Lehman/A.M. Best Co. 2nd Annual Conference

Greig Woodring President & Chief Executive Officer, Reinsurance Group of America, Inc.

"Price always wins with the hot term products. We don't need to compete on term to complete our growth story." --Greig Woodring President & Chief Executive Officer, Reinsurance Group of America, Inc.

Jack B. Lay Executive Vice President and Chief Financial Officer, Reinsurance Group of America, Inc.

Reinsurance Group CEO: Mergers Boosting Life
Reinsurance Business

Mergers and acquisitions among life insurers and new players entering the market are boosting the life reinsurance business, according to A. Greig Woodring, president and chief executive officer, Reinsurance Group of America Inc. (NYSE: RGA).

Speaking at the second annual Insurance Conference in New York, co-sponsored by Lehman Bros. and A.M. Best Co., Woodring said life reinsurers had achieved a 22% compound average growth rate over the past five years. In 2000, out of a total of $18.5 trillion in existing life insurance, $4.15 trillion was reinsured.

The life reinsurance business belongs to the biggest players, Woodring said, noting that the five largest life reinsurers had 60% of the business last year. He expects the percentage of life business reinsured to grow based on the following factors:

-- Life insurers are using reinsurance to manage their in-force business in the wake of a merger or acquisition, often reinsuring in-force blocks of business. "As they get bigger, they learn the value of reinsurance," Woodring said. Companies use reinsurance in such instances to "resculpt the liability side of their balance sheet," he said.

-- As banks build their life insurance business, they are expected to cede the mortality risk. Reinsurers also can help banks build that business by providing new products and services, he said.

-- As life insurers focus more on distribution and asset management to compensate for slow growth in life insurance sales, they are interested in reinsuring more business to free up capital for expansion.

Other life reinsurance growth areas include:

-- Asset-intensive products such as annuities.

-- Producer-owed reinsurance. Agents and brokers reinsure a portion of their book of business into a captive with the goal of capitalizing on good results.

Another facet of life reinsurance is the automatic market, which includes whole and term life products. "Price always wins with the hot term products," Woodring said, noting that for the past 18 to 24 months, RGA has been on the sidelines of the term reinsurance market. "We don't need to compete on term to complete our growth story."

RGA specializes in facultative life reinsurance, which is written on an individual basis and is not as sensitive to competitive pricing pressures.

Reinsurers work with life insurers to underwrite special circumstances, such as a 65-year-old man who has undergone heart-bypass surgery. In such cases, the reinsurer is furnished with the applicant's entire medical files to aid in underwriting, Woodring said.

RGA's average facultative policy is $1.3 million, Woodring said. Last year, the company reviewed 110,000 facultative application in North America and more than 168,000 worldwide.

Higher-than-expected claims of about $9 million dampened the company's first-quarter earnings, but net income rose 5.9% to $21.6 million.

(By Marilyn Ostermiller, executive editor, ostermm@ambest.com.)