UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 24, 2014

 

 

REINSURANCE GROUP OF AMERICA, INCORPORATED

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Missouri		1-11848		43-1627032
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification Number)

1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017

(Address of Principal Executive Office)

Registrant’s telephone number, including area code: (636) 736-7000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On April 24, 2014, Reinsurance Group of America, Incorporated (the “Company”) issued (1) a press release (the “Press Release”) announcing its earnings for the three-month period ended March 31, 2014, and providing certain additional information, a copy of which is furnished with this report as Exhibit 99.1, and (2) a Quarterly Financial Supplement for the quarter ended March 31, 2014, a copy of which is attached hereto as Exhibit 99.2. The Press Release also notes that a conference call will be held on April 25, 2014 to discuss the financial and operating results for the three-month period ended March 31, 2014. The Press Release and Quarterly Financial Supplement are furnished and are not filed pursuant to Instruction B.2 of Form 8-K.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits.

 

Exhibit No.		Exhibit
99.1		Press Release of Reinsurance Group of America, Incorporated dated April 24, 2014
99.2		Quarterly Financial Supplement for the quarter ended March 31, 2014

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SIGNATURE

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 hereunto duly authorized.

 

				REINSURANCE GROUP OF AMERICA, INCORPORATED
Date: April 24, 2014				By:		/s/ Jack B. Lay
						Jack B. Lay
						Senior Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release dated April 24, 2014
99.2		Quarterly Financial Supplement for the quarter ended March 31, 2014

Exhibit 99.1

 

PRESS RELEASE

REINSURANCE GROUP OF AMERICA REPORTS FIRST-QUARTER RESULTS

 

•

Earnings per diluted share: operating income* $1.61, net income $1.92

 

•

Reported net premiums rose six percent quarter over quarter; up nine percent in original currencies

 

•

Higher-than-expected mortality claims in North America adversely affected results

 

•

Repurchased approximately 1.45 million shares for $113 million during the quarter

ST. LOUIS, April 24, 2014 – Reinsurance Group of America, Incorporated (NYSE: RGA), a leading global provider of life reinsurance, reported operating income* of $114.8 million, or $1.61 per diluted share, versus last year’s $122.8 million, or $1.65 per diluted share. Net income totaled $136.7 million, or $1.92 per diluted share, compared with $185.5 million, or $2.49 per diluted share in the prior-year quarter. The current quarter reflects adverse mortality experience in several markets, partially offset by lower general expenses and a lower effective tax rate. A generally stronger U.S. dollar reduced operating income by approximately $4.3 million after taxes, or $0.06 per diluted share.

 

		Quarterly Results
($ in thousands, except per share data)		2014				2013
Net premiums		$	2,100,637			$	1,979,693
Net income			136,664				185,535
Net income per diluted share			1.92				2.49
Operating income*			114,807				122,847
Operating income per diluted share*			1.61				1.65
Book value per share			89.92				94.34
Book value per share (excl. Accumulated Other Comprehensive Income “AOCI”)*			71.51				67.37
Total assets			40,541,581				40,197,101

 

*	See ‘Use of Non-GAAP Financial Measures’ below

Consolidated net premiums increased six percent to $2.1 billion. On a local currency basis, net premiums were up nine percent over the first quarter of 2013. Investment income decreased five percent to $404.4 million from $425.1 million in the year-earlier quarter, primarily attributable to a $20.7 million reduction in the fair value of options contracts underlying equity indexed annuities. Excluding spread-based businesses and the value of associated derivatives, investment income increased eight percent compared to the first quarter of 2013. That increase was driven by a growing average invested asset base, partially offset by a lower average portfolio yield, which declined nine basis points to 4.74 percent this period.

 

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The company’s effective tax rate on operating income of 30.7 percent was below the expected effective tax rate of 34 percent to 35 percent, primarily due to tax benefits associated with claims experience on certain international treaties, partially offset by a tax accrual related to the Active Financing Exception business extender provision in the U.S., which had not been enacted as of the end of the quarter.

A. Greig Woodring, president and chief executive officer, commented, “Our overall operating results were somewhat below last year’s first quarter and below our expectations for this quarter, as we experienced adverse mortality volatility beyond the typical range, even when considering first-quarter seasonality. That volatility was partially offset by a lower effective tax rate, lower general expenses, and ongoing strong performance in our asset intensive and financial reinsurance businesses and in our Asia Pacific segment. Mortality claims experience in North America was considerably worse than expected, owing to a more extreme seasonal influence and a spike in large claims, which exceed $1.0 million. The large claims were mostly concentrated in our facultative book of business, a distinct line of business that has performed well over time but has unique risk profiles and larger exposures per policy. Overall mortality claims frequency was higher than expected, but within a normal range.

“Claims fluctuations of the sort experienced during the quarter are an ongoing part of our business. We would expect a return to a more normal pattern as the year progresses.

“During the quarter, we repurchased approximately 1.45 million shares for a total cost of $112.6 million, leaving $187.4 million under the current share repurchase authorization. Our deployable, excess capital position exceeds $500 million, and we will continue to evaluate attractive capital deployment opportunities, which could include additional share repurchases, shareholder dividend increases, block acquisitions, or some combination of all of these. Our ending book value per share for the quarter was $89.92 including AOCI, and $71.51 excluding AOCI.”

SEGMENT RESTRUCTURING

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India operations have been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

SEGMENT RESULTS

U.S. and Latin America

Traditional

The U.S. and Latin America Traditional segment reported pre-tax operating income of $48.2 million versus $72.2 million in the prior-year period, reflecting the above-mentioned negative claims experience. The other product lines in this segment, group and individual health, both performed well. The Latin America operations are relatively small and generally did not have a material impact on top- or bottom-line results. Traditional net premiums rose eight percent to $1,141.9 million from $1,056.4 million a year ago, reflecting stronger growth in individual health, and good production in the individual mortality line. Pre-tax net income totaled $51.0 million for the quarter, compared with $79.5 million in the first quarter of 2013.

 

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Non-Traditional

The Asset Intensive business reported another strong quarter with pre-tax operating income totaling $41.0 million compared with a very strong $45.6 million last year. Results in both periods exceeded expectations and benefited from favorable net interest rate spread performance on fixed annuities. Pre-tax net income decreased to $70.6 million from $89.5 million a year ago, reflecting changes in the fair values of various embedded derivatives.

The Financial Reinsurance business continues to perform well and reported pre-tax operating income of $12.4 million, up from $8.0 million last year, reflecting strong fee income from a growing number of treaties. The outlook for continued growth in financial reinsurance remains encouraging. Pre-tax net income totaled $12.5 million this quarter and $8.0 million in the prior-year period.

Canada

Canadian operations reported pre-tax operating income of $22.1 million this quarter, down from $32.9 million in the prior-year period. Higher-than-expected mortality claims and a relatively weaker Canadian dollar contributed to the lower results this quarter. The currency fluctuation adversely affected pre-tax operating income by approximately $2.3 million for the quarter. Original currency premiums rose four percent over the first quarter of 2013; however, reported net premiums were five percent lower, primarily a result of the currency weakness. Pre-tax net income totaled $20.1 million compared with $36.3 million in the first quarter of 2013.

Europe, Middle East and Africa (EMEA)

EMEA’s pre-tax operating income increased to $14.0 million from last year’s $9.2 million; however, both periods were somewhat below expected levels. This period’s results were hampered primarily by higher individual mortality claims in the U.K. Overall, the other markets in this segment performed well, led by strong results in France. Net foreign currency fluctuations improved pre-tax operating income by approximately $0.4 million. Net reported premiums increased 16 percent and totaled $340.7 million, compared with $292.8 million last year. Original currency premiums increased 13 percent over the prior-year level. Pre-tax net income totaled $15.2 million versus $11.0 million in the year-ago quarter.

Asia Pacific

Asia Pacific pre-tax operating income increased seven percent to $24.7 million from a strong $23.1 million last year. Results in Australia were in line with expectations and the Asian markets performed very well collectively, highlighted by strong results in India and Japan. Asia Pacific reported net premiums totaling $381.8 million, flat with the first quarter of 2013, primarily due to generally weaker foreign currencies. Local currency premiums increased nine percent with good growth in South Korea and Japan. Foreign currency fluctuations adversely affected pre-tax operating income by approximately $3.0 million this quarter. Pre-tax net income increased to $26.3 million from $18.2 million in the comparable prior-year period.

 

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Corporate and Other

The Corporate and Other segment reported pre-tax operating income of $3.3 million versus a pre-tax operating loss of $8.1 million in the first quarter of 2013, primarily reflecting lower overall general expenses compared with a year ago. Pre-tax net income was $3.8 million compared with $36.2 million in the prior-year period, which included a large gain associated with the repurchase of collateral finance facility securities.

Dividend Declaration

The board of directors declared a regular quarterly dividend of $0.30, payable May 30 to shareholders of record as of May 9.

Earnings Conference Call

A conference call to discuss first-quarter results will begin at 9 a.m. Eastern Time on Friday, April 25. Interested parties may access the call by dialing 888-505-4328 (domestic) or 719-325-2167 (international). The access code is 2938723. A live audio webcast of the conference call will be available on the company’s investor relations website at www.rgare.com. A replay of the conference call will be available at the same address for 90 days following the conference call. A telephonic replay will also be available through May 3 at 888-203-1112 (domestic) or 719-457-0820 (international), access code 2938723.

