(The following statement was released by the rating agency)
CHICAGO, March 31 (Fitch) Fitch Ratings has affirmed Reinsurance
America, Inc.'s (RGA) 'A-' Issuer Default Rating (IDR) and the
Financial Strength (IFS) rating of RGA Reinsurance Company (RGA
The Rating Outlook is Stable. A complete list of rating actions
follows at the
end of this release.
Key Rating Drivers
RGA's ratings reflect its strong market position as the largest
individual and group life reinsurance in North America and one
of the leading
life and health reinsurers in the world; solid long-term
and earnings; adequate risk adjusted capitalization; and ample
Offsetting these positives are the rapid growth of asset
intensive business; the
company's increased financial leverage; and RGA Reinsurance's
captives to finance excess statutory reserve requirements.
Fitch views RGA's historical profitability as generally good and
in line with
rating expectations. However, the company's operating earnings
in 2013 were
below expectations due primarily to a $274 million pre-tax
charge. The charge
was related to group disability business in Australia, which is
part of the
company's Asia Pacific segment, a relatively small contributor
historical earnings. Claims incidence and reporting lags in the
permanent disability (TPD) line were the main drivers of the
loss. RGA believes
the charge is very conservative and will cover all future claims
related to this
business, although Fitch believes some uncertainty remains.
RGA's other segments
reported results generally in line with expectations in 2013.
The decline in earnings depressed the company's GAAP
coverage ratio in 2013. Fitch believes, however, that the
group's ability to
service its debt remains sound and that earnings and coverage
improve in 2014.
Fitch views the statutory capitalization of RGA Reinsurance as
although the company relies on support from its parent to
capital levels. RGA Reinsurance's reported risk-based capital
(RBC) ratio was
365% at year-end 2013, a slight increase from 360% at year-end
Fitch believes RGA's liquidity at the holding company level is
holding company has committed to maintain cash and liquid assets
of at least
1.5x interest expense. At year-end 2013, the holding company had
$788 million in
cash and invested assets, or over 6x projected 2014 interest
expense. The next
upcoming debt maturity is in 2017.
Fitch's primary concern is the potential for increased earnings
to a change in RGA's operating profile. RGA's current ratings
are based in part
on the company's historical focus on traditional individual life
in the U.S. and Canada, where results have been stable. Fitch
notes that, while
individual mortality experience is still the dominant driver of
earnings in the U.S. traditional segment, non-traditional
long-term care and group life and health, account for an
of earnings in this segment, and that trend is expected to
continue. Fitch views
this non-traditional business as potentially riskier.
Fitch is monitoring asset growth because of its concern that
RGA's core U.S. traditional market will cause it to look for
growth in riskier
asset-intensive businesses and increase its exposure to interest
Asset leverage (GAAP assets in relation to adjusted equity) was
8x as of
Fitch views RGA's financial leverage as at the high end of its
for the current rating. The financial leverage ratio increased
to 30% at
year-end 2013 from 27% at the prior year-end. The company's
total financing and
commitments ratio of 1.1x is also considered high.
RGA uses affiliated captive reinsurers primarily to manage the
reserves associated primarily with its term life book of
business. Fitch views
RGA's above-average reliance on captive reinsurance as a unique
risk, given the
current regulatory scrutiny of captive arrangements used by life
change in the regulatory approach to affiliated reserve
could have a negative impact on RGA's financial flexibility and
The ratings assigned to RGA reflect 'non-standard' notching
relative to the IFS
rating assigned to RGA Reinsurance. Based on Fitch's notching
reinsurers, standard notching between the subsidiary IFS rating
company's IDR rating is one notch. The current two-notch
difference between RGA
Reinsurance's 'A+' IFS rating and RGA's 'A-' IDR reflects
Fitch's view that RGA
Reinsurance has not been a consistent source of cash flow to the
ratings could be upgraded one notch to 'standard' notching if
became a consistent source of cash flow to the holding company.
Key rating triggers that could result in a downgrade include:
--Further deterioration in the Asia Pacific segment or a loss in
that prevents a recovery in GAAP earnings to 2012 levels within
the next 12 to
--GAAP interest coverage maintained below 7x;
--RBC of RGA Reinsurance drops well below 300% on a sustained
--Holding company financial leverage above 30%;
--TFC maintained well above 1x;
--GAAP asset leverage of 10x or higher.
Key rating triggers that could result in an upgrade include:
--RBC of RGA Reinsurance of 400% or more on a sustained basis;
--Financial leverage maintained in the 15% range;
--A TFC ratio of .6x or below on a sustained basis;
--GAAP interest coverage of 10x or more;
--GAAP asset leverage below 6x.
Fitch has affirmed the following ratings with a Stable Outlook:
Reinsurance Group of America, Inc.
--IDR at 'A-';
--5.625% senior notes due March 15, 2017 at 'BBB+';
--6.45% senior notes due Nov. 15, 2019 at 'BBB+';
--5.00% senior notes due June 1, 2021 at 'BBB+';
--4.70% senior notes due in 2023 at 'BBB+';
--6.75% junior subordinated debentures due Dec. 15, 2065 at
--6.20% subordinated debt due 2042 at 'BBB-'.
RGA Reinsurance Company
--IFS at 'A+'.
Tana M. Higman
Fitch Ratings, Inc.
70 West Madison
Chicago, Illinois 60602
Douglas L. Meyer, CFA
Brian C. Schneider
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS OTHER THAN
MEDIUM OF ITS PUBLIC DISCLOSURE.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (November 2013).
Applicable Criteria and Related Research:
Insurance Rating Methodology
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH