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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1627032
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1370 TIMBERLAKE MANOR PARKWAY
CHESTERFIELD, MISSOURI 63017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(636) 736-7439
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES |X| NO | |
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT). YES |X| NO | |
COMMON STOCK OUTSTANDING ($.01 PAR VALUE) AS OF APRIL 30, 2003: 49,719,795
SHARES
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I - FINANCIAL INFORMATION
1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Income (Unaudited)
Three months ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 2003 and 2002 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6-9
2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-22
3 Quantitative and Qualitative Disclosures About Market Risk 22
4 Controls and Procedures 23
PART II - OTHER INFORMATION
1 Legal Proceedings 23
6 Exhibits and Reports on Form 8-K 23
Signatures 24
Certifications 25
Index to Exhibits 27
2
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE STATEMENTS
(Unaudited)
March 31, December 31,
2003 2002
----------- -----------
(Dollars in thousands)
ASSETS
Fixed maturity securities:
Available-for-sale at fair value (amortized cost of $3,527,957 and
$3,306,319 at March 31, 2003 and December 31, 2002, respectively) $ 3,677,394 $ 3,477,916
Mortgage loans on real estate 264,542 227,492
Policy loans 841,123 841,120
Funds withheld at interest 2,151,424 1,975,071
Short-term investments 15,617 4,269
Other invested assets 126,037 124,327
----------- -----------
Total investments 7,076,137 6,650,195
Cash and cash equivalents 121,172 88,101
Accrued investment income 55,851 35,514
Premiums receivable 308,529 253,892
Reinsurance ceded receivables 422,983 452,220
Deferred policy acquisition costs 1,162,636 1,084,936
Other reinsurance balances 354,682 288,833
Other assets 69,253 38,906
----------- -----------
Total assets $ 9,571,243 $ 8,892,597
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits $ 2,595,427 $ 2,430,042
Interest sensitive contract liabilities 3,637,228 3,413,462
Other policy claims and benefits 849,180 760,166
Other reinsurance balances 275,378 233,286
Deferred income taxes 303,045 291,980
Other liabilities 158,435 55,235
Long-term debt 344,664 327,787
Company-obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely junior subordinated debentures of the Company 158,203 158,176
----------- -----------
Total liabilities 8,321,560 7,670,134
Commitments and contingent liabilities -- --
Stockholders' Equity:
Preferred stock (par value $.01 per share; 10,000,000 shares
authorized; no shares issued or outstanding) -- --
Common stock (par value $.01 per share; 75,000,000 shares authorized,
51,053,273 shares issued at March 31, 2003 and December 31, 2002,
respectively) 511 511
Warrants 66,915 66,915
Additional paid-in capital 614,442 613,042
Retained earnings 510,076 480,301
Accumulated other comprehensive income:
Accumulated currency translation adjustment, net of income taxes 10,416 715
Unrealized appreciation of securities, net of income taxes 87,025 102,768
----------- -----------
Total stockholders' equity before treasury stock 1,289,385 1,264,252
Less treasury shares held of 1,415,276 and 1,596,629 at cost at
March 31, 2003 and December 31, 2002, respectively (39,702) (41,789)
----------- -----------
Total stockholders' equity 1,249,683 1,222,463
----------- -----------
Total liabilities and stockholders' equity $ 9,571,243 $ 8,892,597
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
March 31,
-------------------------
2003 2002
--------- ---------
(Dollars in thousands, except per share data)
REVENUES:
Net premiums $ 545,215 $ 469,105
Investment income, net of related expenses 107,145 88,013
Realized investment losses, net (9,828) (3,591)
Other revenues 11,017 6,685
--------- ---------
Total revenues 653,549 560,212
BENEFITS AND EXPENSES:
Claims and other policy benefits 423,605 387,726
Interest credited 40,796 27,725
Policy acquisition costs and other insurance expenses 104,581 71,499
Other operating expenses 25,755 19,517
Interest expense 8,959 8,554
--------- ---------
Total benefits and expenses 603,696 515,021
--------- ---------
Income from continuing operations before income taxes 49,853 45,191
Provision for income taxes 16,693 16,155
--------- ---------
Income from continuing operations 33,160 29,036
Discontinued operations:
Loss from discontinued accident and health operations,
net of income taxes (418) (1,256)
========= =========
Net income $ 32,742 $ 27,780
========= =========
Earnings per share from continuing operations:
Basic earnings per share $ 0.67 $ 0.59
========= =========
Diluted earnings per share $ 0.67 $ 0.58
========= =========
Earnings per share from net income:
Basic earnings per share $ 0.66 $ 0.56
========= =========
Diluted earnings per share $ 0.66 $ 0.56
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
4
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW
(Unaudited)
Three months ended
March 31,
-------------------------
2003 2002
--------- ---------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 32,742 $ 27,780
Adjustments to reconcile net income to net cash provided by
operating activities:
Change in:
Accrued investment income (20,078) (21,212)
Premiums receivable (61,001) 3,980
Deferred policy acquisition costs (71,237) (64,460)
Reinsurance ceded balances 29,237 (38,239)
Future policy benefits, other policy claims and benefits, and
other reinsurance balances 175,377 165,751
Deferred income taxes 11,756 19,938
Other assets and other liabilities 37,487 (7,588)
Amortization of net investment discounts and other (9,284) (9,351)
Realized investment losses, net 9,828 3,591
Other, net (3,755) 841
--------- ---------
Net cash provided by operating activities 131,072 81,031
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of fixed maturity securities - available for sale 578,545 227,304
Purchases of fixed maturity securities - available for sale (708,315) (526,071)
Cash invested in policy loans and mortgage loans on real estate (39,703) (14,900)
Cash invested in funds withheld at interest (23,786) (20,038)
Principal payments on mortgage loans on real estate 2,651 5,909
Change in short-term investments and other invested assets (13,992) 112,303
--------- ---------
Net cash used in investing activities (204,600) (215,493)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (2,967) (2,971)
Borrowings under credit agreements 16,331 --
Purchase of treasury stock -- (6,594)
Exercise of stock options 2,087 10
Excess deposits on universal life and other
investment type policies and contracts 90,231 31,750
--------- ---------
Net cash provided by financing activities 105,682 22,195
Effect of exchange rate changes 917 996
--------- ---------
Change in cash and cash equivalents 33,071 (111,271)
Cash and cash equivalents, beginning of period 88,101 226,670
--------- ---------
Cash and cash equivalents, end of period $ 121,172 $ 115,399
========= =========
Supplementary disclosure of cash flow information:
Amount of interest paid $ 7,134 $ 3,403
Amount of income taxes paid $ 1,420 $ 16,855
See accompanying notes to unaudited condensed consolidated financial statements.
5
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Reinsurance Group of America, Incorporated ("RGA") and Subsidiaries
(collectively, the "Company") have been prepared in conformity with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 2003 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2003. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002
("Annual Report").
The accompanying unaudited condensed consolidated financial statements include
the accounts of Reinsurance Group of America, Incorporated and its Subsidiaries.
All material intercompany accounts and transactions have been eliminated. The
Company has reclassified the presentation of certain prior period information to
conform to the 2003 presentation.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share on income from continuing operations (in thousands except per share
information):
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002
------- -------
Earnings:
Income from continuing operations (numerator for basic
and diluted calculations) $33,160 $29,036
Shares:
Weighted average outstanding shares (denominator for
basic calculation) 49,551 49,420
Equivalent shares from outstanding stock options
(denominator for diluted calculation) 180 330
------- -------
Denominator for diluted calculation 49,731 49,750
Earnings per share:
Basic $ 0.67 $ 0.59
Diluted $ 0.67 $ 0.58
------- -------
The calculation of equivalent shares from outstanding stock options does not
include the impact of options having a strike price that exceeds the average
stock price for the earnings period, as the result would be antidilutive. For
the three-month periods ended March 31, 2003 and 2002, approximately 2.1 million
and 0.9 million, respectively, in outstanding stock options were not included in
the calculation of common equivalent shares. These options were outstanding at
the end of their respective periods. Diluted earnings per share exclude the
antidilutive effect of 5.6 million shares that would be issued upon exercise of
outstanding warrants to purchase Company common stock, as the Company could
repurchase more shares than it issues with the exercise proceeds.
