Credit Suisse Starts Reinsurance Group of America (RGA) at Neutral
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Credit Suisse initiates coverage on Reinsurance Group of America (NYSE: RGA) with a Neutral rating and a price target of $115.00.
Analyst John Nadel commented, "RGA offers investors a somewhat unique opportunity to have exposure to mortality improvement in the U.S. and internationally. The company has delivered solid long-term revenue, earnings and book value growth. While it is essentially a pure-play life reinsurance business, short-term results are often volatile given the inherent unpredictability involved in estimating mortality from quarter to quarter. The flipside is that this volatility has in the past created opportunities to build or add to positions, particularly following EPS shortfalls. While RGA currently has significant excess capital available for deployment and has demonstrated healthy operating performance over the long term, we believe current valuation at 10.9x 2017E EPS and 1.23x 2Q16 BVPS excl. AOCI to be high relative to the group. This compares with a historical average P/E of 10.1x and P/BVPS excl. AOCI of 1.34x. We do not believe fundamentals have improved enough to justify RGA shares grossly outperforming our coverage universe, up over 27% YTD. Thus, we initiate with a Neutral rating. Click here for full details in our industry launch presentation."
Shares of Reinsurance Group of America closed at $107.52 yesterday.
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