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A.M. Best Affirms Credit Ratings of Reinsurance Group of America, Incorporated and Its Subsidiaries
[August 02, 2017]

A.M. Best Affirms Credit Ratings of Reinsurance Group of America, Incorporated and Its Subsidiaries

A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of RGA Reinsurance Company (Chesterfield, MO), RGA Americas Reinsurance Company, Ltd (Bermuda) and its subsidiaries, RGA Life Reinsurance Company of Canada (Toronto, Canada) and RGA Atlantic Reinsurance Company Ltd. (Barbados), collectively referred to as RGA Re. A.M. Best also affirmed the Long-Term ICR of "a-" and all Long-Term Issue Credit Ratings (Long-Term IR) on the existing debt securities and indicative shelf ratings of Reinsurance Group of America, Incorporated (RGA) (Chesterfield, MO) [NYSE: RGA]. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and Long-Term IRs.)

The ratings of RGA Re reflect its top five global market position as a leading life reinsurer, stable risk-adjusted capitalization and favorable, albeit fluctuating GAAP-adjusted operating earnings trends. RGA Re has very strong brand recognition as a leading provider of underwriting and facultative capabilities with an expanding geographical presence in Asia and emerging markets. On a consolidated basis, premium trends (adjusted for currency headwinds due to a strong U.S. dollar) remain favorable and reflect the global diversification of RGA Re's footprint as a leading reinsurer in North America, Asia and Latin America.

The ratings recognize RGA Re's strong technological platform, sophisticated and highly integrated global enterprise risk management framework that includes comprehensive risk tolerance limits, economic capital modeling and stochastic stress testing. Despite industry-wide pressures on investment returns, spreads on interest-sensitive business lines in North America remain relatively stable within its asset-intensive business lines. A.M. Best views RGA's debt-servicing capabilities favorably, with sufficient liquidity to service its debt, a well-laddered debt maturity structure, strong interest coverage ratios and financial leverage ratios that remain within A.M. Best's guidelines for its current ratings.

These strengths are partially offset by expansion of its business profile from mortality risk into higher-risk product lines, including longevity reinsurance, long-term care and annuities, which A.M. Best views as of lower creditworthiness in its product continuum. Consistent with other North American reinsurers, RGA Re's mortality in-force metrics remain relatively flat given ongoing challenges in the highly competitive U.S.-traditional marketplace, which has experienced declining cession rates for many years, although the pace of declie has stabilized. Slow U.S.-business growth has been partially offset by increased reliance on international growth and the ability to secure highly competitive deal flow to generate organic earnings growth. RGA Re has a large block of annuities that lack surrender charge protection and has a large in-force block of life business with high minimum guarantees, although A.M. Best notes that the shifting business profile has reduced interest sensitivity within North America in recent years. While its operating profile is increasingly diversified among morbidity, mortality, longevity and spread-based earnings, there is the potential for higher levels of operating volatility given changes in its reserve mix. Additionally, there has been an increase in higher-risk assets (e.g., below-investment grade bonds and BA assets), along with an increase in performing mortgage loans relative to statutory capital in recent years. RGA Re's statutory capital structure remains heavily supported by captive solutions. Additionally, dependence on access to available lower-cost funding to support redundant reserves or provide capital market solutions has contributed to elevated operating leverage at its statutory entities, although still within current A.M. Best guidelines.

A decline in risk-adjusted capital could result in a negative rating action. An adverse trend in operating performance could result in a negative rating action. A material shift toward product lines that A.M. Best views as of lower credit worthiness in its product continuum could result in a negative rating action.

The following Long-Term IRs have been affirmed with a stable outlook:

Reinsurance Group of America, Incorporated-

-- "a-" on $400 million 3.95% senior unsecured notes, due 2026

-- "bbb+" on $400 million 5.75% fixed to floating rate subordinated debentures, due 2056

-- "a-" on $400 million 6.45% senior unsecured notes, due 2019

-- "a-" on $400 million 5% senior unsecured notes, due 2021

-- "a-" on $400 million 4.7% senior unsecured notes, due 2023

-- "bbb+" on $400 million 6.2% fixed to floating subordinated debentures, due 2042

-- "bbb" on $400 million variable rate junior subordinated debentures, due 2065

The following indicative Long-Term IRs available under shelf registrations have been affirmed with a stable outlook:

Reinsurance Group of America, Incorporated-

-- "a-" on senior unsecured debt

-- "bbb+" on subordinated debt

-- "bbb" on preferred stock

RGA Capital Trust III and IV-

- "bbb" on trust preferred securities

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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