e10vq
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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 September 30, 2007
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact name of Registrant as specified in its charter)
     
MISSOURI   43-1627032
(State or other jurisdiction   (IRS employer
of incorporation or organization)   identification number)
1370 Timberlake Manor Parkway
Chesterfield, Missouri 63017
(Address of principal executive offices)
(636) 736-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ       No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer þ       Accelerated filer o       Non-accelerated filer o
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 October 31, 2007: 62,001,463 shares.
 
 

 


 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
             
Item       Page
PART I - FINANCIAL INFORMATION
       
   
 
       
1  
Financial Statements
       
   
 
       
        3  
   
 
       
        4  
   
 
       
        5  
   
 
       
        6  
   
 
       
2       13  
   
 
       
3       36  
   
 
       
4       36  
   
 
       
PART II - OTHER INFORMATION
       
   
 
       
1       36  
   
 
       
1A       36  
   
 
       
2       36  
   
 
       
6       36  
   
 
       
        37  
   
 
       
        38  
 302 Certification of Chief Executive Officer
 302 Certification of Chief Financial Officer
 906 Certification of Chief Executive Officer
 906 Certification of Chief Financial Officer

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    September 30,     December 31,  
    2007     2006  
    (Dollars in thousands)  
Assets
               
Fixed maturity securities:
               
Available-for-sale at fair value (amortized cost of $8,605,635 and $7,867,932 at September 30, 2007 and December 31, 2006, respectively)
  $ 8,933,291     $ 8,372,173  
Mortgage loans on real estate
    827,298       735,618  
Policy loans
    1,018,215       1,015,394  
Funds withheld at interest
    4,653,590       4,129,078  
Short-term investments
    153,757       140,281  
Other invested assets
    274,914       220,356  
 
           
Total investments
    15,861,065       14,612,900  
Cash and cash equivalents
    451,027       160,428  
Accrued investment income
    121,510       68,292  
Premiums receivable and other reinsurance balances
    763,599       695,307  
Reinsurance ceded receivables
    688,821       563,570  
Deferred policy acquisition costs
    3,076,574       2,808,053  
Other assets
    136,751       128,287  
 
           
Total assets
  $ 21,099,347     $ 19,036,837  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Future policy benefits
  $ 6,127,566     $ 5,315,428  
Interest sensitive contract liabilities
    6,564,305       6,212,278  
Other policy claims and benefits
    2,050,378       1,826,831  
Other reinsurance balances
    141,635       145,926  
Deferred income taxes
    635,575       828,848  
Other liabilities
    604,144       177,490  
Short-term debt
    30,710       29,384  
Long-term debt
    895,992       676,165  
Collateral finance facility
    850,256       850,402  
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company
    158,819       158,701  
 
           
Total liabilities
    18,059,380       16,221,453  
 
               
Commitments and contingent liabilities (See Note 5)
               
 
               
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 September 30, 2007 and December 31, 2006)
    631       631  
Warrants
    66,915       66,915  
Additional paid-in-capital
    1,094,966       1,081,433  
Retained earnings
    1,482,970       1,307,743  
Accumulated other comprehensive income:
               
Accumulated currency translation adjustment, net of income taxes
    238,267       109,067  
Unrealized appreciation of securities, net of income taxes
    217,961       335,581  
Pension and postretirement benefits, net of income taxes
    (11,849 )     (11,297 )
 
           
Total stockholders’ equity before treasury stock
    3,089,861       2,890,073  
Less treasury shares held of 1,129,184 and 1,717,722 at cost at September 30, 2007 and December 31, 2006, respectively
    (49,894 )     (74,689 )
 
           
Total stockholders’ equity
    3,039,967       2,815,384  
 
           
Total liabilities and stockholders’ equity
  $ 21,099,347     $ 19,036,837  
 
           
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                                 
    Three months ended September 30,     Nine months ended September 30,  
    2007     2006     2007     2006  
    (Dollars in thousands, except per share data)  
Revenues
                               
Net premiums
  $ 1,227,907     $ 1,076,191     $ 3,561,003     $ 3,145,236  
Investment income, net of related expenses
    190,458       183,357       681,103       538,903  
Investment related losses, net
    (9,138 )     (125 )     (24,714 )     (4,807 )
Change in value of embedded derivatives
    (52,975 )     4,272       (57,263 )     (2,251 )
Other revenues
    22,089       18,788       61,637       47,035  
 
                       
Total revenues
    1,378,341       1,282,483       4,221,766       3,724,116  
Benefits and Expenses:
                               
Claims and other policy benefits
    1,006,864       846,908       2,890,012       2,532,952  
Interest credited
    30,475       43,582       205,193       149,843  
Policy acquisition costs and other insurance expenses
    178,244       188,731       542,679       513,235  
Change in deferred acquisition costs associated with change in value of embedded derivatives
    (39,163 )     2,886       (42,601 )     (2,339 )
Other operating expenses
    57,284       54,568       169,325       146,925  
Interest expense
    9,860       15,103       53,545       46,884  
Collateral finance facility expense
    13,047       13,136       38,940       13,413  
 
                       
Total benefits and expenses
    1,256,611       1,164,914       3,857,093       3,400,913  
Income from continuing operations before income taxes
    121,730       117,569       364,673       323,203  
Provision for income taxes
    40,932       41,995       127,901       113,260  
 
                       
Income from continuing operations
    80,798       75,574       236,772       209,943  
Discontinued operations:
                               
Loss from discontinued accident and health operations, net of income taxes
    (4,277 )     (1,539 )     (6,524 )     (3,207 )
 
                       
Net income
  $ 76,521     $ 74,035     $ 230,248     $ 206,736  
 
                       
 
                               
Basic earnings per share:
                               
Income from continuing operations
  $ 1.30     $ 1.23     $ 3.83     $ 3.43  
Discontinued operations
    (0.07 )     (0.02 )     (0.10 )     (0.05 )
 
                       
Net income
  $ 1.23     $ 1.21     $ 3.73     $ 3.38  
 
                       
 
                               
Diluted earnings per share:
                               
Income from continuing operations
  $ 1.26     $ 1.20     $ 3.69     $ 3.34  
Discontinued operations
    (0.07 )     (0.03 )     (0.10 )     (0.05 )
 
                       
Net income
  $ 1.19     $ 1.17     $ 3.59     $ 3.29  
 
                       
 
                               
Dividends declared per share
  $ 0.09     $ 0.09     $ 0.27     $ 0.27  
 
                       
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Nine months ended  
    September 30,  
    2007     2006  
    (Dollars in thousands)  
Cash Flows from Operating Activities:
               
Net income
  $ 230,248     $ 206,736  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Change in:
               
Accrued investment income
    (52,044 )     (40,120 )
Premiums receivable and other reinsurance balances
    (38,713 )     (37,955 )
Deferred policy acquisition costs
    (173,596 )     (197,550 )
Reinsurance ceded balances
    (125,251 )     (9,889 )
Future policy benefits, other policy claims and benefits, and other reinsurance balances
    641,536       455,242  
Deferred income taxes
    25,198       97,806  
Excess tax benefits from share-based payment arrangement
    (2,832 )      
Other assets and other liabilities, net
    110,478       48,957  
Amortization of net investment discounts and other
    (54,321 )     (40,525 )
Investment related losses, net
    24,714       4,807  
Other, net
    15,720       2,991  
 
           
Net cash provided by operating activities
    601,137       490,500  
 
               
Cash Flows from Investing Activities:
               
Sales of fixed maturity securities - available for sale
    1,886,028       1,216,753  
Maturities of fixed maturity securities - available for sale
    109,806       78,042  
Purchases of fixed maturity securities - available for sale
    (2,336,861 )     (2,604,214 )
Cash invested in mortgage loans on real estate
    (141,320 )     (73,567 )
Cash invested in policy loans
    (8,750 )     (8,581 )
Cash invested in funds withheld at interest
    (69,705 )     (43,871 )
Net increase in securitized lending activities
    62,589       88,618  
Principal payments on mortgage loans on real estate
    44,392       51,543  
Principal payments on policy loans
    5,929       31,739  
Change in short-term investments and other invested assets
    (95,560 )     96,421  
 
           
Net cash used in investing activities
    (543,452 )     (1,167,117 )
 
               
Cash Flows from Financing Activities:
               
Dividends to stockholders
    (16,676 )     (16,517 )
Proceeds from long-term debt issuance
    295,311        
Principal payments on debt
          (100,000 )
Net repayments under credit agreements
    (78,871 )      
Net proceeds from collateral finance facility
          837,500  
Purchases of treasury stock
    (3,611 )      
Excess tax benefits from share-based payment arrangement
    2,832        
Exercise of stock options, net
    12,544       7,582  
Excess deposits on universal life and other investment type policies and contracts
    15,089       64,755  
 
           
Net cash provided by financing activities
    226,618       793,320  
Effect of exchange rate changes
    6,296       (811 )
 
           
Change in cash and cash equivalents
    290,599       115,892  
Cash and cash equivalents, beginning of period
    160,428       128,692  
 
           
Cash and cash equivalents, end of period
  $ 451,027     $ 244,584  
 
           
 
               
Supplementary information:
               
Cash paid for interest
  $ 78,119     $ 51,805  
Cash paid (received) for income taxes, net of refunds
  $ 20,821     $ (12,980 )
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Reinsurance Group of America, Incorporated (“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 nine-month period ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2006 Annual Report on Form 10-K (“2006 Annual Report”) filed with the Securities and Exchange Commission on February 26, 2007.
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 2007 presentation.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share on income from continuing operations (in thousands, except per share information):
                                 
    Three months ended   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
     
Earnings:
                               
Income from continuing operations (numerator for basic and diluted calculations)
  $ 80,798     $ 75,574     $ 236,772     $ 209,943  
Shares:
                               
Weighted average outstanding shares (denominator for basic calculation)
    61,995       61,290       61,806       61,205  
Equivalent shares from outstanding stock options
    2,217       1,815       2,412       1,606  
     
Denominator for diluted calculation
    64,212       63,105       64,218       62,811  
Earnings per share:
                               
Basic
  $ 1.30     $ 1.23     $ 3.83     $ 3.43  
Diluted
  $ 1.26     $ 1.20     $ 3.69     $ 3.34  
     
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 nine months ended September 30, 2007, approximately 0.3 million stock options were excluded from the calculation. For the three and nine month periods ended September 30, 2007 and 2006, 0.4 million performance contingent shares were excluded from the calculation.

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3. Comprehensive Income
The following schedule reflects the change in accumulated other comprehensive income (dollars in thousands):
                                 
    Three months ended   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
     
Net income
  $ 76,521     $ 74,035     $ 230,248     $ 206,736  
Accumulated other comprehensive income (expense), net of income tax:
                               
Unrealized gains (losses), net of reclassification adjustment for losses, net included in net income
    13,853       233,060       (117,620 )     2,181  
Foreign currency items
    56,311       (1,502 )     129,200       31,217  
Pension and postretirement benefit adjustments
    (239 )           (552 )      
     
Comprehensive income
  $ 146,446     $ 305,593     $ 241,276     $ 240,134  
     
4. 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 2006 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 other than internally developed software. 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 (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   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
     
Total revenues
                               
U.S.
  $ 764,724     $ 791,050     $ 2,531,787     $ 2,338,989  
Canada
    157,447       131,861       442,925       377,599  
Europe & South Africa
    175,437       150,094       520,156       448,349  
Asia Pacific
    251,348       186,783       658,270       511,580  
Corporate & Other
    29,385       22,695       68,628       47,599  
     
Total
  $ 1,378,341     $ 1,282,483     $ 4,221,766     $ 3,724,116  
     

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    Three months ended   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
     
Income (loss) from continuing operations before income taxes
                               
U.S.
  $ 66,152     $ 84,802     $ 245,544     $ 236,073  
Canada
    22,798       13,462       62,034       32,967  
Europe & South Africa
    11,689       8,813       44,659       40,879  
Asia Pacific
    17,240       20,378       43,181       34,717  
Corporate & Other
    3,851       (9,886 )     (30,745 )     (21,433 )
     
Total
  $ 121,730     $ 117,569     $ 364,673     $ 323,203  
     
                 
    Total assets
    September 30,   December 31,
    2007   2006
     
U.S.
  $ 13,472,193     $ 12,387,202  
Canada
    2,542,777       2,182,712  
Europe & South Africa
    1,304,149       1,140,374  
Asia Pacific
    1,345,552       1,099,700  
Corporate and Other
    2,434,676       2,226,849  
     
