At the same time, Standard & Poor's lowered its counterparty credit rating on RGA Re's parent, Reinsurance Group of America Inc. (RGA), to 'A-' from 'A'. The outlook is stable.
"The ratings on RGA reflect its strategic importance to MetLife, very strong business position, very strong operating performance, and improved capitalization," said Standard & Poor's credit analyst Kevin Ahern. "Partially offsetting these strengths are the challenges associated with earnings volatility, which is primarily related to potential market pressures and the company's continued international expansion."
RGA's consolidated business position is very strong. As of Dec. 31, 2002, the company had $759 billion of life reinsurance in force worldwide, a 23% increase from Dec. 31, 2001. According to 2001 figures, RGA Re had the second largest share (11.4%) of the North American life reinsurance market, which continues to consolidate. The company's main competitive advantage is its facultative underwriting expertise. The group also maintains a strong, stable Canadian life reinsurance operation. RGA Re is leveraging its experience and reputation to expand its business into the international markets. RGA Re's strong client relationships with many of the large life companies and the company's leading fast response time in facultative underwriting further contribute to its very strong business position. These factors should allow for further market penetration given the recent consolidation in this segment. Overall premium growth increased 19% in 2002, reflecting strong growth in both the U.S. and international segments.
RGA is viewed as strategically important to MetLife, the ultimate parent, because RGA provides MetLife with very strong earnings. MetLife also values RGA's business position, with RGA Re providing a substantial presence in the life reinsurance market. RGA Re's expertise in underwriting and reinsurance creates synergies between the two companies. As RGA expands internationally, additional capital might be needed internally or externally to support growth. Standard & Poor's expects MetLife's ownership percentage to remain proportionately at the current level (59%).
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com under Fixed Income in the left navigation bar, select Credit Ratings Actions.
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