Yesterday, Reinsurance Group of America Inc. (RGA) announced that it has priced the $400 million of unsecured notes at an issue price of 99.447% with a fixed rate coupon of 5.0%, due 2021. The interest on the notes will be paid twice a year.
The proceeds from the issue will be used primarily to pay off $200 million senior notes that are supposed to mature in December 2011 while the remaining funds will be used for general corporate purposes.
The rating agency Moody’s has rated the notes at Baa1 with a stable outlook.
Headquartered in Missouri, Reinsurance Group’s first quarter results were ahead of the Zacks Consensus Estimate, benefiting from an improvement in net premiums written coupled with an improvement in net investment income.
The company has diversified its operations and holds a significant position in the U.S. The recent acquisition of ReliaStar will further position it as a leader in the North American market. Moreover, expanding international business also provides scope for the company’s long-term growth. The company is poised to benefit from consolidations within the life reinsurance industry.
Meanwhile, headwinds include reliance on retrocession, increased retention and complying with Solvency II requirements in the European region while a low interest rate environment and foreign currency exposure are other negative factors. However, a stable balance sheet and strong ratings restore our confidence in the company.
Reinsurance Group competes primarily with Munich Re, Swiss Re, General Re, a subsidiary of Berkshire Hathaway Inc. (BRK.A) (BRK.B).The stock carries a Zacks #3 Rank, which translates into a Hold recommendation over the short term (1-3 months). Also, over the longer term (6+ months) we rate the shares as Neutral.
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