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Investing.com - Raymond James downgraded Reinsurance Group of America (NYSE:RGA), a $12.4 billion market cap insurance player, from Market Perform to Underperform on Friday, citing rising risk factors and relative valuation concerns. According to InvestingPro data, the stock currently trades at a P/E ratio of 16.27x, while analysis suggests the company is slightly undervalued based on its Fair Value model.
The investment firm set a price target of $151.50, implying approximately 19% downside potential, and applied a roughly 6.0x P/E multiple to 2026 EPS. Raymond James noted that RGA has become more comparable to companies with combinations of spread-based businesses and mortality exposure. Despite the downgrade, InvestingPro data shows RGA maintains a "GOOD" overall Financial Health Score of 2.88, with particularly strong marks in relative value and cash flow metrics.
The analyst report highlighted concerns about RGA’s recent Equitable (NYSE:EQH) deal, which "will likely have no earnings at transfer," as the block had low reported earnings when held at EQH. Raymond James warned that RGA will need to cut expenses and reposition assets quickly to achieve excess earnings on the block.
The firm also identified emerging underwriting risks, including challenges in India, increased retention limits on life insurance, and stop loss pressures cited in the second quarter of 2025. Additionally, Raymond James pointed to RGA’s capital deployment exceeding its organic capital generation over the past two years amid heavy competition for reinsurance opportunities.
Raymond James estimated that RGA would have approximately $300 million in excess capital in Q2 2025, excluding $2 billion of capital freed up from recognition of value of in-force business, which it described as "a thin margin for error" given the company posted $(158) million of accounting impacts from unfavorable biometric factors in the same quarter. While concerns exist, InvestingPro analysis highlights RGA’s strong dividend history, with 15 consecutive years of increases and 33 years of consistent payments. Get access to 8 more exclusive InvestingPro Tips and a comprehensive Pro Research Report covering RGA’s complete financial picture.
In other recent news, Reinsurance Group of America (RGA) reported its second-quarter 2025 earnings, which fell short of market expectations. The company posted an earnings per share (EPS) of $4.72, missing the anticipated $5.56, representing a negative surprise of 15.11%. Revenue also came in below forecasts at $5.6 billion, compared to the expected $5.67 billion, resulting in a 1.23% shortfall. Additionally, RGA has formed a long-term partnership with FoxPath Capital Partners, a New York-based credit secondaries investment firm, including a strategic investment and a multi-fund anchor commitment. The financial terms of this transaction have not been disclosed. FoxPath, founded in 2023, specializes in providing private market liquidity solutions across the credit landscape. These developments reflect RGA’s ongoing strategic efforts and financial performance in the current market environment.
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