The company has posted to its website a Quarterly Financial Supplement that includes financial information for all segments as well as information on its investment portfolio. Additionally, the company posts periodic reports, press releases and other useful information on its investor relations website.

Use of Non-GAAP Financial Measures

RGA uses a non-GAAP financial measure called operating income as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability and underlying trends of the company’s continuing operations, primarily because that measure excludes substantially all of the effect of net investment related gains and losses, as well as changes in the fair value of certain embedded derivatives and related deferred acquisition costs. These items can be volatile, primarily due to the credit market and interest rate environment, and are not necessarily indicative of the performance of the company’s underlying businesses. Additionally, operating income excludes any net gain or loss from discontinued operations, the cumulative effect of any accounting changes, and other items that management believes are not indicative of the company’s ongoing operations. The definition of operating income can vary by company and is not considered a substitute for GAAP net income. Reconciliations to GAAP net income are provided in the following tables. Additional financial information can be found in the Quarterly Financial Supplement on RGA’s Investor Relations website at www.rgare.com in the “Quarterly Results” tab and in the “Featured Report” section.

Book value per share outstanding before impact of AOCI is a non-GAAP financial measure that management believes is important in evaluating the balance sheet in order to ignore the effects of unrealized amounts primarily associated with mark-to-market adjustments on investments and foreign currency translation.

 

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Operating return on equity is a non-GAAP financial measure calculated as operating income divided by average shareholders’ equity excluding AOCI.

About RGA

Reinsurance Group of America, Incorporated is among the largest global providers of life reinsurance, with operations in Australia, Barbados, Bermuda, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Singapore, South Africa, South Korea, Spain, Taiwan, Turkey, the United Arab Emirates, the United Kingdom and the United States. Worldwide, the company has approximately $3.0 trillion of life reinsurance in force, and assets of $40.5 billion.

Cautionary Statement Regarding Forward-looking Statements

This release 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 capital and credit market conditions and their impact on our liquidity, access to capital, and cost of capital, (2) the impairment of other financial institutions and its effect on our business, (3) requirements to post collateral or make payments due to declines in market value of assets subject to our collateral arrangements, (4) the fact that the determination of allowances and impairments taken on our investments is highly subjective, (5) adverse changes in mortality, morbidity, lapsation, or claims experience, (6) changes in our financial strength and credit ratings and the effect of such changes on our future results of operations and financial condition, (7) inadequate risk analysis and underwriting, (8) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in our current and planned markets, (9) the availability and cost of collateral necessary for regulatory reserves and capital, (10) market or economic conditions that adversely affect the value of our investment securities or result in the impairment of all or a portion of the value of certain of our investment securities, (11) market or economic conditions that adversely affect our ability to make timely sales of investment securities, (12) risks inherent in our risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (13) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (14) adverse litigation or arbitration results, (15) the adequacy of reserves, resources, and accurate information relating to settlements, awards, and terminated and discontinued lines of business, (16) the stability of and actions by governments and economies in the markets in which we operate, including ongoing uncertainties regarding the amount of United States sovereign debt and the credit ratings thereof, (17) competitive factors and competitors’ responses to our initiatives, (18) the success of our clients, (19) successful execution of our entry into new markets, (20) successful development and introduction of new products and distribution opportunities,

 

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(21) our ability to successfully integrate and operate reinsurance business that we acquire, (22) action by regulators who have authority over our reinsurance operations in the jurisdictions in which we operate, (23) our dependence on third parties, including those insurance companies and reinsurers to which we cede some reinsurance, third-party investment managers, and others, (24) the threat of natural disasters, catastrophes, terrorist attacks, epidemics, or pandemics anywhere in the world where we or our clients do business, (25) changes in laws, regulations, and accounting standards applicable to us, our subsidiaries, or our business, (26) the effect of our status as an insurance holding company and regulatory restrictions on our ability to pay principal and interest on our debt obligations, and (27) other risks and uncertainties described in this document and in our other filings with the Securities and Exchange Commission.

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 Securities and Exchange Commission. These forward-looking statements 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. For a discussion of the risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to review the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2013.

Investor Contact

Jeff Hopson

Senior Vice President – Investor Relations

(636) 736-7000

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Consolidated Net Income to Operating Income

(Dollars in thousands)

 

(Unaudited)		Three Months Ended March 31,
		2014				2013
GAAP net income		$	136,664			$	185,535
Reconciliation to operating income:
Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net			(17,007	)			31,434
Capital (gains) losses on funds withheld, included in investment income			(253	)			(1,321	)
Embedded derivatives:
Included in investment related (gains) losses, net			(34,827	)			(92,022	)
Included in interest credited			(4,264	)			(12,552	)
DAC offset, net			34,494				42,002
Gain on repurchase of collateral finance facility securities			—				(30,229	)
Operating income		$	114,807			$	122,847

Reconciliation of Consolidated Pre-tax Net Income to Pre-tax Operating Income

(Dollars in thousands)

 

(Unaudited)		Three Months Ended March 31,
		2014				2013
Income before income taxes		$	199,440			$	278,827
Reconciliation to pre-tax operating income:
Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net			(26,306	)			48,842
Capital (gains) losses on funds withheld, included in investment income			(389	)			(2,031	)
Embedded derivatives:
Included in investment related (gains) losses, net			(53,580	)			(141,572	)
Included in interest credited			(6,560	)			(19,311	)
DAC offset, net			53,068				64,618
Gain on repurchase of collateral finance facility securities			—				(46,506	)
Pre-tax operating income		$	165,673			$	182,867

 

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Reconciliation of Pre-tax Net Income to Pre-tax Operating Income

(Dollars in thousands)

 

(Unaudited)		Three Months Ended March 31, 2014
		Pre-tax net income				Capital (gains) losses, derivatives and other, net				Change in value of embedded derivatives, net				Pre-tax operating income
U.S. and Latin America Operations:
Traditional		$	50,972			$	(4,224	)		$	1,455			$	48,203
Non-Traditional:
Asset Intensive			70,615				(19,239	)(1)			(10,371	)(2)			41,005
Financial Reinsurance			12,509				(83	)			—				12,426
Total U.S. and Latin America			134,096				(23,546	)			(8,916	)			101,634
Canada Operations			20,064				2,059				—				22,123
Europe, Middle East and Africa			15,205				(1,229	)			—				13,976
Asia Pacific Operations			26,311				(1,653	)			—				24,658
Corporate and Other			3,764				(482	)			—				3,282
Consolidated		$	199,440			$	(24,851	)		$	(8,916	)		$	165,673

 

(1)	Asset Intensive is net of $1,844 DAC offset.

(2)	Asset Intensive is net of $51,224 DAC offset.

 

(Unaudited)		Three Months Ended March 31, 2013
		Pre-tax net income				Capital (gains) losses, derivatives and other, net				Change in value of embedded derivatives, net				Gain on debt repurchase				Pre-tax operating income (loss)
U.S. and Latin America Operations:
Traditional		$	79,543			$	(7,253	)		$	(56	)		$	—			$	72,234
Non-Traditional:
Asset Intensive			89,523				14,888	(1)			(58,815	)(2)			—				45,596
Financial Reinsurance			8,041				(34	)			—				—				8,007
Total U.S. and Latin America			177,107				7,601				(58,871	)			—				125,837
Canada Operations			36,308				(3,431	)			—				—				32,877
Europe, Middle East and Africa			10,963				(1,772	)			—				—				9,191
Asia Pacific Operations			18,242				4,821				—				—				23,063
Corporate and Other			36,207				2,198				—				(46,506	)			(8,101	)
Consolidated		$	278,827			$	9,417			$	(58,871	)		$	(46,506	)		$	182,867

 

(1)	Asset Intensive is net of $(37,394) DAC offset.

(2)	Asset Intensive is net of $102,012 DAC offset.

