Reinsurance Group of America Inc.
) Issuer Default Rating (IDR) of 'A-' has been affirmed by Fitch
Ratings. Concurrently, the rating agency reiterated the Insurer
Financial Strength (IFS) of 'A+' of RGA Reinsurance Company (RGA
Reinsurance), the company's subsidiary. All the ratings carry a
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Fitch acknowledges the company's overall strong position with
respect to balance sheet as well as business operations.
Fitch views that the company's financial leverage ratio of 27% as
of Sept. 30, 2012 stands at higher than median level, but is
reasonable when compared to the current ratings. The company also
has significant financial commitments witnessed by total
financing and commitments (TFC) ratio which stands at relatively
high level of 1x.
Fitch also views favorably the level of capitalization at RGA
Reinsurance. However, the dependence on the parent to maintain
the capital dilutes the confidence. The rating agency expects
Reinsurance's risk-based capital (RBC) ratio to lie in the range
of 360% to 370% at year-end 2012, modestly up from 356% at
RGA Reinsurance is also adequately poised with respect to
servicing its debt liabilities, with interest expense remaining
solid at 8x as of Sep 30, 2012. However, its cash coverage ratio
stands at a low level of 3x. On the other hand, the rating agency
is relieved to some extent, given committed cash as dividend and
interest payments to be received by the holding company from
On the operating side the rating agency is satisfied with the
company's performance. It, however, expects 2012 profitability
will be flat to down primarily due to adverse individual
mortality and group morbidity in its U.S. traditional segment.
Moreover earnings will also suffer from low interest rates.
The company is witnessing strong competition in its niche U.S.
life reinsurance market. Despite that the company has been able
to maintain its number two position in the market place.
Recently the company has also expanded its asset intensive
business, which might impart earrings volatility, given the
company's lack of competency in managing mortality risk. Fitch
will continue to remain watchful of operations of this segment.
Going forward factors that might cause an adverse rating change
are decline of RBC ratio below 300% and holding company financial
leverage above 30%. TFC ratio increase above 1x; GAAP interest
coverage below 5x and asset leverage more than 10x are also
factors which could affect the adverse rating change.
A positive rating action may also come about if the company's RBC
increases beyond 400%; financial leverage (excluding collateral
financing) stays below 15% range; TFC ratio remains .6x or below;
GAAP interest coverage is 10x or more and asset leverage is below
The Chubb Cor
Everest Re Group Ltd. (
) also carry an investment grade rating from Fitch.
The stock currently retains a Zacks Rank #3 (Hold). The company
is expected to release fourth quarter earnings on Jan 31, 2013.
The Zacks Consensus Estimate for fourth quarter earnings stands
at $1.80 per share, down from $1.91 per share reported in the
year ago quarter.