Reinsurance Group of America Inc.’s RGA subsidiaries RGA Reinsurance Company, and RGA Americas Reinsurance Company, Ltd., were recently affirmed financial strength rating (“FSR”) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” by A. M. Best. The rating agency also affirmed the same ratings to the affiliates of RGA Americas Reinsurance Company, Ltd. – RGA Life Reinsurance Company of Canada and RGA Atlantic Reinsurance Company Ltd.
Additionally, the company was also affirmed with ICR of “a-” by A. M. Best. All the ratings had a stable outlook.
Headquartered at St. Louis, MO. Reinsurance Group has operations in 26 countries. Reinsurance Group’s ratings reflect its solid foothold in the global and North American life reinsurance market, along with a consistent level of risk-adjusted capitalization and favorable operating earnings trends. Additionally, the U.S. and Latin America operating results are comparatively stable.
However, these positives were partially offset by business profile expansion from mortality risk to higher risk product lines including longevity reinsurance, long-term care and annuities over the years. The highly competitive U.S. traditional market place poses a big challenge for Reinsurance Group as it continues to experience declining cession rates. However, the pace of decline has begun to stabilize. This is due to the increased reliance upon international growth and the ability to secure highly competitive deal flow to generate organic earnings growth.
Moreover, A.M. Best views Reinsurance Group’s debt servicing capabilities favorably, with sufficient liquidity to service its debt, strong interest coverage ratios and financial leverage ratios.
The company is not likely to witness positive ratings in the near to medium term. However, Reinsurance Group could witness a downgrade if there is 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 the company’s global market leadership position.
Rating affirmations or upgrades from credit rating agencies play an important part in instilling investor confidence in the stock as well as in maintaining its creditworthiness in the market. Currently, Reinsurance Group carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the life insurance sector include American Equity Investment Life Holding Co. AEL, Universal American Corp UAM and Voya Financial, Inc. VOYA. While American Equity Investment sports a Zacks Rank #1 (Strong Buy), Universal American and Voya Financial hold a Zacks Rank #2 (Buy).
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