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

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A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of RGA Reinsurance Company (St. Louis, MO), RGA Americas Reinsurance Company, Ltd (Bermuda) and its subsidiaries; RGA Life Reinsurance Company of Canada (Montreal, Canada) and RGA Atlantic Reinsurance Company Ltd. (Barbados), 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 reflect its leading global and North American life reinsurance market positions, stable risk-adjusted capitalization levels and favorable GAAP adjusted operating earnings trends. U.S. and Latin America GAAP operating results remain relatively stable with declines in traditional business offset by growth within its asset intensive business segment. Canadian GAAP results reflect a decline due to unfavorable mortality. Current year Asia Pacific results have improved due to stabilization of its Australian disability business, which experienced adverse morbidity in 2013. RGA continues to be recognized favorably in industry surveys with a strong technological platform and has a highly integrated global enterprise risk management framework, which includes comprehensive risk tolerance limits, economic capital modeling and stochastic stress testing.

These strengths are partially offset by expansion of its business profile from mortality risk into higher risk product lines in A.M. Best’s product continuum including longevity reinsurance, long-term care and annuities in recent years. Consistent with other North American reinsurers, RGA faces ongoing challenges to maintain market share in the highly competitive U.S. traditional market place, which continues to experience declining cession rates, albeit the pace of decline is beginning to stabilize. The decline in cession rates has been partially offset by increased reliance upon international growth and its ability to secure highly competitive deal flow to generate organic earnings growth. RGA’s operating model utilizes significant levels of operating leverage to secure noneconomic reserves with ongoing regulatory risk related to the use of captive solutions for redundant reserve financing, and while its operating profile is increasingly diversified amongst morbidity, mortality, longevity and spread based earnings, there is the potential for higher levels of operating volatility given the changes in the product mix. Additionally, there has been an increase in higher risk assets (mortgage loans and below investment grade bonds) relative to statutory capital in recent years.

A.M. Best views RGA’s debt servicing capabilities favorably, with sufficient liquidity at the holding company to service its debt, strong interest coverage ratios and financial leverage ratios that remain within A.M. Best’s guidelines for its current ratings.

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

The following debt ratings have been affirmed:

Reinsurance Group of America, Incorporated-
– “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, Incorporated-
– “a-” on senior unsecured 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.

Key insurance criteria reports utilized:

  • A.M. Best’s Liquidity Model for U.S. Life Insurers
  • Analyzing Insurance Holding Company Liquidity
  • A.M. Best’s Perspective on Operating Leverage
  • Evaluating Country Risk
  • Evaluating U.S. Surplus Notes
  • Rating Members of Insurance Groups
  • Understanding BCAR for U.S. and Canadian Life/Health Insurers
  • Understanding Universal BCAR
  • Insurance Holding Company and Debt Ratings
  • Risk Management and the Rating Process for Insurance Companies

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright (c) 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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