 

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Per Share and Shares Data

(In thousands, except per share data)

 

(Unaudited)		Three Months Ended March 31,
		2014				2013
Diluted earnings per share from operating income		$	1.61			$	1.65
Earnings per share from net income:
Basic earnings per share		$	1.94			$	2.51
Diluted earnings per share		$	1.92			$	2.49
Weighted average number of common and common equivalent shares outstanding			71,264				74,389

 

(Unaudited)		At or for the Three Months Ended March 31,
		2014				2013
Treasury shares			9,624				5,837
Common shares outstanding			69,514				73,301
Book value per share outstanding		$	89.92			$	94.34
Book value per share outstanding, before impact of AOCI		$	71.51			$	67.37

 

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollars in thousands)

 

(Unaudited)		Three Months Ended March 31,
		2014				2013
Revenues:
Net premiums		$	2,100,637			$	1,979,693
Investment income, net of related expenses			404,375				425,131
Investment related gains (losses), net:
Other-than-temporary impairments on fixed maturity securities			(303	)			(202	)
Other-than-temporary impairments on fixed maturity securities transferred to (from) accumulated other comprehensive income			—				—
Other investment related gains (losses), net			84,874				94,573
Total investment related gains (losses), net			84,571				94,371
Other revenue			67,590				101,907
Total revenues			2,657,173				2,601,102
Benefits and expenses:
Claims and other policy benefits			1,843,677				1,688,910
Interest credited			110,594				125,483
Policy acquisition costs and other insurance expenses			354,873				357,357
Other operating expenses			110,936				119,501
Interest expense			35,084				28,486
Collateral finance facility expense			2,569				2,538
Total benefits and expenses			2,457,733				2,322,275
Income before income taxes			199,440				278,827
Income tax expense			62,776				93,292
Net income		$	136,664			$	185,535

# # #

Exhibit 99.2

 

Financial Supplement

First Quarter 2014

(Unaudited)

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Reinsurance Group of America, Incorporated

Financial Supplement

1st Quarter 2014

Table of Contents

 

		Page
Non-GAAP Disclosure			1
Notes			2
Consolidated
Financial Highlights			3
Consolidated Income Statement (incl. Operating Income Reconciliation)			4
Consolidated Operating Income Statement			5
Consolidated Balance Sheets			6
Segment Pre-tax Operating Income Summaries and Reconciliations to U.S. GAAP
U.S. and Latin America Operations			7
Canada Operations			11
Europe, Middle East & Africa Operations			12
Asia Pacific Operations			13
Corporate and Other			14
Summary of Pre-tax Segment Operating Income			15
Investments
Cash and Invested Assets, Yield Summary			16
Amortized cost, Gross Unrealized Gains and Losses, Estimated Fair Values of Fixed Maturity and Equity Securities			17
Corporate Securities by Sector (Fixed Maturities and Equities)			18
Quality of Fixed Maturity Securities and Structured Fixed Maturity Securities			19
Gross Unrealized Losses Aging			20
Fixed Maturity and Equity Securities Below Amortized Cost			21
Consolidated Gross Gains and Losses			22

 

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Reinsurance Group of America, Incorporated

Financial Supplement

This Financial Supplement is for information purposes only and includes unaudited figures. This report should be read in conjunction with documents filed by Reinsurance Group of America, Incorporated with the SEC.

Non-GAAP Disclosures

RGA uses a non-GAAP financial measure called operating income as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under RGA’s management incentive programs. Management believes that operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability and underlying trends of the company’s continuing operations, primarily because that measure excludes substantially all of the effect of net investment related gains and losses, as well as changes in the fair value of certain embedded derivatives and related deferred acquisition costs. These items can be volatile, primarily due to the credit market and interest rate environment and are not necessarily indicative of the performance of the company’s underlying businesses. Additionally, operating income excludes any net gain or loss from discontinued operations, the cumulative effect of any accounting changes, and other items that management believes are not indicative of the company’s ongoing operations. The definition of operating income can vary by company and is not considered a substitute for GAAP net income. A reconciliation of income before income taxes of the operating segments to pre-tax operating income (loss) is presented herein.

RGA evaluates its stockholder equity position excluding the impact of Accumulated Other Comprehensive Income (“AOCI”) since the net unrealized gains or losses included in AOCI primarily relate to changes in interest rates, credit spreads on its investment securities and foreign currency fluctuations that are not permanent and can fluctuate significantly from period to period.

Additionally, RGA uses a non-GAAP financial measure called operating return on equity, which is calculated as operating income divided by average shareholders’

equity excluding AOCI.

 

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Reinsurance Group of America, Incorporated

SEGMENT RESTRUCTURING

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India operations have been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

 

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Reinsurance Group of America, Incorporated

Financial Highlights (1)

 

(USD thousands, except inforce & per share data)		Three Months Ended or As of																				Current Qtr
		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,				vs. PY
		2014				2013				2013				2013				2013				Quarter
Net premiums		$	2,100,637			$	2,212,998			$	2,026,180			$	2,035,156			$	1,979,693			$	120,944
Net income			136,664				144,959				137,955				(49,612	)			185,535				(48,871	)
Operating income			114,807				154,509				152,887				(71,797	)			122,847				(8,040	)
Operating return on equity (ex AOCI)—annualized			9.3	%			12.7	%			12.9	%			-6.0	%			10.1	%			-0.8	%
Operating return on equity (ex AOCI)—trailing 12 months			7.2	%			7.4	%			8.1	%			7.1	%			11.4	%			-4.2	%
Total assets			40,541,581				39,674,473				39,526,555				38,790,621				40,197,101				344,480
Assumed Life Reinsurance in Force (in billions)
U.S. and Latin America Traditional		$	1,393.2			$	1,397.0			$	1,400.4			$	1,399.6			$	1,402.2			$	(9.0	)
U.S. and Latin America Non-Traditional			2.2				2.2				2.2				2.2				2.2				—
Canada			376.7				386.4				391.1				376.4				382.8				(6.1	)
Europe, Middle East and Africa			587.6				556.7				555.1				514.3				506.0				81.6
Asia Pacific			595.6				547.6				555.0				531.3				579.6				16.0
Total Life Reinsurance in Force		$	2,955.3			$	2,889.9			$	2,903.8			$	2,823.8			$	2,872.8			$	82.5
Assumed New Business Production (in billions)
U.S. and Latin America Traditional		$	20.4			$	21.1			$	22.3			$	22.8			$	29.4			$	(9.0	)
U.S. and Latin America Non-Traditional			—				—				—				—				—				—
Canada			12.4				10.4				11.6				11.1				12.9				(0.5	)
Europe, Middle East and Africa			46.5				24.6				21.4				22.3				37.9				8.6
Asia Pacific			19.6				22.8				36.3				47.8				15.7				3.9
Total New Business Production		$	98.9			$	78.9			$	91.6			$	104.0			$	95.9			$	3.0
Per Share and Shares Data
Basic earnings per share
Net income		$	1.94			$	2.05			$	1.95			$	(0.69	)		$	2.51			$	(0.57	)
Operating income		$	1.63			$	2.19			$	2.16			$	(0.99	)		$	1.66			$	(0.03	)
Diluted earnings per share
Net income		$	1.92			$	2.03			$	1.93			$	(0.69	)		$	2.49			$	(0.57	)
Operating income		$	1.61			$	2.17			$	2.14			$	(0.99	)		$	1.65			$	(0.04	)
Wgt. average common shares outstanding (basic)			70,574				70,650				70,865				72,350				73,838				(3,264	)
Wgt. average common shares outstanding (diluted)			71,264				71,332				71,391				72,769				74,389				(3,125	)
Common shares issued			79,138				79,138				79,138				79,138				79,138				—
Treasury shares			9,624				8,370				8,595				8,170				5,837				3,787
Common shares outstanding			69,514				70,768				70,543				70,968				73,301				(3,787	)
Book value per share		$	89.92			$	83.87			$	83.58			$	82.97			$	94.34
Per share effect of accumulated other comprehensive income (AOCI)		$	18.41			$	14.21			$	15.60			$	16.66			$	26.97
Book value per share, excluding AOCI		$	71.51			$	69.66			$	67.98			$	66.31			$	67.37
Shareholder dividends paid		$	21,243.6			$	21,177.3			$	21,296.2			$	17,415.9			$	17,752.7			$	3,490.9

 

(1)

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India has been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

 

				Page 3

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Reinsurance Group of America, Incorporated

Consolidated GAAP Income Statement (incl. Operating Income Reconciliations)

 