Total
  $ 21,099,347     $ 19,036,837  
     
5. Commitments and Contingent Liabilities
The Company has commitments to fund investments in mortgage loans and limited partnerships in the amount of $21.3 million and $110.7 million, respectively, at September 30, 2007. 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 mortgage loans and limited partnerships are carried at cost less any other-than-temporary impairments and are included in total investments in the condensed consolidated balance sheets.
The Company is currently a party to three arbitrations that involve its discontinued accident and health business, including personal accident business, which includes London market excess of loss business, and workers’ compensation carve-out business. The Company is also party to a threatened arbitration related to its life reinsurance business. As of September 30, 2007, the parties involved in these actions have raised claims, or established reserves that may result in claims, in the amount of $24.3 million, which is $23.5 million in excess of the amounts held in reserve by the Company. The Company generally has little information regarding any reserves established by the ceding companies, and must rely on management estimates to establish policy claim liabilities. It is possible that any such reserves could be increased in the future. The Company believes it has substantial defenses upon which to contest these claims, including but not limited to misrepresentation and breach of contract by direct and indirect ceding companies. See Note 20, “Discontinued Operations” in the Company’s consolidated financial statements accompanying the 2006 Annual Report for more information. Additionally, from time to time, the Company is subject to litigation related to employment-related matters in the normal course of its business. The Company cannot predict or determine the ultimate outcome of the pending litigation or arbitrations or provide useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome could, from time to time, have a material adverse effect on the Company’s consolidated net income in a particular quarter or year.
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 September 30,

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2007 and December 31, 2006, there were approximately $21.5 million and $19.4 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 September 30, 2007 and December 31, 2006, $360.3 million and $437.7 million, respectively, in letters of credit from various banks were outstanding between the various subsidiaries of the Company. On September 24, 2007 the Company entered into a five-year, syndicated revolving credit facility with an overall capacity of $750.0 million, replacing its $600.0 million five-year revolving credit facility, which was scheduled to mature in September 2010. The Company may borrow cash and may obtain letters of credit in multiple currencies under the new facility. As of September 30, 2007, the Company had $305.0 million in issued, but undrawn, letters of credit under this new 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 $314.8 million and $276.5 million as of September 30, 2007 and December 31, 2006, 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 September 30, 2007, RGA’s exposure related to these guarantees was $158.8 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.
6. Employee Benefit Plans
The components of net periodic benefit costs were as follows (dollars in thousands):
                                 
    Three months ended   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
           
Net periodic pension benefit cost:
                               
Service cost
  $ 806     $ 518     $ 2,077     $ 1,555  
Interest cost
    424       425       1,274       1,273  
Expected return on plan assets
    (469 )     (379 )     (1,407 )     (1,137 )
Amortization of prior service cost
    70       7       244       22  
Amortization of prior actuarial (gain) loss
    51       91       120       275  
           
Net periodic pension benefit cost
  $ 882     $ 662     $ 2,308     $ 1,988  
     

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    Three months ended   Nine months ended
    September 30,   September 30,
    2007   2006   2007   2006
           
Net periodic other benefits cost:
                               
Service cost
  $ 71     $ 156     $ 214     $ 515  
Interest cost
    135       163       404       474  
Expected return on plan assets
                       
Amortization of prior service cost
    7             19        
Amortization of prior actuarial (gain) loss
    40       77       122       209  
           
Net periodic other benefits cost
  $ 253     $ 396     $ 759     $ 1,198  
     
The Company made $1.9 million in pension contributions during the second quarter of 2007 and expects this to be the only contribution for the year.
7. Financing Activities
On September 24, 2007 the Company entered into a five-year, syndicated revolving credit facility with an overall capacity of $750.0 million, replacing its $600.0 million five-year revolving credit facility, which was scheduled to mature in September 2010. The Company may borrow cash and may obtain letters of credit in multiple currencies under the new facility. The credit facility may be increased, at the Company’s election, to provide for up to an additional $100 million of borrowings and letters of credit. Interest on borrowings is based either on the prime, federal funds or LIBOR rates plus a base rate margin defined in the agreement. Fees payable for the credit facility depend upon the Company’s senior unsecured long-term debt rating. As of September 30, 2007, the Company had no cash borrowings outstanding and $305.0 million in issued, but undrawn, letters of credit under this new facility. The credit agreement is unsecured but contains affirmative, negative and financial covenants customary for financings of this type.
On March 6, 2007, RGA issued 5.625% Senior Notes due March 15, 2017 with a face amount of $300.0 million. These senior notes have been registered with the Securities and Exchange Commission. The net proceeds from the offering were approximately $295.3 million, a portion of which were used to pay down $50.0 million of indebtedness under a U.S. bank credit facility. The remaining net proceeds are designated for general corporate purposes. Capitalized issue costs were approximately $2.6 million.
8. Equity Based Compensation
Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123(r), “Share-Based Payment” (“SFAS 123(r)”). SFAS 123(r) requires that the cost of all share-based transactions be recorded in the financial statements. The Company has been recording compensation cost for all equity-based grants or awards after January 1, 2003 consistent with the requirement of SFAS No. 123 “Accounting for Stock-Based Compensation”, as amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of SFAS No. 123”. Equity compensation expense was $3.8 million and $4.5 million in the third quarter of 2007 and 2006, respectively, and $13.3 million and $15.2 million in the first nine months of 2007 and 2006, respectively. In the first quarter of 2007, the Company granted 0.3 million incentive stock options at $59.63 weighted average per share and 0.1 million performance contingent units (“PCUs”) to employees. Additionally, non-employee directors were granted a total of 4,800 shares of common stock. As of September 30, 2007, the total compensation cost of non-vested awards not yet recognized in the financial statements was $15.9 million with various recognition periods over the next five years.
9. New Accounting Standards
Effective January 1, 2007 the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company’s financial statements. FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in

