Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

REINSURANCE GROUP OF AMERICA, INCORPORATED

(RGA)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Reinsurance of America Incorporated : GROUP OF AMERICA INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/07/2021 | 01:04pm EDT
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, among others,
statements relating to projections of the future operations, strategies,
earnings, revenues, income or loss, ratios, financial performance and growth
potential of the Company. Forward-looking statements often contain words and
phrases such as "intend," "expect," "project," "estimate," "predict,"
"anticipate," "should," "believe" and other similar expressions. Forward-looking
statements are based on management's current expectations and beliefs concerning
future developments and their potential effects on the Company. Forward-looking
statements are not a guarantee of future performance and are subject to risks
and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance, and achievements could differ materially
from those set forth in, contemplated by or underlying the forward-looking
statements.
The effects of the COVID-19 pandemic and the response thereto on economic
conditions, the financial markets and insurance risks, and the resulting effects
on the Company's financial results, liquidity, capital resources, financial
metrics, investment portfolio and stock price, could cause actual results and
events to differ materially from those expressed or implied by forward-looking
statements. Additionally, numerous other important factors (whether related to,
resulting from or exacerbated by the COVID-19 pandemic or otherwise) could also
cause results and events to differ materially from those expressed or implied by
forward-looking statements, including, without limitation: (1) adverse changes
in mortality, morbidity, lapsation or claims experience, (2) inadequate risk
analysis and underwriting, (3) adverse capital and credit market conditions and
their impact on the Company's liquidity, access to capital and cost of capital,
(4) changes in the Company's financial strength and credit ratings and the
effect of such changes on the Company's future results of operations and
financial condition, (5) the availability and cost of collateral necessary for
regulatory reserves and capital, (6) requirements to post collateral or make
payments due to declines in market value of assets subject to the Company's
collateral arrangements, (7) action by regulators who have authority over the
Company's reinsurance operations in the jurisdictions in which it operates,
(8) the effect of the Company parent's status as an insurance holding company
and regulatory restrictions on its ability to pay principal of and interest on
its debt obligations, (9) general economic conditions or a prolonged economic
downturn affecting the demand for insurance and reinsurance in the Company's
current and planned markets, (10) the impairment of other financial institutions
and its effect on the Company's business, (11) fluctuations in U.S. or foreign
currency exchange rates, interest rates, or securities and real estate markets,
(12) market or economic conditions that adversely affect the value of the
Company's investment securities or result in the impairment of all or a portion
of the value of certain of the Company's investment securities, that in turn
could affect regulatory capital, (13) market or economic conditions that
adversely affect the Company's ability to make timely sales of investment
securities, (14) risks inherent in the Company's risk management and investment
strategy, including changes in investment portfolio yields due to interest rate
or credit quality changes, (15) the fact that the determination of allowances
and impairments taken on the Company's investments is highly subjective,
(16) the stability of and actions by governments and economies in the markets in
which the Company operates, including ongoing uncertainties regarding the amount
of U.S. sovereign debt and the credit ratings thereof, (17) the Company's
dependence on third parties, including those insurance companies and reinsurers
to which the Company cedes some reinsurance, third-party investment managers and
others, (18) financial performance of the Company's clients, (19) the threat of
natural disasters, catastrophes, terrorist attacks, epidemics or pandemics
anywhere in the world where the Company or its clients do business,
(20) competitive factors and competitors' responses to the Company's
initiatives, (21) development and introduction of new products and distribution
opportunities, (22) execution of the Company's entry into new markets,
(23) integration of acquired blocks of business and entities, (24) interruption
or failure of the Company's telecommunication, information technology or other
operational systems, or the Company's failure to maintain adequate security to
protect the confidentiality or privacy of personal or sensitive data stored on
such systems, (25) adverse litigation or arbitration results, (26) the adequacy
of reserves, resources and accurate information relating to settlements, awards
and terminated and discontinued lines of business, (27) changes in laws,
regulations, and accounting standards applicable to the Company or its business,
(28) the effects of the Tax Cuts and Jobs Act of 2017 may be different than
expected and (29) other risks and uncertainties described in this document and
in the Company's other filings with the Securities and Exchange Commission
("SEC").
Forward-looking statements should be evaluated together with the many risks and
uncertainties that affect the Company's business, including those mentioned in
this document and described in the periodic reports the Company files with the
SEC. These forward-looking statements speak only as of the date on which they
are made. The Company does not undertake any obligation to update these
forward-looking statements, even though the Company's situation may change in
the future. For a discussion of these risks and uncertainties that could cause
actual results to differ materially from those contained in the forward-looking
statements, you are advised to see Item 1A - "Risk Factors" in the 2020 Annual
Report, as may be supplemented by Item 1A - "Risk Factors" in the Company's
subsequent Quarterly Reports on Form 10-Q.
                                       37

--------------------------------------------------------------------------------

Table of Contents

Overview

The Company is among the leading global providers of life reinsurance and
financial solutions, with $3.4 trillion of life reinsurance in force and assets
of $84.8 billion as of March 31, 2021. Traditional reinsurance includes
individual and group life and health, disability, and critical illness
reinsurance. Financial solutions includes longevity reinsurance, asset-intensive
reinsurance, capital solutions, including financial reinsurance and stable value
products. The Company derives revenues primarily from renewal premiums from
existing reinsurance treaties, new business premiums from existing or new
reinsurance treaties, fee income from financial solutions business and income
earned on invested assets.
Historically, the Company's primary business has been traditional life
reinsurance, which involves reinsuring life insurance policies that are often in
force for the remaining lifetime of the underlying individuals insured, with
premiums earned typically over a period of 10 to 30 years. To a lesser extent,
the Company also reinsures health business typically reinsured for one to three
years. Each year, however, a portion of the business under existing treaties
terminates due to, among other things, lapses or voluntary surrenders of
underlying policies, deaths of insureds, and the exercise of recapture options
by ceding companies. The Company has expanded its financial solutions business,
including significant asset-intensive and longevity risk transactions, which
allow its clients to take advantage of growth opportunities and manage their
capital, longevity and investment risk.
The Company's long-term profitability largely depends on the volume and amount
of death- and health-related claims incurred and the ability to adequately price
the risks it assumes. While death claims are reasonably predictable over a
period of many years, claims become less predictable over shorter periods and
are subject to significant fluctuation from quarter to quarter and year to year.
For longevity business, the Company's profitability depends on the lifespan of
the underlying contract holders and the investment performance for certain
contracts. Additionally, the Company generates profits on investment spreads
associated with the reinsurance of investment type contracts and generates fees
from financial reinsurance transactions, which are typically shorter duration
than its traditional life reinsurance business. The Company believes its sources
of liquidity are sufficient to cover potential claims payments on both a
short-term and long-term basis.
As is customary in the reinsurance business, clients continually update, refine,
and revise reinsurance information provided to the Company. Such revised
information is used by the Company in preparation of its condensed consolidated
financial statements and the financial effects resulting from the incorporation
of revised data are reflected in the current period.
Segment Presentation
The Company has geographic-based and business-based operational segments.
Geographic-based operations are further segmented into traditional and financial
solutions businesses. The Company allocates capital to its segments based on an
internally developed economic capital model, the purpose of which is to measure
the risk in the business and to provide a consistent basis upon which capital is
deployed. The economic capital model considers the unique and specific nature of
the risks inherent in RGA's businesses.
As a result of the economic capital allocation process, a portion of investment
income is credited to the segments based on the level of allocated capital. In
addition, the segments are charged for excess capital utilized above the
allocated economic capital basis. This charge is included in policy acquisition
costs and other insurance expenses. Segment investment performance varies with
the composition of investments and the relative allocation of capital to the
operating segments.
Segment revenue levels can be significantly influenced by currency fluctuations,
large transactions, mix of business and reporting practices of ceding companies,
and therefore may fluctuate from period to period. Although reasonably
predictable over a period of years, segment claims experience can be volatile
over shorter periods. See "Results of Operations by Segment" below for further
information about the Company's segments.
                                       38

--------------------------------------------------------------------------------

Table of Contents


Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the
application of accounting policies that often involve a significant degree of
judgment. Management, on an ongoing basis, reviews estimates and assumptions
used in the preparation of financial statements. If management determines that
modifications in assumptions and estimates are appropriate given current facts
and circumstances, results of operations and financial position as reported in
the condensed consolidated financial statements could change significantly.
Management believes the critical accounting policies relating to the following
areas are most dependent on the application of estimates and assumptions:

Premiums receivable;

Deferred acquisition costs;

Liabilities for future policy benefits and incurred but not reported claims;

Valuation of investments and impairments to specific investments;

Valuation of embedded derivatives; and

  Income taxes.
A discussion of each of the critical accounting policies may be found in the
Company's 2020 Annual Report under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies."
Consolidated Results of Operations
Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic continues to cause increases in the Company's
claims costs, primarily relating to its mortality business. However, the Company
cannot reliably predict the future impact of the pandemic on its business,
results of operations and financial condition as the impact will largely depend
on, among other factors, the impact of new variants of the virus, successful
rollout of the vaccination programs globally, country-specific circumstances,
measures by public and private institutions, and COVID-19's impact on all other
causes of death. In addition, clients' ability to write new business in this
environment may result in a slowdown in the Company's new business temporarily;
however, much of the Company's premiums and other revenues are contractually
recurring for many years to come.
The ultimate amount and timing of claims the Company will experience as a result
of the COVID-19 pandemic will be dependent on many variables and uncertainties.
These variables and uncertainties include those discussed above, in addition to
age, gender, comorbidities, other insured versus general population
characteristics, geography-specific institutional and individual mitigating
actions, medical capacity, and other factors. To date, general population
COVID-19 deaths have been heavily concentrated in individuals aged 70 and older
and with pre-existing comorbidities. The Company's insured population has lower
exposure to older ages than the general population and covers a generally
healthier population due to underwriting and socioeconomic factors of those
purchasing insurance. In addition, the Company's longevity business may act as a
modest offset to excess life insurance claims.
The Company's COVID-19 projection and financial impact models continue to be
updated and refined based on updated external data and the Company's claim
experience to date and are subject to the many variables and uncertainties noted
above. Although it varies from country to country, the overall financial impact
of COVID-19 on the Company is currently projected to be within the range of
previous estimates for the same level of general population deaths as there
continues to be significant differences between general and insured population
mortality. The U.S. is the key driver of mortality claim costs followed by the
UK, Canada and South Africa. For the three month period ended March 31, 2021,
the Company estimates it has incurred approximately $485 million of COVID-19
related life and health claim costs, including amounts incurred but not
reported, with approximately $358 million of that amount being associated with
the U.S. and Latin America Traditional segment. The Company estimates that every
additional 10,000 population deaths in the U.S., UK, or Canada as a result of
COVID-19 would result in the following corresponding excess mortality claims of
approximately:
•$15 million to $25 million in the U.S.;
•$4 million to $6 million in the UK; and
•$10 million to $15 million in Canada.
While the global financial markets stabilized since the beginning of the
pandemic, they continue to be in a state of uncertainty due to COVID-19 mandated
economic shutdowns and historically large and rapid central bank and fiscal
policies meant to offset the economic impact of the pandemic. The economic
weakness and uncertainty caused by these events may also adversely affect the
Company's financial performance. All investments held by the Company, directly
or in a funds withheld at
                                       39

