A.M. Best Affirms Ratings of Reinsurance Group of America, Incorporated and Its Subsidiaries

A.M. Best has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of RGA Reinsurance Company (St. Louis, MO) and RGA Life Reinsurance Company of Canada (Montreal, Canada), collectively referred to as RGA Reinsurance. A.M. Best also has affirmed the ICR of “a-” and all ratings on the existing debt securities and indicative shelf ratings of Reinsurance Group of America, Incorporated (RGA) (St. Louis, MO) [NYSE: RGA]. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The ratings of RGA are based upon its stable risk-adjusted capitalization, favorable GAAP earnings trends (after adjustment for large unfavorable Australian disability claims) and strong franchise in the global reinsurance market. Earnings are primarily driven by both its U.S. and Canadian traditional (mortality) segments. The group’s business and operating profile is expanding from the continued growth and diversification benefits it derives from its international market segments, along with the recent expansion of its U.S.-based asset intensive business. RGA maintains a leadership position in the reinsurance marketplace, utilizing its technology infrastructure to provide facultative services to its client base. RGA continues to be recognized favorably in industry surveys and has a reasonably well-developed enterprise risk management program.

Offsetting these positive rating factors are the potential challenges in the highly competitive and consolidating reinsurance market, as reflected in declining cession rates in RGA’s U.S. market, and a business profile that is dependent on the utilization of operating leverage to secure reserve credits for noneconomic reserves. With cession rates on the decline in the U.S. marketplace, RGA has been able to capitalize on growth in the international marketplace, despite global economic challenges and some recent adverse morbidity experience within its Asia Pacific business segment primarily related to the afore-mentioned Australian business. In recent years, RGA’s operating profile has become more sensitive to interest rates due to its expansion in U.S. annuity reinsurance, which could place pressure on its balance sheet and earnings profile if interest rates reverse course and trend lower.

A.M. Best views RGA’s debt servicing capabilities favorably, with cash flows supported by its consistently profitable operations, and its financial leverage ratios remain within A.M. Best’s guidelines for its current ratings. RGA also maintains strong overall liquidity.

Positive rating movement for the near to medium term is unlikely. Key rating factors that could result in negative rating actions include a sustained decline in risk-adjusted capital and/or adverse trends in operating performance or a material decline in RGA’s market leadership position in its core reinsurance markets.

The following debt ratings have been affirmed:

Reinsurance Group of America, Inc—
-- “a-” on $300 million 5.625% senior unsecured notes, due 2017
-- “a-” on $400 million 6.45% senior unsecured notes, due 2019
-- “a-” on $400 million 5% senior unsecured notes, due 2021
-- “a-” on $400 million 4.7% senior unsecured notes, due 2023
-- “bbb+” on $400 million 6.2% fixed to floating subordinated debentures, due 2042
-- “bbb” on $400 million 6.75 % fixed to floating junior subordinated debentures, due 2065

The following indicative ratings available under shelf registration have been affirmed:

Reinsurance Group of America, Inc—
-- “a-” on senior debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock

RGA Capital Trust III and IV—
-- “bbb” on trust preferred securities

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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