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22 Sep 2009
New York, September 22, 2009 -- Moody's Investors Service affirmed Reinsurance Group of America,
Inc.'s (RGA; NYSE: RGA) credit ratings (senior debt
at Baa1) and RGA Reinsurance Company's (RGA Re) insurance financial
strength rating at A1. The outlook on all the ratings is stable.
Moody's also assigned ratings to RGA's $1.5
billion shelf registration (senior debt at (P) Baa1). The multi-security
shelf registration allows RGA to issue senior unsecured debt, subordinated
debt, and preferred stock. Proceeds of securities issued
under the shelf will be used for general corporate purposes.
The shelf registration also allows for the issuance of preferred securities
by RGA Capital Trust III and RGA Capital Trust IV, which are statutory
business trusts established by the company solely for the purpose of raising
financing for RGA. Preferred securities issued by RGA Capital Trust
III and RGA Capital Trust IV will be irrevocably and unconditionally guaranteed
by RGA and will rank pari passu with the company's junior subordinated
The rating agency said that RGA's ratings and stable outlook reflect
the company's strong and stable financial profile, including
consistent profitability, even during the downturn in the economy
and capital markets. According to Ann Perry, Moody's
Vice President and Senior Credit Officer, "RGA's ratings
also recognize the company's strong market position in the North American
life reinsurance industry, its status as a key player in facultative
reinsurance and its expertise in managing mortality risk as demonstrated
by the company's performance in its core domestic operations. In
addition, RGA has opportunities for international expansion in selected
markets, although growth in international and non-traditional
businesses presents additional surveillance, regulatory, political
and structuring risks."
Moody's noted that RGA's investment portfolio has exposure
to hybrid securities, CMBS, commercial mortgage loans and
below investment grade securities. In commenting on the stable
outlook, the rating agency said that although it expects RGA to
incur additional investment losses in these asset classes, the company's
2009 year-to-date impairments and future expected credit
losses should be manageable in the context of the company's earnings
and capital base. In addition, the holding company retains
most of the proceeds from last year's equity offering, which
could be used to support the capital positions of the operating subsidiaries.
However, Moody's Perry observed, "Because RGA,
like all reinsurers, has a substantial concentration in mortality
risk, it could be subject to severe capital pressure in the event
of an acute global pandemic."
According to the rating agency, RGA's strengths are also somewhat
offset by the relatively higher volatility in quarterly mortality results.
RGA Re has also historically 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 decrease, and that growth in the mature North American markets
Moody's said that the ratings could be upgraded if the following
occurred: (a) pre-tax investment losses of RGA consolidated
entities below $80 million in 2009; (b) consolidated GAAP
earnings consistently above 15% ROE; (c) RBC of both RGA Re
and consolidated entities sustained above 350%; (d) financial
leverage of RGA below 15% and earnings coverage consistently above
10x; and (e) holding company cash coverage of interest expense of
more than 7x.
Moody's added that a downgrade of RGA's ratings could result
from the following factors: (a) pre-tax investment losses
of RGA consolidated entities exceed $150 million; (b) GAAP
earnings consistently below 8% ROE; (c) RBC of both RGA Re
and consolidated entities below 275%; (d) financial leverage
of RGA consistently above 25% and earnings coverage below 7x;
and (e) holding company cash coverage of interest expense of less than
Moody's assigned the following prospective ratings with a stable outlook:
Reinsurance Group of America, Inc. - senior debt at
(P)Baa1; subordinated debt at (P)Baa2; junior subordinated debt
at (P)Baa2; preferred stock at (P)Baa3;
RGA Capital Trust III - preferred stock at (P)Baa2;
RGA Capital Trust IV - preferred stock at (P)Baa2.
Moody's affirmed the following ratings with a stable outlook:
Reinsurance Group of America, Inc. - senior debt at
Baa1; junior subordinated debt at Baa3;
RGA Capital Trust I - preferred stock at Baa2; preferred stock
shelf at (P) Baa2;
RGA Capital Trust II - preferred stock at (P)Baa2;
RGA Reinsurance Company -- insurance financial strength
Reinsurance Group of America, Inc., headquartered in
Chesterfield, Missouri, reported total assets of approximately
$22.6 billion and shareholders' equity of $3.1
billion as of June 30, 2009.
Moody's last rating action on RGA was on June 2, 2008 when the rating
agency affirmed the credit rating of RGA (senior debt at Baa1, stable
outlook) following the company's announcement that MetLife, Inc.
(MetLife; NYSE MET) would split-off, on a tax-free
basis, essentially all of its majority owned stake of RGA.
The principal methodology used in rating RGA was Moody's Global Rating
Methodology for Reinsurers, published in July 2008 and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to pay punctually senior policyholder claims and
obligations. For more information, visit our website at www.moodys.com/insurance.
Financial Institutions Group
Moody's Investors Service
Moody's affirms RGA (sr debt at Baa1) with stable outlook; assigns shelf ratings
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
No Related Data.
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