6
3. COMPREHENSIVE INCOME (LOSS)
The following schedule reflects the change in accumulated other comprehensive
income (loss) for the three-month periods ended March 31, 2003 and 2002 (dollars
in thousands):
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002
-------- --------
Net income $ 32,742 $ 27,780
Accumulated other comprehensive
income (expense), net of income tax:
Unrealized losses (15,743) (45,788)
Foreign currency items 9,701 16,535
-------- --------
Comprehensive income (loss) $ 26,700 $ (1,473)
-------- --------
4. SEGMENT INFORMATION
Prior to 2003, the Company reported the results of its operations in five main
operational segments segregated primarily by geographic region: U.S., Canada,
Latin America, Asia Pacific, and Europe & South Africa. The Latin America, Asia
Pacific, and Europe & South Africa segments were presented historically as one
reportable segment, Other International. As a result of the Company's declining
presence in Argentina and changes in management responsibilities for part of the
Latin America region, beginning with the first quarter of 2003, the Other
International reportable segment no longer includes Latin America operations.
Latin America results relating to the Argentine privatized pension business as
well as direct insurance operations in Argentina are now reported in the
Corporate and Other segment. The results for all other Latin America business,
primarily traditional reinsurance business in Mexico, will be reported as part
of U.S. operations in the Traditional sub-segment. The Asia Pacific and Europe &
South Africa operational segments are presented herein as one reportable
segment, Other International. Prior period segment information has been
reclassified to conform to this new presentation.
The accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies in Note 2 of the Annual Report. The
Company measures segment performance based on profit or loss from operations
before income taxes. There are no intersegment transactions and the Company does
not have any material long-lived assets. Investment income is allocated to the
segments based upon average assets and related capital levels deemed appropriate
to support the segment business volumes.
Information related to total revenues and income (loss) from continuing
operations before income taxes for each reportable segment are summarized below
(dollars in thousands).
INCOME (LOSS) FROM CONTINUING
TOTAL REVENUES OPERATIONS BEFORE INCOME TAXES
---------------------------- ------------------------------
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
2003 2002 2003 2002
---- ---- ---- ----
U.S. $450,806 $413,725 $42,638 $38,458
Canada 68,024 62,028 10,627 8,845
Other International 130,316 75,322 3,777 1,923
Corporate and Other 4,403 9,137 (7,189) (4,035)
-------- -------- ------- -------
Total from continuing operations $653,549 $560,212 $49,853 $45,191
-------- -------- ------- -------
Other International assets increased approximately 19% from the amounts
disclosed in Note 17 of the Annual Report, primarily due to the continued growth
in the Europe & South Africa and Asia Pacific segments. Latin America assets
have been reclassed between U.S. and Corporate and Other segments.
7
5. DIVIDENDS
The Board of Directors declared a dividend of six cents per share of common
stock on January 29, 2003. This dividend was paid on February 25, 2003 to
shareholders of record as of February 4, 2003.
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is currently a party to various litigation and arbitrations that
involve medical reinsurance arrangements, personal accident business, and
aviation bodily injury carve-out business. As of March 31, 2003, the ceding
companies involved in these disputes have raised claims that are $43.2 million
in excess of the amounts held in reserve by the Company. The Company believes it
has substantial defenses upon which to contest these claims, including but not
limited to misrepresentation and breach of contract by direct and indirect
ceding companies. In addition, the Company is in the process of auditing ceding
companies which have indicated that they anticipate asserting claims in the
future against the Company that are $8.0 million in excess of the amounts held
in reserve by the Company. Depending upon the audit findings in these cases,
they could result in litigation or arbitrations in the future. See Note 21,
"Discontinued Operations," in the Company's 2002 Annual Report for more
information. From time to time, the Company is subject to litigation and
arbitration related to its reinsurance business and to employment-related
matters in the normal course of its business. While it is not feasible to
predict or determine the ultimate outcome of the pending litigation or
arbitrations or provide reasonable ranges of potential losses, it is the opinion
of management, after consultation with counsel, that their outcomes, after
consideration of the provisions made in the Company's consolidated financial
statements, would not have a material adverse effect on its consolidated
financial position, but could have a positive or negative effect on net income.
The Company has obtained letters of credit in favor of various affiliated and
unaffiliated insurance companies from which the Company assumes business. This
allows the ceding company to take statutory reserve credits. The letters of
credit issued by banks represent a guarantee of performance under the
reinsurance agreements. At March 31, 2003, there were approximately $39.8
million of outstanding letters of credit in favor of third-party entities.
Additionally, the Company utilizes letters of credit to secure reserve credits
when it retrocedes business to its offshore subsidiaries, including RGA Americas
Reinsurance Company, Ltd. and RGA Reinsurance Company (Barbados) Ltd. As of
March 31, 2003, $338.3 million in letters of credit from various banks were
outstanding between the various subsidiaries of the Company. Fees associated
with letters of credit are not fixed for periods in excess of one year and are
based on the Company's ratings and the general availability of these instruments
in the marketplace.
RGA has issued guarantees of its subsidiaries' performance for the payment of
amounts due under certain credit facilities and reinsurance treaties, whereby if
a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries
will make a payment to fulfill the obligation. Treaty guarantees are granted to
ceding companies in order to provide them additional security, particularly in
cases where RGA's subsidiary is relatively new, unrated, or not of a significant
size, relative to the ceding company. Liabilities supported by the treaty
guarantees, before consideration for any legally offsetting amounts due from the
guaranteed party, totaled $110.6 million as of March 31, 2003 and are reflected
on the Company's consolidated balance sheet as future policy benefits.
Guarantees related to credit facilities provide additional security to third
party banks should a subsidiary fail to make principal and/or interest payments
when due. As of March 31, 2003, RGA's exposure related to credit facility
guarantees was $35.2 million and had a maximum potential exposure of $44.9
million.
7. NEW ACCOUNTING STANDARDS
In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 Implementation
Issue No. B36, "Embedded Derivatives: Modified Coinsurance Arrangements and Debt
Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only
Partially Related to the Creditworthiness of the Obligor under Those
Instruments" ("FASB B36"). In this new guidance, the FASB has concluded that
funds withheld by a ceding company, for modified coinsurance and coinsurance
with funds withheld contracts, may contain an embedded derivative which should
be bifurcated and valued. The effective date of the implementation guidance is
the first day of the first fiscal quarter beginning after September 15, 2003. As
of March 31, 2003, the Company has not separately reported any potential
embedded derivatives associated with these contracts, which it believes is
consistent with industry practice. At this time, the Company has not estimated
the impact, if any, that the adoption of FASB B36 will have on its financial
position or results of operations.
8
Effective January 1, 2003, the Company adopted the provisions of SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities," FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities," and FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." The
adoption of these provisions did not materially affect the Company's financial
position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123." Effective January 1, 2003, the Company prospectively adopted the fair
value-based employee stock-based compensation expense recognition provisions of
SFAS No. 123, as amended by SFAS No. 148. The Company formerly applied the
intrinsic value-based expense provisions set forth in APB Opinion No. 25,
Accounting for Stock Issued to Employees, ("APB 25"). The Company recorded
pre-tax compensation expense of approximately $0.4 million during the first
quarter of 2003 associated with stock option grants issued during January 2003.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Prior to 2003, the Company reported the results of its operations in five main
operational segments segregated primarily by geographic region: U.S., Canada,
Latin America, Asia Pacific, and Europe & South Africa. The Latin America, Asia
Pacific, and Europe & South Africa segments were presented historically as one
reportable segment, Other International. As a result of the Company's declining
presence in Argentina and changes in management responsibilities for part of the
Latin America region, beginning with the first quarter of 2003, the Other
International reportable segment no longer includes Latin America operations.
