On Monday, Reinsurance Group of America (NYSE:RGA) shares received a steady vote of confidence from Piper Sandler, which reiterated an Overweight rating and a $252.00 price target on the company's stock. This endorsement follows RGA's recent announcement on November 20, 2024, detailing a significant reinsurance contract with John Hancock, a subsidiary of Manulife Financial Corporation (NYSE:MFC).
The contract, a quota-share arrangement, encompasses approximately $4.1 billion in liabilities. It includes $1.9 billion in long-term care (LTC) and $2.2 billion in structured settlements. RGA is set to continue its support for Manulife's U.S. permanent life business on a yearly renewable term basis.
The characteristics of the LTC block align with RGA's existing in-force block, which was issued after 2007. The new block is expected to be accretive to RGA's earnings per share in 2025 and will be funded with internal capital resources.
Earlier in 2024, RGA and Manulife completed a coinsurance transaction for Canadian universal life insurance, adding to a series of three previous transactions between the two companies in Canada and the U.S. Piper Sandler views this latest announcement as a positive development for several reasons.
Firstly, it compensates for a contract that CNO Financial (NYSE:CNO) Group recently terminated in order to retain its new LTC businesses. Secondly, it aligns with improved market conditions for LTC, as indicated by recent discussions by insurers MetLife (NYSE:MET) and Unum Group (NYSE:UNM). Lastly, it is seen as beneficial to RGA's earnings for the year 2025.
The analyst notes the ongoing success of RGA's "mortality-as-a-service flywheel," a model that continues to demonstrate resilience and growth potential within the industry. This recent contract is interpreted as a reinforcement of the company's strategic position and a testament to the robustness of its service offerings in the reinsurance market.
InvestingPro Insights
Reinsurance Group of America's recent contract with John Hancock aligns well with several key metrics and insights from InvestingPro. The company's market cap of $14.95 billion USD reflects its significant presence in the insurance industry, which is further supported by an InvestingPro Tip highlighting RGA as a "prominent player in the Insurance industry."
The positive outlook from Piper Sandler is reinforced by RGA's strong financial performance. The company's revenue growth of 22.08% over the last twelve months and a 9.66% quarterly growth indicate robust business expansion, potentially fueled by strategic contracts like the one with John Hancock. Additionally, an InvestingPro Tip reveals that "5 analysts have revised their earnings upwards for the upcoming period," suggesting growing confidence in RGA's future performance.
RGA's dividend policy also stands out, with an InvestingPro Tip noting that the company "has raised its dividend for 15 consecutive years" and "has maintained dividend payments for 32 consecutive years." This consistent dividend growth, coupled with a current dividend yield of 1.57%, may appeal to income-focused investors.
For those interested in a deeper analysis, InvestingPro offers 6 additional tips that could provide further insights into RGA's financial health and market position.
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