UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

REINSURANCE GROUP OF AMERICA, INCORPORATED

MISSOURI (State or other jurisdiction of incorporation or organization)		43-1627032 (IRS employer identification number)

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  þ      No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   o      No  þ

Common stock outstanding ($.01 par value) as of July 31, 2008: 62,323,070 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) June 30, 2008 and December 31, 2007			3
		Condensed Consolidated Statements of Income (Unaudited) Three and six months ended June 30, 2008 and 2007			4
		Condensed Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 2008 and 2007			5
		Notes to Condensed Consolidated Financial Statements (Unaudited)			6
2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
3		Quantitative and Qualitative Disclosures About Market Risk			45
4		Controls and Procedures			45
		PART II — OTHER INFORMATION
1		Legal Proceedings			46
1A		Risk Factors			46
2		Unregistered Sales of Equity Securities and Use of Proceeds			47
4		Submission of Matters to a Vote of Security Holders			48
6		Exhibits			48
		Signatures			49
		Index to Exhibits			50
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

(Unaudited)

		June 30,				December 31,
		2008				2007
		(Dollars in thousands)
Assets
Fixed maturity securities:
Available-for-sale at fair value (amortized cost of $9,594,910 and $8,916,692 at June 30, 2008 and December 31, 2007, respectively)		$	9,667,961			$	9,397,916
Mortgage loans on real estate			798,896				831,557
Policy loans			1,048,517				1,059,439
Funds withheld at interest			4,825,297				4,749,496
Short-term investments			47,081				75,062
Other invested assets			418,864				284,220
Total investments			16,806,616				16,397,690
Cash and cash equivalents			362,689				404,351
Accrued investment income			106,679				77,537
Premiums receivable and other reinsurance balances			800,404				717,228
Reinsurance ceded receivables			752,203				722,313
Deferred policy acquisition costs			3,460,294				3,161,951
Other assets			121,282				116,939
Total assets		$	22,410,167			$	21,598,009
Liabilities and Stockholders’ Equity
Future policy benefits		$	6,619,084			$	6,333,177
Interest-sensitive contract liabilities			7,220,659				6,657,061
Other policy claims and benefits			2,239,868				2,055,274
Other reinsurance balances			173,162				201,614
Deferred income taxes			561,912				760,633
Other liabilities			599,034				465,358
Short-term debt			—				29,773
Long-term debt			926,095				896,065
Collateral finance facility			850,000				850,361
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company			158,946				158,861
Total liabilities			19,348,760				18,408,177
Commitments and contingent liabilities (See Note 7)
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; 140,000,000 shares authorized; 63,128,273 shares issued at June 30, 2008 and December 31, 2007)			631				631
Warrants			66,915				66,915
Additional paid-in-capital			1,115,540				1,103,956
Retained earnings			1,660,041				1,540,122
Accumulated other comprehensive income:
Accumulated currency translation adjustment, net of income taxes			215,582				221,987
Unrealized appreciation of securities, net of income taxes			47,478				313,170
Pension and postretirement benefits, net of income taxes			(8,082	)			(8,351	)
Total stockholders’ equity before treasury stock			3,098,105				3,238,430
Less treasury shares held of 812,722 and 1,096,775 at cost at June 30, 2008 and December 31, 2007, respectively			(36,698	)			(48,598	)
Total stockholders’ equity			3,061,407				3,189,832
Total liabilities and stockholders’ equity		$	22,410,167			$	21,598,009

See accompanying notes to condensed consolidated financial statements (unaudited).

(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands, except per share data)
Revenues:
Net premiums		$	1,358,555			$	1,207,646			$	2,656,620			$	2,333,096
Investment income, net of related expenses			254,868				274,902				454,394				490,645
Investment related losses, net			(7,079	)			(14,218	)			(162,339	)			(19,864	)
Other revenues			36,262				20,446				54,198				39,548
Total revenues			1,642,606				1,488,776				3,002,873				2,843,425
Benefits and Expenses:
Claims and other policy benefits			1,128,827				980,338				2,248,339				1,883,148
Interest credited			63,000				113,652				136,897				174,718
Policy acquisition costs and other insurance expenses			189,272				178,016				205,534				360,997
Other operating expenses			61,997				56,619				125,337				112,041
Interest expense			21,580				23,232				44,674				43,685
Collateral finance facility expense			6,966				13,206				14,440				25,893
Total benefits and expenses			1,471,642				1,365,063				2,775,221				2,600,482
Income from continuing operations before income taxes			170,964				123,713				227,652				242,943
Provision for income taxes			60,158				44,676				80,257				86,969
Income from continuing operations			110,806				79,037				147,395				155,974
Discontinued operations:
Loss from discontinued accident and health operations, net of income taxes			(104	)			(1,562	)			(5,188	)			(2,247	)
Net income		$	110,702			$	77,475			$	142,207			$	153,727
Basic earnings per share:
Income from continuing operations		$	1.78			$	1.28			$	2.37			$	2.53
Discontinued operations			—				(0.03	)			(0.08	)			(0.04	)
Net income		$	1.78			$	1.25			$	2.29			$	2.49
Diluted earnings per share:
Income from continuing operations		$	1.73			$	1.22			$	2.30			$	2.43
Discontinued operations			—				(0.02	)			(0.08	)			(0.04	)
Net income		$	1.73			$	1.20			$	2.22			$	2.39
Dividends declared per share		$	0.09			$	0.09			$	0.18			$	0.18

See accompanying notes to condensed consolidated financial statements (unaudited).