Latin America results relating to the Argentine privatized pension business as
well as direct insurance operations in Argentina are now reported in the
Corporate and Other segment. The results for all other Latin America business,
primarily traditional reinsurance business in Mexico, will be reported as part
of U.S. operations in the Traditional sub-segment. The Asia Pacific and Europe &
South Africa operational segments are presented herein as one reportable
segment, Other International. Prior period segment information has been
reclassified to conform to this new presentation.
The U.S. operations provide traditional life, asset-intensive, and financial
reinsurance products. The Canada operations provide insurers with traditional
life reinsurance as well as creditor and critical illness products. The Asia
Pacific operations provide primarily traditional life and critical illness
reinsurance and, to a lesser extent, financial reinsurance. The Europe & South
Africa operations include traditional life reinsurance and critical illness
business from Europe and South Africa, in addition to other markets being
developed by the Company. The Corporate and Other segment results include the
corporate investment activity, general corporate expenses, interest expense of
RGA, and the provision for income tax expense (benefit). The Company's
discontinued accident and health operations are not reflected in the continuing
operations of the Company. The Company measures segment performance based on
income or loss before income taxes.
Consolidated income from continuing operations before income taxes for the first
quarter of 2003 increased $4.7 million compared to the prior-year period. After
tax diluted earnings per share from continuing operations were $0.67 and $0.58
for the first quarter of 2003 and 2002, respectively.
Consolidated investment income from continuing operations increased 21.7% during
the first quarter of 2003, primarily due to a larger invested asset base.
Invested assets as of March 31, 2003 totaled $7.1 billion, a 30.0% increase over
March 31, 2002. The average yield earned on investments increased marginally to
6.67% for the first quarter of 2003 compared to 6.64% for the first quarter of
2002. Investment income is allocated to the segments based upon average assets
and related capital levels deemed appropriate to support the segment business
volumes.
The consolidated provision for income taxes on continuing operations increased
3.3% for the first quarter of 2003 compared to the same period in 2002. This
increase was not proportional to the increase in consolidated income from
continuing operations before income taxes as the effective tax rate decreased to
33.5% from 35.7% for the first quarter of 2003 and 2002, respectively. The
decrease in the effective tax rate was primarily due to earnings in certain
foreign subsidiaries, which resulted in a release of valuation allowances in
those entities, and the partial release of a valuation allowance related to a
statutory reduction of the Canadian income tax rate.
Further discussion and analysis of the results for the first quarter of 2003
compared to the first quarter of 2002 are presented by segment.
10
U.S. OPERATIONS
U.S. Operations consists of two major sub-segments: Traditional and
Non-Traditional. The Traditional sub-segment primarily specializes in
mortality-risk reinsurance. This category derives revenues primarily from
renewal premiums from existing mortality-risk reinsurance treaties, new business
premiums from existing or new mortality-risk reinsurance treaties, and income
earned on invested assets. The Non-traditional category consists of Asset
Intensive and Financial Reinsurance.
FOR THE THREE MONTHS ENDED MARCH 31, 2003 (IN THOUSANDS)
TRADITIONAL NON-TRADITIONAL
ASSET- FINANCIAL TOTAL
INTENSIVE REINSURANCE U.S.
-------------- ------------ ------------- --------------
REVENUES:
Net premiums $ 368,807 $ 1,098 $ -- $ 369,905
Investment income, net of related expenses 42,701 36,334 -- 79,035
Realized investment losses, net (5,244) (2,861) -- (8,105)
Other revenues 1,813 1,247 6,911 9,971
-------------- ------------ ------------- -------------
Total revenues 408,077 35,818 6,911 450,806
BENEFITS AND EXPENSES:
Claims and other policy benefits 293,726 1,619 -- 295,345
Interest credited 15,319 25,141 -- 40,460
Policy acquisition costs and other insurance
expenses 50,805 8,028 2,520 61,353
Other operating expenses 8,455 1,112 1,443 11,010
-------------- ------------ ------------- -------------
Total benefits and expenses 368,305 35,900 3,963 408,168
Income (loss) before income taxes $ 39,772 $ (82) $ 2,948 $ 42,638
-------------- ------------ ------------- -------------
FOR THE THREE MONTHS ENDED 31, 2002 (IN THOUSANDS)
TRADITIONAL NON-TRADITIONAL
ASSET- FINANCIAL TOTAL
INTENSIVE REINSURANCE U.S.
-------------- ------------ ------------- -------------
REVENUES:
Net premiums $ 346,830 $ 868 $ -- $ 347,698
Investment income, net of related expenses 37,155 23,718 103 60,976
Realized investment gains (losses), net (2,045) 564 -- (1,481)
Other revenues 120 261 6,151 6,532
-------------- ------------ ------------- -------------
Total revenues 382,060 25,411 6,254 413,725
BENEFITS AND EXPENSES:
Claims and other policy benefits 287,753 6,001 -- 293,754
Interest credited 14,032 13,693 -- 27,725
Policy acquisition costs and other insurance
expenses 41,493 1,845 1,900 45,238
Other operating expenses 6,418 200 1,932 8,550
-------------- ------------ ------------- -------------
Total benefits and expenses 349,696 21,739 3,832 375,267
Income before income taxes $ 32,364 $ 3,672 $ 2,422 $ 38,458
-------------- ------------ ------------- -------------
Income before income taxes for the U.S. operations segment totaled $42.6 million
for the first quarter of 2003, a 10.9% increase from the comparable prior-year
period. The increase in income is primarily the result of improved claim
experience offset in part by a $6.6 million increase in realized losses on
securities transactions compared to the same period last year. The claims and
other policy benefits as a percent of net premiums for the Traditional
sub-segment declined to 79.6% from 83.0% for the same period last year, a
reflection of the improved claim experience.
11
Traditional Reinsurance
The U.S. traditional reinsurance is the oldest and largest sub-segment of the
Company. This sub-segment provides life reinsurance to domestic clients for a
variety of life products through yearly renewable term agreements, coinsurance,
and modified coinsurance arrangements. These reinsurance arrangements may be
either facultative or automatic agreements. During the first quarter of 2003,
production totaled $26.5 billion compared to $36.5 billion for the same period
in 2002. Total inforce as of March 31, 2003 for U.S. Operations was $557.6
billion, an increase of 11.0% over the total at March 31, 2002. Management
believes industry consolidations and the trend towards reinsuring mortality
risks should continue to provide reinsurance opportunities, although the timing
and level of production is uncertain.
Income before income taxes for U.S. traditional reinsurance increased 22.9% in
the first quarter of 2003. The increase in income for the quarter was due to
favorable claim experience and continued premium growth, somewhat offset by an
increase in net realized investment losses of $3.2 million.
Net premiums for U.S. traditional reinsurance increased 6.3% in the first
quarter of 2003. New premiums from facultative and automatic treaties and
renewal premium on existing blocks of business all contributed to growth,
however, the growth rate is at a lower level than that expected for the year.
Net investment income increased 14.9% in the first quarter of 2003. The increase
is due to growth in the invested asset base, primarily due to increased
operating cash flows on traditional reinsurance.
The amount of claims and other policy benefits increased 2.1% in the first
quarter of 2003, however, the loss ratio was favorable when compared to the same
period for last year. Claims and other policy benefits as a percentage of net
premiums were 79.6% and 83.0%, in the first quarter of 2003 and 2002,
respectively. The decrease in claims as a percentage of premiums for the period
is the result of improved claim experience compared to the same period last
year. The level of death claims may fluctuate from period to period, but
exhibits less volatility over the long term.
Interest credited relates to amounts credited on the Company's cash value
products in this sub-segment, which have a significant mortality component. This
amount fluctuates with the changes in deposit levels, cash surrender values and
investment performance.
As a percentage of net premiums, policy acquisition costs and other insurance
expenses were 13.8% and 12.0% for the first quarter of 2003 and 2002,
respectively. The increase in this ratio is related to the proportional increase
in the volume of coinsurance business written versus yearly renewable term
business. These ratios will fluctuate due to variations in the mixture of
business being written.
Other operating expenses, as a percentage of net premiums were 2.3% and 1.9% for
the first quarter of 2003 and 2002, respectively. This ratio will fluctuate
slightly from period to period, but should remain fairly constant over the long
term.
Asset-Intensive Reinsurance
The U.S. asset-intensive reinsurance sub-segment includes the reinsurance of
annuities and corporate-owned and bank-owned life insurance ("BOLI"). Most of
these agreements are coinsurance or modified coinsurance of non-mortality risks
such that the Company recognizes profit or losses primarily from the spread
between the investment earnings and interest credited on the underlying deposit
liabilities.
Income before income taxes for the first quarter of 2003 was a loss of $82
thousand versus a gain of $3.7 million in the comparable prior year period.
Contributing to the decrease were realized investment losses of $2.9 million for
the first quarter of 2003 compared to realized investment gains of $564 thousand
for the comparable prior year period. In addition, first quarter results were
affected by poor investment performance in an underlying asset portfolio on a
block of annuity business and adverse mortality experience on one BOLI block.
12
Total revenues, which are comprised primarily of investment income, increased
from $25.4 million to $35.8 million or 40.9% for the comparable quarters. The
growth in revenue is the result of new annuity treaties executed in late 2002.
Three new annuity treaties contributed $15.0 million of additional revenues over
the prior comparable period. The increase in revenue was offset by the realized
losses of $2.9 million in the asset-intensive segment. The asset base increased
from $2.4 billion as of December 31, 2002 to $2.7 billion as of March 31, 2003.
Financial Reinsurance
The U.S. financial reinsurance sub-segment includes net fees earned on financial
reinsurance agreements and the Company's investment in RGA Financial Group
L.L.C. ("RGA Financial Group"). Financial reinsurance agreements represent low
risk business that the Company assumes and generally subsequently retrocedes
with a net fee earned on the transaction. The fees earned from the assumption of
the financial reinsurance contracts are reflected in other revenues, and the
fees paid to retrocessionaires are reflected in policy acquisition costs and
other insurance expenses.
Income before income taxes increased to $2.9 million in the first quarter of
2003, as compared to $2.4 million in the prior-year period. These results are
attributed to higher amounts of financial reinsurance outstanding during the
respective periods. Financial reinsurance outstanding, as measured by pre-tax
statutory surplus, was $880.8 million and $632.3 million as of March 31, 2003
and 2002, respectively.
CANADA OPERATIONS
The Company conducts reinsurance business in Canada through RGA Life Reinsurance
Company of Canada ("RGA Canada"), a wholly-owned company. RGA Canada is a
leading life reinsurer in Canada assisting clients with capital management
activity and mortality risk management and is primarily engaged in traditional
individual life reinsurance, including preferred underwriting products, as well
as creditor and non-guaranteed critical illness products. More than 90% of RGA
Canada's premium income is derived from life reinsurance products. Clients
include most of the life insurers in Canada. The Canada operations compete with
a small number of individual and group life reinsurers primarily on the bases of
price, service, and financial strength.
FOR THE THREE MONTHS ENDED MARCH 31 (IN THOUSANDS) 2003 2002
-------- --------
REVENUES:
Net premiums $ 48,586 $ 46,533
Investment income, net of related expenses 19,766 15,605
Realized investment losses, net (263) (81)
Other revenues (65) (29)
-------- --------
Total revenues 68,024 62,028
BENEFITS AND EXPENSES:
Claims and other policy benefits 49,130 45,723
Interest credited 289 --
Policy acquisition costs and other insurance expenses 5,593 5,217
Other operating expenses 2,385 2,243
-------- --------
Total benefits and expenses 57,397 53,183
Income before income taxes $ 10,627 $ 8,845
-------- --------
Income before income taxes increased by 20.1% to $10.6 million in the first
quarter of 2003. Excluding realized investment losses, income before income
taxes was $10.9 million compared to $8.9 million in the prior year period. The
increase is primarily the result of lower than expected death claims and the
effects of changes in the foreign exchange rates during 2003 compared to 2002.
Strengthening of the Canadian dollar during 2003 positively affected the
reported income before income taxes by $0.5 million or 4.5% in the first
quarter.
13
Net premiums increased 4.4% to $48.6 million during the first quarter of 2003.
The increase is primarily the result of normal production offset by lower than
anticipated premium on certain treaties. The increase in strength of the
Canadian dollar contributed $2.6 million or 5.6% to net premiums reported during
the quarter. Premium levels are significantly influenced by large transactions
and reporting practices of ceding companies and therefore can fluctuate from
period to period.
Net investment income increased 26.7% in the first quarter of 2003, primarily
due to an increase in the invested asset base. Further, the strengthening of the
foreign exchange rate had a positive impact of $1.0 million or 5.2%. The
invested asset base growth is due to operating cash flows on traditional
reinsurance and annuity transactions and interest on the growth of funds
withheld at interest.
Claims and other policy benefits increased by 7.5% during the first quarter of
2003. Claims and other policy benefits as a percentage of net premiums were
101.1% in the first quarter of 2003 compared to 98.3% in 2002. The increased
percentage is primarily the result of several large inforce blocks assumed in
1998 and 1997. These blocks are mature blocks of level premium business in which
mortality as a percentage of premiums is expected to be higher than the
historical ratios and increase over time. The nature of level premium policies
requires that the Company invest the amounts received in excess of mortality
costs to fund claims in the later years. Claims and other policy benefits as a
percentage of net premiums and investment income were 71.9% and 73.6% for the
first quarter of 2003 and 2002, respectively. The Company expects mortality to
fluctuate somewhat from period to period but exhibits less volatility over
longer periods of time.
Policy acquisition costs and other insurance expenses as a percentage of net
premiums totaled 11.5% for the first quarter of 2003 compared to 11.2% in the
prior-year period. Policy acquisition costs as a percentage of net premiums are
affected by the level of creditor business, which upon loss of life, reinsures
the amount of unpaid principal on mortgage or auto loans. This type of
reinsurance has significant allowances for commissions. Excluding creditor
business, policy acquisition costs and other insurance expenses as a percentage
of net premiums totaled 10.0% for the first quarter of 2003 compared to 9.1% in
the prior-year period. The increase is primarily due to the mix of business in
the segment, which varies from period to period, primarily due to new
production.
OTHER INTERNATIONAL OPERATIONS
The Other International Operations reportable segment comprises the Asia Pacific
segment and the Europe & South Africa segment. The Asia Pacific segment provides
life reinsurance for a variety of life products, critical illness (paid on the
earlier of death or diagnosis of a pre-defined critical illness), disability
income, and financial reinsurance to life insurance companies throughout the
Asian region, with primary focus on Australia, Hong Kong, Japan, Malaysia, South
Korea, and Taiwan. The Europe & South Africa segment provides life reinsurance
for a variety of life products through yearly renewable term and coinsurance
agreements and the reinsurance of accelerated critical illness coverage. The
Europe & South Africa segment has business primarily from the United Kingdom,
South Africa and Spain. Reinsurance agreements for both segments may be either
facultative or automatic agreements covering primarily individual risks and in
some markets group risks. Each segment operates multiple offices throughout each
region to best meet the needs of the local client companies.