--------------------------------------------------------------------------------

Table of Contents


interest reinsurance arrangement, are monitored for conformance with the
Company's stated investment policy limits as well as any limits prescribed by
the applicable jurisdiction's insurance laws and regulations. The current market
environment may result in certain investments being downgraded which can affect
conformance with these limits. The level of potential impairments will depend on
broad economic conditions and the pace at which global economies recover from
the effects of COVID-19 and the response thereto. See "Investments" for more
information.
The safety and well-being of the Company's employees and clients continues to be
a priority. The Company's business continuity plans remain activated and the
actions taken during 2020 to protect both employees and clients, such as working
from home, restricting travel, conducting meetings remotely, and reinforcing the
importance of face coverings, good hygiene and social distancing, also continue.
The Company's offices worldwide are at a minimum adhering to local government
mandates and guidelines regarding occupancy levels; however, in certain
situations the Company's guidelines are more restrictive than those of local
governments.
The Company has not experienced any significant disruptions to its daily
operations, despite most of its workforce working remotely. However, COVID-19
heightened operational risks and related impacts, which may include a reduction
in new business volumes from slower sales, impacts to the Company's workforce
productivity due to travel restrictions, temporary office closures and increased
remote working situations, and potential client delays in paying premiums and
reporting claims. Similar to other reinsurers, the Company is heavily reliant on
timely reporting from its clients and other third parties. The Company continues
to emphasize awareness and training regarding operational risks, including
privacy and cybersecurity risks, as such risks are heightened during remote
working situations. In addition, the Company continues to monitor its programs,
processes and procedures designed to manage these risks.
RGA's operating subsidiaries continue to be well capitalized and the Company
continues to monitor its solvency position under multiple capital regimes on a
regular basis while considering both its developing experience and economic
conditions. In addition, the Company utilizes its internal capital model to
assess its ability to meet its long-term obligations under a range of stress
scenarios on a consolidated basis. This internal capital model is also used as
the capital basis for RGA's consolidated Own Risk and Solvency Assessment.
Results from Operations - 2021 compared to 2020
The following table summarizes net income for the periods presented.
For the three months ended March 31,
(Dollars in millions, except per share data)                                2021               2020            2021 vs 2020

Revenues:

Net premiums                                                            $   2,914          $   2,819          $         95
Investment income, net of related expenses                                    812                594                   218

Investment related gains (losses), net: Impairments and change in allowance for credit losses on fixed maturity securities

                                                   (2)               (34)                   32

Other investment related gains (losses), net                                  304               (251)                  555
Total investment related gains (losses), net                                  302               (285)                  587
Other revenues                                                                 91                 76                    15
Total revenues                                                              4,119              3,204                   915
Benefits and Expenses:
Claims and other policy benefits                                            3,192              2,664                   528
Interest credited                                                             146                146                     -
Policy acquisition costs and other insurance expenses                         333                248                    85
Other operating expenses                                                      214                195                    19
Interest expense                                                               45                 41                     4
Collateral finance and securitization expense                                   3                  6                    (3)
Total benefits and expenses                                                 3,933              3,300                   633
 Income (loss) before income taxes                                            186                (96)                  282
Provision for income taxes                                                     47                 (8)                   55
Net income (loss)                                                       $     139          $     (88)         $        227
Earnings per share:
Basic earnings per share                                                $    2.04          $   (1.41)         $       3.45
Diluted earnings per share                                              $   

2.03 $ (1.41) $ 3.44



The increase in income for the three months ended March 31, 2021 was primarily
the result of:
•A one-time adjustment of $162 million, pretax, associated with prior periods
that includes $92 million, pretax, to correct the accounting for equity method
limited partnerships to reflect unrealized gains in investment income, net of
                                       40

--------------------------------------------------------------------------------

Table of Contents


related expenses that were previously included in accumulated other
comprehensive income, and a $70 million, pretax, correction reflected in other
investment related gains (losses), net to adjust the carrying value of certain
limited partnerships from cost less impairments to a fair value approach, using
the net asset value ("NAV") per share or its equivalent.
•$144 million, pretax, of capital gains included in other investment related
gains (losses), net associated with portfolio repositioning.
•Changes in the fair value of embedded derivatives, associated with modco/funds
withheld treaties, increased investment related gains by $50 million for the
three month period ended March 31 2021, compared to a decrease of $230 million
for the three month period ended March 31, 2020.
•The increases in investment income and investment related gains (losses), net
were partially offset by unfavorable mortality claims, primarily in the U.S. and
Latin America and EMEA segments.
•As discussed in the "Impacts of the COVID-19 Pandemic" above, the Company
estimates it has incurred approximately $485 million, pretax, of COVID-19
related life and health claim costs, including amounts incurred but not
reported, with approximately $358 million, pretax, in the U.S. and Latin America
segment.
Foreign currency fluctuations can result in variances in the financial statement
line items. Foreign currency exchange fluctuation did not have a material impact
on income before taxes for the three months ended March 31, 2021. Unless
otherwise stated, all amounts discussed below are net of foreign currency
fluctuations.
Premiums and business growth
The increase in premiums is primarily due to growth in life reinsurance in
force. Consolidated assumed life insurance in force increased to $3,428.6
billion as of March 31, 2021, from $3,412.4 billion as of March 31, 2020, due to
new business production and in force transactions offset by an increase in
lapses and mortality claims in the current period, primarily attributable to the
increased claims as result of the ongoing COVID-19 pandemic. The Company added
new business production, measured by face amount of insurance in force, of $77.9
billion, and $94.8 billion during the three months ended March 31, 2021 and
2020, respectively.
Investment income, net of related expenses and investment related gains and
losses
The increase in investment income, net of related expenses is primarily
attributable to the aforementioned accounting correction associated with equity
method limited partnerships, in addition to an increase in the average invested
asset base and yield:
•The average invested assets at amortized cost, excluding spread related
business, totaled $33.4 billion and $29.7 billion in 2021 and 2020,
respectively.
•The average yield earned on investments, excluding spread related business, was
5.67% and 4.08% for the three-month periods ended March 31, 2021 and 2020,
respectively.
A continued low interest rate environment, in addition to higher cash and cash
equivalents balances held by the Company during the COVID-19 pandemic, is
expected to put downward pressure on this yield in future reporting periods. The
average yield will vary from year to year depending on several variables,
including the prevailing risk-fee interest rate and credit spread environment,
prepayment fees and make-whole premiums, changes in the mix of the underlying
investments and cash and cash equivalents balances. Variable investment income
from joint ventures and limited partnerships, including unrealized gains and
losses on certain limited partnerships, will also vary from year to year and can
be highly variable based on equity-market performance, the timing of dividends
and distributions on certain investments. Investment income is allocated to the
operating segments based upon average assets and related capital levels deemed
appropriate to support segment operations.
The increase in investment related gains (losses) is primarily attributable to
the following:
•During the three months ended March 31, 2021, the Company incurred $2 million
of impairments and change in allowance for credit losses on fixed maturities
compared to $34 million during the first three months of 2020.
•Changes in the fair value of embedded derivatives, associated with modco/funds
withheld treaties, increased investment related gains (losses) by $50 million
for the three month period ended March 31 2021, compared to a decrease of $230
million for the three month period ended March 31, 2020.
•During the three months ended March 31, 2021, the Company repositioned its
portfolio generating capital gains of $144 million.
•Unrealized gains of $104 million, including the previously mentioned correction
of $70 million due to the change in fair value of certain cost method limited
partnerships were recognized during the first three months of 2021.
                                       41

--------------------------------------------------------------------------------

Table of Contents


The effective tax rate on a consolidated basis was 25.3% and 8.9% for the three
months ended March 31, 2021 and 2020, respectively. See Note 9 - "Income Tax" in
the Notes to Consolidated Financial Statements for additional information on the
Company's consolidated effective tax rate.
Impact of certain derivatives
The Company recognizes in consolidated income, any changes in the fair value of
embedded derivatives on modco or funds withheld treaties, equity index annuities
("EIAs") and variable annuities with guaranteed minimum benefit riders. The
Company utilizes freestanding derivatives to minimize the income statement
volatility due to changes in the fair value of embedded derivatives associated
with guaranteed minimum benefit riders. The following table presents the effect
of embedded derivatives and related freestanding derivatives on income before
income taxes for the periods indicated (dollars in millions):
                                                                         

Three months ended March 31,

                                                                2021              2020             2021 vs. 2020
Modco/Funds withheld:
Unrealized gains (losses)                                   $      50          $   (230)         $          280
Deferred acquisition costs/retrocession                           (17)              113                    (130)
Net effect                                                         33              (117)                    150
EIAs:
Unrealized gains (losses)                                          29               (12)                     41
Deferred acquisition costs/retrocession                           (15)                8                     (23)
Net effect                                                         14                (4)                     18
Guaranteed minimum benefit riders:
Unrealized gains (losses)                                          19              (128)                    147
Related freestanding derivatives, net of deferred
acquisition costs costs/retrocession                              (54)              164                    (218)
Net effect                                                        (35)               36                     (71)
Total net effect after freestanding derivatives             $      12          $    (85)         $           97


                                       42

--------------------------------------------------------------------------------

Table of Contents


Results of Operations by Segment
U.S. and Latin America Operations
The U.S. and Latin America operations include business generated by the
Company's offices in the U.S., Mexico and Brazil. The offices in Mexico and
Brazil provide services to clients in other Latin American countries. The U.S.
and Latin America operations consist of two major segments: Traditional and
Financial Solutions. The Traditional segment primarily specializes in the
reinsurance of individual mortality risk, health and long-term care and to a
lesser extent, group reinsurance. The Financial Solutions segment consists of
Asset-Intensive and Capital Solutions. Asset-Intensive within the Financial
Solutions segment includes coinsurance of annuities and corporate-owned life
insurance policies and to a lesser extent, fee-based synthetic guaranteed
investment contracts, which include investment-only, stable value contracts.
Capital Solutions within the Financial Solutions segment primarily involves
assisting ceding companies in meeting applicable regulatory requirements by
enhancing the ceding companies' financial strength and regulatory surplus
position through relatively low risk reinsurance and other transactions.
Typically, these transactions do not qualify as reinsurance under GAAP, due to
the low-risk nature of the transactions, therefore only the related net fees are
reflected in other revenues on the condensed consolidated statements of income.
The following table summarizes income before income taxes for the Company's U.S.
and Latin America operations for the periods presented:
For the three months ended March 31,
(dollars in millions)                                           2021              2020            2021 vs 2020

Revenues:

Net premiums                                                 $  1,432          $  1,385          $         47
Investment income, net of related expenses                        465               395                    70
Investment related gains (losses), net                              -              (167)                  167
Other revenues                                                     58                59                    (1)
Total revenues                                                  1,955             1,672                   283
Benefits and expenses:
Claims and other policy benefits                                1,800             1,420                   380
Interest credited                                                 131               148                   (17)
Policy acquisition costs and other insurance expenses             231               137                    94
Other operating expenses                                           48                44                     4
Total benefits and expenses                                     2,210             1,749                   461
Income (loss) before income taxes                            $   (255)      

$ (77) $ (178)



The increase in loss before income taxes was the result of a significant
increase in claims and other policy benefits in the U.S. Traditional segment.
Partially offsetting the increase in losses was the impact of embedded
derivatives in U.S. Financial Solutions as well as higher variable investment
income, primarily generated from unrealized gains in the U.S. Traditional
segment's investments in limited partnerships. The significant increase in
claims was primarily related to an increase in large and non-large claim
frequency within the individual mortality business. While the cause of death is
not yet available for all claims, the Company believes the excess claim costs
are primarily attributable to COVID-19.