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the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made.
As a result of implementation of FIN 48, the Company recognized a $17.3 million increase in the liability for unrecognized tax benefits, a $5.3 million increase in the interest liability for unrecognized tax benefits, and a corresponding reduction to the January 1, 2007 balance of retained earnings of $22.6 million. The Company’s total amount of unrecognized tax benefits upon adoption of FIN 48 was $196.3 million. The Company reclassified, at adoption, $9.1 million of current tax liabilities to the liability for unrecognized tax benefits. The Company also reclassified, at adoption, $169.9 million of deferred income tax liabilities to the liability for unrecognized tax benefits for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate if recognized was $26.4 million. The Company also had $29.8 million of accrued interest, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense.
The Company files income tax returns in the U.S. federal jurisdiction and various state and non U.S. jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non U.S. income tax examinations by tax authorities for years before 2003.
As of September 30, 2007, the Company’s total amount of unrecognized tax benefits was $196.3 million, which is unchanged from the amount recorded as of the date of adoption. The total amount of unrecognized tax benefit included that would affect the effective tax rate, if recognized, was approximately $25.7 million, a decrease of approximately $0.7 million from the amount recorded as of the date of adoption. The net decrease was primarily due to tax issues that were effectively settled in the current quarter. As a result of these settlements, items within the liability for unrecognized tax benefits were reclassified to current and deferred taxes, as applicable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits and unrecognized tax benefits that, if recognized, would affect the effective tax rate, for the nine months ended September 30, 2007 is as follows:
                 
            Unrecognized Tax Benefits That,
    Total Unrecognized   If Recognized Would Affect the
(dollars in millions)   Tax Benefits   Effective Tax Rate
     
Balance at January 1, 2007 (date of adoption)
  $ 196.3     $ 26.4  
Additions for tax positions of prior years
           
Reductions for tax positions of prior years
    (5.8 )     (6.5 )
Additions for tax positions of current year
    5.8       5.8  
Reductions for tax positions of current year
           
Settlements with tax authorities
           
     
Balance at September 30, 2007
  $ 196.3     $ 25.7  
     
During the three months and nine months ended September 30, 2007, the Company recognized a decrease of $9.4 million and $0.7 million, respectively, in interest expense. As of September 30, 2007, the Company had $29.1 million of accrued interest related to unrecognized tax benefits. The net decrease of approximately $0.7 million from the date of adoption resulted from the resolution of effectively settled tax issues in the current quarter.
Effective January 1, 2007, the Company adopted the provisions of the FASB’s Emerging Issues Task Force (“EITF”) Issue 06-5. This issue, titled “Accounting for the Purchases of Life Insurance - Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4”, clarified that the amount of the DAC receivable beyond one year generally must be discounted to present value under Accounting Principles Board

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Opinion 21. The adoption of EITF Issue 06-05 did not have a material impact on the Company’s condensed consolidated financial statements.
Effective January 1, 2007, the Company adopted Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments”. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants (“AICPA”) issued related Technical Practice Aids (“TPAs”) to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. The adoption of SOP 05-1 and related TPAs did not have a material impact on the Company’s 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 is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company’s condensed consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with certain exceptions. The Company is currently evaluating the impact of SFAS 157 on the Company’s condensed consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
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 2006 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 many 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 $6 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 business in run-off 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 (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 $4.2 million, or 3.5%, and $41.5 million, or 12.8%, for the third quarter and first nine months of 2007, respectively, primarily due to increased premium levels in all segments. Also, contributing to these increases were improved mortality experience in the Canada segment partially offset by adverse mortality experience in the Europe and South Africa segment. Favorable foreign currency exchange fluctuations resulted in an increase to income from continuing operations before income taxes totaling approximately $5.3 million and $6.8 million for the third quarter and first nine months of 2007, respectively. Consolidated net premiums increased $151.7 million, or 14.1%, and $415.8 million, or 13.2%, during the third quarter and first nine months of 2007, respectively, due to growth in life reinsurance in force. Foreign currency fluctuations favorably affected net premiums by approximately $33.4 million and $67.7 million in the third quarter and first nine months of 2007, respectively, as compared to the same periods in 2006.
Consolidated investment income, net of related expenses, increased $7.1 million, or 3.9%, and $142.2 million, or 26.4%, during the third quarter and first nine months of 2007, respectively, primarily due to market value changes related to the Company’s funds withheld at interest investment related to the reinsurance of certain equity indexed

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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, a larger invested asset base, and a higher effective yield. Invested assets as of September 30, 2007 totaled $15.9 billion, a 12.4% increase over September 30, 2006. A portion of the increase in invested assets is related to the Company’s investment of the net proceeds from the issuance of senior notes in March 2007. The average yield earned on investments, excluding funds withheld, increased slightly from 5.79% in the third quarter of 2006 to 6.00% for the third quarter 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 and changes in the mix of the underlying investments and the timing of dividends and distributions on certain investments. Net investment related losses totaled $24.7 million for the first nine months of 2007 which includes $4.7 million in other-than-temporary write-downs on fixed maturity securities and a $10.5 million foreign currency translation loss related to the Company’s decision to sell its direct insurance operations in Argentina. The Company does not expect the ultimate sale of that subsidiary to generate a material financial impact. Investment income and a portion of investment related gains (losses) are allocated to the segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.
Income before income taxes was negatively affected by a decrease, net of deferred acquisition costs, in the value of embedded derivatives associated with modified coinsurance arrangements due to the impact of widening credit spreads in the U.S. debt markets. The net effect on income before income taxes for the third quarter and first nine months of 2007 was a decrease of $13.8 million and $14.7 million, respectively.
The effective tax rate on a consolidated basis was 33.6% for the third quarter and 35.1% for the first nine months of 2007, compared to 35.7% and 35.0% for the comparable prior-year periods. The effective tax rates for the third quarter and first nine months of 2007 were affected by the application of FIN 48.
Critical Accounting Policies
The Company’s accounting policies are described in Note 2 in the 2006 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 investment impairments; and the establishment of arbitration or litigation reserves. The balances of these accounts are significant to the Company’s financial position and 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

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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.
Differences in experience compared with the assumptions and estimates utilized in the justification of the recoverability of DAC, in establishing reserves for future policy benefits and claim liabilities, or in the determination of other-than-temporary impairments to investment securities can have a material effect on the Company’s results of operations and financial condition.
The Company is currently a party to various litigation and arbitrations. While it is difficult to predict or determine the ultimate outcome of the pending litigation or arbitrations or even to provide useful ranges of potential losses, it is the opinion of management, after consultation with counsel, that the outcomes of such litigation and arbitrations, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome could, from time to time, have a material adverse effect on the Company’s consolidated net income in a particular quarter or year. See Note 20, “Discontinued Operations” of the consolidated financial statements accompanying the 2006 Annual Report for more information.
Further discussion and analysis of the results for 2007 compared to 2006 are presented by segment. References to income before income taxes exclude the effects of discontinued operations.