		Three Months Ended																				Current Qtr
		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,				vs. PY
(USD thousands)		2014				2013				2013				2013				2013				Quarter
Revenues:
Net premiums		$	2,100,637			$	2,212,998			$	2,026,180			$	2,035,156			$	1,979,693			$	120,944
Investment income, net of related expenses			404,375				461,134				369,366				444,234				425,131				(20,756	)
Investment related gains (losses), net
OTTI on fixed maturity securities			(303	)			(2,258	)			(391	)			(9,803	)			(202	)			(101	)
OTTI on fixed maturity securities transferred to/from AOCI			—				—				59				(306	)			—				—
Other investment related gains (losses), net			84,874				99				(76,133	)			58,352				94,573				(9,699	)
Total investment related gains (losses), net			84,571				(2,159	)			(76,465	)			48,243				94,371				(9,800	)
Other revenue			67,590				64,821				70,734				63,009				101,907				(34,317	)
Total revenues			2,657,173				2,736,794				2,389,815				2,590,642				2,601,102				56,071
Benefits and expenses:
Claims and other policy benefits			1,843,677				1,869,949				1,714,899				2,030,574				1,688,910				154,767
Interest credited			110,594				172,747				59,939				118,345				125,483				(14,889	)
Policy acquisition costs and other insurance expenses			354,873				304,837				268,081				370,505				357,357				(2,484	)
Other operating expenses			110,936				122,136				111,672				113,408				119,501				(8,565	)
Interest expense			35,084				35,072				30,831				29,918				28,486				6,598
Collateral finance facility expense			2,569				2,563				2,698				2,650				2,538				31
Total benefits and expenses			2,457,733				2,507,304				2,188,120				2,665,400				2,322,275				135,458
Income before income taxes			199,440				229,490				201,695				(74,758	)			278,827				(79,387	)
Income tax expense			62,776				84,531				63,740				(25,146	)			93,292				(30,516	)
Net income		$	136,664			$	144,959			$	137,955			$	(49,612	)		$	185,535			$	(48,871	)
Pre-tax Operating Income Reconciliation:
Income before income taxes			199,440				229,490				201,695				(74,758	)			278,827				(79,387	)
Investment and derivative losses (gains)—non-operating (1)			(26,306	)			45,090				30,513				37,057				48,842				(75,148	)
Change in value of modified coinsurance and funds withheld embedded derivatives (1)			(77,241	)			337				67,460				(47,716	)			(90,258	)			13,017
GMXB embedded derivatives (1)			23,661				(35,098	)			(19,829	)			(35,809	)			(51,314	)			74,975
Funds withheld losses (gains)—investment income			(389	)			(2,540	)			3,465				(11,733	)			(2,031	)			1,642
EIA embedded derivatives—interest credited			(6,560	)			2,795				(30,292	)			(32,161	)			(19,311	)			12,751
DAC offset, net			53,068				4,334				(27,330	)			56,786				64,618				(11,550	)
Gain on repurchase of collateral finance facility securities			—				—				—				—				(46,506	)			46,506
Operating Income Before Income Taxes		$	165,673			$	244,408			$	225,682			$	(108,334	)		$	182,867			$	(17,194	)
After-tax Operating Income Reconciliation:
Net Income			136,664				144,959				137,955				(49,612	)			185,535				(48,871	)
Investment and derivative losses (gains)—non-operating (1)			(17,007	)			29,161				19,174				23,726				31,434				(48,441	)
Change in value of modified coinsurance and funds withheld embedded derivatives (1)			(50,207	)			219				43,849				(31,015	)			(58,668	)			8,461
GMXB embedded derivatives (1)			15,380				(22,814	)			(12,889	)			(23,276	)			(33,354	)			48,734
Funds withheld losses (gains)—investment income			(253	)			(1,651	)			2,252				(7,625	)			(1,321	)			1,068
EIA embedded derivatives—interest credited			(4,264	)			1,817				(19,690	)			(20,905	)			(12,552	)			8,288
DAC offset, net			34,494				2,818				(17,764	)			36,910				42,002				(7,508	)
Gain on repurchase of collateral finance facility securities			—				—				—				—				(30,229	)			30,229
Operating Income		$	114,807			$	154,509			$	152,887			$	(71,797	)		$	122,847			$	(8,040	)

 

(1)	Included in “Investment related gains (losses), net” on Consolidated GAAP Income Statement

 

				Page 4

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Reinsurance Group of America, Incorporated

Consolidated Operating Income Statement

 

		Three Months Ended																				Current Qtr vs. PY Quarter
		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,
(USD thousands, except per share data)		2014				2013				2013				2013				2013
Revenues:
Net premiums		$	2,100,637			$	2,212,998			$	2,026,180			$	2,035,156			$	1,979,693			$	120,944
Investment income, net of related expenses			403,986				458,594				372,831				432,501				423,100				(19,114	)
Investment related gains (losses), net			4,685				8,170				1,679				1,775				1,641				3,044
Other revenue			67,590				64,821				70,734				63,009				55,401				12,189
Total revenues			2,576,898				2,744,583				2,471,424				2,532,441				2,459,835				117,063
Benefits and expenses:
Claims and other policy benefits			1,843,677				1,869,949				1,714,899				2,030,574				1,688,910				154,767
Interest credited			117,154				169,952				90,231				150,506				144,794				(27,640	)
Policy acquisition costs and other insurance expenses			301,805				300,503				295,411				313,719				292,739				9,066
Other operating expenses			110,936				122,136				111,672				113,408				119,501				(8,565	)
Interest expense			35,084				35,072				30,831				29,918				28,486				6,598
Collateral finance facility expense			2,569				2,563				2,698				2,650				2,538				31
Total benefits and expenses			2,411,225				2,500,175				2,245,742				2,640,775				2,276,968				134,257
Operating income before income taxes			165,673				244,408				225,682				(108,334	)			182,867				(17,194	)
Operating income tax expense			50,866				89,899				72,795				(36,537	)			60,020				(9,154	)
Operating income		$	114,807			$	154,509			$	152,887			$	(71,797	)		$	122,847			$	(8,040	)
Wgt. Average Common Shares Outstanding (Diluted)			71,264				71,332				71,391				72,769				74,389				(3,125	)
Diluted Earnings Per Share—Operating Income		$	1.61			$	2.17			$	2.14			$	(0.99	)		$	1.65			$	(0.04	)
Foreign currency effect (1):
Net premiums		$	(50,225	)		$	(49,448	)		$	(51,810	)		$	(21,551	)		$	(19,730	)		$	(30,495	)
Operating income before income taxes		$	(6,605	)		$	(8,679	)		$	(4,959	)		$	13,640			$	(2,791	)		$	(3,814	)

 

(1)	Compared to comparable prior year period

 

				Page 5

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Reinsurance Group of America, Incorporated

Consolidated Balance Sheets

 

(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Assets
Fixed maturity securities, available-for-sale		$	22,157,182			$	21,474,136			$	21,289,108			$	21,284,216			$	22,401,659
Mortgage loans on real estate			2,526,228				2,486,680				2,488,582				2,377,246				2,325,191
Policy loans			1,296,897				1,244,469				1,244,878				1,245,252				1,245,812
Funds withheld at interest			5,814,231				5,771,467				5,739,872				5,777,395				5,698,594
Short-term investments			118,789				139,395				44,192				38,601				180,707
Other invested assets			1,234,779				1,324,960				1,116,391				1,035,809				1,129,651
Total investments			33,148,106				32,441,107				31,923,023				31,758,519				32,981,614
Cash and cash equivalents			1,127,132				923,647				1,423,235				973,619				1,001,841
Accrued investment income			233,816				267,908				262,330				233,153				230,269
Premiums receivable and other reinsurance balances			1,454,959				1,439,528				1,252,610				1,314,004				1,259,281
Reinsurance ceded receivables			594,794				594,515				592,948				585,555				602,373
Deferred policy acquisition costs			3,450,523				3,517,796				3,533,932				3,453,513				3,545,063
Other assets			532,251				489,972				538,477				472,258				576,660
Total assets		$	40,541,581			$	39,674,473			$	39,526,555			$	38,790,621			$	40,197,101
Liabilities and Stockholders’ Equity
Future policy benefits		$	11,887,951			$	11,866,776			$	11,873,306			$	11,491,692			$	11,355,882
Interest-sensitive contract liabilities			12,809,003				12,947,557				12,868,425				12,991,981				13,141,402
Other policy claims and benefits			3,899,004				3,571,761				3,440,371				3,316,727				3,243,948
Other reinsurance balances			283,249				275,138				264,023				254,815				250,606
Deferred income taxes			2,023,588				1,837,577				1,975,819				1,839,909				2,105,391
Other liabilities			638,967				541,035				510,079				584,488				877,405
Short-term debt			50,000				—				—				120,000				—
Long-term debt			2,214,526				2,214,350				2,214,170				1,815,533				1,815,392
Collateral finance facility			484,747				484,752				484,712				487,556				491,987
Total liabilities			34,291,035				33,738,946				33,630,905				32,902,701				33,282,013
Stockholders’ Equity:
Common stock, at par value			791				791				791				791				791
Additional paid-in-capital			1,782,838				1,777,906				1,778,307				1,772,811				1,765,255
Retained earnings			3,772,776				3,659,938				3,544,632				3,428,646				3,521,492
Treasury stock			(585,358	)			(508,715	)			(528,081	)			(496,462	)			(349,190	)
Accumulated other comprehensive income (AOCI):
Accumulated currency translation adjustment, net of income taxes			164,400				207,083				191,677				164,538				253,370
Unrealized appreciation of securities, net of income taxes			1,136,079				820,245				942,337				1,052,126				1,758,775
Pension and postretirement benefits, net of income taxes			(20,980	)			(21,721	)			(34,013	)			(34,530	)			(35,405	)
Total stockholders’ equity			6,250,546				5,935,527				5,895,650				5,887,920				6,915,088
Total liabilities and stockholders’ equity		$	40,541,581			$	39,674,473			$	39,526,555			$	38,790,621			$	40,197,101
Total stockholders’ equity, excluding AOCI		$	4,971,047			$	4,929,920			$	4,795,649			$	4,705,786			$	4,938,348

 

				Page 6

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Reinsurance Group of America, Incorporated

U.S. and Latin America Traditional Segment Pre-tax Operating Income (1)

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	1,141,905			$	1,246,137			$	1,124,183			$	1,136,742			$	1,056,428			$	85,477
Investment income, net of related expenses			133,376				139,281				138,464				133,544				132,535				841
Other revenue			642				840				880				1,334				652				(10	)
Total revenues			1,275,923				1,386,258				1,263,527				1,271,620				1,189,615				86,308
Benefits and expenses:
Claims and other policy benefits			1,033,707				1,071,733				972,786				981,768				936,881				96,826
Interest credited			12,272				9,886				13,659				13,590				16,150				(3,878	)
Policy acquisition costs and other insurance expenses			156,000				156,447				162,710				166,742				140,072				15,928
Other operating expenses			25,741				24,550				24,085				23,018				24,278				1,463
Total benefits and expenses			1,227,720				1,262,616				1,173,240				1,185,118				1,117,381				110,339
Operating income before income taxes			48,203				123,642				90,287				86,502				72,234				(24,031	)
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			48,203				123,642				90,287				86,502				72,234				(24,031	)
Investment and derivative (losses) gains—non-operating			2,769				(850	)			(5,249	)			3,711				7,309				(4,540	)
Income before income taxes		$	50,972			$	122,792			$	85,038			$	90,213			$	79,543			$	(28,571	)
Loss and Expense Ratios:
Claims and other policy benefits			90.5	%			86.0	%			86.5	%			86.4	%			88.7	%			1.8	%
Policy acquisition costs and other insurance expenses			13.7	%			12.6	%			14.5	%			14.7	%			13.3	%			0.4	%
Other operating expenses			2.3	%			2.0	%			2.1	%			2.0	%			2.3	%			0.0	%

