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Rating Action:

Moody’s rates RGA’s new shelf registration—senior debt at (P)Baa1

26 May 2020

Outlook negative

New York , May 26, 2020 -- Moody's Investors Service, ("Moody's") has assigned provisional debt ratings (senior debt at (P)Baa1) to Reinsurance Group of America, Incorporated's (NYSE: RGA) new shelf registration statement. RGA maintains its shelf for general corporate purposes, including the funding of its reinsurance operations, to redeem or repurchase outstanding securities, or to refinance debt.

Moody's said that the new shelf registration replaces RGA's previous shelf registration statement that was originally filed in May 2017. The outlook on RGA and its subsidiaries' debt and insurance financial strength (IFS) ratings is negative.

RATINGS RATIONALE

The multi-security shelf registration allows RGA to issue senior unsecured debt, subordinated debt, and preferred stock. 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 IV will be irrevocably and unconditionally guaranteed by RGA and will rank pari passu with the company's junior subordinated debt.

Moody's Baa1 senior unsecured debt rating of RGA reflects the company's strong brand and market reputation and significant operating scale driven by its leading market position with expertise in life reinsurance including mortality, morbidity, and longevity risk transfer, group (re)insurance, and inforce management solutions including structured insurance transactions. The rating agency added that RGA's ratings assume that the company will maintain a strong market position in the US, profitably grow its businesses in a measured manner, and limit its reliance on captives to support growth.

The negative outlook reflects uncertainty surrounding the impact on RGA's credit profile as the coronavirus progresses given the potential for higher mortality claims in the company's key markets. The spread of the coronavirus pandemic results in increased mortality risk, with significantly higher death rates in older age groups, and thus the potential for elevated mortality claims against life insurers. The largest concentration of reinsured mortality risk for RGA is in the United States and – to a lesser extent – Canada and the United Kingdom.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Given the negative outlook, there is limited upward pressure on RGA's ratings. A combination of the following drivers could return RGA's outlook to stable: (1) a lower probability for significant underwriting losses on the insurable population and more certainty of the pandemic's trajectory; (2) consolidated GAAP return on capital (ROC) consistently above 6% (ex AOCI); (3) NAIC RBC ratio of RGA Re above 350% (company action level) and well capitalized offshore captive entities; and (4) financial leverage below 25%.

Moody's added that given the significant capital volatility associated with the company's exposure to pandemic risk a downgrade of RGA's ratings could result from the following factors: (1) consistently worse-than-expected mortality experience or a worsening of the current pandemic progression causing a loss in GAAP capital of more than 10%; (2) GAAP ROC consistently below 6% (ex AOCI) ; (3) RBC ratio of RGA Re below 325% (CAL) and/or deterioration of capitalization of offshore captives; (4) financial leverage consistently above 30%, earnings interest coverage below 7x; or (5) if a collateral call on RGA due to a stress scenario (at the holding company) exceeds 35% of GAAP equity (ex AOCI).

Moody's has assigned provisional debt ratings to securities that may be issued under RGA's shelf registration statement with a negative outlook as follows:

Reinsurance Group of America, Incorporated - provisional senior unsecured debt shelf at (P)Baa1; provisional subordinated debt shelf at (P)Baa2; provisional junior subordinated debt shelf at (P)Baa2; provisional preferred stock shelf at (P)Baa3; provisional non-cumulative preferred stock shelf at (P)Baa3;

RGA Capital Trust III: provisional preferred stock shelf at (P)Baa2;

RGA Capital Trust IV: provisional preferred stock shelf at (P)Baa2.

Reinsurance Group of America, Incorporated, headquartered in Chesterfield, Missouri, reported total assets of approximately $75.7 billion and shareholders' equity of $9.3 billion as of March 31, 2020.

The principal methodology used in these ratings was Reinsurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187551 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Bob Garofalo
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Scott Robinson, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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