Reinsurance Group of America currently trades at $210.33 per share and has shown little upside over the past six months, posting a middling return of 3.9%. The stock also fell short of the S&P 500’s 9.3% gain during that period.

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Why Is Reinsurance Group of America Not Exciting?

We don’t have much confidence in Reinsurance Group of America. Here are three reasons why there are better opportunities than RGA, plus one stock we’d rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Reinsurance Group of America’s net premiums earned has grown at a 2.1% annualized rate over the last two years, much worse than the broader insurance industry and slower than its total revenue.

2. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Reinsurance Group of America’s weak 7.8% annual EPS growth over the last two years aligns with its revenue trend. On the bright side, this tells us its incremental sales were profitable.

3. BVPS Projections Show Stormy Skies Ahead

The key to book value per share (BVPS) growth is an insurer’s ability to earn underwriting profits while generating strong returns on its float - Warren Buffet’s secret sauce.

Over the next 12 months, Consensus estimates call for Reinsurance Group of America’s BVPS to shrink by 3.3% to $168.62, a sour projection.

Final Judgment

Reinsurance Group of America isn’t a terrible business, but it doesn’t pass our bar. With its shares underperforming the market lately, the stock trades at 1× forward P/B (or $210.33 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d recommend looking at the most dominant software business in the world.

Stocks We Would Buy Instead of Reinsurance Group of America

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