                                       43

--------------------------------------------------------------------------------

Table of Contents


Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)                                               2021                     2020               2021 vs 2020
Revenues:
Net premiums                                                 $        1,419           $        1,373           $         46
Investment income, net of related expenses                              207                      161                     46
Investment related gains (losses), net                                    6                       (7)                    13
Other revenues                                                            5                        6                     (1)
Total revenues                                                        1,637                    1,533                    104
Benefits and expenses:
Claims and other policy benefits                                      1,740                    1,367                    373
Interest credited                                                        17                       19                     (2)
Policy acquisition costs and other insurance expenses                   182                      175                      7
Other operating expenses                                                 36                       34                      2
Total benefits and expenses                                           1,975                    1,595                    380
Income (loss) before income taxes                            $         

(338) $ (62) $ (276) Key metrics: Life insurance in force

                                        $1,610.2 

billion $1,618.4 billion Claims and other policy benefits as a percentage of net premiums ("loss ratios")

                                          122.6   %                 99.6   %

Policy acquisition costs and other insurance expenses as a percentage of net premiums

                                        12.8   %                 12.7   %
Other operating expenses as a percentage of net
premiums                                                                2.5   %                  2.5   %


The increase in loss before income taxes for the U.S. and Latin America
Traditional segment was primarily due to unfavorable claims experience within
the Individual Mortality business.
Revenues
•The increase in net premiums was primarily due to organic growth as well as new
sales. The segment added new life business production, measured by face amount
of insurance in force, of $28.5 billion and $34.0 billion during the three
months ended March 31, 2021 and 2020, respectively.
•The increase in net investment income was primarily due to higher variable
investment income associated with investments in limited partnerships and
private equity funds primarily generated from unrealized gains in the underlying
investments.
Benefits and expenses
•The increase in the loss ratio for the three months ended March 31, 2021, as
compared to the same period in 2020, was primarily due to unfavorable large and
non-large claims experience in the individual mortality line of business,
attributed primarily to the COVID-19 pandemic. As explained above, while the
cause of death is not yet available for all claims, the Company estimates that
approximately $358 million of excess claims for the three months ended March 31,
2021, were attributable to COVID-19.

                                       44

--------------------------------------------------------------------------------

Table of Contents


Financial Solutions
For the three months ended March
31,                                                           2021                                                            2020                                                         2021 vs 2020
                                                                 Capital                                                         Capital                                                           Capital
                                     Asset-Intensive            Solutions            Total           Asset-Intensive            Solutions            Total            Asset-Intensive             Solutions            Total
(dollars in millions)
Revenues:
Net premiums                       $             13          $          -          $    13          $            12          $          -          $   12          $                1          $          -          $     1
Investment income, net of related
expenses                                        257                     1              258                      233                     1             234                          24                     -               24
Investment related gains (losses),
net                                              (6)                    -               (6)                    (160)                    -            (160)                        154                     -              154
Other revenues                                   26                    27               53                       28                    25              53                          (2)                    2                -
Total revenues                                  290                    28              318                      113                    26             139                         177                     2              179
Benefits and expenses:
Claims and other policy benefits                 60                     -               60                       53                     -              53                           7                     -                7
Interest credited                               114                     -              114                      129                     -             129                         (15)                    -              (15)
Policy acquisition costs and other
insurance expenses                               47                     2               49                      (38)                    -             (38)                         85                     2               87
Other operating expenses                          9                     3               12                        7                     3              10                           2                     -                2
Total benefits and expenses                     230                     5              235                      151                     3             154                          79                     2               81
Income before income taxes         $             60          $         23          $    83          $           (38)         $         23          $  (15)         $               98          $          -          $    98


Asset-Intensive Reinsurance
The increase in income before income taxes for the U.S. and Latin America
Financial Solutions' Asset-intensive segment was primarily due to higher
investment related gains (losses), net in coinsurance portfolios and the
increase in fair value of the embedded derivatives related to modco/funds
withheld treaties.
The invested asset base supporting this segment decreased to $23.2 billion as of
March 31, 2021, from $23.9 billion as of March 31, 2020.
•The decrease in the asset base was primarily due to the run off of existing
inforce blocks and fewer blocks reinsured..
•As of March 31, 2021 and 2020, $3.2 billion and $3.4 billion, respectively, of
the invested assets were funds withheld at interest, of which greater than 90%
was associated with one client.
Impact of certain derivatives
Income from the asset-intensive business tends to be volatile due to changes in
the fair value of certain derivatives, including embedded derivatives associated
with reinsurance treaties structured on a modco or funds withheld basis, as well
as embedded derivatives associated with the Company's reinsurance of EIAs and
variable annuities with guaranteed minimum benefit riders. Fluctuations occur
period to period primarily due to changing investment conditions including, but
not limited to, interest rate movements (including risk-free rates and credit
spreads), implied volatility, the Company's own credit risk and equity market
performance, all of which are factors in the calculations of fair value.
Therefore, management believes it is helpful to distinguish between the effects
of changes in these derivatives, net of related hedging activity, and the
primary factors that drive profitability of the underlying treaties, namely
investment income, fee income (included in other revenues), and interest
credited. These fluctuations are considered unrealized by management and do not
affect current cash flows, crediting rates or spread performance on the
underlying treaties.
The following table summarizes the asset-intensive results and quantifies the
impact of these embedded derivatives for the periods presented. Revenues before
certain derivatives, benefits and expenses before certain derivatives, and
income before income taxes and certain derivatives should not be viewed as
substitutes for GAAP revenues, GAAP benefits and expenses, and GAAP income
before income taxes.
                                       45

--------------------------------------------------------------------------------

  Table of Contents

                                                                              Three months ended
(dollars in millions)                                                             March 31,
                                                                                        2021              2020
Revenues:
Total revenues                                                                       $    290          $    113
Less:
Embedded derivatives - modco/funds withheld treaties                                       44              (222)

Guaranteed minimum benefit riders and related free standing derivatives

                                                                               (64)               74
Revenues before certain derivatives                                                       310               261
Benefits and expenses:
Total benefits and expenses                                                               230               151
Less:
Embedded derivatives - modco/funds withheld treaties                                       17              (113)

Guaranteed minimum benefit riders and related free standing derivatives

                                                                               (29)               38
Equity-indexed annuities                                                                  (14)                4
Benefits and expenses before certain derivatives                                          256               222
Income before income taxes:
Income (loss) before income taxes                                                          60               (38)

Less:

Embedded derivatives - modco/funds withheld treaties                                       27              (109)

Guaranteed minimum benefit riders and related free standing derivatives

                                                                               (35)               36
Equity-indexed annuities                                                                   14                (4)
Income before income taxes and certain derivatives                          

$ 54 $ 39



Embedded Derivatives - Modco/Funds Withheld Treaties - Represents the change in
the fair value of embedded derivatives on funds withheld at interest associated
with treaties written on a modco or funds withheld basis. The fair value changes
of these embedded derivatives are reflected in revenues, while the related
impact on deferred acquisition expenses is reflected in benefits and expenses.
The Company's utilization of a credit valuation adjustment did not have a
material effect on the change in fair value of these embedded derivatives for
the three months ended March 31, 2021 and 2020.
The change in fair value of the embedded derivatives related to modco/funds
withheld treaties, net of deferred acquisition costs increased (decreased)
income before income taxes by $27 million and $(109) million for the three
months ended March 31, 2021 and 2020, respectively. The increase in income for
the three months ended March 31, 2021, was primarily due to tightening credit
spreads, partially offset by higher risk free interest rates.
Guaranteed Minimum Benefit Riders - Represents the impact related to guaranteed
minimum benefits associated with the Company's reinsurance of variable
annuities. The fair value changes of the guaranteed minimum benefits along with
the changes in fair value of the free standing derivatives (interest rate swaps,
financial futures and equity options), purchased by the Company to substantially
hedge the liability are reflected in revenues, while the related impact on
deferred acquisition expenses is reflected in benefits and expenses. The change
in fair value of the embedded derivatives on guaranteed minimum benefits are net
of an increase (decrease) in investment related gains (losses), net of $(55)
million and $99 million for the three months ended March 31, 2021 and 2020,
respectively, associated with the Company's utilization of a credit valuation
adjustment.
The change in fair value of the guaranteed minimum benefits, after allowing for
changes in the associated free standing derivatives, increased (decreased)
income before income taxes by $(35) million and $36 million for the three months
ended March 31, 2021 and 2020, respectively. The decrease in income for the
three months ended March 31, 2021, was primarily due to a reduction in the
credit valuation adjustment which has the impact of increasing the fair value of
the guaranteed minimum benefit liability.
Equity-Indexed Annuities - Represents changes in the liability for
equity-indexed annuities in excess of changes in account value, after
adjustments for related deferred acquisition expenses. The change in fair value
of embedded derivative liabilities associated with equity-indexed annuities
increased (decreased) income before income taxes by $14 million and by $(4)
million for the three months ended March 31, 2021 and 2020, respectively. The
increase in income for the three months ended March 31, 2021, was due to an
increase in risk free interest rates which has the impact of lowering the fair
value of the liability.
                                       46

--------------------------------------------------------------------------------

Table of Contents


The changes in derivatives discussed above are considered unrealized by
management and do not affect current cash flows, crediting rates or spread
performance on the underlying treaties. Fluctuations occur period to period
primarily due to changing investment conditions including, but not limited to,
interest rate movements (including benchmark rates and credit spreads), credit
valuation adjustments, implied volatility and equity market performance, all of
which are factors in the calculations of fair value. Therefore, management
believes it is helpful to distinguish between the effects of changes in these
derivatives and the primary factors that drive profitability of the underlying
treaties, namely investment income, fee income (included in other revenues) and
interest credited.
Discussion and analysis before certain derivatives
•Income before income taxes and certain derivatives increased by $15 million for
the three months ended March 31, 2021, as compared to the same period in 2020.
The increase was primarily due to the impact from improved equity market
performance and higher investment related gains (losses), net in coinsurance and
funds withheld portfolios.
•Revenue before certain derivatives increased by $49 million for the three
months ended March 31, 2021, as compared to the same period in 2020. The
increase in the first quarter of 2021 was primarily due to the increases in fair
value of equity options associated with the reinsurance of EIAs and higher
investment related gains (losses), net in coinsurance portfolios. The effect on
investment income related to equity options is substantially offset by a
corresponding change in interest credited.
•Benefits and expenses before certain derivatives increased by $34 million for
the three months ended March 31, 2021, as compared to the same period in 2020.
The increase in the current quarter was primarily due to higher interest
credited associated with the reinsurance of EIAs due to improved equity market
performance. The effect on interest credited related to equity options is
substantially offset by a corresponding increase in investment income.
Capital Solutions
Income before income taxes for the U.S. and Latin America Capital Solutions'
business for the three months ended March 31, 2021, was consistent with the
three months ended March 31, 2020, as the growth from new transactions was
offset by the termination of certain transactions. Fees earned from this
business can vary significantly depending on the size of the transactions and
the timing of their completion and therefore can fluctuate from period to
period.
•As of March 31, 2021 and 2020, the amount of reinsurance assumed from client
companies, as measured by pre-tax statutory surplus, risk based capital and
other financial structures was $22.0 billion and $18.1 billion, respectively.
                                       47

--------------------------------------------------------------------------------

Table of Contents


Canada Operations
The Company conducts reinsurance business in Canada primarily through RGA
Canada, which assists clients with capital management activity and mortality and
morbidity risk management. The Canada operations are primarily engaged in
Traditional reinsurance, which consists mainly of traditional individual life
reinsurance, and to a lesser extent creditor, group life and health, critical
illness and disability reinsurance. Creditor insurance covers the outstanding
balance on personal, mortgage or commercial loans in the event of death,
disability or critical illness and is generally shorter in duration than
traditional individual life insurance. The Canada Financial Solutions segment
consists of longevity and capital solutions.
For the three months ended March 31,
(dollars in millions)                                        2021       2020       2021 vs 2020
Revenues:
Net premiums                                                $ 303      $ 281      $         22
Investment income, net of related expenses                     60         50                10
Investment related gains (losses), net                          2        (12)               14
Other revenues                                                  4          1                 3
Total revenues                                                369        320                49
Benefits and expenses:
Claims and other policy benefits                              284        240                44
Interest credited                                               -          -                 -
Policy acquisition costs and other insurance expenses          45         45                 -
Other operating expenses                                       10          9                 1
Total benefits and expenses                                   339        294                45
Income (loss) before income taxes                           $  30      $  

