Reinsurance Group OK'd in China, Units Rated by A.M. Best
Reinsurance Group of America, Inc. (RGA) has announced that its one of its units RGA Reinsurance Company has received consent from the China Insurance Regulatory Commission (“CIRC”) to operate a Branch Office in that country’s capital, Shanghai.
The company has been operating in China since 2005, when it opened a representative office in Beijing.
This approval comes as an opportunity for Reinsurance Group to tap the growing Chinese insurance market. The company plans to penetrate further into the region by offering a wide range of products and services to the Chinese population.
Not only China, the company has a significant presence in Canada, Australia and New Zealand, Asia, and Europe, Middle East and Africa. International expansion at Reinsurance Group is not new. Effort by the company over the last two decades in this direction has produced a well-established and seasoned operation.
In its Asia business, the company expects growth rates of 15–20% in pre-tax operating income and 10%–15% in net premium by 2016. The company is confident of generating profits consistently from in the in-force business.
On the same day, A.M. Best undertook rating action on two units of Reinsurance Group. The company’s subsidiaries – RGA Americas Reinsurance Company, Ltd and RGA Atlantic Reinsurance Company, Ltd – wereconferred a financial strength rating of A+ and the issuer credit ratings of “aa-”. The ratings carry a stable outlook.
The ratings acknowledge the importance of the units’ consolidated operating profile, which is projected to represent nearly 40% of the company’s equity and 35% of pre-tax consolidated results. The ratings also take into account strong capital levels of the units, affiliation with the parent company and a high quality investment portfolio.
The company is contemplating on relocating RGA Americas to Barbados from Bermuda, given its strategic importance to the company. With redomestication, RGA Atlantic will become the direct subsidiary of RGA America. The company anticipates that these units will be instrumental in providing reinsurance (means insurance for insurance) solutions to external clients along with retrocession (reinsurance for reinsurers) of business from other RGA entities.
However, factors which counter the positive rating are stiff competition faced by the units in global reinsurance market. Moreover, withhigher incidences of the population turning unhealthy or sick (morbidity) in the Asia Pacific region also remains a headwind.
The rating agency will not undertake any positive rating action in the near term. However, a negative rating action may follow if the capital position deteriorates or the units’ overall importance to the group diminishes.
Reinsurance Group carries a Zacks Rank # 2 (Buy). Other stocks worth considering include China Life Insurance Co. Ltd. (LFC), Lincoln National Corporation (LNC) and Health Insurance Innovations, Inc. (HIIQ). All these stocks carry the same rank as Reinsurance Group.
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Read the Full Research Report on LNC
Read the Full Research Report on LFC
Read the Full Research Report on HIIQ
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