(Unaudited)

		Six months ended June 30,
		2008				2007
		(Dollars in thousands)
Cash Flows from Operating Activities:
Net income		$	142,207			$	153,727
Adjustments to reconcile net income to net cash provided by operating activities:
Change in:
Accrued investment income			(27,922	)			(26,440	)
Premiums receivable and other reinsurance balances			(92,232	)			42,087
Deferred policy acquisition costs			(285,759	)			(82,761	)
Reinsurance ceded balances			(29,890	)			(36,197	)
Future policy benefits, other policy claims and benefits, and other reinsurance balances			468,180				373,895
Deferred income taxes			(39,703	)			77,666
Other assets and other liabilities, net			102,314				16,477
Amortization of net investment premiums, discounts and other			(50,866	)			(29,674	)
Investment related losses, net			162,339				19,864
Excess tax benefits from share-based payment arrangement			(3,732	)			(2,839	)
Other, net			21,394				9,656
Net cash provided by operating activities			366,330				515,461
Cash Flows from Investing Activities:
Sales of fixed maturity securities available-for-sale			1,237,413				1,132,529
Maturities of fixed maturity securities available-for-sale			81,275				106,051
Purchases of fixed maturity securities available-for-sale			(1,812,224	)			(1,531,894	)
Cash invested in mortgage loans on real estate			—				(91,194	)
Cash invested in policy loans			(9,054	)			(8,750	)
Cash invested in funds withheld at interest			(54,425	)			(46,636	)
Net increase on securitized lending activities			12,806				90,398
Principal payments on mortgage loans on real estate			32,625				24,818
Principal payments on policy loans			19,976				5,929
Change in short-term investments and other invested assets			(118,431	)			(124,582	)
Net cash used in investing activities			(610,039	)			(443,331	)
Cash Flows from Financing Activities:
Dividends to stockholders			(11,190	)			(11,097	)
Proceeds from long-term debt issuance			—				295,311
Net repayments under credit agreements			—				(66,602	)
Purchases of treasury stock			(3,104	)			(3,611	)
Excess tax benefits from share-based payment arrangement			3,732				2,839
Exercise of stock options, net			3,981				12,146
Net change in payables for securities sold under agreements to repurchase			(30,094	)			—
Excess deposits (payments) on universal life and other investment type policies and contracts			237,503				(49,443	)
Net cash provided by financing activities			200,828				179,543
Effect of exchange rate changes on cash			1,219				2,787
Change in cash and cash equivalents			(41,662	)			254,460
Cash and cash equivalents, beginning of period			404,351				160,428
Cash and cash equivalents, end of period		$	362,689			$	414,888
Supplementary information:
Cash paid for interest		$	52,128			$	50,267
Cash paid for income taxes, net of refunds		$	22,250			$	22,440

See accompanying notes to condensed consolidated financial statements (unaudited).

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

1. Organization and Basis of Presentation

Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. As of June 30, 2008, General American Life Insurance Company (“General American”), a Missouri life insurance company, directly owned approximately 51.7% of the outstanding shares of common stock of RGA. General American is a wholly-owned subsidiary of MetLife, Inc. (“MetLife”), a New York-based insurance and financial services holding company. On June 2, 2008 MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of this year.

The accompanying unaudited condensed consolidated financial statements of RGA and its 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 six-month period ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2007 Annual Report on Form 10-K (“2007 Annual Report”) filed with the Securities and Exchange Commission on February 28, 2008.

The accompanying unaudited condensed consolidated financial statements include the accounts of Reinsurance Group of America, Incorporated and its subsidiaries. All intercompany accounts and transactions have been eliminated. The Company has reclassified the presentation of certain prior-period information to conform to the current presentation.

2. Summary of Significant Accounting Policies

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. In compliance with SFAS No. 157, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

In accordance with SFAS 157, assets and liabilities recorded at fair value on the condensed consolidated balance sheets are categorized as follows:

	Level 1.		Unadjusted quoted prices in active markets for identical assets or liabilities.

	Level 2.		Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assts or liabilities.

	Level 3.		Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3

		assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

See Note 5 — “Fair Value Disclosures” for further details on the Company’s assets and liabilities recorded at fair value as of June 30, 2008.

3. 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								Six months ended
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Earnings:
Income from continuing operations (numerator for basic and diluted calculations)		$	110,806			$	79,037			$	147,395			$	155,974
Shares:
Weighted average outstanding shares (denominator for basic calculation)			62,283				61,898				62,214				61,710
Equivalent shares from outstanding stock options			1,699				2,643				1,892				2,509
Denominator for diluted calculation			63,982				64,541				64,106				64,219
Earnings per share:
Basic		$	1.78			$	1.28			$	2.37			$	2.53
Diluted		$	1.73			$	1.22			$	2.30			$	2.43

The calculation of common equivalent shares does not include the impact of options or warrants having a strike or conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. For the three and six months ended June 30, 2008, approximately 0.7 million stock options and 0.4 million performance contingent shares were excluded from the calculation. For the three and six months ended June 30, 2007, all stock options were included and approximately 0.4 million performance contingent shares were excluded from the calculation.

4. Comprehensive Income

The following schedule reflects the change in accumulated other comprehensive income (dollars in thousands):

		Three months ended								Six months ended
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Net income		$	110,702			$	77,475			$	142,207			$	153,727
Accumulated other comprehensive income (loss), net of income tax:
Unrealized losses, net of reclassification adjustment for losses included in net income			(119,696	)			(136,116	)			(265,692	)			(131,473	)
Currency translation adjustments			11,920				58,832				(6,405	)			72,889
Unrealized pension and postretirement benefit adjustment			117				(283	)			269				(313	)
Comprehensive income (loss)		$	3,043			$	(92	)		$	(129,621	)		$	94,830

5. Fair Value Disclosures

Effective January 1, 2008, the Company adopted SFAS 157, which defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s adoption of SFAS 157 resulted in a pre-tax gain of approximately $3.9 million, included in interest credited, related primarily to the decrease in the fair value of embedded derivative liabilities associated with equity-indexed annuity products primarily from the incorporation of nonperformance risk, also referred to as the Company’s own credit risk, into the fair value calculation.

SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In accordance with SFAS 157, valuation techniques utilized by management for invested assets and embedded derivatives reported at fair value are generally categorized into three types:

Market Approach. Market approach valuation techniques use prices and other relevant information from market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include comparables and matrix pricing. Comparables use market multiples, which might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering both quantitative and qualitative factors specific to the measurement. Matrix pricing is a mathematical technique used principally to value certain securities without relying exclusively on quoted prices for the specific securities but comparing the securities to benchmark or comparable securities.

Income Approach. Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. These techniques rely on current expectations of future amounts. Examples of income approach valuation techniques include present value techniques, option-pricing models and binomial or lattice models that incorporate present value techniques.

Cost Approach. Cost approach valuation techniques are based upon the amount that, at present, would be required to replace the service capacity of an asset, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility.

The three approaches described within SFAS 157 are consistent with generally accepted valuation methodologies. While all three approaches are not applicable to all assets or liabilities reported at fair value, where appropriate and possible, one or more valuation techniques may be used. The selection of the valuation method(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued, and significant expertise and judgment is required. The Company performs regular analysis and review of the various methodologies utilized in determining fair value to ensure that the valuation approaches utilized are appropriate and consistently applied, and that the various assumptions are reasonable. This process involves quantitative and qualitative analysis. Examples of procedures performed include, but are not limited to, review of pricing trends and monitoring of recent trade information. In addition, the Company utilizes both internal and external cash flow models to analyze the reasonableness of fair values, where appropriate.

For invested assets reported at fair value, when available, fair values are based on quoted prices in active markets that are regularly and readily obtainable. Generally, these are very liquid investments and the valuation does not require management judgment. When quoted prices in active markets are not available, fair value is based on the market valuation techniques described above, primarily a combination of the market approach, including matrix pricing and the income approach. The assumptions and inputs used by management in applying these methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and assumptions regarding liquidity and future cash flows.

The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market.

When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and are consistent with what other market participants would use when pricing such securities.

The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings.

For embedded derivative liabilities associated with the underlying products in reinsurance treaties, primarily equity-indexed annuity treaties, the Company utilizes a market standard method, which includes an estimate of future equity option purchases and an adjustment for the Company’s own credit risk that takes into consideration the Company’s financial strength rating, also commonly referred to as a claims paying rating. The capital market inputs to the model, such as equity indexes, equity volatility, interest rates and the Company’s credit adjustment, are generally observable. However, the valuation models also use inputs requiring certain actuarial assumptions such as future interest margins, policyholder behavior, including future equity participation rates, and explicit risk margins related to non-capital market inputs, that are generally not observable and may require use of significant management judgment. Changes in interest rates, equity indices, equity volatility, the Company’s own credit risk, and actuarial assumptions regarding policyholder behavior may result in significant fluctuations in the value of embedded derivatives liabilities associated with equity-indexed annuity reinsurance treaties.

The fair value of embedded derivatives associated with funds withheld reinsurance treaties is determined based upon a total return swap methodology with reference to the fair value of the investments held by the ceding Company that support the Company’s funds withheld at interest asset. The fair value of the underlying assets is generally based on market observable inputs using market standard valuation methodologies. However, the valuation also requires certain significant inputs based on actuarial assumptions about policyholder behavior, which are generally not observable.

For the quarter ended June 30, 2008, the application of valuation methodologies applied to similar assets and liabilities has been consistent.

SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1		Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets and liabilities include investment securities and derivative contracts that are traded in exchange markets.

Level 2		Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or market standard valuation methodologies and assumptions with significant inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include investment securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose values are determined using market standard valuation methodologies. This category primarily includes U.S. and foreign corporate securities, Canadian and Canadian provincial government securities, and residential and commercial mortgage-backed securities, among others. Management values most of these securities using inputs that are market observable.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the related assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using market standard valuation methodologies described above. When observable inputs are not available, the market standard methodologies for determining the estimated fair value of certain securities that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation and cannot be supported by reference to market activity.

		Even though unobservable, management believes these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing similar assets and liabilities. For the Company’s invested assets, this category generally includes U.S. and foreign corporate securities (primarily private placements), asset-backed securities (including those with exposure to subprime mortgages), and to a lesser extent, certain residential and commercial mortgage-backed securities, among others. Additionally, the Company’s embedded derivatives, all of which are associated with reinsurance treaties, are classified in Level 3 since their values include significant unobservable inputs associated with actuarial assumptions regarding policyholder behavior. Embedded derivatives are reported with the host instruments on the condensed consolidated balance sheet.

As required by SFAS 157, when inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest priority level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within Level 3 may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands).

		June 30, 2008
						Fair Value Measurements Using:
		Total				Level 1				Level 2				Level 3
Assets:
Fixed maturity securities – available-for-sale:
U.S. corporate securities		$	3,372,299			$	—			$	2,574,313			$	797,986
Canadian and Canadian provincial governments			2,155,928				—				2,132,109				23,819
Residential mortgage-backed securities			1,272,537				—				1,154,622				117,915
Foreign corporate securities			1,136,256				1,874				1,014,266				120,116
Asset-backed securities			452,347				—				127,134				325,213
Commercial mortgage-backed securities			842,140				—				797,134				45,006
U.S. government and agencies securities			8,488				1,246				7,242				—
State and political subdivision securities			42,609				6,990				—				35,619
Other foreign government securities			385,357				111,347				237,311				36,699
Total fixed maturity securities – available-for-sale			9,667,961				121,457				8,044,131				1,502,373
Funds withheld at interest – embedded derivatives			(245,070	)			—				—				(245,070	)
Short-term investments			1,927				—				1,927				—
Other invested assets – equity securities			190,365				138,275				40,751				11,339
Other invested assets – derivatives			4,853				—				4,853				—
Reinsurance ceded receivable – embedded derivatives			81,163				—				—				81,163
Total		$	9,701,199			$	259,732			$	8,091,662			$	1,349,805
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	(588,870	)		$	—			$	—			$	(588,870	)
Other liabilities – derivatives			(4,491	)			—				(4,491	)			—
Total		$	(593,361	)		$	—			$	(4,491	)		$	(588,870	)

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2008 (dollars in thousands).

