AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of RGA Reinsurance Company (Chesterfield, MO), RGA Americas Reinsurance Company Ltd (Bermuda), RGA Life Reinsurance Company of Canada (Toronto, Canada), Aurora National Life Assurance Company (Los Angeles, CA) and RGA Atlantic Reinsurance Company, Ltd. (Barbados). These companies collectively are referred to as RGA. AM Best also has affirmed the Long-Term ICR of “a-” (Excellent) and all existing Long-Term Issue Credit Ratings (Long-Term IRs) on the debt securities and indicative shelf ratings of Reinsurance Group of America, Incorporated (Chesterfield, MO) [NYSE: RGA]. The outlook of these Credit Ratings (ratings) is stable. Concurrently AM Best has assigned “bbb+” (Good) on the $700 million, 7.125% subordinated debentures, due 2052 of Reinsurance Group of America, Incorporated. The outlook assigned to this rating is stable. (See below for a detailed listing of the Long-Term IRs.)
The ratings reflect RGA’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).
RGA’s balance sheet strength remains very strong underpinned by its consolidated risk-adjusted capitalization, which remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), despite significant impacts from the COVID-19 pandemic over the past two years. RGA had bolstered its balance sheet strength over the past two years by reducing the level of share repurchases, while increasing the level of cash and cash equivalents within the organization. While the company has since reduced the level of cash within the organization, liquidity measures remain strong and financial leverage remains well within AM Best guidelines for the current rating. In addition, RGA maintains a high quality investment portfolio, which has experienced only a modest amount of impairments during the past year.
RGA also benefits from its leading market positions in the United States, Canada, Europe and Asia with approximately 45% of revenues coming from international operations. Overall net premiums increased about 7% in 2021 after a more modest increase in 2020 due to the pandemic. Premium growth has primarily been driven by growth in all geographic areas of its traditional reinsurance segment, and particularly in Asia. The company’s extensive risk management framework, which includes a strong focus on operational and strategic risks in addition to performing a multitude of stress tests and continual monitoring of emerging risks, are key factors in its very strong ERM assessment.
Partially offsetting these positive rating factors is the volatility of earnings in recent periods within certain core segments, including its U.S. individual mortality segment and its Australia business segment. AM Best notes that mortality increased materially over the past two and a half years due to the COVID-19 pandemic, leading to losses in the individual life insurance segment. The pandemic has also negatively impacted the amount of insurance in-force over the past two years due to high mortality and increased lapses. However, earnings generated from its other core businesses generally have been increasing in recent periods and mortality has shown improvement in more recent months. While some earnings volatility may continue over the near term, AM Best expects that earnings will gradually improve as mortality rates continue to decline as COVID-19 moves into an endemic phase. RGA also has increased its exposure to higher-risk product lines, including annuities and longevity reinsurance, and maintains a moderate-sized block of long-term care business that may add to operating volatility over the mid-to-long term.
The following Long-Term IRs have been affirmed with a stable outlook:
Reinsurance Group of America, Incorporated—
— “a-” (Excellent) on $400 million 4.7% senior unsecured notes, due 2023
— “a-” (Excellent) on $400 million 3.95% senior unsecured notes, due 2026
— “a-” (Excellent) on $600 million 3.9% senior unsecured notes, due 2029
— “a-” (Excellent) on $600 million 3.15% senior unsecured notes, due 2030
— “bbb+” (Good) on $400 million 6.2% fixed to floating subordinated debentures, due 2042
— “bbb+” (Good) on $400 million 5.75% fixed to floating rate subordinated debentures, due 2056
— “bbb” (Good) on $400 million variable rate junior subordinated debentures, due 2065
The following indicative Long-Term IRs available under shelf registrations have been affirmed with a stable outlook:
Reinsurance Group of America, Incorporated—
— “a-” (Excellent) on senior unsecured debt
— “bbb+” (Good) on subordinated debt
— “bbb” (Good) on preferred stock
RGA Capital Trust III and IV—
— “bbb” (Good) on trust preferred securities
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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