 

(1)

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India has been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

 

				Page 7

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Reinsurance Group of America, Incorporated

U.S. and Latin America Non-Traditional Segment—Asset Intensive Reinsurance Pre-tax Operating Income

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	5,180			$	3,754			$	3,800			$	11,129			$	3,838			$	1,342
Investment income, net of related expenses			158,619				209,847				128,563				190,296				178,719				(20,100	)
Investment related gains (losses), net			—				—				—				—				—				—
Other revenue			28,276				26,761				28,519				29,937				28,881				(605	)
Total revenues			192,075				240,362				160,882				231,362				211,438				(19,363	)
Benefits and expenses:
Claims and other policy benefits			4,260				4,674				8,899				11,083				3,588				672
Interest credited			101,644				153,501				76,097				136,424				128,096				(26,452	)
Policy acquisition costs and other insurance expenses			41,072				36,819				33,642				40,747				30,045				11,027
Other operating expenses			4,094				3,102				4,198				2,878				4,113				(19	)
Total benefits and expenses			151,070				198,096				122,836				191,132				165,842				(14,772	)
Operating income before income taxes			41,005				42,266				38,046				40,230				45,596				(4,591	)
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			41,005				42,266				38,046				40,230				45,596				(4,591	)
Investment and derivative gains (losses)—non-operating (1)			21,300				(40,727	)			(33,190	)			(39,071	)			(52,932	)			74,232
Change in value of modified coinsurance and funds withheld embedded derivatives (1)			78,696				462				(68,703	)			46,325				90,202				(11,506	)
GMXB embedded derivatives (1)			(23,661	)			35,098				19,829				35,809				51,314				(74,975	)
Funds withheld gains (losses)—investment income			(217	)			1,797				(3,755	)			10,541				650				(867	)
EIA embedded derivatives—interest credited			6,560				(2,795	)			30,292				32,161				19,311				(12,751	)
DAC offset, net			(53,068	)			(4,334	)			27,330				(56,786	)			(64,618	)			11,550
Income before income taxes		$	70,615			$	31,767			$	9,849			$	69,209			$	89,523			$	(18,908	)

 

(1)	Included in “Investment related gains (losses), net” on Consolidated GAAP Income Statement

 

				Page 8

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Reinsurance Group of America, Incorporated

U.S. and Latin America Non-Traditional Segment—Asset Intensive Reinsurance Pre-tax Operating Income

(Cont’d)

 

		Three Months Ended
(USD millions)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Annuity account values:
Fixed annuities (deferred)		$	5,156			$	5,079			$	5,180			$	5,264			$	5,357
Net interest spread (fixed annuities):			2.5	%			2.3	%			2.5	%			2.3	%			2.2	%
Equity-indexed annuities		$	4,741			$	4,768			$	4,724			$	4,795			$	4,809
Variable annuities:
No riders		$	943			$	961			$	950			$	946			$	960
GMDB only			85				86				83				56				80
GMIB only			6				6				6				6				6
GMAB only			51				52				52				52				54
GMWB only			1,733				1,752				1,704				1,660				1,707
GMDB / WB			459				467				459				450				465
Other			30				31				31				30				32
Total VA account values		$	3,307			$	3,355			$	3,285			$	3,200			$	3,304
Fair value of liabilities associated with living benefit riders		$	54			$	30			$	65			$	85			$	121
Interest-sensitive contract liabilities associated with:
Guaranteed investment contracts		$	301			$	297			$	236			$	200			$	200
Bank-owned life insurance (BOLI)		$	538			$	534			$	531			$	529			$	525
Other asset-intensive business		$	71			$	72			$	73			$	73			$	75

 

				Page 9

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Reinsurance Group of America, Incorporated

U.S. and Latin America Non-Traditional Segment—Financial Reinsurance Pre-tax Operating Income

 

		Three Months Ended																				Current Qtr vs. PY Quarter
		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,
(USD thousands)		2014				2013				2013				2013				2013
Revenues:
Investment income, net of related expenses		$	1,247			$	2,048			$	1,160			$	819			$	597			$	650
Other revenue			19,098				16,191				15,599				16,306				12,797				6,301
Total revenues			20,345				18,239				16,759				17,125				13,394				6,951
Benefits and expenses:
Policy acquisition costs and other insurance expenses			5,742				2,501				3,228				3,602				3,440				2,302
Other operating expenses			2,177				1,462				2,008				1,636				1,947				230
Total benefits and expenses			7,919				3,963				5,236				5,238				5,387				2,532
Operating income before income taxes			12,426				14,276				11,523				11,887				8,007				4,419
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			12,426				14,276				11,523				11,887				8,007				4,419
Investment and derivative gains (losses)—non-operating			83				(5	)			(321	)			(100	)			34				49
Income before income taxes		$	12,509			$	14,271			$	11,202			$	11,787			$	8,041			$	4,468

 

				Page 10

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Reinsurance Group of America, Incorporated

Canadian Segment Pre-tax Operating Income

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	230,844			$	243,340			$	236,067			$	239,633			$	243,271			$	(12,427	)
Investment income, net of related expenses			46,997				51,750				49,871				50,450				49,174				(2,177	)
Investment related gains (losses), net			1,006				1,149				866				970				1,005				1
Other revenue			961				531				(196	)			302				208				753
Total revenues			279,808				296,770				286,608				291,355				293,658				(13,850	)
Benefits and expenses:
Claims and other policy benefits			194,756				187,226				185,011				196,584				189,698				5,058
Interest credited			—				9				19				6				12				(12	)
Policy acquisition costs and other insurance expenses			53,104				53,119				55,553				52,134				60,832				(7,728	)
Other operating expenses			9,825				9,263				10,052				10,942				10,239				(414	)
Total benefits and expenses			257,685				249,617				250,635				259,666				260,781				(3,096	)
Operating income before income taxes			22,123				47,153				35,973				31,689				32,877				(10,754	)
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			22,123				47,153				35,973				31,689				32,877				(10,754	)
Investment and derivative gains (losses)—non-operating			(2,665	)			2,586				5,606				2,778				2,050				(4,715	)
Funds withheld gains (losses)—investment income			606				743				290				1,192				1,381				(775	)
Income before income taxes		$	20,064			$	50,482			$	41,869			$	35,659			$	36,308			$	(16,244	)
Loss and Expense Ratios:
Loss ratios (creditor business)			31.5	%			18.3	%			30.5	%			33.0	%			32.7	%			-1.2	%
Loss ratios (excluding creditor business)			98.0	%			89.4	%			92.3	%			94.5	%			93.2	%			4.8	%
Claims and other policy benefits / (net premiums + investment income)			70.1	%			63.4	%			64.7	%			67.8	%			64.9	%			5.2	%
Policy acquisition costs and other insurance expenses (creditor business)			58.1	%			70.7	%			61.3	%			59.0	%			61.0	%			-2.9	%
Policy acquisition costs and other insurance expenses (excluding creditor business)			13.9	%			11.5	%			12.5	%			12.3	%			12.9	%			1.0	%
Other operating expenses			4.3	%			3.8	%			4.3	%			4.6	%			4.2	%			0.1	%
Foreign currency effect (1):
Net premiums		$	(21,718	)		$	(14,338	)		$	(10,348	)		$	(3,144	)		$	(1,562	)		$	(20,156	)
Operating income before income taxes		$	(2,333	)		$	(3,315	)		$	(1,819	)		$	(434	)		$	(521	)		$	(1,812	)
Creditor reinsurance net premiums		$	47,344			$	42,558			$	53,021			$	48,618			$	61,114			$	(13,770	)

 

Note:

The loss ratios on creditor reinsurance business are normally lower than traditional reinsurance, while allowances are normally higher as a percentage of premiums.

