?

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 (RGA -1.46%) dropped as much 11% after its quarterly report left investors unimpressed.

So what: Though net income grew by 7%, operating profits fell sharply from $1.87 a share to $1.35 as claims from the U.S. and Australia were higher than expected. Management believes that operating income, a NON-GAAP figure that excludes investment-related gains, is a better measure of "ongoing profitability and underlying trends." Net premiums, meanwhile, increased 8%, and management said that segments outside of those underperforming businesses in the U.S. and Australia did well.

Now what: An 11% drop, or more than $6, seems a little steep for claims that amounted to a $0.66 loss per share in earnings, and investors can take some solace in knowing the company was able to make up for it with the added investment income. The increased claims do not seem like a long-term problem for the company, leaving the stock looking appealing as it operates in a stable business with a P/E of 7 and trades below book value. This could be right time to get on board for prospective investors.

Want to stay connected with Reinsurance Group of America? Just add the company to your watchlist here.

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Stocks Mentioned

Reinsurance Group of America, Incorporated Stock Quote
Reinsurance Group of America, Incorporated
$119.77 (-1.46%) $-1.78

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