RGA Q2 Deep Dive: Revenue Outpaces, Claims Volatility and Capital Strategy in Focus

August 13, 2025 at 00:13 AM EDT

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Global life reinsurance provider Reinsurance Group of America (NYSE: RGA) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 10.9% year on year to $5.68 billion. Its non-GAAP profit of $4.72 per share was 15% below analysts’ consensus estimates.

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Reinsurance Group of America (RGA) Q2 CY2025 Highlights:

Revenue: $5.68 billion vs analyst estimates of $5.62 billion (10.9% year-on-year growth, 1.1% beat)
Adjusted EPS: $4.72 vs analyst expectations of $5.55 (15% miss)
Adjusted Operating Income: $397 million vs analyst estimates of $565 million (7% margin, 29.7% miss)
Market Capitalization: $12.31 billion

StockStory’s Take

Reinsurance Group of America’s second quarter was marked by top-line growth but notable profit challenges, prompting a significant negative market reaction. Management attributed the underperformance to claims volatility within the U.S. individual life segment and higher-than-expected claims in healthcare excess, a segment of its U.S. Group business. CEO Tony Cheng described the quarter as “below expectations due to large claims volatility in U.S. individual life and unfavorable claims in our healthcare excess business,” highlighting that these factors offset favorable trends seen earlier in the year. Executives emphasized that these issues were consistent with broader market experiences and stressed that most of the healthcare excess block would be repriced by January 2026.

Looking forward, management expects performance to stabilize as pricing actions in healthcare excess take effect and capital flexibility is deployed for growth and shareholder returns. CEO Tony Cheng stated, “Our business momentum remains very strong in both our financial solutions and traditional businesses,” citing the recent Equitable transaction and a robust pipeline across regions. The company also anticipates earnings contributions from newly acquired blocks and continued growth in Asia and the U.K. Management cautioned that claims experience may remain volatile quarter-to-quarter but reiterated confidence in the company’s long-term strategy and ability to meet intermediate-term financial targets.

Key Insights from Management’s Remarks

Management cited claims volatility and healthcare excess challenges as the main drivers of profit shortfall, but also highlighted capital optimization and global business momentum as strategic successes.

Healthcare excess claims pressure: Unfavorable claims in the U.S. healthcare excess business, driven by expensive treatments like specialty drugs and transplants, weighed on segment profitability. Management noted this line is annually repriced and expects material rate increases will restore margins by 2026.
U.S. individual life volatility: The U.S. individual life segment experienced higher large claims, reversing prior quarter gains. Management described this as unusual quarterly volatility, with overall year-to-date experience aligning with long-term expectations.
Capital flexibility increased: RGA materially increased its excess and deployable capital through balance sheet optimization and the recognition of additional value in-force credits, providing more funds for growth initiatives and potential shareholder returns.
Strategic global wins: The company secured asset-intensive transactions across five countries and three continents, reflecting the strength of its global platform. Asia, the U.K., and U.S. traditional businesses all contributed to new business growth, with Asia highlighted for robust premium gains and product development.
Equitable transaction closed: The acquisition of a block from Equitable, effective April 1, is expected to enhance earnings power in the second half of the year and beyond. The transaction aligns with RGA’s focus on exclusive and tailored solutions, strengthening its position in financial solutions markets.

Drivers of Future Performance

Management’s outlook centers on repricing actions, capital deployment for growth and shareholder returns, and leveraging global business momentum amid ongoing claims variability.

Healthcare excess repricing: The majority of the healthcare excess block will be repriced by January 2026, with management expecting significant margin improvement as higher rates take effect and claims normalize.
Capital allocation priorities: RGA plans to balance capital deployment between new business opportunities and returning cash to shareholders through dividends and opportunistic share repurchases. Management indicated a long-term target of 20% to 30% payout of after-tax operating earnings.
Global growth pipeline: Continued expansion in Asia, the U.K., and U.S. through both traditional and financial solutions segments is expected to drive future revenue. Management highlighted regulatory changes in Asia and increasing demand for biometric and asset-intensive solutions as key growth drivers.

Catalysts in Upcoming Quarters

In upcoming quarters, StockStory analysts will watch (1) the impact of healthcare excess repricing on segment margins, (2) the integration and earnings contribution from the Equitable transaction, and (3) execution on global new business wins, especially in Asia and the U.K. Additionally, we will monitor capital deployment between growth investments and shareholder returns, as well as any reduction in claims volatility within the core U.S. segments.

Reinsurance Group of America currently trades at $186.92, down from $192.49 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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