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Rating Action:

Moody's affirms RGA (sr debt at Baa1) with stable outlook; assigns shelf ratings

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 debt.

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 could slow.

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 4x.

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 at A1.

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 website.

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.

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

Moody's affirms RGA (sr debt at Baa1) with stable outlook; assigns shelf ratings
No Related Data.
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