		Total Fair Value Measurements for the three months ended June 30, 2008
						Total gains/losses
						(realized/unrealized) included in:
														Purchases,				Transfers
		Balance								Other				issuances				in and/or				Balance
		April 1,								comprehensive				and				out of				June 30,
		2008				Earnings, net				loss				disposals				Level 3				2008
Assets:
Fixed maturity securities available-for-sale		$	1,509,166			$	(442	)		$	(41,661	)		$	55,804			$	(20,494	)		$	1,502,373
Funds withheld at interest – embedded derivatives			(233,618	)			(11,452	)			—				—				—				(245,070	)
Other invested assets – equity securities			20,202				1				(1,241	)			7,000				(14,623	)			11,339
Reinsurance ceded receivable – embedded derivatives			78,216				(1,459	)			—				4,406				—				81,163
Total		$	1,373,966			$	(13,352	)		$	(42,902	)		$	67,210			$	(35,117	)		$	1,349,805
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	(585,572	)		$	5,983			$	—			$	(9,281	)		$	—			$	(588,870	)
Total		$	(585,572	)		$	5,983			$	—			$	(9,281	)		$	—			$	(588,870	)

		Total Fair Value Measurements for the six months ended June 30, 2008
						Total gains/losses
						(realized/unrealized) included in:
														Purchases,				Transfers
		Balance								Other				issuances				in and/or				Balance
		January 1,								comprehensive				and				out of				June 30,
		2008				Earnings, net				loss				disposals				Level 3				2008
Assets:
Fixed maturity securities available-for-sale		$	1,500,054			$	(7,552	)		$	(77,782	)		$	127,087			$	(39,434	)		$	1,502,373
Funds withheld at interest – embedded derivatives			(85,090	)			(159,980	)			—				—				—				(245,070	)
Other invested assets – equity securities			13,950				2				(1,720	)			13,730				(14,623	)			11,339
Reinsurance ceded receivable – embedded derivatives			68,298				4,586				—				8,279				—				81,163
Total		$	1,497,212			$	(162,944	)		$	(79,502	)		$	149,096			$	(54,057	)		$	1,349,805
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	(531,160	)		$	(37,695	)		$	—			$	(20,015	)		$	—			$	(588,870	)
Total		$	(531,160	)		$	(37,695	)		$	—			$	(20,015	)		$	—			$	(588,870	)

The tables below summarize gains and losses due to changes in fair value, including both realized and unrealized gains and losses, recorded in earnings for Level 3 assets and liabilities for the three and six months ended June 30, 2008 (dollars in thousands).

		Total Gains and Losses
		Classification of gains/losses (realized/unrealized) included in earnings for the three months
		ended June 30, 2008
																		Policy
		Investment								Claims &								acquisition
		income, net				Investment				other								costs and other
		of related				related gains				policy				Interest				insurance
		expenses				(losses), net				benefits				credited				expenses				Total
Assets:
Fixed maturity securities – available-for-sale		$	345			$	(787	)		$	—			$	—			$	—			$	(442	)
Funds withheld at interest – embedded derivatives			—				(11,452	)			—				—				—				(11,452	)
Other invested assets – equity securities			1				—				—				—				—				1
Reinsurance ceded receivable – embedded derivatives			—				—				—				—				(1,459	)			(1,459	)
Total		$	346			$	(12,239	)		$	—			$	—			$	(1,459	)		$	(13,352	)
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	—			$	7,428			$	1,271			$	(2,716	)		$	—			$	5,983
Total		$	—			$	7,428			$	1,271			$	(2,716	)		$	—			$	5,983

		Total Gains and Losses
		Classification of gains/losses (realized/unrealized) included in earnings for the six months
		ended June 30, 2008
																		Policy
		Investment								Claims &								acquisition
		income, net				Investment				other								costs and other
		of related				related gains				policy				Interest				insurance
		expenses				(losses), net				benefits				credited				expenses				Total
Assets:
Fixed maturity securities – available-for-sale		$	157			$	(7,709	)		$	—			$	—			$	—			$	(7,552	)
Funds withheld at interest – embedded derivatives			—				(159,980	)			—				—				—				(159,980	)
Other invested assets – equity securities			2				—				—				—				—				2
Reinsurance ceded receivable – embedded derivatives			—				—				—				—				4,586				4,586
Total		$	159			$	(167,689	)		$	—			$	—			$	4,586			$	(162,944	)
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	—			$	942			$	1,721			$	(40,358	)		$	—			$	(37,695	)
Total		$	—			$	942			$	1,721			$	(40,358	)		$	—			$	(37,695	)

The tables below summarize changes in unrealized gains or losses recorded in earnings for the three and six months ended June 30, 2008 for Level 3 assets and liabilities that are still held at June 30, 2008 (dollars in thousands).