14
FOR THE THREE MONTHS ENDED MARCH 31, 2003 (IN THOUSANDS)
TOTAL
ASIA EUROPE & SOUTH OTHER
PACIFIC AFRICA INTERNATIONAL
------- ------ -------------
REVENUES:
Net premiums $ 42,410 $ 83,877 $126,287
Investment income, net of related expenses 2,727 840 3,567
Realized investment gains (losses), net (387) 825 438
Other revenues 200 (176) 24
-------- -------- --------
Total revenues 44,950 85,366 130,316
BENEFITS AND EXPENSES:
Claims and other policy benefits 27,264 53,783 81,047
Policy acquisition costs and other insurance
expenses 11,522 25,534 37,056
Other operating expenses 4,527 3,440 7,967
Interest expense 269 200 469
-------- -------- --------
Total benefits and expenses 43,582 82,957 126,539
Income before income taxes $ 1,368 $ 2,409 $ 3,777
-------- -------- --------
FOR THE THREE MONTHS ENDED MARCH 31, 2002 (IN THOUSANDS)
TOTAL
ASIA EUROPE & SOUTH OTHER
PACIFIC AFRICA INTERNATIONAL
------- ------ -------------
REVENUES:
Net premiums $ 33,152 $ 40,213 $ 73,365
Investment income, net of related expenses 1,369 231 1,600
Realized investment losses, net (50) (295) (345)
Other revenues 696 6 702
-------- -------- --------
Total revenues 35,167 40,155 75,322
BENEFITS AND EXPENSES:
Claims and other policy benefits 22,568 25,190 47,758
Policy acquisition costs and other insurance
expenses 8,224 11,948 20,172
Other operating expenses 2,731 2,487 5,218
Interest expense 173 78 251
-------- -------- --------
Total benefits and expenses 33,696 39,703 73,399
Income before income taxes $ 1,471 $ 452 $ 1,923
-------- -------- --------
Income before income taxes during the first quarter of 2003 doubled from $1.9
million to $3.8 million, driven by a 72.1% growth in premiums from $73.4 million
to $126.3 million. Most of the growth is attributable to growth in the Europe &
South Africa segment, in which premiums grew 108.6% during the first quarter of
2003. The growth has been generated by new business premiums from facultative
and automatic treaties and renewal premiums from existing treaties, including
premiums associated with accelerated critical illness coverage. Premiums in the
Asia Pacific segment grew by 27.9% during the first quarter of 2003 through a
combination of new clients and new business from existing clients. Premiums
associated with critical illness coverage totaled $41.1 million for the quarter
ended March 31, 2003 compared with $19.5 million for the same period in 2002.
15
Net investment income increased to $3.6 million in the first quarter of 2003 due
to an increase in allocated assets supporting the growth in the overall
business. Investment income and realized investment gains and losses are
allocated to the operating segments on the basis of capital required to support
underlying business and investment performance varies with the composition of
investments and the relative allocation of capital to units. Other income
declined because of the run-off of financial reinsurance in Asia Pacific.
Claims and other policy benefits, as a percentage of net premiums, were 64.2%
and 65.1%, in the first quarter of 2003 and 2002, respectively. Claims as a
percentage of premiums in Asia Pacific improved from 68.1% to 64.3%, while the
experience in Europe & South Africa claims worsened slightly from 62.6% to
64.1%. Claims and other policy benefits include claims paid, claims in the
course of payment and establishment of additional reserves to provide for
unreported claims. The level of death claims may fluctuate from period to
period, but exhibits less volatility over the long term. The Company monitors
mortality trends to evaluate the appropriateness of reserve levels and
periodically adjusts the reserve levels.
Policy acquisition costs and other insurance expenses as a percentage of net
premiums were 29.3% in the first quarter of 2003 compared to 27.5% in 2002.
These percentages fluctuate due to the timing of client company reporting and
variations in the mixture of business being written, along with the mix of new
and renewal business. Other operating expenses declined from 7.1% of premiums in
2002 to 6.3% in 2003; over time, sustained growth in premiums should lessen the
burden of start-up expenses and expansion costs. Interest expense increased in
2003 over 2002 due to higher interest rates and an increase in debt levels in
Europe & South Africa to support the growth in operations.
CORPORATE AND OTHER OPERATIONS
Corporate and Other operations include investment income on invested assets not
allocated to support segment operations and undeployed proceeds from the
Company's capital raising efforts, in addition to unallocated realized capital
gains or losses. General corporate expenses consist of unallocated overhead and
executive costs and interest expense related to debt and the $225.0 million,
5.75% mandatorily redeemable trust preferred securities. Additionally, Corporate
and Other operations includes results from the Company's Argentine privatized
pension business, which is currently in run-off, and an insignificant amount of
direct insurance operations in Argentina.
FOR THE THREE MONTHS ENDED MARCH 31 (IN THOUSANDS) 2003 2002
-------- --------
REVENUES:
Net premiums $ 437 $ 1,509
Investment income, net of related expenses 4,777 9,832
Realized investment losses, net (1,898) (1,684)
Other revenues 1,087 (520)
-------- --------
Total revenues 4,403 9,137
BENEFITS AND EXPENSES:
Claims and other policy benefits (1,917) 491
Interest credited 47 --
Policy acquisition costs and other insurance expenses 579 872
Other operating expenses 4,393 3,506
Interest expense 8,490 8,303
-------- --------
Total benefits and expenses 11,592 13,172
Loss before income taxes $ (7,189) $ (4,035)
-------- --------
Loss before income taxes increased 78.2% during the first quarter of 2003
primarily due to decreases in net premiums and investment income, offset in part
by realized foreign currency gains related to the Company's Argentine privatized
pension business. Investment income decreased 51.4% during the first quarter of
2003 primarily due to a decrease in the amount of unallocated investments. The
segment reported negative claims and
16
other policy benefits as a result of foreign currency gains on its Argentine
peso business. Other operating expenses increased $0.9 million during the first
quarter of 2003, partially due to $0.4 million in compensation expense
associated with the granting of stock options in January 2003.
DISCONTINUED OPERATIONS
The discontinued accident and health division reported a loss, net of taxes, of
$0.4 million for 2003 compared to a loss, net of taxes, of $1.3 million for the
first quarter of 2002. The calculation of the claim reserve liability for the
entire portfolio of accident and health business requires management to make
estimates and assumptions that affect the reported claim reserve levels.
Management must make estimates and assumptions based on historical loss
experience, changes in the nature of the business, anticipated outcomes of claim
disputes and claims for rescission, and projected future premium run-off, all of
which may affect the level of the claim reserve liability. Due to the
significant uncertainty associated with the run-off of this business, net income
in future periods could be affected positively or negatively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows from operating activities for the periods ended
March 31, 2003 and 2002 were $131.1 million and $81.0 million, respectively.
Cash flows from operating activities are affected by the timing of premiums
received, claims paid, and working capital changes. The Company believes the
short-term cash requirements of its business operations will be sufficiently met
by the positive cash flows generated. Additionally, the Company maintains a high
quality fixed maturity portfolio with good liquidity characteristics. These
securities are available for sale and generally can be easily sold to meet the
Company's obligations, if necessary.
Net cash used in investing activities was $204.6 million and $215.5 million in
2003 and 2002, respectively. Changes in cash provided by investing activities
primarily relate to the management of the Company's investment portfolios and
the investment of excess capital generated by operating and financing
activities.
Net cash provided by financing activities was $105.7 million and $22.1 million
in 2003 and 2002, respectively. Changes in cash provided by financing activities
primarily relate to the issuance of equity or debt securities, borrowings or
payments under the Company's existing credit agreements, treasury stock
activity, and excess deposits or withdrawals under investment type contracts.
RGA is a holding company whose primary uses of liquidity include, but are not
limited to, the immediate capital needs of its operating companies associated
with the Company's primary businesses, dividends paid by RGA to its
shareholders, interest payments on its senior indebtedness and junior
subordinated notes (See Notes 15, "Long-Term Debt," and 16, "Issuance of Trust
Piers Units," in the Annual Report), and repurchases of RGA common stock under a
plan approved by the board of directors. 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 two
operating subsidiaries, and dividends from operating subsidiaries. As the
Company continues its expansion efforts, RGA will continue to be dependent on
these sources of liquidity.
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 net worth ranging from $600
million to $700 million, and minimum rating requirements. 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 amounts greater than $10 million or $25 million
depending on the agreement, bankruptcy proceedings, and any event which results
in the acceleration of the maturity of indebtedness. As of March 31, 2003, the
Company had $344.7 million in outstanding borrowings under its debt agreements
and was in compliance with all covenants under those agreements.
The ability of the Company to make debt principal and interest payments depends
primarily on the earnings and surplus of its subsidiaries, investment earnings
on undeployed capital proceeds, and the Company's ability to raise
17
additional funds. At March 31, 2003, Reinsurance Company of Missouri,
Incorporated ("RCM") and RGA Canada had statutory capital and surplus of $576.3
million and $200.6 million, respectively. RCM's primary asset is its investment
in RGA Reinsurance Company, the Company's principal operating subsidiary based
in Missouri. The transfer of funds from the subsidiaries to RGA is subject to
applicable insurance laws and regulations. The Company expects any future
increases in liquidity needs due to treaty recaptures, relatively large policy
loans or unanticipated material claims levels would be met first by operating
cash flows and then by selling fixed-income securities or short-term
investments.