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U.S. OPERATIONS
U.S. operations consist of two major sub-segments: Traditional and Non-Traditional. The Traditional sub-segment primarily specializes in mortality-risk reinsurance. The Non-Traditional sub-segment consists of Asset-Intensive and Financial Reinsurance.
For the three months ended September 30, 2007 (dollars in thousands)
                                 
    Traditional   Non-Traditional   Total
            Asset-   Financial   U.S.
            Intensive   Reinsurance   Operations
     
Revenues:
                               
Net premiums
  $ 690,388     $ 1,555     $     $ 691,943  
Investment income, net of related expenses
    89,221       28,870       (9 )     118,082  
Investment related losses, net
    (5,457 )     (5,409 )     (2 )     (10,868 )
Change in value of embedded derivatives
          (52,975 )           (52,975 )
Other revenues
    242       11,095       7,205       18,542  
     
Total revenues
    774,394       (16,864 )     7,194       764,724  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    572,871       2,280             575,151  
Interest credited
    14,845       15,457             30,302  
Policy acquisition costs and other insurance expenses
    99,759       16,283       1,831       117,873  
Change in deferred acquisition costs associated with change in value of embedded derivatives
          (39,163 )           (39,163 )
Other operating expenses
    11,631       1,757       1,021       14,409  
     
Total benefits and expenses
    699,106       (3,386 )     2,852       698,572  
 
                               
Income (loss) before income taxes
  $ 75,288     $ (13,478 )   $ 4,342     $ 66,152  
     
For the three months ended September 30, 2006 (dollars in thousands)
                                 
    Traditional   Non-Traditional   Total
            Asset-   Financial   U.S.
            Intensive   Reinsurance   Operations
     
Revenues:
                               
Net premiums
  $ 646,529     $ 1,559     $     $ 648,088  
Investment income, net of related expenses
    76,900       48,473       (7 )     125,366  
Investment related gains (losses), net
    200       (1,998 )     4       (1,794 )
Change in value of embedded derivatives
          4,272             4,272  
Other revenues
    271       7,263       7,584       15,118  
     
Total revenues
    723,900       59,569       7,581       791,050  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    514,259       1,069       3       515,331  
Interest credited
    12,337       30,824             43,161  
Policy acquisition costs and other insurance expenses
    109,213       17,644       2,392       129,249  
Change in deferred acquisition costs associated with change in value of embedded derivatives
          2,886             2,886  
Other operating expenses
    12,334       1,869       1,418       15,621  
     
Total benefits and expenses
    648,143       54,292       3,813       706,248  
 
                               
Income before income taxes
  $ 75,757     $ 5,277     $ 3,768     $ 84,802  
     

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For the nine months ended September 30, 2007 (dollars in thousands)
                                 
    Traditional   Non-Traditional   Total
            Asset-   Financial   U.S.
            Intensive   Reinsurance   Operations
     
Revenues:
                               
Net premiums
  $ 2,078,560     $ 4,779     $     $ 2,083,339  
Investment income, net of related expenses
    261,300       214,141       110       475,551  
Investment related losses, net
    (10,292 )     (7,336 )     (9 )     (17,637 )
Change in value of embedded derivatives
          (57,263 )           (57,263 )
Other revenues
    648       28,209       18,940       47,797  
     
Total revenues
    2,330,216       182,530       19,041       2,531,787  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    1,710,076       6,250       1       1,716,327  
Interest credited
    43,694       159,939             203,633  
Policy acquisition costs and other insurance expenses
    300,946       58,764       6,026       365,736  
Change in deferred acquisition costs associated with change in value of embedded derivatives
          (42,601 )           (42,601 )
Other operating expenses
    35,103       5,083       2,962       43,148  
     
Total benefits and expenses
    2,089,819       187,435       8,989       2,286,243  
 
                               
Income (loss) before income taxes
  $ 240,397     $ (4,905 )   $ 10,052     $ 245,544  
     
For the nine months ended September 30, 2006 (dollars in thousands)
                                 
    Traditional   Non-Traditional   Total
            Asset-   Financial   U.S.
            Intensive   Reinsurance   Operations
     
Revenues:
                               
Net premiums
  $ 1,920,667     $ 4,638     $     $ 1,925,305  
Investment income, net of related expenses
    222,599       167,794       (162 )     390,231  
Investment related gains (losses), net
    (3,535 )     (7,842 )     4       (11,373 )
Change in value of embedded derivatives
          (2,251 )           (2,251 )
Other revenues
    227       14,460       22,390       37,077  
     
Total revenues
    2,139,958       176,799       22,232       2,338,989  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    1,568,045       927       4       1,568,976  
Interest credited
    35,620       112,291             147,911  
Policy acquisition costs and other insurance expenses
    292,614       48,578       7,052       348,244  
Change in deferred acquisition costs associated with change in value of embedded derivatives
          (2,339 )           (2,339 )
Other operating expenses
    31,192       5,058       3,874       40,124  
     
Total benefits and expenses
    1,927,471       164,515       10,930       2,102,916  
 
                               
Income before income taxes
  $ 212,487     $ 12,284     $ 11,302     $ 236,073  
     
Income before income taxes for the U.S. operations segment totaled $66.2 million and $245.5 million for the third quarter and first nine months of 2007, respectively, compared to $84.8 million and $236.1 million for the same periods in the prior year. Issue B36 of FAS 133 (described below in the Asset-Intensive sub-segment) had a significant impact on income in both the current quarter and first nine months of 2007, contributing a $13.8 million loss for the quarter and a $14.7 million loss for the year compared to income of $1.4 million and a loss of $0.1 million for the same periods in 2006, respectively. In addition, mortality experience was slightly less favorable in 2007 as compared to 2006 and investment related losses were higher in both the quarter and first nine months of