		Changes in Unrealized Gains and Losses
		Changes in unrealized gains/losses relating to assets and liabilities still held at the reporting
		date for the three months ended June 30, 2008
																		Policy
		Investment								Claims &								acquisition
		income, net				Investment				other								costs and other
		of related				related gains				policy				Interest				insurance
		expenses				(losses), net				benefits				credited				expenses				Total
Assets:
Fixed maturity securities – available-for-sale		$	354			$	(116	)		$	—			$	—			$	—			$	238
Funds withheld at interest – embedded derivatives			—				(11,452	)			—				—				—				(11,452	)
Other invested assets – equity securities			1				—				—				—				—				1
Reinsurance ceded receivable – embedded derivatives			—				—				—				—				(314	)			(314	)
Total		$	355			$	(11,568	)		$	—			$	—			$	(314	)		$	(11,527	)
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	—			$	7,428			$	2,419			$	(19,845	)		$	—			$	(9,998	)
Total		$	—			$	7,428			$	2,419			$	(19,845	)		$	—			$	(9,998	)

		Changes in Unrealized Gains and Losses
		Changes in unrealized gains/losses relating to assets and liabilities still held at the reporting
		date for the six months ended June 30, 2008
																		Policy
		Investment								Claims &								acquisition
		income, net				Investment				other								costs and other
		of related				related gains				policy				Interest				insurance
		expenses				(losses), net				benefits				credited				expenses				Total
Assets:
Fixed maturity securities – available-for-sale		$	156			$	(2,095	)		$	—			$	—			$	—			$	(1,939	)
Funds withheld at interest – embedded derivatives			—				(159,980	)			—				—				—				(159,980	)
Other invested assets – equity securities			2				—				—				—				—				2
Reinsurance ceded receivable – embedded derivatives			—				—				—				—				7,496				7,496
Total		$	158			$	(162,075	)		$	—			$	—			$	7,496			$	(154,421	)
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	—			$	942			$	2,489			$	(73,090	)		$	—			$	(69,659	)
Total		$	—			$	942			$	2,489			$	(73,090	)		$	—			$	(69,959	)

6. Segment Information

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2 of the consolidated financial statements accompanying the 2007 Annual Report. The Company measures segment performance primarily based on profit or loss from operations before income taxes. There are no intersegment reinsurance 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.

The Company allocates capital to its segments based on an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model considers the unique and specific nature of the risks inherent in the Company’s businesses. As a result of the economic capital allocation process, a portion of investment income and investment related gains and losses are credited to the segments based on the level of allocated equity. 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.

Information related to total revenues, income (loss) from continuing operations before income taxes, and total assets of the Company for each reportable segment are summarized below (dollars in thousands).

		Three months ended								Six months ended
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Total revenues
U.S.		$	942,555			$	927,982			$	1,654,349			$	1,767,063
Canada			192,430				156,684				363,383				285,478
Europe & South Africa			194,205				171,242				391,757				344,719
Asia Pacific			290,454				209,665				545,869				406,922
Corporate & Other			22,962				23,203				47,515				39,243
Total		$	1,642,606			$	1,488,776			$	3,002,873			$	2,843,425
		Three months ended								Six months ended
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Income (loss) from continuing operations before income taxes
U.S.		$	109,166			$	86,215			$	124,451			$	179,392
Canada			26,778				24,202				50,449				39,236
Europe & South Africa			17,041				11,846				23,084				32,970
Asia Pacific			21,256				15,609				39,819				25,941
Corporate & Other			(3,277	)			(14,159	)			(10,151	)			(34,596	)
Total		$	170,964			$	123,713			$	227,652			$	242,943

		Total assets
		June 30, 2008				December 31, 2007
U.S.		$	14,601,544			$	13,779,284
Canada			2,824,335				2,738,005
Europe & South Africa			1,382,268				1,345,900
Asia Pacific			1,549,589				1,355,111
Corporate and Other			2,052,431				2,379,709
Total		$	22,410,167			$	21,598,009

7. Commitments and Contingent Liabilities

The Company has commitments to fund investments in limited partnerships in the amount of $105.9 million at June 30, 2008. The Company anticipates that the majority of these amounts will be invested over the next five years; however, contractually these commitments could become due at the request of the counterparties. Investments in limited partnerships are carried at cost less any other-than-temporary impairments and are included in other invested assets in the condensed consolidated balance sheets.

In January 2006, the Company was threatened with an arbitration related to its life reinsurance business. To date, the ceding company involved has not acted upon this threat. As of June 30, 2008, the ceding company involved in this action has raised a claim in the amount of $4.9 million, none of which has been accrued by the Company. The Company believes it has substantial defenses upon which to contest this claim, including but not limited to breach of contract by the ceding company.

Additionally, the Company is subject to litigation in the normal course of its business. The Company currently has no such other material litigation. However, it is possible that an adverse outcome on any particular arbitration or litigation situation could have a material adverse effect on the Company’s consolidated net income in a particular reporting period.

The Company has obtained letters of credit, issued by banks, 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. At June 30, 2008 and December 31, 2007, there were approximately $23.9 million and $22.6 million, respectively, of outstanding bank letters of credit in favor of third parties. 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. The Company cedes business to its offshore affiliates to help reduce the amount of regulatory capital required in certain jurisdictions, such as the U.S. and the United Kingdom. The capital required to support the business in the offshore affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often considered to be quite conservative. As of June 30, 2008 and December 31, 2007, $480.4 million and $459.6 million, respectively, in letters of credit from various banks were outstanding between the various subsidiaries of the Company. The Company maintains a syndicated revolving credit facility with an overall capacity of $750.0 million, which is scheduled to mature in September 2012. The Company may borrow cash and may obtain letters of credit in multiple currencies under this facility. As of June 30, 2008, the Company had $426.6 million in issued, but undrawn, letters of credit under this facility, which is included in the total above. Applicable letter of credit fees and fees payable for the credit facility depend upon the Company’s senior unsecured long-term debt rating. Fees associated with the Company’s other 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 to third parties on behalf of its subsidiaries’ performance for the payment of amounts due under certain credit facilities, reinsurance treaties and office lease obligations, whereby if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the obligation. In limited circumstances, 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. Liabilities supported by the treaty guarantees, before consideration for any legally offsetting amounts due from the guaranteed party, totaled $337.1 million and $325.1 million as of June 30, 2008 and December 31, 2007, respectively, and are reflected on the Company’s condensed consolidated balance sheets in future policy benefits. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related to trust preferred securities and credit facilities provide additional security to third parties should a subsidiary fail to make principal and/or interest payments when due. As of June 30, 2008, RGA’s exposure related to these guarantees was $159.0 million.