26 $ 4



•The increase in income before income taxes for the three months ended March 31,
2021, as compared to the same period in 2020 is primarily due to increases in
net premiums in the Canada Traditional segment and investment related gains.
These increases are mostly offset by increased claims and other policy benefits
associated with the COVID-19 pandemic.
•While foreign currency fluctuations can result in variances in the financial
statement line items, fluctuation in the Canadian dollar did not result in a
material change in income before income taxes for the three months ended
March 31, 2021. Unless otherwise stated, all amounts discussed below are net of
foreign currency fluctuations.
Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)                                              2021                   2020              2021 vs 2020
Revenues:
Net premiums                                                 $         280          $         260          $         20
Investment income, net of related expenses                              60                     49                    11
Investment related gains (losses), net                                   2                    (12)                   14
Other revenues                                                           1                     (1)                    2
Total revenues                                                         343                    296                    47
Benefits and expenses:
Claims and other policy benefits                                       266                    220                    46
Interest credited                                                        -                      -                     -
Policy acquisition costs and other insurance expenses                   45                     45                     -
Other operating expenses                                                 8                      8                     -
Total benefits and expenses                                            319                    273                    46
Income (loss) before income taxes                            $          24          $          23          $          1
Key metrics:
Life insurance in force                                        $460.1 

billion $389.5 billion Claims and other policy benefits as a percentage of net premiums ("loss ratios")

                                          95.0  %                84.6  %

Policy acquisition costs and other insurance expenses as a percentage of net premiums

                                       16.1  %                17.3  %
Other operating expenses as a percentage of net
premiums                                                               2.9  %                 3.1  %


The increase in income before income taxes for the three months ended March 31,
2021, is primarily due to increases in net premiums and investment related gains
(losses), net, offset by less favorable individual life mortality experience as
compared to 2020.
Revenues
                                       48

--------------------------------------------------------------------------------

Table of Contents


•The segment added new life business production, measured by face amount of
insurance in force, of $14.2 billion, and $12.2 billion during the first three
months of 2021 and 2020, respectively.
•The increase in net investment income was primarily due to increased variable
investment income and an increase in the invested asset base due to growth in
the underlying business volume partially offset by a decline in interest rates.
The change in investment related gains (losses) is primarily attributable to an
increase in the fair value of credit default derivatives due to the tightening
of credit spreads.
Benefits and expenses
•The increase in the loss ratio for the three months ended March 31, 2021, as
compared to the same period in 2020, was primarily due to unfavorable claims
experience in the individual mortality line of business, attributed primarily to
the COVID-19 pandemic. While the cause of death is not yet available for all
claims, the Company estimates that approximately $26 million of excess claims
for the three months ended March 31, 2021, were attributable to COVID-19 or
COVID-19 related factors.
Financial Solutions Reinsurance
For the three months ended March 31,
(dollars in millions)                                        2021      2020      2021 vs 2020
Revenues:
Net premiums                                                $ 23      $ 21      $          2
Investment income, net of related expenses                     -         1                (1)
Investment related gains (losses), net                         -         -                 -
Other revenues                                                 3         2                 1
Total revenues                                                26        24                 2
Benefits and expenses:
Claims and other policy benefits                              18        20                (2)
Interest credited                                              -         -                 -

Policy acquisition costs and other insurance expenses - -

               -
Other operating expenses                                       2         1                 1
Total benefits and expenses                                   20        21                (1)
Income (loss) before income taxes                           $  6      $  3  

$ 3



The increase in income before income taxes was primarily a result of favorable
mortality experience on longevity business for the three months ended March 31,
2021, as compared to the same period in 2020.
Europe, Middle East and Africa Operations
The Europe, Middle East and Africa ("EMEA") operations include business
primarily generated by offices in France, Germany, Ireland, Italy, the Middle
East, the Netherlands, Poland, South Africa, Spain and the United Kingdom
("UK"). EMEA consists of two major segments: Traditional and Financial
Solutions. The Traditional segment primarily provides reinsurance through yearly
renewable term and coinsurance agreements on a variety of life, health and
critical illness products. Reinsurance agreements may be facultative or
automatic agreements covering primarily individual risks and, in some markets,
group risks. The Financial Solutions segment consists of reinsurance and other
transactions associated with longevity closed blocks, payout annuities, capital
management solutions and financial reinsurance.
For the three months ended March 31,
(dollars in millions)                                        2021       2020       2021 vs 2020
Revenues:
Net premiums                                                $ 517      $ 443      $          74
Investment income, net of related expenses                     68         47                 21
Investment related gains (losses), net                         16         (6)                22
Other revenues                                                  2          1                  1
Total revenues                                                603        485                118
Benefits and expenses:
Claims and other policy benefits                              544        387                157
Interest credited                                              (1)       (17)                16
Policy acquisition costs and other insurance expenses          31         31                  -
Other operating expenses                                       37         37                  -
Total benefits and expenses                                   611        438                173
Income (loss) before income taxes                           $  (8)     $  

47 $ (55)

                                       49

--------------------------------------------------------------------------------

Table of Contents


•The decrease in income before income taxes for the three months ended March 31,
2021, as compared to the same period in 2020 was primarily due to unfavorable
mortality experience due to the COVID-19 pandemic partially offset by an
increase in net premiums, investment income and investment related gains.
•While foreign currency fluctuations can result in variances in the financial
statement line items, fluctuations in foreign currency did not have a material
impact on income before income taxes for the three months ended March 31, 2021.
Unless otherwise stated, all amounts discussed below are net of foreign currency
fluctuations.
Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)                                              2021                   2020               2021 vs 2020
Revenues:
Net premiums                                                 $         438          $         390          $          48
Investment income, net of related expenses                              20                     19                      1
Investment related gains (losses), net                                   -                      -                      -
Other revenues                                                          (1)                    (2)                     1
Total revenues                                                         457                    407                     50
Benefits and expenses:
Claims and other policy benefits                                       469                    334                    135
Interest credited                                                        -                      -                      -
Policy acquisition costs and other insurance expenses                   29                     30                     (1)
Other operating expenses                                                27                     26                      1
Total benefits and expenses                                            525                    390                    135
Income (loss) before income taxes                            $         (68)         $          17          $         (85)
Key metrics:
Life insurance in force                                        $830.8 

billion $763.1 billion Claims and other policy benefits as a percentage of net premiums ("loss ratios")

                                         107.1  %                85.6  %

Policy acquisition costs and other insurance expenses as a percentage of net premiums

                                        6.6  %                 7.7  %
Other operating expenses as a percentage of net
premiums                                                               6.2  %                 6.7  %


The decrease in income before income taxes for the three months ended March 31,
2021, as compared to the same period in 2020 is primarily due to unfavorable
mortality experience, partially offset by an increase in net premiums.
Revenues
•The increase in net premiums was due to an in increase in business volume on
new and existing treaties.
•The segment added new life business production, measured by face amount of
insurance in force, of $27.6 billion, and $32.9 billion during the three months
ended March 31, 2021, and the same period in 2020, respectively.
Benefits and expenses
•The increase in the loss ratio for the first three months of 2021 is due to
unfavorable mortality experience primarily attributable to COVID-19. While the
cause of death is not available for all claims, the Company estimates that
approximately $98 million of excess claims for the three months ended March 31,
2021, were attributable to COVID-19 or COVID-19 related factors.
Financial Solutions
For the three months ended March 31,
(dollars in millions)                                        2021      2020      2021 vs 2020
Revenues:
Net premiums                                                $ 79      $ 53      $         26
Investment income, net of related expenses                    48        28                20
Investment related gains (losses), net                        16        (6)               22
Other revenues                                                 3         3                 -
Total revenues                                               146        78                68
Benefits and expenses:
Claims and other policy benefits                              75        53                22
Interest credited                                             (1)      (17)               16

Policy acquisition costs and other insurance expenses 2 1

               1
Other operating expenses                                      10        11                (1)
Total benefits and expenses                                   86        48                38
Income (loss) before income taxes                           $ 60      $ 30  

$ 30

                                       50

--------------------------------------------------------------------------------

Table of Contents


The increase in income before income taxes for the first three months was
primarily due to new business activity and investment related gains on the
investments supporting the segment's payout annuity business.
Revenues
•The increase in net premiums was primarily due to increased volumes of closed
longevity block business.
•The increase in net investment income was primarily related to higher income
associated with unit-linked policies which fluctuate with market performance and
is offset by an increase in interest credited.
•The increase in net investment related gains was primarily due to increases in
the fair market value of derivatives.
Benefits and expenses
•The increase in claims and other policy benefits is the result of increased
volumes of closed longevity block business and some unfavorable experience from
payout annuity business.
•The increase in benefits and expenses is also related to an increase in
interest credited. Interest credited in this segment relates to amounts credited
to the contract holders of unit-linked products. This amount will fluctuate
according to contract holder investment selections, equity returns and interest
rates. The effect on interest credited related to unit-linked products is
substantially offset by a corresponding change in investment income.
Asia Pacific Operations
The Asia Pacific operations include business generated by its offices
principally in Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand,
Singapore, South Korea and Taiwan. The Traditional segment's principal types of
reinsurance include individual and group life and health, critical illness,
disability and superannuation. Reinsurance agreements may be facultative or
automatic agreements covering primarily individual risks, and in some markets,
group risks. Superannuation is the Australian government mandated compulsory
retirement savings program. Superannuation funds accumulate retirement funds for
employees, and, in addition, typically offer life and disability insurance
coverage. The Financial Solutions segment includes financial reinsurance,
asset-intensive and certain disability and life blocks.
For the three months ended March 31,
(dollars in millions)                                     2021       2020       2021 vs 2020
Revenues:
Net premiums                                             $ 662      $ 710      $         (48)
Investment income, net of related expenses                  61         44                 17
Investment related gains (losses), net                      11        (33)                44
Other revenues                                              17         14                  3
Total revenues                                             751        735                 16
Benefits and expenses:
Claims and other policy benefits                           564        617                (53)
Interest credited                                           15         13                  2

Policy acquisition costs and other insurance expenses 54 63

              (9)
Other operating expenses                                    49         43                  6
Total benefits and expenses                                682        736                (54)
Income (loss) before income taxes                        $  69      $  (1)  

$ 70



•The increase in income before taxes as compared to the same period in 2020 was
the result of favorable claims experience across the segment as compared to the
prior year, as well as income from new business growth within the Financial
Solutions business.
•Foreign currency fluctuations can result in variances in the financial
statement line items. Foreign currency fluctuations resulted in a $2 million
increase in income before income taxes during the three months ended March 31,
2021. Unless otherwise stated, all amounts discussed below are net of foreign
currency fluctuations.
                                       51

--------------------------------------------------------------------------------

Table of Contents


Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)                                              2021                   2020               2021 vs 2020
Revenues:
Net premiums                                                 $         609          $         636          $         (27)
Investment income, net of related expenses                              33                     27                      6
Investment related gains (losses), net                                  (1)                     -                     (1)
Other revenues                                                           6                      4                      2
Total revenues                                                         647                    667                    (20)
Benefits and expenses:
Claims and other policy benefits                                       518                    555                    (37)
Interest credited                                                        -                      -                      -
Policy acquisition costs and other insurance expenses                   43                     49                     (6)
Other operating expenses                                                45                     39                      6
Total benefits and expenses                                            606                    643                    (37)
Income (loss) before income taxes                            $          41          $          24          $          17
Key metrics:
Life insurance in force                                        $521.0 

billion $635.6 billion Claims and other policy benefits as a percentage of net premiums ("loss ratios")

                                          85.1  %                87.3  %

Policy acquisition costs and other insurance expenses as a percentage of net premiums

                                        7.1  %                 7.7  %
Other operating expenses as a percentage of net
premiums                                                               7.4  %                 6.1  %