The Company's $140 million U.S. credit facility expires in May 2003. As of March
31, 2003, the Company had $10 million in outstanding borrowings under this
facility and is currently in the process of renewing the facility. The Company
can give no assurances that it will be successful in negotiating the renewal,
and if successful, that the terms, including cost, will be comparable to the
current terms. As of March 31, 2003, the average interest rate on long-term debt
outstanding, excluding the Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely junior subordinated debentures of
the Company ("Trust Preferred Securities"), was 6.53%. Interest is expensed on
the face amount, or $225.0 million, of the Trust Preferred Securities at a rate
of 5.75%.
Based on the historic cash flows and the current financial results of the
Company, subject to any dividend limitations which may be imposed by various
insurance regulations, management believes RGA's cash flows from operating
activities, together with undeployed proceeds from its capital raising efforts,
including interest and investment income on those proceeds, interest income
received on surplus notes with two operating subsidiaries, and its ability to
raise funds in the capital markets, will be sufficient to enable RGA to make
dividend payments to its shareholders, to make interest payments on its senior
indebtedness and junior subordinated notes, to repurchase RGA common stock under
the plan approved by the board of directors, and to meet its other obligations.
A general economic downturn or a downturn in the equity and other capital
markets could adversely affect the market for many annuity and life insurance
products. Because the Company obtains substantially all of its revenues through
reinsurance arrangements that cover a portfolio of life insurance products, as
well as annuities, its business would be harmed if the market for annuities or
life insurance were adversely affected.
INVESTMENTS
The Company had total cash and invested assets of $7.2 billion and $5.6 billion
at March 31, 2003 and 2002, respectively. All investments made by RGA and its
subsidiaries conform to the qualitative and quantitative limits prescribed by
the applicable jurisdiction's insurance laws and regulations. In addition, the
operating companies Boards of Directors periodically review the investment
portfolios of the international subsidiaries. The RGA Board of Directors also
reviews all material investment portfolios. The Company's investment strategy is
to maintain a predominantly investment-grade, fixed maturity portfolio, to
provide adequate liquidity for expected reinsurance obligations, and to maximize
total return through prudent asset management. The Company's asset/liability
duration matching differs between the U.S. and Canada operating segments. The
target duration for U.S. portfolios, which are segmented along product lines,
range between four and seven years. Based on Canadian reserve requirements, a
portion of the Canadian liabilities is strictly matched with long-duration
Canadian assets, with the remaining assets invested to maximize the total rate
of return, given the characteristics of the corresponding liabilities and
Company liquidity needs. The Company's earned yield on invested assets was 6.67%
through March 31, 2003, compared with 6.64% through March 31, 2002. See "Note 5
- - INVESTMENTS" in the Notes to Consolidated Financial Statements of the Annual
Report for additional information regarding the Company's investments.
The Company's fixed maturity securities are invested primarily in commercial and
industrial bonds, public utilities, Canadian government securities, and mortgage
and asset-backed securities. As of March 31, 2003, approximately 97% of the
Company's consolidated investment portfolio of fixed maturity securities was
investment-grade. Important factors in the selection of investments include
diversification, quality, yield, total rate of return potential, and call
protection. The relative importance of these factors is determined by market
conditions and the underlying product or portfolio characteristics. Cash
equivalents are invested in high-grade money market instruments. The largest
asset class in which fixed maturities were invested was in commercial and
industrial bonds, which represented approximately 33.2% of fixed maturity
securities as of March 31, 2003, an increase from 32.2% as of December 31, 2002.
A majority of these securities were classified as corporate securities, with an
average Standard and Poor's ("S&P") rating of A at March 31, 2003. The Company
owns floating rate securities that represent
18
approximately 2.2% of fixed maturity securities at March 31, 2003, compared to
2.8% at December 31, 2002. These investments may have a higher degree of income
variability than the other fixed income holdings in the portfolio due to the
floating rate nature of the interest payments.
Within the fixed maturity security portfolio, the Company holds approximately
$114.9 million in asset-backed securities at March 31, 2003, which include
credit card and automobile receivables, home equity loans and collateralized
bond obligations. The Company's asset-backed securities are diversified by
issuer and contain both floating and fixed rate securities. Approximately 35.9%,
or $41.2 million are collateralized bond obligations. In addition to the risks
associated with floating rate securities, principal risks in holding
asset-backed securities are structural, credit and capital market risks.
Structural risks include the securities priority in the issuer's capital
structure, the adequacy of and ability to realize proceeds from collateral, and
the potential for prepayments. Credit risks include consumer or corporate
credits such as credit card holders, equipment lessees, and corporate obligors.
Capital market risks include general level of interest rates and the liquidity
for these securities in the marketplace.
The Company monitors its fixed maturity securities to determine impairments in
value. In conjunction with its external investment managers, the Company
evaluates factors such as financial condition of the issuer, payment
performance, the length of time and the extent to which the market value has
been below amortized cost, compliance with covenants, general market conditions
and industry sector, intent and ability to hold securities, and various other
subjective factors. As of March 31, 2003, the Company held fixed maturities with
a cost basis of $16.5 million and a market value of $18.1 million, or 0.5% of
fixed maturities, that were non-income producing. Securities, based on
management's judgment, with an other-than-temporary impairment in value are
written down to fair value. The Company recorded other-than-temporary
write-downs of $8.8 million and $8.3 million as of March 31, 2003 and 2002,
respectively. The circumstances that gave rise to these impairments were
bankruptcy proceedings and deterioration in collateral value supporting certain
asset-backed securities. During 2003, the Company sold fixed maturity securities
with a fair value of $108.6 million at a net loss of $10.5 million.
The following table presents the total gross unrealized losses for fixed
maturity securities where the estimated fair value had declined and remained
below amortized cost by the indicated amount (in thousands):
At March 31, 2003
-----------------------------------------------
Gross Unrealized
Losses % of Total
------------------- --------------------
Less than 20% $36,576 55.7%
20% or more for less than six months 20,454 31.1%
20% or more for six months or greater 8,648 13.2%
------- ------
Total $65,678 100.0%
While all of these securities are monitored for potential impairment, the
Company's experience indicates that the first two categories do not present as
great a risk of impairment, and often, fair values recover over time. These
securities have generally been adversely affected by the downturn in the
financial markets, overall economic conditions, and continuing effects of the
September 11, 2001 tragedies. Substantially all of the $8.6 million in
unrealized losses on fixed maturity securities whose book has exceeded market
20% or more for six months or longer were related to Canadian zero coupon bonds
whose maturities are long term. Small movements in interest rates can have a
significant impact on the fair value of these securities due to their long-term
duration. The issuers of these bonds are substantially all highly rated Canadian
corporations or government agencies.
19
The following table presents the total gross unrealized losses for fixed
maturity securities as of March 31, 2003, by class of security, and broken out
between investment and non-investment grade investments whose market value has
been below amortized cost for the length of time indicated (in thousands):
Number of months
------------------------------------------------
More than
six, but
Less than less than Over
six twelve twelve Total
--- ------ ------ -----
Investment grade securities:
Commercial and industrial $ 5,135 $ 273 $20,288 $25,696
Public utilities 568 -- 11,246 11,814
Asset-backed securities 3,828 2,265 3,316 9,409
Canadian and Canadian provincial governments 142 -- 6,822 6,964
Mortgage-backed securities 587 -- 92 679
Finance 163 225 255 643
U.S. government and agencies 76 -- -- 76
Foreign governments 36 -- -- 36
------ ----- ------ ------
Investment grade securities 10,535 2,763 42,019 55,317
------ ----- ------ ------
More than
six, but
Less than less than Over
six twelve twelve Total
--- ------ ------ -----
Non-investment grade securities:
Commercial and industrial 1,549 -- 709 2,258
Public utilities 2,007 -- 93 2,100
Asset-backed securities 2,150 -- 2,748 4,898
Finance 848 156 101 1,105
------- ------ ------- -------
Non-investment grade securities 6,554 156 3,651 10,361
------- ------ ------- -------
Total $17,089 $2,919 $45,670 $65,678
======= ====== ======= =======
Approximately $35.9 million of the total unrealized losses were related to
securities issued by the airline, financial, automotive, telecommunication, and
utility sectors. These securities have generally been adversely affected by the
downturn in the financial markets, overall economic conditions, and continuing
effects of the September 11, 2001 tragedies. The Company believes that the
analysis of each such security whose price has been below market for greater
than twelve months indicated that the financial strength, liquidity, leverage,
future outlook and/or recent management actions support the view that the
security was not other-than-temporarily impaired as of March 31, 2003.