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Since this indemnity generally is not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under this indemnity in the future.

8. Employee Benefit Plans

The components of net periodic benefit costs were as follows (dollars in thousands):

		Three months ended								Six months ended
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Net periodic pension benefit cost:
Service cost		$	661			$	472			$	1,480			$	1,271
Interest cost			585				258				1,171				850
Expected return on plan assets			(469	)			(483	)			(938	)			(938	)
Amortization of prior service cost			147				79				154				174
Amortization of prior actuarial (gain) loss			92				(44	)			164				69
Net periodic pension benefit cost		$	1,016			$	282			$	2,031			$	1,426
Net periodic other benefits cost:
Service cost		$	157			$	(63	)		$	315			$	143
Interest cost			145				79				290				269
Expected return on plan assets			—				—				—				—
Amortization of prior service cost			—				12				—				12
Amortization of prior actuarial (gain) loss			36				(2	)			71				82
Net periodic other benefits cost		$	338			$	26			$	676			$	506

The Company made pension contributions of $4.0 million during the second quarter of 2008 and expects this to be the only contribution for the year.

9. Equity Based Compensation

Equity compensation expense was $2.4 million and $2.9 million in the second quarter of 2008 and 2007, respectively, and $7.8 million and $9.5 million in the first six months of 2008 and 2007, respectively. In the first quarter of 2008, the Company granted 0.4 million incentive stock options at $56.03 weighted average per share and 0.2 million performance contingent units (“PCUs”) to employees. Additionally, non-employee directors were granted a total of 4,800 shares of common stock. As of June 30, 2008, 1.7 million share options at $32.43 weighted average per share vested and exercisable with a remaining weighted average exercise period of 4.0 years. As of June 30, 2008, the total compensation cost of non-vested awards not yet recognized in the financial statements was $20.9 million. It is estimated that these costs will vest over a weighted average period of 2.0 years.

10. New Accounting Standards

In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its condensed consolidated financial statements.

In February 2008, the FASB issued Staff Position (“FSP”) No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP 140-3”). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its condensed consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations — A Replacement of FASB Statement No. 141” (“SFAS 141(r)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 141(r) establishes principles and requirements for how an acquirer recognizes and measures certain items in a business combination, as well as disclosures about the nature and financial effects of a business combination. SFAS 160 establishes accounting and

reporting standards surrounding noncontrolling interest, or minority interests, which are the portions of equity in a subsidiary not attributable, directly or indirectly, to a parent. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to apply the fair value option available under SFAS 159 for any of its eligible financial instruments.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. As of June 30, 2008, General American Life Insurance Company (“General American”), a Missouri life insurance company, directly owned approximately 51.7% of the outstanding shares of common stock of RGA. General American is a wholly-owned subsidiary of MetLife, Inc. (“MetLife”), a New York-based insurance and financial services holding company. On June 2, 2008 MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of this year.

The Company’s primary business is 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. Each year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or surrenders of underlying policies, deaths of policyholders, and the exercise of recapture options by ceding companies.

The Company derives revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new reinsurance treaties, income earned on invested assets, and fees earned from financial reinsurance transactions. The Company believes that industry trends have not changed materially from those discussed in its 2007 Annual Report.

The Company’s profitability primarily depends on the volume and amount of death claims incurred and its ability to adequately price the risks it assumes. While death claims are reasonably predictable over a period of years, claims become less predictable over shorter periods and are subject to significant fluctuation from quarter to quarter and year to year. The maximum amount of coverage the Company retains per life is $8.0 million. Claims in excess of this retention amount are retroceded to retrocessionaires; however, the Company remains fully liable to the ceding company for the entire amount of risk it assumes. The Company believes its sources of liquidity are sufficient to cover potential claims payments on both a short-term and long-term basis.

The Company measures performance based on income or loss from continuing operations before income taxes for each of its five segments. The Company’s U.S., Canada, Europe & South Africa and Asia Pacific operations provide traditional life reinsurance to clients. The Company’s U.S. operations also provide asset-intensive and financial reinsurance products. The Company also provides insurers with critical illness reinsurance in its Canada, Europe & South Africa and Asia Pacific operations. Asia Pacific operations also provide financial reinsurance. The Corporate and Other segment results include the corporate investment activity, general corporate expenses, interest expense of RGA, operations of RGA Technology Partners, Inc., a wholly-owned subsidiary that develops and markets technology solutions for the insurance industry, Argentine privatized pension business in run-off, investment income and expense associated with the Company’s collateral finance facility and the provision for income taxes. The Company’s discontinued accident and health operations are not reflected in its results from continuing operations.

The Company allocates capital to its segments based on an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a 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 and investment related gains and losses are credited to the segments based on the level of allocated equity. 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.

Results of Operations

Consolidated income from continuing operations before income taxes increased $47.3 million, or 38.2%, and decreased $15.3 million, or 6.3%, for the three and six months ended June 30, 2008, as compared to the same periods in 2007. The increase for the second quarter was primarily due to increased premiums related to growth in assumed insurance in force. The decrease in income for the six months can be largely attributed to unfavorable

mortality experience in the U.S. and Europe & South Africa segments and an unrealized loss due to an unfavorable change in the value of embedded derivatives within the U.S. segment due to the impact of widening credit spreads in the U.S. debt markets. Offsetting these negative income items for the first six months were increases in premium levels in all segments. Favorable foreign currency exchange fluctuations resulted in an increase to income from continuing operations before income taxes totaling approximately $6.2 million and $13.2 million for the second quarter and first six months of 2008, respectively.