The increase in income before income taxes is primarily the result of net
favorable claims experience across the segment, partially offset by a decrease
in net premiums.
Revenues
•The decrease in net premiums was primarily due to premium reductions in
Australia group business as a result of the non-renewal of two large group
treaties effective June 30, 2020.
•The segment added new life business production, measured by face amount of
insurance in force, of $7.6 billion, and $15.7 billion during the three months
ended March 31, 2021 and 2020, respectively, due to new business production and
in force transactions offset by lapses, recaptures and non-renewal of two large
group treaties in Australia.
Benefits and expenses
•The decrease in the loss ratio for the three months ended March 31, 2021, as
compared to the same period in 2020 was primarily due to favorable claims
experience across the segment. While the cause of death is not yet available for
all claims, the Company estimates that approximately $5 million of claims for
the three months ended March 31, 2021, were attributable to COVID-19 or COVID-19
related factors, primarily in India.
Financial Solutions
For the three months ended March 31,
(dollars in millions)                                        2021      2020       2021 vs 2020
Revenues:
Net premiums                                                $ 53      $  74      $         (21)
Investment income, net of related expenses                    28         17                 11
Investment related gains (losses), net                        12        (33)                45
Other revenues                                                11         10                  1
Total revenues                                               104         68                 36
Benefits and expenses:
Claims and other policy benefits                              46         62                (16)
Interest credited                                             15         13                  2

Policy acquisition costs and other insurance expenses 11 14

                (3)
Other operating expenses                                       4          4                  -
Total benefits and expenses                                   76         93                (17)
Income (loss) before income taxes                           $ 28      $ 

(25) $ 53

                                       52

--------------------------------------------------------------------------------

Table of Contents


The increase in income before income taxes is primarily due to favorable
fluctuations in the fair value of derivatives and continued growth and favorable
experience on existing asset-intensive business in Asia. The amount of
reinsurance assumed from client companies, as measured by pre-tax statutory
surplus, risk based capital and other financial reinsurance structures was $1.6
billion and $3.8 billion for the three months ended March 31, 2021 and 2020,
respectively. Fees earned from this business can vary significantly depending on
the size, complexity and timing of the transactions and, therefore, can
fluctuate from period to period.
Revenues
•The decrease in net premiums is attributable to a lower contribution from
single premium asset-intensive transactions in the three months ended March 31,
2021, as compared to the same period in 2020.
•The increase in investment related gains (losses), net is primarily due to
favorable fluctuations in the fair value of derivatives due to tightening credit
spreads and higher future inflation expectations.
Benefits and expenses
•The decrease in claims and other policy benefits is the result of a lower
reserve impact from single premium asset-intensive transactions in the three
months ended March 31, 2021, as compared to the same period in 2020.
Corporate and Other
Corporate and Other revenues primarily include investment income from
unallocated invested assets, investment related gains and losses and service
fees. Corporate and Other expenses consist of the offset to capital charges
allocated to the operating segments within the policy acquisition costs and
other insurance income line item, unallocated overhead and executive costs,
interest expense related to debt, and the investment income and expense
associated with the Company's collateral finance and securitization transactions
and service business expenses. Additionally, Corporate and Other includes
results from certain wholly-owned subsidiaries, such as RGAX, and joint ventures
that, among other activities, develop and market technology, and provide
consulting and outsourcing solutions for the insurance and reinsurance
industries. The Company has increased its investment and expenditures in this
area in an effort to both support its clients and accelerate the development of
new solutions and services to increase consumer engagement within the life
insurance industry and hence generate new future revenue streams.
For the three months ended March 31,
(dollars in millions)                                                 2021       2020       2021 vs 2020
Revenues:
Net premiums                                                         $   -      $   -      $           -
Investment income, net of related expenses                             158         58                100
Investment related gains (losses), net                                 273        (67)               340
Other revenues                                                          10          1                  9
Total revenues                                                         441         (8)               449
Benefits and expenses:
Claims and other policy benefits                                         -          -                  -
Interest credited                                                        1          2                 (1)
Policy acquisition costs and other insurance income                    (28)       (28)                 -
Other operating expenses                                                70         62                  8
Interest expense                                                        45         41                  4
Collateral finance and securitization expense                            3          6                 (3)
Total benefits and expenses                                             91         83                  8
Loss before income taxes                                             $ 350  

$ (91) $ 441



The increase in income before income taxes is primarily due to an increase in
total revenues.
Revenues
•The increase in net investment income includes a reclassification of
approximately $92 million of pre-tax unrealized gains on certain limited
partnerships, for which the Company uses the equity method of accounting, from
AOCI to net investment income. The unrealized gains should have been recognized
directly in net investment income in the same prior periods they were reported
as earnings by the investees. The remaining increase is attributable to higher
investment income on Corporate invested assets due to a higher asset base and
higher yield.
                                       53

--------------------------------------------------------------------------------

Table of Contents


•The increase in investment related gains (losses), net, includes $104 million
of changes in the carrying value of investments in limited partnerships
considered to be investment companies, $70 million of which relates to an
adjustment to the carrying value from cost less impairments to a fair value
approach, using the net asset value ("NAV") per share or its equivalent, which
should have been recognized in prior periods. The remaining increase is
attributable to gains on sales of fixed maturity securities of $144 million, a
decrease in the valuation allowance on mortgage loans, as a result of assumption
updates due to the improving view of the impact of the COVID-19 pandemic, and
favorable changes in the fair value of derivatives.
Liquidity and Capital Resources
Overview
The Company believes that cash flows from the source of funds available to it
will provide sufficient cash flows for the next twelve months to satisfy the
current liquidity requirements of the Company under various scenarios that
include the potential risk of early recapture of reinsurance treaties, market
events and higher than expected claims associated with the pandemic. Given the
uncertainty associated with the COVID-19 pandemic and the related volatility in
the financial markets, the Company continues to maintain a higher cash and cash
equivalent balance than its historical balances. The Company performs periodic
liquidity stress testing to ensure its asset portfolio includes sufficient high
quality liquid assets that could be utilized to bolster its liquidity position
under stress scenarios. These assets could be utilized as collateral for secured
borrowing transactions with various third parties or by selling the securities
in the open market if needed. The Company's liquidity requirements have been and
will continue to be funded through net cash flows from operations. However, in
the event of significant unanticipated cash requirements, see "the COVID-19
Pandemic" for more information, the Company has multiple liquidity alternatives
available based on market conditions and the amount and timing of the liquidity
need. These alternatives include borrowings under committed credit facilities,
secured borrowings, the ability to issue long-term debt, preferred securities or
common equity and, the sale of invested assets subject to market conditions.
Current Market Environment
The Company's average investment yield, excluding spread business, for the three
months ended March 31, 2021, was 5.67%, 159 basis points above the same period
in 2020. The increase in average yield is primarily attributable to the
aforementioned accounting correction associated with equity method limited
partnerships, and an increase in the average invested asset base and overall
yield. However, the current interest rate environment continues to put downward
pressure on the Company's investment yield. The Company's insurance liabilities,
in particular its annuity products, are sensitive to changing market factors.
Gross unrealized gains on fixed maturity securities available-for-sale decreased
from $7.4 billion at December 31, 2020, to $4.7 billion at March 31, 2021, due
to tightening credit spreads. Additionally, gross unrealized losses increased
from $0.2 billion at December 31, 2020, to $0.5 billion at March 31, 2021.
The Company continues to be in a position to hold any investment security
showing an unrealized loss until recovery, provided it remains comfortable with
the credit of the issuer. As indicated above, gross unrealized gains on fixed
maturity securities of $4.7 billion remain well in excess of gross unrealized
losses of $0.5 billion as of March 31, 2021. The Company does not rely on
short-term funding or commercial paper and to date it has experienced no
liquidity pressure, nor does it anticipate such pressure in the foreseeable
future.
The Company projects its reserves to be sufficient, and it would not expect to
write down deferred acquisition costs or be required to take any actions to
augment capital, even if interest rates remain at current levels for the next
five years, assuming all other factors remain constant. While the Company has
felt the pressures of sustained low interest rates and volatile equity markets
and may continue to do so, its business and results of operations are not overly
sensitive to these risks. Mortality and morbidity risks continue to be the most
significant risk for the Company. Although management believes the Company's
current capital base is adequate to support its business at current operating
levels, it continues to monitor new business opportunities and any associated
new capital needs that could arise from the changing financial landscape.
The Holding Company
RGA is an insurance holding company whose primary uses of liquidity include, but
are not limited to, the immediate capital needs of its operating companies,
dividends paid to its shareholders, repurchase of common stock and interest
payments on its indebtedness. The primary sources of RGA's liquidity include
proceeds from its capital-raising efforts, interest income on undeployed
corporate investments, interest income received on surplus notes with RGA
Reinsurance, RCM and Rockwood Re and dividends from operating subsidiaries. The
following tables provide comparative information for RGA (dollars in millions):
                                       54

--------------------------------------------------------------------------------

  Table of Contents

                                                     Three months ended March 31,
                                                                                2021      2020
Interest expense                                                               $ 52      $ 50
Capital contributions to subsidiaries                                             4        15
Dividends to shareholders                                                        48        44
Repurchases of treasury stock                                                     -       153
Interest and dividend income                                                     32       226


                                           March 31, 2021      December 31, 2020
Cash and invested assets                  $        1,176      $            1,308


See Item 15, Schedule II - "Condensed Financial Information of the Registrant"
in the 2020 Annual Report for additional financial information related to RGA.
The undistributed earnings of substantially all of the Company's foreign
subsidiaries have been reinvested indefinitely in those non-U.S. operations, as
described in Note 9 - "Income Tax" in the Notes to Consolidated Financial
Statements in the 2020 Annual Report. As U.S. Tax Reform generally eliminates
U.S. federal income taxes on dividends from foreign subsidiaries, the Company
does not expect to incur material income taxes if these funds are repatriated.
RGA endeavors to maintain a capital structure that provides financial and
operational flexibility to its subsidiaries, credit ratings that support its
competitive position in the financial services marketplace, and shareholder
returns. As part of the Company's capital deployment strategy, it has in recent
years repurchased shares of RGA common stock and paid dividends to RGA
shareholders, as authorized by the board of directors. On January 24, 2019,
RGA's board of directors authorized a share repurchase program for up to $400
million of RGA's outstanding common stock. The authorization was effective
immediately and does not have an expiration date. On May 6, 2020, the Company
announced that it has suspended stock repurchases until further notice. The
resumption and pace of repurchase activity depends on various factors such as
the level of available cash, the impact of the ongoing COVID-19 pandemic, an
evaluation of the costs and benefits associated with alternative uses of excess
capital, such as acquisitions and in force reinsurance transactions, and RGA's
stock price.
Details underlying dividend and share repurchase program activity were as
follows (in millions, except share data):
                                                 Three months ended March 

31,

                                                     2021                   

2020

     Dividends to shareholders           $       48                      $        44
     Repurchases of common stock                  -                              153
     Total amount paid to shareholders   $       48                      $       197

     Number of shares repurchased                 -                       

1,074,413

     Average price per share             $        -                      $ 

142.05



In April 2021, RGA's board of directors declared a quarterly dividend of $0.70
per share. All future payments of dividends are at the discretion of RGA's board
of directors and will depend on the Company's earnings, capital requirements,
insurance regulatory conditions, operating conditions, and other such factors as
the board of directors may deem relevant. The amount of dividends that RGA can
pay will depend in part on the operations of its reinsurance subsidiaries. See
Note 3 - "Equity" in the Notes to Condensed Consolidated Financial Statements
for information on the Company's share repurchase program.
Debt
Certain of the Company's debt agreements contain financial covenant restrictions
related to, among others, liens, the issuance and disposition of stock of
restricted subsidiaries, minimum requirements of consolidated net worth, maximum
ratios of debt to capitalization and change of control provisions. The Company
is required to maintain a minimum consolidated net worth, as defined in the debt
agreements, of $5.3 billion, calculated as of the last day of each fiscal
quarter. Also, consolidated indebtedness, calculated as of the last day of each
fiscal quarter, cannot exceed 35% of the sum of the Company's consolidated
indebtedness plus adjusted consolidated stockholders' equity. A material ongoing
covenant default could require immediate payment of the amount due, including
principal, under the various agreements. Additionally, the Company's debt
agreements contain cross-default covenants, which would make outstanding
borrowings immediately payable in the event of a material uncured covenant
default under any of the agreements, including, but not limited to, non-payment
of indebtedness when due for an amount in excess of the amounts set forth in
those agreements, bankruptcy proceedings, or any other event that results in the
acceleration of the maturity of indebtedness.
                                       55