(1)	Compared to comparable prior year period

 

				Page 11

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Reinsurance Group of America, Incorporated

Europe, Middle East and Africa Segment Pre-tax Operating Income (1)

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	340,743			$	332,495			$	303,259			$	292,180			$	292,809			$	47,934
Investment income, net of related expenses			13,369				14,122				12,860				13,623				11,429				1,940
Investment related gains, net			2,593				5,495				—				—				—				2,593
Other revenue			7,923				5,347				12,409				3,926				1,577				6,346
Total revenues			364,628				357,459				328,528				309,729				305,815				58,813
Benefits and expenses:
Claims and other policy benefits			307,341				293,181				250,965				262,443				260,258				47,083
Interest credited			2,786				6,114				—				—				—				2,786
Policy acquisition costs and other insurance expenses			13,265				17,883				13,348				9,396				11,607				1,658
Other operating expenses			27,260				28,250				25,874				26,381				24,759				2,501
Total benefits and expenses			350,652				345,428				290,187				298,220				296,624				54,028
Operating income before income taxes			13,976				12,031				38,341				11,509				9,191				4,785
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			13,976				12,031				38,341				11,509				9,191				4,785
Investment and derivative gains (losses)—non-operating			1,229				(54	)			1,323				440				1,772				(543	)
Income before income taxes		$	15,205			$	11,977			$	39,664			$	11,949			$	10,963			$	4,242
Loss and Expense Ratios:
Claims and other policy benefits			90.2	%			88.2	%			82.8	%			89.8	%			88.9	%			1.3	%
Policy acquisition costs and other insurance expenses			3.9	%			5.4	%			4.4	%			3.2	%			4.0	%			-0.1	%
Other operating expenses			8.0	%			8.5	%			8.5	%			9.0	%			8.5	%			-0.5	%
Foreign currency effect (2):
Net premiums		$	8,690			$	148			$	(6,548	)		$	(9,877	)		$	(8,418	)		$	17,108
Operating income before income taxes		$	394			$	(164	)		$	(301	)		$	(755	)		$	(339	)		$	733
Critical illness net premiums		$	65,678			$	65,082			$	62,404			$	63,685			$	63,260			$	2,418

 

(1)

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India has been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

(2)	Compared to comparable prior year period

 

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Reinsurance Group of America, Incorporated

Asia Pacific Segment Pre-tax Operating Income (1)

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	381,750			$	387,803			$	357,867			$	355,211			$	384,324			$	(2,574	)
Investment income, net of related expenses			24,642				26,860				22,889				21,951				22,630				2,012
Investment related gains, net			861				1,287				576				570				382				479
Other revenue			6,123				10,472				7,804				10,953				7,336				(1,213	)
Total revenues			413,376				426,422				389,136				388,685				414,672				(1,296	)
Benefits and expenses:
Claims and other policy benefits			303,596				313,132				297,208				578,808				298,401				5,195
Interest Credited			246				263				270				274				311				(65	)
Policy acquisition costs and other insurance expenses			54,289				53,267				47,284				60,171				62,086				(7,797	)
Other operating expenses			30,587				32,819				30,116				32,070				30,811				(224	)
Total benefits and expenses			388,718				399,481				374,878				671,323				391,609				(2,891	)
Operating income (loss) before income taxes			24,658				26,941				14,258				(282,638	)			23,063				1,595
Operating to U.S. GAAP Reconciliation:
Operating income before income taxes			24,658				26,941				14,258				(282,638	)			23,063				1,595
Investment and derivative gains (losses)—non-operating			1,653				(3,282	)			4,521				(4,707	)			(4,821	)			6,474
Income (loss) before income taxes		$	26,311			$	23,659			$	18,779			$	(287,345	)		$	18,242			$	8,069
Loss and Expense Ratios:
Claims and other policy benefits			79.5	%			80.7	%			83.0	%			162.9	%			77.6	%			1.9	%
Policy acquisition costs and other insurance expenses			14.2	%			13.7	%			13.2	%			16.9	%			16.2	%			-2.0	%
Other operating expenses			8.0	%			8.5	%			8.4	%			9.0	%			8.0	%			0.0	%
Foreign currency effect (2):
Net premiums		$	(37,197	)		$	(35,258	)		$	(34,914	)		$	(8,530	)		$	(9,750	)		$	(27,447	)
Operating income before income taxes		$	(2,960	)		$	(5,298	)		$	(2,348	)		$	14,924			$	(2,071	)		$	(889	)
Critical illness net premiums		$	60,398			$	66,980			$	74,220			$	51,478			$	54,883			$	5,515

 

(1)

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India has been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been adjusted to conform to the new reporting alignment.

(2)	Compared to comparable prior year period

 

				Page 13

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Reinsurance Group of America, Incorporated

Corporate and Other Segment Pre-tax Operating Income

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Revenues:
Net premiums		$	215			$	(531	)		$	1,004			$	261			$	(977	)		$	1,192
Investment income, net of related expenses			25,736				14,686				19,024				21,818				28,016				(2,280	)
Investment related gains (losses), net			225				239				237				235				254				(29	)
Other revenue			4,567				4,679				5,719				251				3,950				617
Total revenues			30,743				19,073				25,984				22,565				31,243				(500	)
Benefits and expenses:
Claims and other policy benefits			17				3				30				(112	)			84				(67	)
Interest credited			206				179				186				212				225				(19	)
Policy acquisition costs and other insurance expenses			(21,667	)			(19,533	)			(20,354	)			(19,073	)			(15,343	)			(6,324	)
Other operating expenses			11,252				22,690				15,339				16,483				23,354				(12,102	)
Interest expense			35,084				35,072				30,831				29,918				28,486				6,598
Collateral finance facility expense			2,569				2,563				2,698				2,650				2,538				31
Total benefits and expenses			27,461				40,974				28,730				30,078				39,344				(11,883	)
Operating income (loss) before income taxes			3,282				(21,901	)			(2,746	)			(7,513	)			(8,101	)			11,383
Operating to U.S. GAAP Reconciliation:
Operating income (loss) before income taxes			3,282				(21,901	)			(2,746	)			(7,513	)			(8,101	)			11,383
Investment and derivative gains (losses)—non-operating			482				(3,557	)			(1,960	)			1,283				(2,198	)			2,680
Gain on repurchase of collateral finance facility securities			—				—				—				—				46,506				(46,506	)
Income (loss) before income taxes		$	3,764			$	(25,458	)		$	(4,706	)		$	(6,230	)		$	36,207			$	(32,443	)
Foreign currency effect (1):
Net premiums		$	—			$	—			$	—			$	—			$	—			$	—
Operating income before income taxes		$	(1,706	)		$	98			$	(491	)		$	(95	)		$	140			$	(1,846	)

 

(1)	Compared to comparable prior year period

 

				Page 14

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Reinsurance Group of America, Incorporated

Summary of Pre-tax Segment Operating Income (1)

 

		Three Months Ended																				Current Qtr vs. PY Quarter
(USD thousands)		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
U.S. and Latin America:
Traditional		$	48,203			$	123,642			$	90,287			$	86,502			$	72,234			$	(24,031	)
Non-Traditional:
Asset Intensive			41,005				42,266				38,046				40,230				45,596				(4,591	)
Financial Reinsurance			12,426				14,276				11,523				11,887				8,007				4,419
Total U.S. and Latin America Segment			101,634				180,184				139,856				138,619				125,837				(24,203	)
Canadian Segment			22,123				47,153				35,973				31,689				32,877				(10,754	)
Europe, Middle East and Africa			13,976				12,031				38,341				11,509				9,191				4,785
Asia Pacific Segment			24,658				26,941				14,258				(282,638	)			23,063				1,595
Corporate and Other			3,282				(21,901	)			(2,746	)			(7,513	)			(8,101	)			11,383
Consolidated		$	165,673			$	244,408			$	225,682			$	(108,334	)		$	182,867			$	(17,194	)

 

(1)

The company realigned certain operations and management responsibilities to better fit within its geographic-based segments. Mexico and Latin America operations were moved from Europe & South Africa to the U.S. segment, which has been renamed U.S. and Latin America. India has been moved from Europe & South Africa to the Asia Pacific segment. Europe & South Africa has been renamed Europe, Middle East and Africa. Prior-period figures have been restated to conform to the new reporting alignment.

 

				Page 15

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

 

Cash and Invested Assets
		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Fixed maturity securities, available-for-sale		$	22,157,182			$	21,474,136			$	21,289,108			$	21,284,216			$	22,401,659
Mortgage loans on real estate			2,526,228				2,486,680				2,488,582				2,377,246				2,325,191
Policy loans			1,296,897				1,244,469				1,244,878				1,245,252				1,245,812
Funds withheld at interest			5,814,231				5,771,467				5,739,872				5,777,395				5,698,594
Short-term investments			118,789				139,395				44,192				38,601				180,707
Other invested assets			1,234,779				1,324,960				1,116,391				1,035,809				1,129,651
Cash and cash equivalents			1,127,132				923,647				1,423,235				973,619				1,001,841
Total cash and invested assets		$	34,275,238			$	33,364,754			$	33,346,258			$	32,732,138			$	33,983,455

Investment Income and Yield Summary

 

		Three Months Ended																				Current Qtr vs. PY Quarter
		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Average invested assets at amortized cost (1)		$	19,726,037			$	18,954,561			$	18,263,880			$	18,112,841			$	17,992,152			$	1,733,885
Net investment income (1)		$	229,644			$	217,928			$	213,318			$	212,047			$	213,322			$	16,322
Annualized investment yield (ratio of net investment income to average invested assets) (1)			4.74	%			4.68	%			4.75	%			4.77	%			4.83	%			-0.09	%

 

(1)	Excludes spread related business (e.g. coinsurance of annuities).

