A.M. Best Assigns Ratings to RGA's Trust PIERS and Senior Securities

Business Wire, Dec 19, 2001

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 19, 2001

A.M. Best Co. has assigned an "a" senior debt rating to Reinsurance Group of America, Incorporated's (NYSE: RGA), St. Louis, issuance of $200 million of 6.75 % senior notes due 2011.

A.M. Best has also assigned an "a-" rating to $225 million of Trust Preferred Income Equity Redeemable Securities (PIERS) Units due 2051, issued by RGA Capital Trust I, a statutory business trust that is wholly owned and guaranteed on a junior subordinated basis by RGA. Additionally, the existing senior notes and indicative shelf ratings under RGA's shelf offering have been affirmed. The financial strength rating of A (Superior) on the group's core U.S. and Canadian life/health reinsurance subsidiaries remains unchanged.

The securities being issued under RGA's existing shelf registration, which will have a remaining balance of approximately $230 million after the issuance. Proceeds from the two offerings will be used to improve RGA's capital structure by repaying outstanding bank borrowings and a $75 million loan with a MetLife subsidiary. A.M. Best views the refinancing positively since it lengthens RGA's debt maturity profile and transfers its debt obligations to the capital markets rather than to a few obligors. The excess proceeds will support growth at the company's operating subsidiaries by capitalizing on the insurance industry's growing appetite for life reinsurance products and services.

Each trust PIERS Unit is comprised of a trust preferred security equal to approximately 70% of the initial unit value and a warrant to purchase common shares of RGA representing approximately 30% of the initial unit value. At any time after issuance, the preferred security and the warrant components of each unit may be separated by the holder and subsequently recombined to form a unit. The warrant component can be exercised for a fixed number of common shares, subject to customary antidilution adjustments, at a premium of 23% over the closing price of RGA common stock of $32.50 on December 12, 2001.

Following the issuance of these securities, as of September 30, 2001, RGA's proforma financial leverage defined as total borrowings--debt plus trust preferred securities--to total capital was approximately 32%. Although higher than prior levels, this ratio is expected to moderate to the 25% to 30% range in the medium-term. Nonetheless, RGA has and is expected to maintain strong debt servicing capabilities supported by a fixed charge coverage in the mid to upper single digit range.

These rating actions reflect RGA's strong franchise in the North American life reinsurance market, high level of expertise in assessing mortality risk--which has led to sustained earnings growth in its core businesses--high quality balance sheet and strong risk-adjusted capitalization. Furthermore, the ratings consider the implicit and explicit benefits RGA derives from its strategic affiliation with its majority owner, MetLife.

Offsetting these strengths is an increasingly competitive pricing environment in the life reinsurance market that may pressure margins in the near-term. Moreover, the company recently announced losses from the terrorist attacks in the United States on September 11, 2001, unfavorable underwriting losses from its discontinued operations in Argentina and in its accident and health lines of business and credit losses in its investment portfolio. However, A.M. Best believes that RGA is well positioned to capitalize on its underwriting expertise and operational efficiencies in its core markets as primary writers continue to outsource mortality risk. This is especially true particularly given the breadth and quality of its traditional and non-traditional product development and service capabilities and its growing presence in the global reinsurance marketplace.

RGA offers a broad array of reinsurance products targeting life insurance and financial services companies and is a member of the MetLife Group. As of September 30, 2001, RGA reported assets of approximately $6.5 billion, life insurance in-force of approximately $585 billion and stockholders' equity of $919 million.

The following new ratings are assigned:

- "a" rating on $200 million 6.75% senior notes, due 2011

RGA Capital Trust I--

- "a-" on $225 million 5.75% trust preferred securities (PIERS)

Units, guaranteed by Reinsurance Group of America, Inc.

The following indicative ratings available under shelf registration have been affirmed:

Reinsurance Group of America, Inc.

- "a" senior debt rating

- "a-" subordinated debt rating

- "bbb " preferred and convertible stock rating

RGA Capital Trust II

- "a-" trust preferred securities rating

The following rating on existing debt was also affirmed:

- "a" rating on $100 million 7.25% senior notes, due 2006

The A (Superior) financial strength rating of the following members of RGA remains unchanged:

- RGA Reinsurance Company

- RGA Life Reinsurance Company of Canada

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.