--------------------------------------------------------------------------------

Table of Contents


As of March 31, 2021 and December 31, 2020, the Company had $3.6 billion, in
outstanding borrowings under its debt agreements and was in compliance with all
covenants under those agreements. As of March 31, 2021 and December 31, 2020,
the average interest rate on long-term debt outstanding was 4.54%. The ability
of the Company to make debt principal and interest payments depends on the
earnings and surplus of subsidiaries, investment earnings on undeployed capital
proceeds, available liquidity at the holding company, and the Company's ability
to raise additional funds.
The Company enters into derivative agreements with counterparties that reference
either the Company's debt rating or its financial strength rating. If either
rating is downgraded in the future, it could trigger certain terms in the
Company's derivative agreements, which could negatively affect overall
liquidity. For the majority of the Company's derivative agreements, there is a
termination event should the long-term senior debt ratings drop below either
BBB+ (S&P) or Baa1 (Moody's) or the financial strength ratings drop below either
A- (S&P) or A3 (Moody's).
The Company may borrow up to $850 million in cash and obtain letters of credit
in multiple currencies on its revolving credit facility that matures in August
2023. As of March 31, 2021, the Company had no cash borrowings outstanding and
$21 million in issued, but undrawn, letters of credit under this facility.
On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face
amount of $600 million. This security has been registered with the Securities
and Exchange Commission. The net proceeds were approximately $593 million and
will be used in part to repay the Company's $400 million 5.00% Senior Notes due
in 2021, and the remainder will be used for general corporate purposes.
Capitalized issue costs were approximately $5 million.
Based on the historic cash flows and the current financial results of the
Company, management believes RGA's cash flows will be sufficient to enable RGA
to meet its obligations for at least the next 12 months.
Credit and Committed Facilities
At March 31, 2021, the Company maintained an $850 million syndicated revolving
credit facility in addition to committed letter of credit facilities aggregating
$1.2 billion. See Note 13 - "Debt" in the Notes to Consolidated Financial
Statements in the 2020 Annual Report for further information about these
facilities.
The Company has obtained bank letters of credit in favor of various affiliated
and unaffiliated insurance companies from which the Company assumes business.
These letters of credit represent guarantees of performance under the
reinsurance agreements and allow ceding companies to take statutory reserve
credits. Certain of these letters of credit contain financial covenant
restrictions similar to those described in the "Debt" discussion above. At
March 31, 2021, there were approximately $23 million of outstanding bank letters
of credit in favor of third parties. Additionally, in accordance with applicable
regulations, the Company utilizes letters of credit to secure statutory reserve
credits when it retrocedes business to its affiliated subsidiaries. The Company
cedes business to its affiliates to help reduce the amount of regulatory capital
required in certain jurisdictions, such as the U.S. and the UK. The Company
believes the capital required to support the business in the affiliates reflects
more realistic expectations than the original jurisdiction of the business,
where capital requirements are often considered to be quite conservative. As of
March 31, 2021, $1.5 billion in letters of credit from various banks were
outstanding, but undrawn, backing reinsurance between the various subsidiaries
of the Company.
Cash Flows
The Company's principal cash inflows from its reinsurance operations include
premiums and deposit funds received from ceding companies. The primary liquidity
concerns with respect to these cash flows are early recapture of the reinsurance
contract by the ceding company and lapses of annuity products reinsured by the
Company. The Company's principal cash inflows from its invested assets result
from investment income and the maturity and sales of invested assets. The
primary liquidity concerns with respect to these cash inflows relates to the
risk of default by debtors and interest rate volatility. The Company manages
these risks very closely. See "Investments" and "Interest Rate Risk" below.
Additional sources of liquidity to meet unexpected cash outflows in excess of
operating cash inflows and current cash and equivalents on hand drawing funds
under a revolving credit facility, under which the Company had availability of
$829 million as of March 31, 2021. The Company also has $349 million of funds
available through collateralized borrowings from the FHLB as of March 31, 2021.
As of March 31, 2021, the Company could have borrowed these additional amounts
without violating any of its existing debt covenants.
The Company's principal cash outflows relate to the payment of claims
liabilities, interest credited, operating expenses, income taxes, dividends to
shareholders, purchases of treasury stock, and principal and interest under debt
and other financing obligations. The Company seeks to limit its exposure to loss
on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers under excess coverage
and coinsurance contracts (See Note 2 - "Significant Accounting Policies and
Pronouncements" in the Notes to Consolidated Financial Statements in the 2020
Annual Report). The Company performs annual financial reviews of its
retrocessionaires to evaluate financial stability and performance. The Company
has never experienced a material default in connection with retrocession
arrangements, nor has it
                                       56

--------------------------------------------------------------------------------

Table of Contents


experienced any difficulty in collecting claims recoverable from
retrocessionaires; however, no assurance can be given as to the future
performance of such retrocessionaires nor to the recoverability of future
claims. The Company's management believes its recent action to increase cash and
cash equivalents along with its current sources of liquidity are adequate to
meet its cash requirements for the next 12 months, despite the uncertainty
associated with the pandemic.
Summary of Primary Sources and Uses of Liquidity and Capital
The Company's primary sources and uses of liquidity and capital are summarized
as follows:
                                                                                       For the three months ended March 31,
                                                                                      2021                              2020
                                                                                              (Dollars in millions)

Sources:

         Net cash provided by operating activities                                    2,366                             2,207

         Exercise of stock options, net                                                   -                                 1
         Change in cash collateral for derivative positions and other
         arrangements                                                                     -                                51
         Cash provided by changes in universal life and other
         investment type policies and contracts                                           -                               475

         Total sources                                                                2,366                             2,734

Uses:
         Net cash used in investing activities                                        2,492                             1,096
         Dividends to stockholders                                                       48                                44
         Repayment of collateral finance and securitization notes                        42                                19

         Principal payments of long-term debt                                             1                                 1

         Purchases of treasury stock                                                      1                               156

         Change in cash collateral for derivative positions and other
         arrangements                                                                    25                                 -
         Cash used for changes in universal life and other
         investment type policies and contracts                                          26                                 -
         Effect of exchange rate changes on cash                                         17                                47
         Total uses                                                                   2,652                             1,363
Net change in cash and cash equivalents                                                (286)                            1,371


Cash Flows from Operations - The principal cash inflows from the Company's
reinsurance activities come from premiums, investment and fee income, annuity
considerations and deposit funds. The principal cash outflows relate to the
liabilities associated with various life and health insurance, annuity and
disability products, operating expenses, income tax payments and interest on
outstanding debt obligations. The primary liquidity concern with respect to
these cash flows is the risk of shortfalls in premiums and investment income,
particularly in periods with abnormally high claims levels.
Cash Flows from Investments - The principal cash inflows from the Company's
investment activities come from repayments of principal on invested assets,
proceeds from maturities of invested assets, sales of invested assets and
settlements of freestanding derivatives. The principal cash outflows relate to
purchases of investments, issuances of policy loans and settlements of
freestanding derivatives. The Company typically has a net cash outflow from
investing activities because cash inflows from insurance operations are
reinvested in accordance with its asset/liability management discipline to fund
insurance liabilities. The Company closely monitors and manages these risks
through its credit risk management process. The primary liquidity concerns with
respect to these cash flows are the risk of default by debtors and market
disruption, which could make it difficult for the Company to sell investments.
Financing Cash Flows - The principal cash inflows from the Company's financing
activities come from issuances of RGA debt and equity securities, and deposit
funds associated with universal life and other investment type policies and
contracts. The principal cash outflows come from repayments of debt, payments of
dividends to stockholders, purchases of treasury stock, and withdrawals
associated with universal life and other investment type policies and contracts.
A primary liquidity concern with respect to these cash flows is the risk of
early contractholder and policyholder withdrawal.
Contractual Obligations
There were no material changes in the Company's contractual obligations from
those reported in the 2020 Annual Report.
Asset / Liability Management
The Company actively manages its cash and invested assets using an approach that
is intended to balance quality, diversification, asset/liability matching,
liquidity and investment return. The goals of the investment process are to
optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted
total return while managing the assets and liabilities on a cash flow and
duration basis.
                                       57

--------------------------------------------------------------------------------

Table of Contents


The Company has established target asset portfolios for its operating segments,
which represent the investment strategies intended to profitably fund its
liabilities within acceptable risk parameters. These strategies include
objectives and limits for effective duration, yield curve sensitivity and
convexity, liquidity, asset sector concentration and credit quality.
The Company's asset-intensive products are primarily supported by investments in
fixed maturity securities reflected on the Company's balance sheet and under
funds withheld arrangements with the ceding company. Investment guidelines are
established to structure the investment portfolio based upon the type, duration
and behavior of products in the liability portfolio so as to achieve targeted
levels of profitability. The Company manages the asset-intensive business to
provide a targeted spread between the interest rate earned on investments and
the interest rate credited to the underlying interest-sensitive contract
liabilities. The Company periodically reviews models projecting different
interest rate scenarios and their effect on profitability. Certain of these
asset-intensive agreements, primarily in the U.S. and Latin America Financial
Solutions operating segment, are generally funded by fixed maturity securities
that are withheld by the ceding company.
The Company's liquidity position (cash and cash equivalents and short term
investments) was $3.3 billion and $3.6 billion at March 31, 2021 and
December 31, 2020, respectively. Given the uncertainty associated with the
COVID-19 pandemic and the related volatility in the financial markets, the
Company has increased its liquidity position. Liquidity needs are determined
from valuation analyses conducted by operational units and are driven by product
portfolios. Periodic evaluations of demand liabilities and short-term liquid
assets are designed to adjust specific portfolios, as well as their durations
and maturities, in response to anticipated liquidity needs.
See "Securities Borrowing, Lending and Other" in Note 4 - "Investments" in the
Notes to Condensed Consolidated Financial Statements for information related to
the Company's securities borrowing, lending and repurchase/reverse repurchase
programs. In addition to its security agreements with third parties, certain
RGA's subsidiaries have entered into intercompany securities lending agreements
to more efficiently source securities for lending to third parties and to
provide for more efficient regulatory capital management.
The Company is a member of the FHLB and holds $86 million of FHLB common stock,
which is included in other invested assets on the Company's condensed
consolidated balance sheets. The Company has entered into funding agreements
with the FHLB under guaranteed investment contracts whereby the Company has
issued the funding agreements in exchange for cash and for which the FHLB has
been granted a blanket lien on the Company's commercial and residential
mortgage-backed securities and commercial mortgage loans used to collateralize
the Company's obligations under the funding agreements. The Company maintains
control over these pledged assets, and may use, commingle, encumber or dispose
of any portion of the collateral as long as there is no event of default and the
remaining qualified collateral is sufficient to satisfy the collateral
maintenance level. The funding agreements and the related security agreements
represented by this blanket lien provide that upon any event of default by the
Company, the FHLB's recovery is limited to the amount of the Company's liability
under the outstanding funding agreements. The amount of the Company's liability
for the funding agreements with the FHLB under guaranteed investment contracts
was $1.8 billion at March 31, 2021 and December 31, 2020, which is included in
interest sensitive contract liabilities on the Company's condensed consolidated
balance sheets. The advances on these agreements are collateralized primarily by
commercial and residential mortgage-backed securities, commercial mortgage
loans, and U.S. Treasury and government agency securities. The amount of
collateral exceeds the liability and is dependent on the type of assets
collateralizing the guaranteed investment contracts.
                                       58