 

				Page 16

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Amortized cost, gross unrealized gains and losses, and estimated fair values of fixed maturity and equity securities

(Excludes Funds Withheld Portfolios)

 

March 31, 2014
		Amortized Cost				Unrealized Gains				Unrealized Losses				Estimated Fair Value				% of Total				Other-than- temporary Impairment in AOCI
Available-for-sale:
Corporate securities		$	11,858,578			$	762,137			$	102,415			$	12,518,300				56.4	%		$	—
Canadian and Canadian provincial governments			2,655,865				802,236				7,937				3,450,164				15.6	%			—
Residential mortgage-backed securities			969,944				45,270				13,343				1,001,871				4.5	%			(300	)
Asset-backed securities			933,130				23,247				11,798				944,579				4.3	%			(2,259	)
Commercial mortgage-backed securities			1,367,205				95,154				11,856				1,450,503				6.5	%			(1,609	)
U.S. government and agencies			447,071				18,158				2,967				462,262				2.1	%			—
State and political subdivisions			368,465				31,367				9,200				390,632				1.8	%			—
Other foreign government, supranational, and foreign government-sponsored enterprises			1,897,266				57,073				15,468				1,938,871				8.8	%			—
Total fixed maturity securities		$	20,497,524			$	1,834,642			$	174,984			$	22,157,182				100.0	%		$	(4,168	)
Non-redeemable preferred stock			84,156				7,273				2,662				88,767				31.5	%
Other equity securities			191,988				2,921				1,661				193,248				68.5	%
Total equity securities		$	276,144			$	10,194			$	4,323			$	282,015				100.0	%

 

December 31, 2013
		Amortized Cost				Unrealized Gains				Unrealized Losses				Estimated Fair Value				% of Total				Other-than- temporary Impairment in AOCI
Available-for-sale:
Corporate securities		$	11,697,394			$	616,147			$	202,786			$	12,110,755				56.4	%		$	—
Canadian and Canadian provincial governments			2,728,111				669,762				16,848				3,381,025				15.7	%			—
Residential mortgage-backed securities			970,434				38,126				18,917				989,643				4.6	%			(300	)
Asset-backed securities			891,751				18,893				15,812				894,832				4.2	%			(2,259	)
Commercial mortgage-backed securities			1,314,782				91,651				17,487				1,388,946				6.5	%			(1,609	)
U.S. government and agencies			489,631				16,468				4,748				501,351				2.3	%			—
State and political subdivisions			313,252				21,907				14,339				320,820				1.5	%			—
Other foreign government, supranational, and foreign government-sponsored enterprises			1,865,379				45,347				23,962				1,886,764				8.8	%			—
Total fixed maturity securities		$	20,270,734			$	1,518,301			$	314,899			$	21,474,136				100.0	%		$	(4,168	)
Non-redeemable preferred stock			81,993				5,342				5,481				81,854				20.2	%
Other equity securities			327,479				618				4,220				323,877				79.8	%
Total equity securities		$	409,472			$	5,960			$	9,701			$	405,731				100.0	%

 

				Page 17

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Corporate Securities by Sector (Fixed Maturities and Equities)

(Excludes Funds Withheld Portfolios)

 

		March 31, 2014														December 31, 2013
		Amortized Cost				Estimated Fair Value				% of Total				Average Credit Ratings (1)		Amortized Cost				Estimated Fair Value				% of Total				Average Credit Ratings (1)
Financial Institutions
Banking		$	2,416,669			$	2,526,982				19.7	%		A-		$	2,328,148			$	2,408,741				19.2	%		A-
Brokerage			179,723				189,568				1.5	%		A-			158,777				164,922				1.3	%		A-
Finance Comp.			150,118				161,046				1.3	%		A			151,129				158,859				1.3	%		A
Insurance			676,863				727,733				5.7	%		A-			665,252				693,516				5.5	%		A-
REITs			515,657				538,914				4.2	%		BBB+			476,830				491,058				3.9	%		BBB+
Other Finance			318,065				331,028				2.6	%		BBB			454,822				460,661				3.7	%		BBB
Total Financial Institutions		$	4,257,095			$	4,475,271				35.0	%				$	4,234,958			$	4,377,757				34.9	%
Industrials
Basic			830,184				857,444				6.7	%		BBB			847,764				858,886				6.9	%		BBB
Capital Goods			568,189				598,736				4.7	%		BBB			574,108				596,150				4.8	%		BBB
Communications			1,172,482				1,252,148				9.8	%		BBB+			1,163,875				1,205,796				9.6	%		BBB+
Consumer Cyclical			684,762				717,616				5.6	%		BBB+			701,664				721,933				5.8	%		BBB
Consumer Noncyclical			1,063,050				1,131,632				8.8	%		BBB+			1,062,238				1,107,972				8.9	%		BBB+
Energy			678,760				723,230				5.6	%		BBB+			658,870				691,306				5.5	%		BBB+
Technology			490,006				503,651				3.9	%		BBB+			455,081				456,505				3.6	%		BBB+
Transportation			373,192				396,694				3.1	%		A-			365,233				380,249				3.0	%		A-
Other Industrial			106,666				114,359				0.9	%		A-			114,520				119,353				1.0	%		A-
Total Industrials		$	5,967,291			$	6,295,510				49.1	%				$	5,943,353			$	6,138,150				49.1	%
Utilities
Electric			1,056,302				1,127,827				8.8	%		BBB+			1,077,167				1,121,373				9.0	%		BBB+
Natural Gas			786,719				827,708				6.5	%		BBB			777,395				800,971				6.4	%		BBB
Other Utility			56,530				63,238				0.5	%		A-			62,768				67,471				0.5	%		BBB+
Total Utilities		$	1,899,551			$	2,018,773				15.8	%				$	1,917,330			$	1,989,815				15.9	%
Other Sectors			10,785				10,761				0.1	%		AA			11,225				10,764				0.1	%		AA
Total		$	12,134,722			$	12,800,315				100.0	%		BBB+		$	12,106,866			$	12,516,486				100.0	%		BBB+

 

(1)

The Average Credit Rating designations are based on the weighted average ratings from nationally recognized rating organizations, primarily those assigned by S&P. In instances where a S&P rating is not available, the Company will reference the rating provided by Moody’s, and in the absence of both the Company will assign equivalent ratings based on information from the NAIC.

 

				Page 18

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Ratings of Fixed Maturity Securities

(Excludes Funds Withheld Portfolios)

 

				March 31, 2014												December 31, 2013												September 30, 2013												June 30, 2013												March 31, 2013
NAIC Designation (1)		Rating Agency Designation (2)		Amortized Cost				Estimated Fair Value				% of Total				Amortized Cost				Estimated Fair Value				% of Total				Amortized Cost				Estimated Fair Value				% of Total				Amortized Cost				Estimated Fair Value				% of Total				Amortized Cost				Estimated Fair Value				% of Total
1		AAA/AA/A		$	13,519,276			$	14,859,087				67.0	%		$	12,868,061			$	13,867,584				64.6	%		$	12,460,380			$	13,643,495				64.1	%		$	12,307,880			$	13,643,772				64.1	%		$	12,332,953			$	14,419,490				64.3	%
2		BBB			5,882,308				6,177,731				27.9	%			6,072,604				6,255,451				29.1	%			6,117,081				6,298,628				29.6	%			5,997,232				6,189,030				29.1	%			6,058,221				6,524,007				29.1	%
3		BB			637,814				666,571				3.0	%			725,733				740,465				3.4	%			652,300				655,000				3.1	%			723,316				728,014				3.4	%			731,136				757,948				3.4	%
4		B			379,529				379,688				1.7	%			387,687				400,775				1.9	%			499,580				512,325				2.4	%			519,789				530,990				2.5	%			497,504				507,879				2.3	%
5		CCC			60,003				60,427				0.3	%			106,619				106,873				0.5	%			87,364				86,644				0.4	%			90,970				84,157				0.4	%			98,290				79,039				0.4	%
6		In or near default			18,594				13,678				0.1	%			110,030				102,988				0.5	%			100,645				93,016				0.4	%			118,134				108,253				0.5	%			120,845				113,296				0.5	%
		Total		$	20,497,524			$	22,157,182				100.0	%		$	20,270,734			$	21,474,136				100.0	%		$	19,917,350			$	21,289,108				100.0	%		$	19,757,321			$	21,284,216				100.0	%		$	19,838,949			$	22,401,659				100.0	%

 

(1)

Effective January 1, 2014, structured securities held by the Company’s insurance subsidiaries that maintain the National Association of Insurance Commissioners (NAIC) statutory basis of accounting that meet the definition of SSAP No. 43R began utilizing the NAIC rating methodology. All other securities will continue to utilize the Nationally Recognized Statistical Rating Organizations (NRSRO) ratings, as available, or equivalent rating based on information from the NAIC.

(2)	The Rating Agency Designation includes all “+” or “-” at that rating level (e. g. ‘BBB’ includes ‘BBB+’, ‘BBB’, and ‘BBB-’).