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2007 compared to the prior year. Offsetting these negative income impacts was overall growth in total business in force as evidenced by the increase in premium both quarter over quarter and year over year.
Traditional Reinsurance
The U.S. Traditional sub-segment provides life reinsurance to domestic clients for a variety of life products through yearly renewable term, coinsurance and modified coinsurance agreements. These reinsurance arrangements may be either facultative or automatic agreements. During the third quarter and first nine months of 2007, this sub-segment added new business production of $36.5 billion and $120.9 billion, measured by face amount of insurance in force, respectively, compared to $43.1 billion and $132.7 billion during the same periods in 2006. Management believes industry consolidation and the established practice of reinsuring mortality risks should continue to provide opportunities for growth.
Income before income taxes for U.S. Traditional reinsurance decreased $0.5 million, or 0.6% quarter over quarter and increased $27.9 million, or 13.1% year over year. In the third quarter of 2007, this sub-segment experienced less favorable mortality than in the third quarter of 2006. In addition, investment related losses increased $5.7 million. Year-to-date stronger premiums and higher investment income were the primary contributors to the increase in net income, offset in part by higher mortality and higher investment related losses.
Net premiums for U.S. Traditional reinsurance totaled $690.4 million and $2,078.6 million for the third quarter and first nine months of 2007. Comparable prior-year numbers were $646.5 million and $1,920.7 million, respectively. The 8.2% increase in year to date net premiums was driven primarily by the growth of total U.S. business in force, which totaled just over $1.2 trillion of face amount as of September 30, 2007. This represents a 5.9% increase over the amount in force on September 30, 2006.
Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments. During the third quarter of 2007, investment income in the sub-segment totaled $89.2 million, a 16.0% increase over the same period in the prior year. Year to date 2007, investment income grew 17.4% over the first nine months of 2006. This increase can be primarily attributed to growth in the invested asset base. Higher investment related losses both quarter over quarter and year over year are generally the result of the Company selling securities at lower book yields and reinvesting in higher book yielding securities. This strategy results in investment losses at the time of sale, but should generate higher future investment income.
Mortality experience for the third quarter and the first nine months of 2007, while unfavorable compared to the same prior-year periods, was within management expectations. The negative variance is mainly the result of the very favorable mortality experience seen in 2006 coupled with this sub-segment’s mix of yearly renewable term versus coinsurance business, which could cause the loss ratio to fluctuate from period to period. Claims and other policy benefits as a percentage of net premiums (loss ratios) were 83.0% for the third quarter and 82.3% for the first nine months of 2007. The loss ratios for the same prior-year periods were 79.5% and 81.6%, respectively. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.
Interest credited relates to amounts credited on cash value products, which have a significant mortality component. The amount of interest credited fluctuates in step with changes in deposit levels, cash surrender values and investment performance. Income before income taxes is affected by the spread between the investment income and the interest credited on the underlying products. Interest credited expense for the third quarter and first nine months of 2007 totaled $14.8 million and $43.7 million, respectively, compared to $12.3 million and $35.6 million for the same periods in 2006. The increase is primarily the result of one treaty in which the credited loan rate increased from 4.6% in 2006 to 5.6% in 2007 based on an increase in the related market index. A corresponding increase in investment income offset this additional expense.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 14.4% for the third quarter of 2007 and 14.5% for the first nine months of 2007. Comparable ratios for the third quarter and first nine months of 2006 were 16.9% and 15.2%, respectively. Overall, while these ratios are expected to remain in a certain range, they may fluctuate from period to period due to varying allowance levels within coinsurance-type arrangements. In addition, the amortization pattern of previously capitalized amounts, which are subject to the form

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of the reinsurance agreement and the underlying insurance policies, may vary. Finally, the mix of first year coinsurance business versus yearly renewable term business can cause the percentage to fluctuate from period to period.
Other operating expenses, as a percentage of net premiums were 1.7% for the third quarter of 2007 and year to date, compared to 1.9% and 1.6% for the third quarter and year to date respectively, in 2006. The expense ratio can fluctuate slightly from period to period, however, the size and maturity of the U.S. operations segment indicates it should remain relatively constant over the long term.
Asset-Intensive Reinsurance
The U.S. Asset-Intensive sub-segment assumes investment risk within underlying annuities and corporate-owned life insurance policies. Most of these agreements are coinsurance, coinsurance with funds withheld or modified coinsurance of non-mortality risks whereby the Company recognizes profits or losses primarily from the spread between the investment income earned and the interest credited on the underlying deposit liabilities.
In accordance with the provisions of 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”), the Company recorded a change in value of embedded derivatives of $(53.0) million and $(57.3) million within revenues for the third quarter and first nine months of 2007, respectively, and $(39.2) million and $(42.6) million of related deferred acquisition costs. Significant fluctuations may occur as the fair value of the embedded derivatives is tied primarily to the movements in credit spreads. During the quarter, management estimates the weighted average asset credit spreads widened by approximately 0.30%. This was partially offset by a decrease in risk free interest rates (swap curve) of approximately 0.10%. These fluctuations have no impact on cash flows or interest spreads on the underlying treaties. Therefore, Company management believes it is helpful to distinguish between the effects of Issue B36 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 Issue B36 to be immaterial.
The Asset-Intensive sub-segment reported a loss before income taxes equal to $13.5 million for the third quarter of 2007 and $4.9 million year to date. Comparable figures for 2006 were income of $5.3 million and $12.3 million, respectively. Of the $18.8 million decrease quarter over quarter, Issue B36 contributed $15.2 million. The remaining $3.6 million can be primarily attributed to an increase in investment related losses. The year over year decrease in income before income taxes of $17.2 million includes $14.8 million of losses relating to Issue B36. The remaining $2.4 million is primarily the result of higher benefits due to an increase in benefit claims on a single premium universal life reinsurance treaty offset in part by an increase in mortality and expense fees earned on a new variable annuity treaty.
Revenues totaled $(16.9) million and $182.5 million for the third quarter and first nine months of 2007, respectively, resulting in a decrease of $76.4 million quarter over quarter and an increase of $5.7 million year over year. Issue B36 related revenues declined $57.2 million and $55.0 in the third quarter and first nine months of 2007 compared to same year prior periods. Excluding Issue B36, total revenues decreased $19.2 million for the quarter and increased $60.7 million for the year. This drop in revenue quarter over quarter can be primarily attributed to a 40.4% decline in investment income. A significant portion of this variance is the result of market value changes related to the Company’s funds withheld at interest investment associated with the reinsurance of equity indexed annuity products. This decrease is offset by a corresponding decrease in interest credited, with minimal impact on income before taxes. Year to date revenue growth can be attributed to higher mortality and expense charges earned on a variable annuity reinsurance treaty as well as an increase in investment income due to a growing asset base. The investment income growth is somewhat offset by the negative market value changes in funds withheld at interest mentioned above.
The average invested asset base supporting this sub-segment grew from $4.3 billion in the third quarter of 2006 to $4.8 billion for the third quarter of 2007. The growth in the asset base is primarily driven by new business written on one existing equity indexed annuity treaty. Invested assets outstanding as of September 30, 2007 were $4.8 billion, of which $3.5 billion were funds withheld at interest. Of the $3.5 billion of total funds withheld balance as of September 30, 2007, 91.1% of the balance is associated with one client.