The unrealized loss due to an unfavorable change in value of embedded derivatives is primarily related to reinsurance treaties written on a modified coinsurance or funds withheld basis and subject to the provisions of 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” (“Issue B36”). Additionally, changes in risk free rates used in the present value calculations of embedded derivatives associated with equity-indexed annuity treaties (“EIAs”) negatively affected income before income taxes in the first six months of 2008. Unfavorable changes in these two types of embedded derivatives, after adjustment for deferred acquisition costs and retrocession, resulted in a decrease in consolidated income from continuing operations before income taxes of approximately $45.9 million for the six months ended June 30, 2008, as compared to the same period in 2007. These fluctuations do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, Company management believes it is helpful to distinguish between the effects of changes in these embedded derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited. Additionally, over the expected life of the underlying treaties, management expects the cumulative effect of the embedded derivatives to be immaterial.

Consolidated net premiums increased $150.9 million, or 12.5%, and $323.5 million, or 13.9%, for the three and six months ended June 30, 2008, as compared to the same periods in 2007, due to growth in life reinsurance in force. Consolidated assumed insurance in force increased to $2.2 trillion for the quarter ended June 30, 2008 from $2.0 trillion for quarter ended June 30, 2007. The Company added new business production, measured by face amount of insurance in force, of $71.6 billion and $81.7 billion during the second quarter, and $148.0 billion and $143.5 billion during the first six months, of 2008 and 2007, respectively. Management believes industry consolidation and the established practice of reinsuring mortality risks should continue to provide opportunities for growth, albeit at rates less than historically experienced. Foreign currency fluctuations favorably affected net premiums by approximately $20.6 million and $67.0 million for the second quarter and first six months of 2008, respectively.

Consolidated investment income, net of related expenses, decreased $20.0 million, or 7.3%, and $36.3 million, or 7.4%, for the three and six months ended June 30, 2008, as compared to the same periods in 2007, primarily due to market value changes related to the Company’s funds withheld at interest investment related to the reinsurance of certain equity indexed annuity products, which are substantially offset by a corresponding change in interest credited to policyholder account balances resulting in a negligible effect on net income. Offsetting the decrease in investment income was a larger invested asset base and a higher effective investment portfolio yield. Invested assets as of June 30, 2008 totaled $16.8 billion, an 8.5% increase over June 30, 2007. The average yield earned on investments, excluding funds withheld, increased to 6.07% in the second quarter of 2008 from 5.90% for the second quarter of 2007. The average yield earned on investments, excluding funds withheld, increased to 6.06% for the first six months of 2008 from 5.92% for the first six months of 2007. The average yield will vary from quarter to quarter and year to year depending on a number of variables, including the prevailing interest rate and credit spread environment, changes in the mix of the underlying investments, and the timing of dividends and distributions on certain investments.

Investment related losses, net decreased $7.1 million and increased $142.5 million for the three and six months ended June 30, 2008, as compared to the same periods in 2007. The large increase for the first six months is primarily due to an increase of $155.7 million in the loss of the aforementioned embedded derivatives related to Issue B36. Investment income and investment related gains and losses are allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.

The effective tax rate on a consolidated basis was 35.2% and 36.1% for the second quarter of 2008 and 2007, respectively, and 35.3% and 35.8% for the first six months of 2008 and 2007, respectively. These effective tax rates

were affected by the ongoing application of FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”.

Critical Accounting Policies

The Company’s accounting policies are described in Note 2 in the 2007 Annual Report. The Company believes its most critical accounting policies include the capitalization and amortization of deferred acquisition costs (“DAC”); the establishment of liabilities for future policy benefits, other policy claims and benefits, including incurred but not reported claims; the valuation of investments, derivatives and investment impairments, if any; accounting for income taxes; and the establishment of arbitration or litigation reserves. The balances of these accounts require extensive use of assumptions and estimates, particularly related to the future performance of the underlying business.

Additionally, for each of the Company’s reinsurance contracts, it must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company must review all contractual features, particularly those that may limit the amount of insurance risk to which the Company is subject or features that delay the timely reimbursement of claims. If the Company determines that the possibility of a significant loss from insurance risk will occur only under remote circumstances, it records the contract under a deposit method of accounting with the net amount receivable or payable reflected in premiums receivable and other reinsurance balances or other reinsurance liabilities on the condensed consolidated balance sheets. Fees earned on the contracts are reflected as other revenues, as opposed to net premiums, on the condensed consolidated statements of income.

Costs of acquiring new business, which vary with and are primarily related to the production of new business, have been deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Deferred policy acquisition costs reflect the Company’s expectations about the future experience of the business in force and include commissions and allowances as well as certain costs of policy issuance and underwriting. Some of the factors that can affect the carrying value of DAC include mortality assumptions, interest spreads and policy lapse rates. The Company performs periodic tests to determine that DAC remains recoverable, and the cumulative amortization is re-estimated and, if necessary, adjusted by a cumulative charge or credit to current operations.

