Asia And Global Markets Will Open New Insurance Horizons

Key Takeaways

• Expansion in Asia and emerging markets, alongside tech-driven underwriting, supports diversified premium growth and efficiency gains.
  
• Strong capital position and disciplined risk selection enable strategic growth, shareholder returns, and resilience amid regulatory changes.
  
• Persistent earnings volatility, rising medical costs, regional concentration risks, complex capital requirements, and intensifying competition threaten long-term profitability and financial flexibility.

Catalysts

Provides reinsurance and financial solutions.

• RGA is capitalizing on growing insurance demand in Asia and other international markets, as evidenced by robust new business in Hong Kong, Taiwan, Korea, and a record number of asset-intensive transactions across five countries and three continents; this global expansion drives sustained premium growth and strengthens revenue diversification.
  
• The company's leadership in digital underwriting solutions and customized reinsurance products, bolstered by data analytics and exclusive arrangements, enhances efficiency and pricing power, which is likely to improve net margins and generate higher earnings as these tech-enabled capabilities scale.
  
• Rising life and health insurance penetration fueled by global aging demographics and an expanding middle class, particularly in emerging markets where RGA is gaining market share, positions the company for above-industry long-term revenue and earnings growth.
  
• 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.
  
• Ongoing regulatory changes and heightened risk awareness in the post-pandemic environment are increasing insurer demand for tailored reinsurance solutions, where RGA's focused expertise and disciplined risk selection can capture higher-margin, exclusive business, underpinning sustainable growth in earnings and return on equity.

Reinsurance Group of America Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Reinsurance Group of America's revenue will grow by 10.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.5% today to 6.6% in 3 years time.
• Analysts expect earnings to reach $1.9 billion (and earnings per share of $28.46) by about August 2028, up from $770.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.2x on those 2028 earnings, down from 15.8x today. This future PE is lower than the current PE for the US Insurance industry at 14.1x.
• Analysts expect the number of shares outstanding to grow by 0.36% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Reinsurance Group of America Future Earnings Per Share Growth

Risks

• Persistently high volatility in U.S. individual life claims and recent unfavorable healthcare excess claims indicate greater earnings variability, which could lead to investor concerns about the stability of net margins and long-term earnings.
  
• Continued pressure from more expensive health treatments (specialty drugs, transplants, etc.) in the U.S. healthcare excess line may signal a broader industry trend of rising medical costs, potentially impacting future profitability if rate increases cannot keep pace, reducing net margins.
  
• Heavy strategic focus and business exposure in markets such as North America and Asia increases RGA's sensitivity to demographic/regulatory shifts and region-specific economic downturns, which could constrain revenue growth if insurance product demand in these markets weakens.
  
• Growing reliance on rating agency and regulatory capital frameworks-including recognition of value of in-force credits and complex capital calculations-introduces capital management risk; if assumptions prove overly optimistic or frameworks change, deployable capital and financial flexibility could be impaired, with direct consequences for return on equity (ROE) and capital available for growth or buybacks.
  
• Increasing industry competition, especially from alternative capital sources and evolving customer preferences toward digital-first or nontraditional insurance products, threatens to compress pricing and shrink RGA's addressable market, putting downward pressure on long-term revenue and earnings potential.

Valuation

• The analysts have a consensus price target of $238.556 for Reinsurance Group of America based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $275.0, and the most bearish reporting a price target of just $205.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $29.0 billion, earnings will come to $1.9 billion, and it would be trading on a PE ratio of 10.2x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $183.69, the analyst price target of $238.56 is 23.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.