Oct. 12, 2009 (Business Wire) -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of RGA Reinsurance Company (RGA Re) (St. Louis, MO) and RGA Life Reinsurance Company of Canada (RGA CN) (Montreal). A.M. Best also has affirmed the ICR of “a-”and debt ratings of the existing debt securities and indicative ratings of Reinsurance Group of America, Incorporated (RGA) (St. Louis, MO) [NYSE: RGA]. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)
The affirmation of the ratings is based upon RGA’s strong franchise position in the North American life reinsurance market, enhanced by continued growth in select international markets. The ratings also reflect RGA’s sufficient risk-adjusted capitalization, profitable operations and improving spread of risk resulting from international expansion. Despite strong operating fundamentals, the group has recorded volatility in its operating results as the impact of the global economic crisis impacted its balance sheet and operating performance. Additionally, heightened mortality during fourth quarter 2008 and first quarter 2009 has pressured results; however, mortality experience has since returned to expected levels. In addition, foreign exchange volatility pressured results as the majority of RGA’s foreign exchange exposures are unhedged.
A.M. Best views RGA’s debt servicing capabilities favorably, with cash flows supported by profitable operations and a strong franchise in the North American life reinsurance market. RGA’s financial leverage ratios remain within tolerance levels for the current ratings. Moreover, RGA maintains a favorable liquidity position, reflecting the high quality of its asset portfolio, strong asset liability management capabilities and sufficient statutory risk-adjusted capital position.
During third quarter 2008, Metlife, Inc (New York, NY) completed its divestiture of its 52% ownership of RGA in a tax-free split off. As A.M. Best had viewed RGA on a stand-alone basis prior to the spin-off, the transaction had no impact on the ratings. Despite RGA’s recent successes in raising capital, A.M. Best remains guarded with respect to potential challenges inherent in RGA’s ability to raise capital as a pure stand-alone company.
The FSR of A+ (Superior) and ICRs of “aa-” have been affirmed for RGA Reinsurance Company and RGA Life Reinsurance Company of Canada.
The ICR of “a-” has been affirmed for Reinsurance Group of America, Incorporated.
The following debt ratings have been affirmed:
Reinsurance Group of America, Incorporated—
-- “a-”on $200 million 6.75% senior unsecured notes, due 2011
-- “a-” on $300 million 5.625% senior unsecured notes, due 2017
-- “bbb” on $400 million junior subordinated debentures, due 2065
RGA Capital Trust I—(guaranteed by Reinsurance Group of America, Incorporated)
-- “bbb” on $225 million 5.75% trust preferred income equity redeemable securities (PIERS), due 2051
The following indicative ratings available under shelf registration have been affirmed:
Reinsurance Group of America, Incorporated—
-- “a-” on senior debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock
RGA Capital Trust III and IV—
-- “bbb” on trust preferred securities
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