Structured Fixed Maturity Securities

 

		March 31, 2014								December 31, 2013								September 30, 2013								June 30, 2013								March 31, 2013
		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Residential mortgage-backed securities:
Agency		$	569,064			$	591,515			$	567,113			$	580,855			$	517,517			$	541,870			$	546,603			$	579,317			$	520,081			$	575,274
Non-agency			400,880				410,356				403,321				408,788				405,064				409,968				468,552				475,651				485,151				501,496
Total residential mortgage-backed securities			969,944				1,001,871				970,434				989,643				922,581				951,838				1,015,155				1,054,968				1,005,232				1,076,770
Commercial mortgage-backed securities			1,367,205				1,450,503				1,314,782				1,388,946				1,371,473				1,453,114				1,564,924				1,638,632				1,596,659				1,698,144
Asset-backed securities			933,130				944,579				891,751				894,832				883,495				885,278				789,849				790,310				752,280				756,544
Total		$	3,270,279			$	3,396,953			$	3,176,967			$	3,273,421			$	3,177,549			$	3,290,230			$	3,369,928			$	3,483,910			$	3,354,171			$	3,531,458

 

				Page 19

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Gross Unrealized Losses Aging

Fixed Maturity Securities

 

		March 31, 2014								December 31, 2013								September 30, 2013								June 30, 2013								March 31, 2013
		Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total
Less than 20%		$	157,050				87.6	%		$	287,032				88.4	%		$	279,211				87.6	%		$	261,628				84.2	%		$	64,399				52.6	%
20% or more for less than six months			163				0.1	%			6,444				2.0	%			6,325				2.0	%			5,629				1.8	%			—				0.0	%
20% or more for six months or greater			17,771				9.9	%			21,423				6.6	%			25,940				8.1	%			37,338				12.0	%			56,296				45.9	%
Total		$	174,984				97.6	%		$	314,899				97.0	%		$	311,476				97.7	%		$	304,595				98.0	%		$	120,695				98.5	%

Equity Securities

 

		March 31, 2014								December 31, 2013								September 30, 2013								June 30, 2013								March 31, 2013
		Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total				Gross Unrealized Losses				% of Total
Less than 20%		$	4,321				2.4	%		$	9,699				3.0	%		$	7,383				2.3	%		$	6,137				2.0	%		$	1,836				1.5	%
20% or more for less than six months			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%
20% or more for six months or greater			2				0.0	%			2				0.0	%			2				0.0	%			2				0.0	%			1				0.0	%
Total		$	4,323				2.4	%		$	9,701				3.0	%		$	7,385				2.3	%		$	6,139				2.0	%		$	1,837				1.5	%

 

				Page 20

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Fixed Maturities and Equity Securities Below Amortized Cost

(Excludes Funds Withheld Portfolios)

 

		As of March 31, 2013
		Less than 12 months								Equal to or greater than 12 months								Total
		Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses
Investment grade securities:
Corporate securities		$	2,057,301			$	64,535			$	311,738			$	31,273			$	2,369,039			$	95,808
Canadian and Canadian provincial governments			114,845				6,334				12,421				1,603				127,266				7,937
Residential mortgage-backed securities			190,212				9,802				32,621				3,294				222,833				13,096
Asset-backed securities			214,774				3,140				79,532				7,023				294,306				10,163
Commercial mortgage-backed securities			106,146				1,295				26,181				5,443				132,327				6,738
U.S. government and agencies			75,193				2,777				4,104				190				79,297				2,967
State and political subdivisions			103,058				5,440				8,158				3,760				111,216				9,200
Other foreign government, supranational, and foreign government-sponsored enterprises			502,280				10,605				68,811				4,829				571,091				15,434
Investment grade securities			3,363,809				103,928				543,566				57,415				3,907,375				161,343
Non-investment grade securities:
Corporate securities			191,113				3,886				43,178				2,721				234,291				6,607
Residential mortgage-backed securities			26,209				197				1,776				50				27,985				247
Asset-backed securities			1,694				10				8,483				1,625				10,177				1,635
Commercial mortgage-backed securities			—				—				5,969				5,118				5,969				5,118
State and political subdivisions			—				—				—				—				—				—
Other foreign government, supranational, and foreign government-sponsored enterprises			2,440				34				—				—				2,440				34
Non-investment grade securities			221,456				4,127				59,406				9,514				280,862				13,641
Total fixed maturity securities		$	3,585,265			$	108,055			$	602,972			$	66,929			$	4,188,237			$	174,984
Non-redeemable preferred stock			20,765				2,660				1				2				20,766				2,662
Other equity securities			—				—				32,833				1,661				32,833				1,661
Total Equity securities		$	20,765			$	2,660			$	32,834			$	1,663			$	53,599			$	4,323
		As of December 31, 2013
		Less than 12 months								Equal to or greater than 12 months								Total
		Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses
Investment grade securities:
Corporate securities		$	3,141,179			$	148,895			$	301,303			$	40,548			$	3,442,482			$	189,443
Canadian and Canadian provincial governments			188,491				14,419				12,029				2,429				200,520				16,848
Residential mortgage-backed securities			283,967				15,900				23,068				1,688				307,035				17,588
Asset-backed securities			255,656				4,916				56,668				4,983				312,324				9,899
Commercial mortgage-backed securities			219,110				3,725				20,068				5,745				239,178				9,470
U.S. government and agencies			133,697				4,469				4,406				279				138,103				4,748
State and political subdivisions			120,193				9,723				15,202				4,616				135,395				14,339
Other foreign government, supranational, and foreign government-sponsored enterprises			665,313				21,075				36,212				2,847				701,525				23,922
Investment grade securities			5,007,606				223,122				468,956				63,135				5,476,562				286,257
Non-investment grade securities:
Corporate securities			283,603				9,451				38,256				3,892				321,859				13,343
Residential mortgage-backed securities			62,146				1,075				3,945				254				66,091				1,329
Asset-backed securities			28,670				415				32,392				5,498				61,062				5,913
Commercial mortgage-backed securities			15,762				81				10,980				7,936				26,742				8,017
State and political subdivisions			—				—				—				—				—				—
Other foreign government, supranational, and foreign government-sponsored enterprises			9,403				40				—				—				9,403				40
Non-investment grade securities			399,584				11,062				85,573				17,580				485,157				28,642
Total fixed maturity securities		$	5,407,190			$	234,184			$	554,529			$	80,715			$	5,961,719			$	314,899
Non-redeemable preferred stock			51,386				5,479				1				2				51,387				5,481
Other equity securities			218,834				1,748				32,550				2,472				251,384				4,220
Total Equity securities		$	270,220			$	7,227			$	32,551			$	2,474			$	302,771			$	9,701

 

				Page 21

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Reinsurance Group of America, Incorporated

Investments

(USD thousands)

Consolidated Investment Related Gains and Losses

 

		Three Months Ended																				Current Qtr vs. PY Quarter
		March 31, 2014				Dec. 31, 2013				Sept. 30, 2013				June 30, 2013				March 31, 2013
Fixed Maturity and Equity Securities:
Other-than-temporary impairment losses on fixed maturities		$	(303	)		$	(2,258	)		$	(391	)		$	(9,803	)		$	(202	)		$	(101	)
Portion of loss recognized in accumulated other comprehensive income (before taxes)			—				—				59				(306	)			—				—
Net other-than-temporary impairment losses on fixed maturities recognized in earnings			(303	)			(2,258	)			(332	)			(10,109	)			(202	)			(101	)
Impairment losses on equity securities			—				—				—				—				—				—
Gain on investment activity			8,067				12,659				21,560				26,845				21,680				(13,613	)
Loss on investment activity			(6,583	)			(12,169	)			(30,434	)			(6,760	)			(11,212	)			4,629
Net gain/(loss) on fixed maturity and equity securities			1,181				(1,768	)			(9,206	)			9,976				10,266				(9,085	)
Other impairment losses and change in mortgage loan provision			1,664				(5,665	)			233				125				(1,626	)			3,290
Other non-derivative gain/(loss), net			8,368				10,536				4,594				6,962				4,589				3,779
Free-standing Derivatives:
Credit Default Swaps			(2,114	)			7,051				10,805				2,428				3,904				(6,018	)
Interest Rate Swaps—non-hedged			29,659				(15,498	)			(8,221	)			(38,414	)			(22,265	)			51,924
Interest Rate Swaps—hedged			(6	)			(5	)			(3	)			31				(17	)			11
Futures			(1,584	)			(3,851	)			(1,139	)			714				(6,881	)			5,297
CPI Swaps			352				85				(39	)			(1,117	)			(871	)			1,223
Equity options			(8,965	)			(19,447	)			(24,112	)			(5,049	)			(30,623	)			21,658
Currency Forwards			1,154				(5,213	)			629				(2,958	)			(5,659	)			6,813
Interest Rate Options			1,282				(3,145	)			(2,375	)			(7,980	)			1,982				(700	)
Total free-standing derivatives			19,778				(40,023	)			(24,455	)			(52,345	)			(60,430	)			80,208
Embedded Derivatives:
Modified coinsurance and funds withheld treaties			77,241				(337	)			(67,460	)			47,716				90,258				(13,017	)
GMXB			(23,661	)			35,098				19,829				35,809				51,314				(74,975	)
Total embedded derivatives			53,580				34,761				(47,631	)			83,525				141,572				(87,992	)
Net gain/(loss) on total derivatives			73,358				(5,262	)			(72,086	)			31,180				81,142				(7,784	)
Total investment related gains / (losses), net		$	84,571			$	(2,159	)		$	(76,465	)		$	48,243			$	94,371			$	(9,800	)

 

				Page 22