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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - SEPTEMBER 24, 2003 12:00 AM (EDT)
A.M. Best Co. commented that the financial strength rating of A+ (Superior) of Reinsurance Group of America (RGA) and the debt ratings of Reinsurance Group of America, Incorporated [NYSE: RGA] (St. Louis) are unaffected by RGA's recently announced definitive agreement to acquire-through coinsurance-the traditional U.S. life reinsurance business of Allianz Life Insurance Company of North America (Allianz) (Minnesota). This transaction brings approximately $240 billion of life reinsurance in force to RGA and is expected to generate $400 to $450 million in annual premiums. The outlook on all the ratings remains stable.
A ceding commission of $310 million will be paid to Allianz at closing which, subject to regulatory approval, is expected during the fourth quarter of 2003. Although the transaction and the capital required to support the business will be funded in the short term through a number of sources including internal funds, retrocession support and bank credit lines, A.M. Best believes RGA will fund the longer-term needs of the business with an equity or debt offering.
The transaction will lower RGA's unit costs and is expected to be immediately accretive to earnings. Although these items are viewed positively by A.M. Best, the transaction is large when compared to RGA's existing business and entails a significant integration effort. Furthermore, longer-term capital requirements to support the business are somewhat uncertain at this time and may require RGA to raise additional debt, possibly increasing leverage ratios beyond what A.M. Best considers prudent for its current rating level. Accordingly, A.M. Best will closely monitor RGA's risk-adjusted capitalization and future financial flexibility as it accesses the capital markets going forward.
Additionally, the financial strength rating of A+ (Superior) of RGA Life Reinsurance Company of Canada (Toronto) is unaffected by this transaction.
As of year-end 2002, RGA reported assets of $8.9 billion, life insurance in-force of approximately $759 billion and stockholders' equity of $1.2 billion.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.