The Company's mortgage loan portfolio consists principally of investments in
U.S.-based commercial offices and retail locations. The mortgage loan portfolio
is diversified by geographic region and property type. Substantially all
mortgage loans are performing and no valuation allowance has been established as
of March 31, 2003.
Policy loans present no credit risk because the amount of the loan cannot exceed
the obligation due 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. Because policy
loans represent premature distributions of policy liabilities, they have the
effect of reducing future disintermediation risk. In addition, 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 comprised approximately 30.4% and 29.7% of the
Company's investments as of March 31, 2003 and December 31, 2002, respectively.
For 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
20
and managed by the ceding company, and are reflected as funds withheld at
interest on RGA's balance sheet. In the event of a ceding company's insolvency,
RGA would need to assert a claim on the assets supporting its reserve
liabilities. However, the risk of loss to RGA is mitigated by its ability to
offset amounts it owes the ceding company for claims or allowances with amounts
owed to RGA from the ceding company. Interest accrues to these 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 a minimum A.M. Best rating of "A-".
COUNTERPARTY RISK
In the normal course of business, the Company seeks to limit its exposure to
reinsurance contracts by ceding a portion of the reinsurance to other insurance
companies or reinsurers. Should a counterparty not be able to fulfill its
obligation to the Company under a reinsurance agreement, the impact could be
material to the Company's financial condition and results of operations.
MARKET RISK
Market risk is the risk of loss that may occur when fluctuations in interest and
currency exchange rates and equity and commodity prices change the value of a
financial instrument. Both derivative and nonderivative financial instruments
have market risk so the Company's risk management extends beyond derivatives to
encompass all financial instruments held that are sensitive to market risk. RGA
is primarily exposed to interest rate risk and foreign currency risk.
Interest Rate Risk arises from many of the Company's primary activities, as the
Company invests substantial funds in interest-sensitive assets and also has
certain interest-sensitive contract liabilities. The Company manages interest
rate risk and credit risk to maximize the return on the Company's capital
effectively and to preserve the value created by its business operations. As
such, certain management monitoring processes are designed to minimize the
impact of sudden and sustained changes in interest rates on fair value, cash
flows, and net interest income.
The Company is subject to foreign currency translation, transaction, and net
income exposure. The Company generally does not hedge the foreign currency
translation exposure related to its investment in foreign subsidiaries as it
views these investments to be long-term. Translation differences resulting from
translating foreign subsidiary balances to U.S. dollars are reflected in equity.
The Company generally does not hedge the foreign currency exposure of its
subsidiaries transacting business in currencies other than their functional
currency (transaction exposure). Currently, the Company believes its foreign
currency transaction exposure is not material to the consolidated results of
operations.
There has been no significant change in the Company's quantitative or
qualitative aspects of market risk during the quarter ended March 31, 2003 from
that disclosed in the Annual Report on Form 10-K for the year ended December 31,
2002.
NEW ACCOUNTING STANDARDS
In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 Implementation
Issue No. B36, "Embedded Derivatives: Modified Coinsurance Arrangements and Debt
Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only
Partially Related to the Creditworthiness of the Obligor under Those
Instruments" ("FASB B36"). In this new guidance, the FASB has concluded that
funds withheld by a ceding company, for modified coinsurance and coinsurance
with funds withheld contracts, may contain an embedded derivative which should
be bifurcated and valued. The effective date of the implementation guidance is
the first day of the first fiscal quarter beginning after September 15, 2003. As
of March 31, 2003, the Company has not separately reported any potential
embedded derivatives associated with these contracts, which it believes is
consistent with industry practice. At this time, the Company has not estimated
the impact, if any, that the adoption of FASB B36 will have on its financial
position or results of operations.
Effective January 1, 2003, the Company adopted the provisions of SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities," FASB
Interpretation No. 46, "Consolidation of Variable Interest
21
Entities," and FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." The adoption of these provisions did not materially
affect the Company's financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123." Effective January 1, 2003, the Company prospectively adopted the fair
value-based employee stock-based compensation expense recognition provisions of
SFAS No. 123, as amended by SFAS No. 148. The Company formerly applied the
intrinsic value-based expense provisions set forth in APB Opinion No. 25,
Accounting for Stock Issued to Employees, ("APB 25"). The Company recorded
pre-tax compensation expense of approximately $0.4 million during the first
quarter of 2003 associated with stock option grants issued during January 2003.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This Quarterly Report on Form 10-Q 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 earnings, revenues,
income or loss, future financial performance and growth potential of Reinsurance
Group of America, Incorporated and its subsidiaries (which we refer to in the
following paragraphs as "we," "us" or "our"). The words "intend," "expect,"
"project," "estimate," "predict," "anticipate," "should," "believe," and other
similar expressions also are intended to identify forward-looking statements.
Forward-looking statements are inherently 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.
Numerous important factors could cause actual results and events to differ
materially from those expressed or implied by forward-looking statements
including, without limitation, (1) adverse changes in mortality and claims
experience, (2) market or economic conditions that adversely affect our ability
to make timely sales of investment securities, (3) competitive factors and
competitors' responses to our initiatives, (4) general economic conditions
affecting the demand for insurance and reinsurance in our current and planned
markets, (5) changes in our financial strength and credit ratings or those of
Metropolitan Life Insurance Company ("MetLife") or its subsidiaries, and the
effect of such changes on our future results of operations and financial
condition, (6) fluctuations in U.S. or foreign currency exchange rates, interest
rates, or securities and real estate markets, (7) changes in investment
portfolio yields or values due to interest rate or credit quality changes, (8)
the stability of governments and economies in the markets in which we operate,
(9) adverse litigation or arbitration results, (10) the success of our clients,
(11) successful execution of our entry into new markets, (12) successful
development and introduction of new products and distribution opportunities,
(13) regulatory action that may be taken by state Departments of Insurance with
respect to us, MetLife, or its subsidiaries, (14) changes in laws, regulations,
and accounting standards applicable to us, our subsidiaries, or our business,
and (15) other risks and uncertainties described in this document and in our
other filings with the Securities and Exchange Commission ("SEC").
Forward-looking statements should be evaluated together with the many risks and
uncertainties that affect our business, including those mentioned in this
document and described in the periodic reports we file with the SEC. You are
cautioned not to place undue reliance on the forward-looking statements, which
speak only as of the date on which they are made. We do not undertake any
obligations to update these forward-looking statements, even though our
situation may change in the future. We qualify all of our forward-looking
statements by these cautionary statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See "Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk" which is incorporated by reference herein.
22
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. Within 90 days prior to
the date of filing this report, the Company evaluated, under the supervision and
with the participation of the Company's Disclosure Committee and the Company's
management, including the Chief Executive Officer and the Chief Financial
Officer, the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that the Company's
disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934, as amended) are effective.
