Yahoo Finance Reinsurance Group (RGA) Prices $500 Million Share Offering
Reinsurance Group of America, Incorporated RGA announced the pricing of 6.2 million shares of its common stock whose par value is 1 cent per share. The shares are priced at $81.00 per share or $500 million for the total offering.
The company intends to deploy the net proceeds from the offering of shares for general corporate purposes. It has given a 30-day option to underwriters to purchase up to 0.9 million of additional shares of common stock at the public offering price of $75 million less an underwriting discount.
Reinsurance Group issues additional shares of common stock or preferred stock for corporate purposes, including raising additional capital, corporate acquisitions, and employee benefit plans. The additional shares can also be utilized to dilute the stock ownership of individuals who seek to obtain control of the company. As of Mar 31, 2020, total number of shares outstanding was 63 million.
Such issuance will dilute the percentage ownership of shareholders. It may also dilute per share projected earnings or book value of the common stock.
Reinsurance Group has issued shares to raise additional capital when other companies are issuing debt, taking advantage of a low interest rate environment. It is likely that its leverage ratio is high and times interest earned is poor implying that its earnings are not sufficient to cover interest obligations. Times interest earned was 5.7% in the first quarter, down from 7.5% in fourth-quarter 2019. Furthermore, its debt to capital has increased 170 basis points since 2017. Also, the company is likely to avoid the interest burden associated with issuing debt.
Shares of this Zacks Rank #4 (Sell) life insurer have lost 42% compared with the industry's decline of 15.2% in a year’s time. Nevertheless, strong capital position and effective capital deployment are likely to drive its shares going forward.
Stocks That Warrant a Look
Some better-ranked stocks from the life insurance sector are American Equity Investment Life Holding Company AEL, BRP Group Inc. BRP and Primerica Inc. PRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Equity Investment provides life insurance products and services in the United States and issues fixed index and rate annuities and single premium immediate annuities, as well as life insurance products. It surpassed estimates in each of the last four quarters, with the average positive surprise being 63.04%.
BRP Group operates as an insurance distribution company in the United States and internationally. It surpassed estimates in two of the last four quarters, with the average positive surprise being 110.72%.
Primerica provides financial products to middle income households, mutual funds and various retirement plans, managed investments, variable and fixed annuities in the United States and Canada. It surpassed estimates in each of the last four quarters, with the average positive surprise being 4.29%.
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American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
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