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Total benefits and expenses, which are comprised primarily of interest credited and policy acquisition costs, decreased $57.7 million from the third quarter of 2006 and increased $22.9 million year to date. Issue B36 related expenses decreased $42.0 million and $40.3 million in the third quarter and year to date; respectively, resulting in decreased expenses of $15.7 million for the third quarter and increased expenses of $63.2 million for the first nine months, respectively, excluding Issue B36. The majority of the change in benefits and expenses relates to interest credited expense, which declined $15.4 million and increased $47.6 million quarter over quarter and year over year, respectively. As mentioned above, a large part of this variance relates to market value changes in certain equity indexed annuity products and is offset in investment income. Also contributing to the increase in benefits and expenses year over year is an increase in benefit claims on a single premium universal life reinsurance treaty in the first quarter of 2007.
Financial Reinsurance
The U.S. Financial Reinsurance sub-segment income consists primarily of net fees earned on financial reinsurance transactions. The majority of the financial reinsurance risks are assumed by the Company and retroceded to other insurance companies or brokered business in which the company does not participate in the assumption of risk. The fees earned from the assumption of the financial reinsurance contracts are reflected in other revenues, and the fees paid to retrocessionaires are reflected in policy acquisition costs and other insurance expenses. Fees earned on brokered business are reflected in other revenues.
Income before income taxes increased $0.6 million in the third quarter and decreased $1.3 million for the first nine months of 2007 compared to the same periods in 2006. In 2006, both the domestic and a portion of various Asia Pacific financial reinsurance treaties were reflected in this segment. Beginning in 2007, the Asia Pacific-based treaties are included with the Company’s Asia Pacific segment with reimbursement to the U.S. segment for costs incurred by U.S. personnel. The current quarter earnings benefited by $1.0 million due to a recapture associated with one large treaty.
At September 30, 2007 and 2006, the amount of reinsurance provided, as measured by pre-tax statutory surplus, was $0.5 billion and $1.8 billion respectively. This decrease is a result of the aforementioned change in reporting for Asia Pacific-based treaties and the recapture of one large treaty. The pre-tax statutory surplus amounts indicated include all business assumed or brokered by the Company in the U.S. Fees earned from this business can vary significantly depending on the size of the transactions and the timing of their completion and therefore can fluctuate from period to period.
CANADA OPERATIONS
The Company conducts reinsurance business in Canada through RGA Life Reinsurance Company of Canada (“RGA Canada”), a wholly-owned subsidiary. RGA Canada assists clients with capital management activity and mortality risk management, and is primarily engaged in traditional individual life reinsurance, as well as creditor, critical illness, and group life and health reinsurance. Creditor insurance covers the outstanding balance on personal, mortgage or commercial loans in the event of death, disability or critical illness and is generally shorter in duration than traditional life insurance.

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    For the three months ended   For the nine months ended
    September 30,   September 30,
(dollars in thousands)   2007   2006   2007   2006
     
Revenues:
                               
Net premiums
  $ 123,676     $ 103,316     $ 345,748     $ 294,838  
Investment income, net of related expenses
    31,057       27,578       89,852       78,881  
Investment related gains, net
    2,713       1,419       7,145       3,565  
Other revenues
    1       (452 )     180       315  
           
Total revenues
    157,447       131,861       442,925       377,599  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    106,416       95,854       303,231       280,382  
Interest credited
    170       211       541       623  
Policy acquisition costs and other insurance expenses
    23,118       18,146       62,937       51,735  
Other operating expenses
    4,945       4,188       14,182       11,892  
           
Total benefits and expenses
    134,649       118,399       380,891       344,632  
 
                               
Income before income taxes
  $ 22,798     $ 13,462     $ 62,034     $ 32,967  
     
Income before income taxes increased by $9.3 million or 69.4%, and $29.1 million or 88.2%, in the third quarter and first nine months of 2007, respectively. These increases were primarily the result of higher premium volume, favorable mortality experience in the current periods and an increase of $3.6 million in investment related gains for the first nine months. Strength in the Canadian dollar resulted in an increase to income before income taxes totaling approximately $1.9 million and $2.0 million during the third quarter and first nine months of 2007, respectively.
Net premiums increased by $20.4 million, or 19.7%, and $50.9 million or 17.3% in the third quarter and first nine months of 2007, respectively. The increase is primarily due to new business from new and existing treaties. In addition, an increase in premium from creditor treaties contributed $6.4 million and $19.7 million of the premium increase in the third quarter and first nine months of 2007, respectively. Creditor and group life and health premiums represented 18.0% and 14.4% of net premiums in the first nine months of 2007 and 2006, respectively. A stronger Canadian dollar resulted in an increase in net premiums of approximately $8.4 million and $9.5 million in the third quarter and first nine months of 2007, respectively, as compared to 2006. Premium levels are significantly influenced by large transactions, mix of business and reporting practices of ceding companies and therefore can fluctuate from period to period.
Net investment income increased $3.5 million or 12.6%, and $11.0 million or 13.9% in the third quarter and first nine months of 2007, respectively. A stronger Canadian dollar resulted in an increase in net investment income of approximately $2.2 million and $2.5 million in the third quarter and first nine months of 2007, respectively. Investment income and investment related gains and losses are allocated to the segments based upon average assets and related capital levels deemed appropriate to support business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments. The increase in investment income was mainly the result of an increase in the allocated asset base due to growth in the underlying business volume.
Loss ratios for this segment were 86.0% and 87.7% in the third quarter and first nine months of 2007, respectively, compared to 92.8% and 95.1% in the comparable prior-year periods. During 2006 and 2005, the Company entered into three significant creditor reinsurance treaties. The loss ratios on this type of business are normally lower than traditional reinsurance, however, allowances are normally higher as a percentage of premiums. Excluding creditor business, the loss ratios for this segment were 96.2% and 97.1% in the third quarter and first nine months of 2007, respectively, compared to 100.4% and 102.6% in the comparable prior-year periods. The lower loss ratios in 2007 are primarily due to favorable mortality experience compared to the prior year. Historically, the loss ratio increased primarily as the result of several large permanent level premium in-force blocks assumed in 1997 and 1998. These blocks are mature blocks of permanent level premium business in which mortality as a percentage of net premiums