(b) Changes in Internal Controls. Subsequent to the date of that evaluation,
there have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls and there were no
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
The Company is currently a party to various litigation and arbitrations that
involve medical reinsurance arrangements, personal accident business, and
aviation bodily injury carve-out business. As of March 31, 2003, the ceding
companies involved in these disputes have raised claims that are $43.2 million
in excess of the amounts held in reserve by the Company. The Company believes it
has substantial defenses upon which to contest these claims, including but not
limited to misrepresentation and breach of contract by direct and indirect
ceding companies. In addition, the Company is in the process of auditing ceding
companies which have indicated that they anticipate asserting claims in the
future against the Company that are $8.0 million in excess of the amounts held
in reserve by the Company. Depending upon the audit findings in these cases,
they could result in litigation or arbitrations in the future. See Note 21 to
the Consolidated Financial Statements, "Discontinued Operations", in the Annual
Report, for more information. From time to time, the Company is subject to
litigation and arbitration related to its reinsurance business and to
employment-related matters in the normal course of its business. While it is not
feasible to predict or determine the ultimate outcome of the pending litigation
or arbitrations or provide reasonable ranges of potential losses, it is the
opinion of management, after consultation with counsel, that their outcomes,
after consideration of the provisions made in the Company's consolidated
financial statements, would not have a material adverse effect on its
consolidated financial position.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) See index to exhibits.
(b) The following report on Form 8-K was filed with the Securities and
Exchange Commission during the quarter ended March 31, 2003:
None.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Reinsurance Group of America, Incorporated
By: /s/ A. Greig Woodring May 13, 2003
--------------------------------------
A. Greig Woodring
President & Chief Executive Officer
(Principal Executive Officer)
/s/ Jack B. Lay May 13, 2003
------------------------------------------
Jack B. Lay
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
24
CEO CERTIFICATION
I, A. Greig Woodring, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinsurance Group of
America, Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ A. Greig Woodring
A. Greig Woodring
President & Chief Executive Officer
25
CFO CERTIFICATION
I, Jack B. Lay, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinsurance Group of
America, Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ Jack B. Lay
Jack B. Lay
Executive Vice President
& Chief Financial Officer
26
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Reinsurance Agreement dated as of December 31, 1992 between General
American Life Insurance Company ("General American") and General
American Life Reinsurance Company of Canada ("RGA Canada"),
incorporated by reference to Amendment No. 1 to Registration
Statement on Form S-1 (No. 33-58960), filed on April 14, 1993 at the
corresponding exhibit
2.2 Retrocession Agreement dated as of July 1, 1990 between General
American and The National Reinsurance Company of Canada, as amended
between RGA Canada and General American on December 31, 1992"),
incorporated by reference to Amendment No. 1 to Registration
Statement on Form S-1 (No. 33-58960), filed on April 14, 1993 at the
corresponding exhibit
2.3 Reinsurance Agreement dated as of January 1, 1993 between RGA
Reinsurance Company ("RGA Reinsurance", formerly "Saint Louis
Reinsurance Company") and General American"), incorporated by
reference to Amendment No. 1 to Registration Statement on Form S-1
(No. 33-58960), filed on April 14, 1993 at the corresponding exhibit
3.1 Restated Articles of Incorporation of Reinsurance Group of America,
Incorporated, as amended, incorporated by reference to Form 10-Q for
the quarter ended September 30, 1999 (No. 1-11848) filed on November
12, 1999 at the corresponding exhibit.
3.2 Bylaws of RGA, as amended, incorporated by reference to Exhibit 3.2
to Form 10-Q for the quarter ended September 30, 2000 (No. 1-11848),
filed on November 13, 2000.
3.3 Certificate of Designations for Series A Junior Participating
Preferred Stock (included as Exhibit A to Exhibit 4.2).
4.1 Form of Specimen Certificate for Common Stock of RGA, incorporated
by reference to Amendment No. 1 to Registration Statement on Form
S-1 (No. 33-58960), filed on April 14, 1993 at the corresponding
exhibit.
4.2 Rights Agreement dated as of May 4, 1993, between RGA and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
incorporated by reference to Amendment No. 1 to Form 10-Q for the
quarter ended March 31, 1997 (No. 1-11848) filed on 21 May 1997 at
the corresponding exhibit.
4.3 Second Amendment to Rights Agreement, dated as of April 22, 1998,
between RGA and ChaseMellon Shareholder Services, L.L.C. (as
successor to Boatmen's Trust Company), as Rights Agent, incorporated
by reference to Registration Statement on Form S-3 (No. 333-5177)
filed on 4 June 1998 at the corresponding exhibit.
4.4 Third Amendment to Rights Agreement dated as of August 12, 1999,
between Reinsurance Group of America, Incorporated and ChaseMellon
Shareholder Services, L.L.C. (as successor to Boatmen's Trust
Company), as Rights Agent, incorporated by reference to Exhibit 4.4
to Form 8-K dated August 10, 1999 (No. 1-11848), filed August 25,
1999.
4.5 Fourth Amendment to Rights Agreement dated as of August 23, 1999,
between Reinsurance Group of America, Incorporated and ChaseMellon
Shareholder Services, L.L.C. (as successor to Boatmen's Trust
Company), as Rights Agent, incorporated by reference to Exhibit 4.1
to Form 8-K dated August 26, 1999 (No. 1-11848), filed September 10,
1999.
27
4.6 Form of Unit Agreement among the Company and the Trust, as Issuers
and The Bank of New York, as Agent, Warrant Agent and Property
Trustee, incorporated by reference to Exhibit 4.1 to Registration
Statement on Form 8-A12B (No. 1-11848) filed on December 18, 2001
4.7 Form of Global Unit Certificate, incorporated by reference to
Exhibit A of Exhibit 4.6 of this Report, incorporated by reference
to Registration Statement on Form 8-A12B (No. 1-11848) filed on
December 18, 2001
4.8 Form of Warrant Agreement between the Company and the Bank of New
York, as Warrant Agent, incorporated by reference to Exhibit 4.3 to
Registration Statement on Form 8-A12B (No. 1-11848) filed on
December 18, 2001
4.9 Form of Warrant Certificate, incorporated by reference to Exhibit A
of Exhibit 4.8 of this Report
4.10 Trust Agreement of RGA Capital Trust I, incorporated by reference to
Exhibit 4.11 to the Registration Statements on Form S-3 (File Nos.
333.55304, 333-55304-01 and 333-55304-02), previously filed with the
SEC on February 9, 2001, as amended (the "Original S-3")
4.11 Form of Amended and Restated Trust Agreement of RGA Capital Trust I,
incorporated by reference to Exhibit 4.7 to Registration Statement
on Form 8-A12B (No. 1-11848) filed on December 18, 2001
4.12 Form of Preferred Security Certificate for the Trust, included as
Exhibit A to Exhibit 4.11 to this Report
4.13 Form of Remarketing Agreement between the Company, as Guarantor, and
The Bank of New York, as Guarantee Trustee, incorporated by
reference to Exhibit 4.12 to Registration Statement on Form 8-A12B
(No. 1-11848) filed on December 18, 2001
4.14 Form of Junior Subordinated Indenture, incorporated by reference to
Exhibit 4.3 of the Original S-3
4.15 Form of First Supplemental Junior Subordinated Indenture between the
Company and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.10 to Registration Statement on Form 8-A12B
(No. 1-11848) filed on December 18, 2001
4.16 Form of Guarantee Agreement between the Company, as Guarantor, and
The Bank of New York, as Guarantee Trustee, incorporated by
reference to Exhibit 4.11 to Registration Statement on Form 8-A12B
(No. 1-11848) filed on December 18, 2001
4.17 Form of Senior Indenture between Reinsurance Group of America,
Incorporated and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.1 to the Original S-3
4.18 Form of First Supplemental Indenture between Reinsurance Group of
America, Incorporated and The Bank of New York, as Trustee, relating
to the 6 - 3/4 Senior Notes Due 2011, incorporated by reference to
Exhibit 4.8 to Form 8-K dated December 12, 2001 (No. 1-11848), filed
December 18, 2001
4.19 Registration Rights agreement dated as of April 15, 1993 between RGA
and General American, incorporated by reference to Amendment No. 1
to Registration Statement on Form S-1 (No. 33-58960), filed on April
14, 1993, at the corresponding exhibit
28
4.20 Registration Rights agreement dated as of November 23, 1999 between
RGA and MetLife, incorporated by reference to Exhibit 99.3 to
Current Report on Form 8-K dated November 23, 1999 (No. 1-11848),
filed on December 6, 1999
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
29