Fitch Ratings has revised Reinsurance Group of America’s outlook to positive from stable and has also affirmed its senior debt ratings at ‘BBB’.
The agency also announced that it has affirmed RGA Reinsurance Company’s (RGA Reinsurance) IFS rating at ‘A’ (Strong).
Fitch says that this outlook revision reflects RGA’s business profile improvement to favourable from moderate as the largest provider of individual and group life reinsurance in North America, as well as being one of the leading life & health reinsurers in the world.
The credit rating agency noted that the outlook also reflects RGA’s improved operating performance post pandemic, and its higher fixed-charge coverage. The affirmation also reflects RGA’s strong-risk adjusted capitalization and its very strong long-term financial performance and earnings.
Fitch highlights how RGA recorded a $977 million net adjusted operating income in its 2022 results, which represents a substantial improvement from $77 million in 2021 and $496 million in 2020. As a result, RGA’s operating ROE returned to a very strong 10.3% in 2022, following 0.8% in 2021 and 5.8% in 2020.
Additionally, RGA’s GAAP fixed-charge coverage improved to 8.3x in 2022 from 2.0x in 2021 and 4.4x in 2020 as operating earnings increased to more normal levels with reduced COVID-19 claims. Fitch states that it expects GAAP fixed-charge coverage to be 8x-9x, in line with rating expectations.
The credit rating agency highlighted a number of factors that could potentially lead to another upgrade, this includes RGA maintaining the TFC ratio below 1.0x, as well as an FLR sustained at 28% or lower, a GAAP asset leverage below 10x and a GAAP fixed-charge coverage of 9x or more.