--------------------------------------------------------------------------------

Table of Contents

Investments

Management of Investments
The Company's investment and derivative strategies involve matching the
characteristics of its reinsurance products and other obligations and to seek to
closely approximate the interest rate sensitivity of the assets with estimated
interest rate sensitivity of the reinsurance liabilities. The Company achieves
its income objectives through strategic and tactical asset allocations, security
and derivative strategies within an asset/liability management and disciplined
risk management framework. Derivative strategies are employed within the
Company's risk management framework to help manage duration, currency, and other
risks in assets and/or liabilities and to replicate the credit characteristics
of certain assets.
The Company's portfolio management groups work with the Enterprise Risk
Management function to develop the investment policies for the assets of the
Company's domestic and international investment portfolios. All investments held
by the Company, directly or in a funds withheld at interest reinsurance
arrangement, are monitored for conformance with the Company's stated investment
policy limits as well as any limits prescribed by the applicable jurisdiction's
insurance laws and regulations. See Note 4 - "Investments" in the Notes to
Condensed Consolidated Financial Statements for additional information regarding
the Company's investments.
Effects of COVID-19
Credit markets continued to recover during the first three months of 2021
following the disruption in the global financial markets caused by the COVID-19
pandemic. The Company has exposure to some of the asset classes and industries
most affected by the COVID-19 pandemic such as commercial mortgage loans,
emerging market debt, energy, and airlines; however, the Company's primary
exposure in these asset classes is of high quality assets. During the quarter,
the Company decreased its valuation allowance on its commercial mortgage loan
portfolio by approximately $17 million to reflect the updated outlook from the
COVID-19 pandemic. The Company continues to monitor and evaluate the impact of
the COVID-19 pandemic on its investment portfolio and is working closely with
its borrowers to evaluate any short-term cash flow issues.
Portfolio Composition
The Company had total cash and invested assets of $75.5 billion and $75.8
billion as of March 31, 2021 and December 31, 2020, respectively, as illustrated
below (dollars in millions):
                                                                                                     December 31,
                                                  March 31, 2021              % of Total                 2020                  % of Total
Fixed maturity securities,
available-for-sale                              $        56,426                       74.7  %       $     56,735                       74.8  %
Equity securities                                           135                        0.2                   132                        0.2
Mortgage loans on real estate                             6,001                        7.9                 5,787                        7.6
Policy loans                                              1,253                        1.7                 1,258                        1.7
Funds withheld at interest                                5,459                        7.2                 5,432                        7.2
Short-term investments                                      157                        0.2                   227                        0.3
Other invested assets                                     2,983                        4.0                 2,829                        3.7
Cash and cash equivalents                                 3,122                        4.1                 3,408                        4.5
Total cash and invested assets                  $        75,536                      100.0  %       $     75,808                      100.0  %


Investment Yield
The following table presents consolidated average invested assets at amortized
cost, net investment income, investment yield, variable investment income
("VII"), and investment yield excluding VII, which can vary significantly from
period to period (dollars in millions). The table excludes spread related
business. Spread related business is primarily associated with contracts on
which the Company earns an interest rate spread between assets and liabilities.
To varying degrees, fluctuations in the yield on other spread related business
is generally subject to corresponding adjustments to the interest credited on
the liabilities.
                                                                       Three months ended
                                                                            March 31,
                                                                                                                        Increase/
                                                                                    2021              2020              (Decrease)
Average invested assets at amortized cost                                   

$ 33,367 $ 29,728 $ 3,639 Net investment income

$ 463 $ 299 $ 164 Annualized investment yield (ratio of net investment income to average invested assets at amortized cost)

                                           5.67  %           4.08  %               159 bps
VII (included in net investment income)                                     

$ 162 $ 3 $ 159 Annualized investment yield excluding VII (ratio of net investment income, excluding VII, to average invested assets, excluding assets with only VII, at amortized cost)

                                   3.79  %           4.19  %              (40) bps


                                       59

--------------------------------------------------------------------------------

Table of Contents



Investment yield increased for the three months ended March 31, 2021, in
comparison to the same period in the prior year, primarily due to increased
variable income from limited partnerships and real estate joint ventures, which
are included in other invested assets on the condensed consolidated balance
sheets. Investment yield excluding variable investment income decreased for the
three months ended March 31, 2021, in comparison to the same period in the prior
year, primarily due to the continued low interest rate environment.
Fixed Maturity Securities Available-for-Sale
See "Fixed Maturity Securities Available-for-Sale" in Note 4 - "Investments" in
the Notes to Condensed Consolidated Financial Statements for tables that provide
the amortized cost, allowance for credit losses, unrealized gains and losses and
estimated fair value of these securities by type as of March 31, 2021 and
December 31, 2020.
The Company holds various types of fixed maturity securities available-for-sale
and classifies them as corporate securities ("Corporate"), Canadian and Canadian
provincial government securities ("Canadian government"), residential
mortgage-backed securities ("RMBS"), asset-backed securities ("ABS"), commercial
mortgage-backed securities ("CMBS"), U.S. government and agencies ("U.S.
government"), state and political subdivisions, and other foreign government,
supranational and foreign government-sponsored enterprises ("Other foreign
government"). RMBS, ABS, and CMBS are collectively "structured securities." As
of March 31, 2021 and December 31, 2020, approximately 93.7% and 94.0%,
respectively, of the Company's consolidated investment portfolio of fixed
maturity securities were investment grade.
Important factors in the selection of investments include diversification,
quality, yield, call protection and total rate of return potential. The relative
importance of these factors is determined by market conditions and the
underlying reinsurance liability and existing portfolio characteristics. The
Company owns floating rate securities that represent approximately 5.3% and 5.6%
of the total fixed maturity securities as of March 31, 2021 and December 31,
2020, respectively. These investments have a higher degree of income variability
than the other fixed income holdings in the portfolio due to fluctuations in
interest payments. The Company holds floating rate investments to match specific
floating rate liabilities primarily reflected in the condensed consolidated
balance sheets as collateral finance notes, as well as to enhance asset
management strategies.
The largest asset class in which fixed maturity securities were invested was
corporate securities, which represented approximately 62.5% and 63.9% of total
fixed maturity securities as of March 31, 2021 and December 31, 2020,
respectively. See "Corporate Fixed Maturity Securities" in Note 4 -
"Investments" in the Notes to Condensed Consolidated Financial Statements for
tables showing the major sector types, which comprise the corporate fixed
maturity holdings as of March 31, 2021 and December 31, 2020.
As of March 31, 2021, the Company's investments in Canadian government
securities represented 8.3% of the fair value of total fixed maturity securities
compared to 9.1% of the fair value of total fixed maturities as of December 31,
2020. These assets are primarily high quality, long duration provincial strip
bonds, the valuation of which is closely linked to the interest rate curve.
These assets are longer in duration and held primarily for asset/liability
management to meet Canadian regulatory requirements.
The Company references rating agency designations in some of its investments
disclosures. These designations are based on the ratings from nationally
recognized statistical rating organizations, primarily Moody's, S&P and Fitch.
Structured securities held by the Company's insurance subsidiaries that maintain
the NAIC statutory basis of accounting utilize the NAIC rating methodology. The
NAIC assigns designations to publicly traded as well as privately placed
securities. The designations assigned by the NAIC range from class 1 to class 6,
with designations in classes 1 and 2 generally considered investment grade (BBB
or higher rating agency designation). NAIC designations in classes 3 through 6
are generally considered below investment grade (BB or lower rating agency
designation).
                                       60

--------------------------------------------------------------------------------

Table of Contents


The quality of the Company's available-for-sale fixed maturity securities
portfolio, as measured at fair value and by the percentage of fixed maturity
securities invested in various ratings categories, relative to the entire
available-for-sale fixed maturity securities portfolio, as of March 31, 2021 and
December 31, 2020 was as follows (dollars in millions):
                                                                                      March 31, 2021                                                     December 31, 2020
         NAIC                       Rating Agency               Amortized           Estimated                                       Amortized           Estimated
     Designation                     Designation                  Cost              Fair Value             % of Total                 Cost              Fair Value             % of Total
          1                  AAA/AA/A                          $  31,323          $    34,096                        60.4  %       $  29,770          $    34,589                        60.9  %
          2                  BBB                                  17,402               18,799                        33.3             16,440               18,751                        33.1
          3                  BB                                    2,622                2,704                         4.8              2,480                2,588                         4.6
          4                  B                                       695                  669                         1.2                713                  697                         1.2
          5                  CCC and lower                           170                  145                         0.3                131                  102                         0.2
          6                  In or near default                       17                   13                           -                 14                    8                           -
                             Total                             $  52,229          $    56,426                       100.0  %       $  49,548          $    56,735                       100.0  %

The Company's fixed maturity portfolio includes structured securities. The following table shows the types of structured securities the Company held as of March 31, 2021 and December 31, 2020 (dollars in millions):

                                                                 March 31, 2021                                                        December 31, 2020
                                                                   Estimated                                                               Estimated
                                          Amortized Cost           Fair Value             % of Total             Amortized Cost            Fair Value             % of Total
RMBS:
Agency                                   $          659          $       701                     10.7  %       $            686          $       744                     11.0  %
Non-agency                                          877                  890                     13.4                     1,049                1,073                     15.8
Total RMBS                                        1,536                1,591                     24.1                     1,735                1,817                     26.8
ABS:
Collateralized loan obligations
("CLOs")                                          1,603                1,593                     24.2                     1,707                1,689                     24.9
ABS, excluding CLOs                               1,553                1,558                     23.7                     1,392                1,403                     20.7
Total ABS                                         3,156                3,151                     47.9                     3,099                3,092                     45.6
CMBS                                              1,774                1,840                     28.0                     1,790                1,868                     27.6
Total                                    $        6,466          $     6,582                    100.0  %       $          6,624          $     6,777                    100.0  %


The Company's RMBS portfolio includes agency-issued pass-through securities and
collateralized mortgage obligations. Agency-issued pass-through securities are
guaranteed or otherwise supported by the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, or the Government National Mortgage
Association. The principal risks inherent in holding RMBS are prepayment and
extension risks, which will affect the timing of when cash will be received and
are dependent on the level of mortgage interest rates. Prepayment risk is the
unexpected increase in principal payments from the expected, primarily as a
result of owner refinancing. Extension risk relates to the unexpected slowdown
in principal payments from the expected. In addition, non-agency RMBS face
credit risk should the borrower be unable to pay the contractual interest or
principal on their obligation. The Company monitors its mortgage-backed
securities to mitigate exposure to the cash flow uncertainties associated with
these risks.
The Company's ABS portfolio primarily consists of CLOs, single-family rentals,
container leasing, railcar leasing, aircraft and student loans. The principal
risks in holding ABS are structural, credit, capital market and interest rate
risks. Structural risks include the securities' cash flow priority in the
capital structure and the inherent prepayment sensitivity of the underlying
collateral. Credit risks include the adequacy and ability to realize proceeds
from the collateral. Credit risks are mitigated by credit enhancements that
include excess spread, over-collateralization and subordination. Capital market
risks include general level of interest rates and the liquidity for these
securities in the marketplace.
The Company's CMBS portfolio primarily consists of large pool securitizations
that are diverse by property type, borrower and geographic dispersion. The
principal risks in holding CMBS are structural and credit risks. Structural
risks include the securities' cash flow priority in the capital structure and
the inherent prepayment sensitivity of the underlying collateral. Credit risks
include the adequacy and ability to realize proceeds from the collateral. The
Company focuses on investment grade rated tranches that provide additional
credit support beyond the equity protection in the underlying loans. These
assets are viewed as an attractive alternative to other fixed income asset
classes.
As of March 31, 2021 and December 31, 2020, the Company had $490 million and
$197 million, respectively, of gross unrealized losses related to its fixed
maturity securities. The Company monitors its fixed maturity securities to
determine impairments in value and evaluates factors such as financial condition
of the issuer, payment performance, compliance with covenants, general market
and industry sector conditions, current intent and ability to hold securities,
and various other subjective factors. Based on management's judgment, securities
determined to have expected credit losses will record an allowance for credit
losses in the amount that the fair value is less than the amortized cost.
                                       61

