AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) 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). These companies collectively are referred to as RGA. AM Best also has affirmed the Long-Term ICR of “a-” (Excellent) and all Long-Term Issue Credit Ratings (Long-Term IR) on the debt securities and indicative shelf ratings of Reinsurance Group of America, Incorporated (Chesterfield, MO) [NYSE: RGA]. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs.)
The ratings reflect RGA’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management.
RGA’s balance sheet strength remains solid, and its consolidated risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Model (BCAR), despite impacts from the COVID-19 pandemic. RGA had bolstered its balance sheet strength over the past year by ceasing share repurchases and completing a $500 million common stock offering, resulting in a record level of cash and cash equivalents within the organization at year-end 2020. As a result, financial leverage declined over the past year to approximately 22%, which is well within AM Best’s guidelines for the current rating. Additional factors supporting RGA’s very strong balance sheet strength assessment are its significant operating cash flows, good financial flexibility and a high quality investment portfolio. AM Best notes that RGA experienced only modest amount of impairments and downgrades within its investment portfolio during the past year.
RGA also benefits from its leading market positions in the United States, Canada, Europe and Asia with approximately 45% of revenues coming from international operations. While overall new business production was negatively impacted by the pandemic, AM Best notes that overall premiums and assumed life insurance inforce have increased in each of the past five years, primarily driven by growth in all geographic areas of its traditional reinsurance segment, and particularly in Asia. The company’s innovative culture and track record of providing new innovative solutions to the insurance industry is also a factor in its favorable business profile assessment.
Partially offsetting these positive rating factors is the volatility of earnings in recent periods within certain core segments, including its U.S. individual mortality segment and its Australian business segment. AM Best notes that mortality increased materially in 2020 and continued through the first part of 2021 due to the COVID-19 pandemic, leading to losses in the individual life insurance segment. However, earnings generated from its other core businesses generally have been increasing in recent periods and mortality has shown improvement in more recent months. While some earnings volatility may continue over the near term, AM Best expects that earnings will gradually improve as mortality rates continue to decline with the roll out of vaccines. RGA also has increased its exposure to higher-risk product lines, including annuities and longevity reinsurance, and maintains a moderate-sized block of long-term care business that may add to operating volatility over the mid-to-long term. Partially mitigating this concern is RGA’s comprehensive risk management framework, which is an integral part of its corporate culture.
The following Long-Term IRs have been affirmed with a stable outlook:
Reinsurance Group of America, Incorporated—
-- “a-” (Excellent) on $400 million 4.7% senior unsecured notes, due 2023
-- “a-” (Excellent) on $400 million 3.95% senior unsecured notes, due 2026
-- “a-” (Excellent) on $600 million 3.9% senior unsecured notes, due 2029
-- “a-” (Excellent) on $600 million 3.15% senior unsecured notes, due 2030
-- “bbb+” (Good) on $400 million 6.2% fixed to floating subordinated debentures, due 2042
-- “bbb+” (Good) on $400 million 5.75% fixed to floating rate subordinated debentures, due 2056
-- “bbb” (Good) 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-” (Excellent) on senior unsecured debt
-- “bbb+” (Good) on subordinated debt
-- “bbb” (Good) on preferred stock
RGA Capital Trust III and IV—
-- “bbb” (Good) on trust preferred securities
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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