Liabilities for future policy benefits under long-term life insurance policies (policy reserves) are computed based upon expected investment yields, mortality and withdrawal (lapse) rates, and other assumptions, including a provision for adverse deviation from expected claim levels. The Company primarily relies on its own valuation and administration systems to establish policy reserves. The policy reserves the Company establishes may differ from those established by the ceding companies due to the use of different mortality and other assumptions. However, the Company relies upon its clients to provide accurate data, including policy-level information, premiums and claims, which is the primary information used to establish reserves. The Company’s administration departments work directly with its clients to help ensure information is submitted by them in accordance with the reinsurance contracts. Additionally, the Company performs periodic audits of the information provided by ceding companies. The Company establishes reserves for processing backlogs with a goal of clearing all backlogs within a ninety-day period. The backlogs are usually due to data errors the Company discovers or computer file compatibility issues, since much of the data reported to the Company is in electronic format and is uploaded to its computer systems.

The Company periodically reviews actual historical experience and relative anticipated experience compared to the assumptions used to establish aggregate policy reserves. Further, the Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing aggregate policy reserves, together with the present value of future gross premiums, are not sufficient to cover the present value of future benefits, settlement and maintenance costs and to recover unamortized acquisition costs. The premium deficiency reserve is established through a charge to income, as well as a reduction to unamortized acquisition costs and, to the extent there are no unamortized acquisition costs, an increase to future policy benefits. Because of the many assumptions and estimates used in establishing reserves and the long-term nature of the Company’s reinsurance contracts, the reserving process, while based on actuarial science, is inherently uncertain. If the Company’s assumptions, particularly on mortality, are inaccurate, its reserves may be inadequate to pay claims and there could be a material adverse effect on its results of operations and financial condition.

Other policy claims and benefits include claims payable for incurred but not reported losses, which are determined using case-basis estimates and lag studies of past experience. These estimates are periodically reviewed and any

adjustments to such estimates, if necessary, are reflected in current operations. The time lag from the date of the claim or death to the date when the ceding company reports the claim to the Company can be several months and can vary significantly by ceding company and business segment. The Company updates its analysis of incurred but not reported claims, including lag studies, on a periodic basis and adjusts its claim liabilities accordingly. The adjustments in a given period are generally not significant relative to the overall policy liabilities.

The Company primarily invests in fixed maturity securities and monitors these fixed maturity securities to determine potential impairments in value. With the Company’s external investment managers, it evaluates its intent and ability to hold securities, along with factors such as the financial condition of the issuer, payment performance, the extent to which the market value has been below amortized cost, compliance with covenants, general market and industry sector conditions, and various other factors. Securities, based on management’s judgments, with an other-than-temporary impairment in value are written down to management’s estimate of fair value.

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands).

		June 30, 2008
						Fair Value Measurements Using:
		Total				Level 1				Level 2				Level 3
Assets:
Fixed maturity securities – available-for-sale		$	9,667,961			$	121,457			$	8,044,131			$	1,502,373
Funds withheld at interest – embedded derivatives			(245,070	)			—				—				(245,070	)
Short-term investments			1,927				—				1,927				—
Other invested assets – equity securities			190,365				138,275				40,751				11,339
Other invested assets – derivatives			4,853				—				4,853				—
Reinsurance ceded receivable – embedded derivatives			81,163				—				—				81,163
Total		$	9,701,199			$	259,732			$	8,091,662			$	1,349,805
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	(588,870	)		$	—			$	—			$	(588,870	)
Other liabilities – derivatives			(4,491	)			—				(4,491	)			—
Total		$	(593,361	)		$	—			$	(4,491	)		$	(588,870	)

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2008 (dollars in thousands).

		Total Fair Value Measurements for the three months ended June 30, 2008
						Total gains/losses
						(realized/unrealized) included in:
														Purchases,				Transfers
		Balance								Other				issuances				in and/or				Balance
		April 1,								comprehensive				and				out of				June 30,
		2008				Earnings, net				loss				disposals				Level 3				2008
Assets:
Fixed maturity securities available-for-sale		$	1,509,166			$	(442	)		$	(41,661	)		$	55,804			$	(20,494	)		$	1,502,373
Funds withheld at interest – embedded derivatives			(233,618	)			(11,452	)			—				—				—				(245,070	)
Other invested assets – equity securities			20,202				1				(1,241	)			7,000				(14,623	)			11,339
Reinsurance ceded receivable – embedded derivatives			78,216				(1,459	)			—				4,406				—				81,163
Total		$	1,373,966			$	(13,352	)		$	(42,902	)		$	67,210			$	(35,117	)		$	1,349,805
Liabilities:
Interest sensitive contract liabilities – embedded derivatives		$	(585,572	)		$	5,983			$	—			$	(9,281	)		$	—			$	(588,870	)
Total		$	(585,572	)		$	5,983			$	—			$	(9,281	)		$	—			$	(588,870	)

		Total Fair Value Measurements for the six months ended June 30, 2008
						Total gains/losses
						(realized/unrealized) included in:
														Purchases,				Transfers
		Balance								Other				issuances				in and/or				Balance
		January 1,								comprehensive				and				out of				June 30,
		2008				Earnings, net				loss				disposals				Level 3				2008
Assets:
Fixed maturity securities available-for-sale		$	1,500,054			$	(7,552	)		$	(77,782	)		$	127,087			$	(39,434	)		$	1,502,373
Funds withheld at interest — embedded derivatives			(85,090	)			(159,980	)			—				—				—				(245,070	)
Other invested assets — equity securities			13,950				2				(1,720	)			13,730				(14,623	)			11,339
Reinsurance ceded receivable — embedded derivatives			68,298				4,586				—				8,279				—				81,163
Total		$	1,497,212			$	(162,944	)		$	(79,502	)		$	149,096			$	(54,057	)		$	1,349,805
Liabilities:
Interest sensitive contract liabilities — embedded derivatives		$	(531,160	)		$	(37,695	)		$	—			$	(20,015	)		$	—			$	(588,870	)
Total		$	(531,160	)		$	(37,695	)		$	—			$	(20,015	)		$	—			$	(588,870	)