--------------------------------------------------------------------------------

Table of Contents


Mortgage Loans on Real Estate
The Company's mortgage loan portfolio consists of U.S., Canada and UK based
investments primarily in commercial offices, light industrial properties and
retail locations. The mortgage loan portfolio is diversified by geographic
region and property type as discussed further under "Mortgage Loans on Real
Estate" in Note 4 - "Investments" in the Notes to Condensed Consolidated
Financial Statements. Most of the mortgage loans in the Company's portfolio
range in size up to $30 million, with the average mortgage loan investment as of
March 31, 2021, totaling approximately $10 million. For the quarter ended
March 31, 2021, the Company decreased its valuation allowance on its commercial
mortgage loan portfolio by approximately $17 million to reflect the updated
outlook from the COVID-19 pandemic.  The Company continues to monitor and
evaluate the impact of COVID-19 pandemic on its investment portfolio and is
working closely with its borrowers to evaluate any short-term cash flow issues.
For the three months ended March 31, 2021, the Company modified the payment
terms of one commercial mortgage loan, with a carrying value of approximately
$10 million in response to COVID-19. For the year ended December 31, 2020, the
Company modified the payments terms of approximately 52 commercial mortgage
loans, with a carrying value of approximately $660 million in response to
COVID-19. These loans met the criteria established in the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act") and were not considered a
troubled debt restructuring. In accordance with the CARES Act criteria, these
loans was not more than 30 days past due at December 31, 2019, and the
modifications included deferral or delayed payments of principal or interest on
the loan.
As of March 31, 2021 and December 31, 2020, the Company's mortgage loans, gross
of unamortized deferred loan origination fees and expenses and valuation
allowances, were distributed geographically as follows (dollars in millions):
                             March 31, 2021                     December 31, 2020
                        Recorded                             Recorded
                       Investment        % of Total         Investment         % of Total
U.S. Region:
West                 $       2,317           38.3  %    $          2,253           38.5  %
South                        2,097           34.6                  2,040           34.8
Midwest                      1,055           17.4                  1,027           17.5
Northeast                      287            4.7                    277            4.7
Subtotal - U.S.              5,756           95.0                  5,597           95.5
Canada                         194            3.2                    188            3.2
United Kingdom                 108            1.8                     76            1.3
Total                $       6,058          100.0  %    $          5,861          100.0  %


See "Allowance for Credit Losses and Impairments" in Note 2 - "Significant
Accounting Policies and Pronouncements" of the Company's 2020 Annual Report for
information regarding the Company's policy for valuation allowances and
impairments on mortgage loans.
See "Mortgage Loans on Real Estate" in Note 4 - "Investments" in the Notes to
Condensed Consolidated Financial Statements for information regarding valuation
allowances and impairments.
Impairments and Allowance for Credit Losses
The Company's determination of whether a decline in value necessitates the
recording of an allowance for credit losses includes an analysis of whether the
issuer is current on its contractual payments, evaluating whether it is probable
that the Company will be able to collect all amounts due according to the
contractual terms of the security and analyzing the overall ability of the
Company to recover the amortized cost of the investment. See "Allowance for
Credit Losses and Impairments" in Note 2 - "Significant Accounting Policies and
Pronouncements" of the Company's 2020 Annual Report for additional information.
The table below summarizes impairments and changes in allowance for credit
losses on fixed maturity securities, other impairment losses and changes in the
mortgage loan provision for the three months ended March 31, 2021 and 2020
(dollars in millions).
                                                                      Three months ended
                                                                          March 31,
                                                                                2021                2020
Impairments and change in allowance for credit losses                       $        2          $       34
Other impairment losses and changes in provision                                    (1)                  -
Change in mortgage loan provision                                                  (17)                 13
Total                                                                       $      (16)         $       47


The change in mortgage loan provision for the three months ended March 31, 2021,
was primarily due to a decrease in the mortgage loan valuation allowance to
reflect the updated outlook from the COVID-19 pandemic. The impairments and
change in allowance for credit losses on fixed maturity securities for the three
months ended March 31, 2020, were primarily related to high-yield securities as
a result of the uncertainty in the global markets due to the COVID-19 pandemic.
In addition, the change
                                       62

--------------------------------------------------------------------------------

Table of Contents


in mortgage loan provision for the three months ended March 31, 2020, was
primarily due to an increase in the mortgage loan valuation allowance to reflect
the estimated impact from the COVID-19 pandemic.
See "Unrealized Losses for Fixed Maturity Securities Available-for-Sale" in Note
4 - "Investments" in the Notes to Condensed Consolidated Financial Statements
for tables that present the estimated fair value and gross unrealized losses for
securities that have estimated fair values below amortized cost by class and
grade, as well as the length of time the related estimated fair value has
remained below amortized cost as of March 31, 2021 and December 31, 2020.
As of March 31, 2021 and December 31, 2020, the Company classified approximately
6.3% and 5.9%, respectively, of its fixed maturity securities in the Level 3
category (refer to Note 6 - "Fair Value of Assets and Liabilities" in the Notes
to Condensed Consolidated Financial Statements for additional information).
These securities primarily consist of private placement corporate securities,
bank loans, and Canadian provincial strip bonds with inactive trading markets.
See "Securities Borrowing, Lending and Repurchase Agreements" in Note 4 -
"Investments" in the Notes to Condensed Consolidated Financial Statements for
information related to the Company's securities borrowing, lending, and
repurchase/reverse repurchase programs.
Policy Loans
The majority of policy loans are associated with one client. These policy loans
present no credit risk because the amount of the loan cannot exceed the
obligation due to the ceding company upon the death of the insured or surrender
of the underlying policy. The provisions of the treaties in force and the
underlying policies determine the policy loan interest rates. The Company earns
a spread between the interest rate earned on policy loans and the interest rate
credited to corresponding liabilities.
Funds Withheld at Interest
For reinsurance agreements written on a modified coinsurance basis and certain
agreements written on a coinsurance basis, assets equal to the net statutory
reserves are withheld and legally owned and managed by the ceding company, and
are reflected as funds withheld at interest on the Company's condensed
consolidated balance sheets. In the event of a ceding company's insolvency, the
Company would need to assert a claim on the assets supporting its reserve
liabilities. However, the risk of loss to the Company is mitigated by its
ability to offset amounts it owes the ceding company for claims or allowances
against amounts owed by the ceding company. Interest accrues to the total funds
withheld at interest assets at rates defined by the treaty terms. The Company is
subject to the investment performance on the withheld assets, although it does
not directly control them. These assets are primarily fixed maturity investment
securities and pose risks similar to the fixed maturity securities the Company
owns. To mitigate this risk, the Company helps set the investment guidelines
followed by the ceding company and monitors compliance. Ceding companies with
funds withheld at interest had an average financial strength rating of "A" as of
March 31, 2021 and December 31, 2020. Certain ceding companies maintain
segregated portfolios for the benefit of the Company.
Other Invested Assets
Other invested assets include limited partnership interests, joint ventures
(other than operating joint ventures), lifetime mortgages, derivative contracts,
fair value option ("FVO") contractholder-directed unit-linked investments, and
FHLB common stock. See "Other Invested Assets" in Note 4 - "Investments" in the
Notes to Condensed Consolidated Financial Statements for a table that presents
the carrying value of the Company's other invested assets by type as of
March 31, 2021 and December 31, 2020.
The Company utilizes derivative financial instruments to protect the Company
against possible changes in the fair value of its investment portfolio as a
result of interest rate changes, to hedge against risk of changes in the
purchase price of securities, to hedge liabilities associated with the
reinsurance of variable annuities with guaranteed living benefits and to manage
the portfolio's effective yield, maturity and duration. In addition, the Company
utilizes derivative financial instruments to reduce the risk associated with
fluctuations in foreign currency exchange rates. The Company uses
exchange-traded, centrally cleared, and customized over-the-counter derivative
financial instruments.
See Note 5 - "Derivative Instruments" in the Notes to Condensed Consolidated
Financial Statements for a table that presents the notional amounts and fair
value of investment related derivative instruments held as of March 31, 2021 and
December 31, 2020.
The Company may be exposed to credit-related losses in the event of
non-performance by counterparties to derivative financial instruments.
Generally, the credit exposure of the Company's derivative contracts is limited
to the fair value and accrued interest of non-collateralized derivative
contracts in an asset position at the reporting date. As of March 31, 2021, the
Company had credit exposure of $18 million.
The Company manages its credit risk related to over-the-counter derivatives by
entering into transactions with creditworthy counterparties, maintaining
collateral arrangements and through the use of master agreements that provide
for a single net
                                       63

--------------------------------------------------------------------------------

Table of Contents


payment to be made by one counterparty to another at each due date and upon
termination. As exchange-traded futures are affected through regulated
exchanges, and positions are marked to market on a daily basis, the Company has
minimal exposure to credit-related losses in the event of nonperformance by
counterparties. See Note 5 - "Derivative Instruments" in the Notes to Condensed
Consolidated Financial Statements for more information regarding the Company's
derivative instruments.
The Company holds $958 million and $935 million, of lifetime mortgages, net of
valuation allowances, as of March 31, 2021 and December 31, 2020, respectively,
in beneficial interests in lifetime mortgages in the UK. Investment income
includes $13 million and $10 million in interest income earned on lifetime
mortgages for the three months ended March 31, 2021 and 2020, respectively.
Lifetime mortgages represent loans provided to individuals 55 years of age and
older secured by the borrower's residence. Lifetime mortgages are comparable to
a home equity loan by allowing the borrower to utilize the equity in their home
as collateral. The amount of the loan is dependent on the appraised value of the
home at the time of origination, the borrower's age and interest rate. Unlike a
home equity loan, no payment of principal or interest is required until the
death of the borrower or sale of the home. Lifetime mortgages may also be either
fully funded at origination, or the borrower can request periodic funding
similar to a line of credit. Lifetime mortgages are subject to risks, including
market, credit, interest rate, liquidity, operational, reputational and legal
risks.
New Accounting Standards
See Note 13 - "New Accounting Standards" in the Notes to Condensed Consolidated
Financial Statements.

© Edgar Online, source Glimpses

All news about REINSURANCE GROUP OF AMERICA, INCORPORATED
06/21REINSURANCE OF AMERICA INCORPORATED  : Citigroup Adjusts Reinsurance Group of Am..
MT
06/08REINSURANCE OF AMERICA INCORPORATED  : RGA Announces Annuity Reinsurance Transac..
PU
06/03REINSURANCE OF AMERICA INCORPORATED  : RGA Ranked #207 on the 2021 Fortune 500 L..
PU
06/02SECTOR UPDATE : Financial Stocks Climb Pre-Bell Wednesday
MT
06/01REINSURANCE OF AMERICA INCORPORATED  : Group of America Signs Agreement With Dai..
MT
06/01REINSURANCE OF AMERICA INCORPORATED  : Group of America Reinsures 200 Billion JP..
BU
05/24China Reinsurance's January-April Premium Income Tops $2 Billion
MT
05/20REINSURANCE GROUP OF AMERICA INC  : Change in Directors or Principal Officers, S..
AQ
05/20INSIDER TRENDS : Reinsurance Group of America Insider Receives Stock Award, Tren..
MT
05/20INSIDER TRENDS : Reinsurance Group of America Insider Gets Stock Award, Extends ..
MT
More news