Reinsurance Group's Australian Business Poses A Concern
Zacks Investment Research | Jul 05, 2016 08:50AM ET
On Jul 4, 2016, we issued an updated research report on Reinsurance Group of America Inc. (NYSE:RGA) .
Reinsurance Group’s Australia business has been underperforming for quite some time, due to competitive direct and reinsurance markets, complex product designs, weakening claims experience and increasing legal activity. Going forward, management expects to witness a certain degree of volatility in its Australia business.
Also, the evolving capital requirement with respect to the introduction of Solvency II could result in significant consolidation in the European insurance market. This would in turn affect the dynamics of the life reinsurance market overall, hurt reinsurance demand and put pressure on life reinsurance margins. However, in the short term, there should be increased demand for reinsurance.
Regulatory compliances will also affect the company as it will have to keep an increased amount of capital aside that could be invested in business.
The company is exposed to the adverse effect of forex as it derives more than one-third of its premiums from international operations in Europe, the Middle East and Africa and the Asia Pacific.
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