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Rating Action:

MOODY'S CONFIRMS REINSURANCE GROUP OF AMERICA'S CREDIT RATINGS (SENIOR DEBT AT Baa1); RATINGS OUTLOOK IS STABLE

14 Jul 2005
MOODY'S CONFIRMS REINSURANCE GROUP OF AMERICA'S CREDIT RATINGS (SENIOR DEBT AT Baa1); RATINGS OUTLOOK IS STABLE

Approximately $500 million of securities affected.

New York, July 14, 2005 -- Moody's Investors Service today confirmed the credit ratings of Reinsurance Group of America, Inc. (RGA) (senior debt at Baa1), and the A1 insurance financial strength rating of its subsidiary, RGA Reinsurance Company. This rating action concludes the review with direction uncertain that was begun on January 31, 2005. The review had been initiated when MetLife, Inc. (MetLife) announced that it may sell its 52% ownership stake in RGA to provide a portion of the cash financing for its planned acquisition of Travelers Life and Annuity (Travelers) business. However, financing for the acquisition of Travelers, which was completed on July 1, 2005, did not require MetLife's sale of its ownership stake in RGA. MetLife has announced that it has no current plans to sell its stake in RGA.

Commenting on the rating action, Moody's said that RGA's current position within the MetLife enterprise is essentially unchanged from its position prior to MetLife's January announcement that it could divest its stake in RGA. According to the rating agency, RGA remains a majority owned subsidiary of MetLife, with the same degree of strategic importance (i.e. non-core) that it had enjoyed prior to the announcement. The rating agency said that RGA's current stand-alone rating is in line with its published rating, but added that the company continues to benefit from the implicit support of MetLife's majority ownership.

Moody's said that the confirmation of RGA's rating reflects the company's strong market position in North American life reinsurance, its status as a key player in facultative reinsurance, and its expertise in managing mortality risk as demonstrated by the good performance in the company's core domestic operations. According to the rating agency, RGA has increased its domestic market share by successfully integrating a block of business it acquired from Allianz in 2003. In addition, Moody's noted that RGA has opportunities for international expansion in select markets, although the rating agency added that growth in international and non-traditional business presents additional monitoring, regulatory, political, and structuring risks.

According to the rating agency, RGA's strengths are somewhat offset by the relatively higher volatility in reinsurance results. Moody's also noted that RGA Re has had low statutory earnings, partly driven by statutory strain related to growth. The rating agency added that it is concerned that the pace of continued mortality improvements could slow, and commented that domestic growth could also slow, given the current high level of new business reinsurance. In addition, Moody's noted that RGA also has exposure to catastrophic risks and terrorist events.

The ability to generate capital internally, combined with the company's plans for capital management, will continue to be a driver in the company's rating profile, according to the rating agency. Moody's stated that it expects that RGA's financial leverage will remain below 25% (debt to capital). The current rating also incorporates an expected NAIC RBC ratio for both RGA Re and consolidated entities of at least 290%, as well as GAAP net income for RGA of at least $200 million annually. In addition to cash coverage of interest expense and common stock dividends of at least 3.5 times, the holding company is expected to maintain at least $100 million of cash and liquid high-grade investment securities.

Factors that could positively influence the rating, Moody's added, include a reduction in financial leverage to less than 15%, a sustained NAIC RBC level for both RGA Re and consolidated entities of at least 350%, GAAP net income for RGA consistently above $300 million annually, and holding company cash coverage of interest expense and common stock dividends of at least 6 times.

The rating agency said that negative rating pressure could develop if financial leverage rose above 25%, NAIC RBC for both RGA Re and consolidated entities declined below 290%, GAAP net income for RGA fell below $200 million annually, or holding company cash coverage of interest expense and common stock dividends fell below 3.5 times.

The following ratings were confirmed with a stable outlook:

Reinsurance Group of America, Inc. - Senior debt at Baa1; Subordinated debt at (P)Baa2; Junior subordinated debt at (P)Baa2; Preferred stock at (P)Baa3.

RGA Capital Trust I - Preferred stock at Baa2.

RGA Capital Trust II - Preferred stock at (P)Baa2.

RGA Capital Trust III - Preferred stock at (P)Baa2.

RGA Capital Trust IV - Preferred stock at (P)Baa2.

RGA Reinsurance Company -- Insurance financial strength at A1.

RGA, Inc., headquartered in Chesterfield, Mo., reported total assets of about $14.4 billion and shareholders' equity of approximately $2.3 billion as of March 31, 2005.

Moody's Insurance Financial Strength Ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations.

Visit our website at www.moodys.com/insurance.

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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