Reinsurance Group of America, Incorporated RGA has announced two new debt offerings. The company has priced 3.95% senior notes and 2.75% fixed-to-floating rate subordinated debentures that are slated to mature in 2026 and 2056, respectively. Each offering has an aggregate principal amount of $400 million.
The company plans to use the proceeds from these offerings to repay upon maturity its $300 million 5.625% senior notes. These notes will mature in Mar 2017. The proceeds can also be deployed in general corporate purposes.
The senior notes have an issue price of 99.996% and a fixed coupon rate of 3.95% payable semiannually. They come with a 10 year, three-month final maturity and with a par-call option three months prior to maturity. The subordinated debentures have an issue price of $25 per debenture and a fixed-rate coupon of 5.75 %,payable quarterly in arrears commencing on, and including, Jun 15, 2026. Annual interest rates for the debentures will equal sum of three-month London Interbank Offered Rate (LIBOR), reset quarterly, plus 4.04% payable quarterly.
Reinsurance Group expects to complete offering both senior notes and subordinated debentures by Sep 25, 2026.
The company displays its pragmatism by issuing debt in the current low interest rate environment. The current rates make it easier for companies to meet their debt obligations on time. Most companies have preferred to issue debt at the prevailing low rates over the past few years and are expected to continue doing so before the Fed hikes rates.
Reinsurance Group enjoys a strong rating from most rating companies. For its Senior Debt, Standard & Poor’s has affirmed an A- (Strong) rating, while Moody’s Investors Service, an arm of Moody's Corporation (MCO), has rendered a Baa1 (Medium) rating. A.M. Best has rated the company a- (Strong).
As of Mar 31, 2016, the company’s long-term debt was $2 billion compared with $2.3 billion at the end of 2015. This reflects a 13% decline. The debt-to-equity ratio was 0.30x at the end of Mar 31, 2016 as against 0.38x at year-end 2015. Following the issuance of these debentures, debt-to-equity ratio will increase to 0.42x, up 1200 basis points.
Zacks Rank and Stocks to Consider
Currently, Reinsurance Group carries a Zacks Rank #3 (Hold). Some better-ranked insurance industry stocks include GWG Holding, Inc. GWGH, Health Insurance Innovations, Inc. HIIQ and Manulife Financial Corporation MFC. Each of these stock sports a Zacks Rank #1 (Strong Buy).
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