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is expected to be higher than historical ratios. The nature of permanent level premium policies requires the Company to set up actuarial liabilities and invest the amounts received in excess of early-year mortality costs to fund claims in the later years when premiums, by design, continue to be level as compared to expected increasing mortality or claim costs. Claims and other policy benefits, as a percentage of net premiums and investment income were 68.8% and 69.6% in the third quarter and first nine months of 2007, respectively, compared to 73.2% and 75.0% in the comparable prior-year periods. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.
Policy acquisition costs and other insurance expenses as a percentage of net premiums totaled 18.7% and 18.2% in the third quarter and first nine months of 2007, respectively, compared to 17.6% and 17.5% in the comparable prior-year periods. Excluding creditor business, policy acquisition costs and other insurance expenses as a percentage of net premiums totaled 11.1% and 11.6% in the third quarter and first nine months of 2007, respectively, compared to 12.0% and 12.6% in the comparable prior-year periods. Overall, while these ratios are expected to remain in a certain range, they may fluctuate from period to period due to varying allowance levels, significantly caused by the mix of first year coinsurance business versus yearly renewable term business. In addition, the amortization pattern of previously capitalized amounts, which are subject to the form of the reinsurance agreement and the underlying insurance policies, may vary.
Other operating expenses increased $0.8 million, or 18.1%, and $2.3 million, or 19.3%, in the third quarter and first nine months of 2007, respectively. Other operating expenses as a percentage of net premiums totaled 4.0% and 4.1% in the third quarter and first nine months of 2007, respectively, compared to 4.1% and 4.0% in the comparable prior-year periods.
EUROPE & SOUTH AFRICA OPERATIONS
The Europe & South Africa segment has operations in Germany, France, India, Italy, Mexico, Poland, Spain, South Africa and the United Kingdom (“UK”). The segment provides life reinsurance for a variety of products through yearly renewable term and coinsurance agreements, and reinsurance of critical illness coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.
                                 
    For the three months ended   For the nine months ended
    September 30,   September 30,
(dollars in thousands)   2007   2006   2007   2006
           
Revenues:
                               
Net premiums
  $ 170,774     $ 145,769     $ 503,366     $ 436,993  
Investment income, net of related expenses
    5,569       4,210       18,446       11,475  
Investment related losses, net
    (863 )     (91 )     (1,717 )     (238 )
Other revenues
    (43 )     206       61       119  
           
Total revenues
    175,437       150,094       520,156       448,349  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    127,281       101,492       370,263       308,172  
Interest credited
    3       133       1,019       479  
Policy acquisition costs and other insurance expenses
    22,592       28,110       65,781       69,188  
Other operating expenses
    13,872       11,546       38,434       29,631  
           
Total benefits and expenses
    163,748       141,281       475,497       407,470  
 
                               
Income before income taxes
  $ 11,689     $ 8,813     $ 44,659     $ 40,879  
     
Income before income taxes was $11.7 million in the third quarter of 2007 as compared to $8.8 million for the third quarter of 2006, and $44.7 million for the first nine

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months of 2006. The increase for the third quarter was primarily due to an increase in the volume of premiums over the prior year partially offset by adverse mortality experience for the third quarter of 2007 compared to the prior year. The nine month increase in 2007 over 2006 was due to growth in net premiums and investment income which was partially offset by adverse mortality experience and an increase in the investment related losses for the first nine months of 2007 compared to 2006. Favorable foreign currency exchange fluctuations resulted in an increase to income before income taxes totaling approximately $1.4 million and $1.8 million for the third quarter and first nine months of 2007, respectively.
Europe & South Africa net premiums increased $25.0 million, or 17.2%, in the third quarter compared to the same period in 2006, and increased $66.4 million or 15.2% during the nine months ended September 30, 2007 compared to the same period in 2006. This increase was primarily the result of new business from both existing and new treaties. During the third quarter and for the first nine months of 2007, several foreign currencies, particularly the British pound and the euro strengthened against the U.S. dollar and increased net premiums by approximately $11.4 million and $30.6 million for the third quarter and first nine months of 2007, respectively, over the prior year. A significant portion of the net premiums was due to reinsurance of critical illness coverage, primarily in the UK. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Net premiums earned from policies including this coverage totaled $59.6 million and $174.5 million during the third quarter and first nine months of 2007, respectively, compared to $54.5 million and $156.1 million in the comparable prior-year periods. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and therefore can fluctuate from period to period.
Investment income increased $1.4 million for the third quarter compared to the same period in 2006 and increased $7.0 million for the nine months ended September 30, 2007 compared to the same period in 2006. These increases were primarily due to an increase in allocated investment income. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.
Loss ratios were 74.5% and 69.6% for the third quarter of 2007 and 2006, respectively, and 73.6% and 70.5% for the nine months ended September 30, 2007 and September 30, 2006, respectively. The increase in loss ratios is due primarily to favorable claims experience in the UK during 2006. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 13.2% in the third quarter of 2007 compared to 19.3% in the third quarter of 2006, and 13.1% for the nine months ended September 30, 2007 compared to 15.8% for the nine months ended September 30, 2006. These percentages fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business. In addition, as the segment grows, renewal premiums, which have lower allowances than first-year premiums, represent a greater percentage of the total net premiums.
Other operating expenses increased to 8.1% of net premiums in the current quarter, and 7.6% of net premiums for the nine months ended September 30, 2007, up from 7.9% and 6.8% in the comparable prior-year periods. These increases were due to higher costs associated with maintaining and supporting the segment’s increase in business over the past several years and the Company’s recent expansion into Central Europe. The Company believes that sustained growth in net premiums should lessen the burden of start-up expenses and expansion costs over time.
ASIA PACIFIC OPERATIONS
The Asia Pacific segment has operations in Australia, Hong Kong, Japan, Malaysia, Singapore, New Zealand, South Korea, Taiwan and mainland China. The principal types of reinsurance for this segment include life, critical illness, disability income, superannuation, and financial reinsurance. Superannuation is the Australian government mandated compulsory retirement savings program. Superannuation funds accumulate retirement funds for employees, and in addition, offer life and disability insurance coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.

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    For the three months ended   For the nine months ended
    September 30,   September 30,
(dollars in thousands)   2007   2006   2007   2006
     
Revenues:
                               
Net premiums
  $ 240,476     $ 178,550     $ 626,285     $ 486,615  
Investment income, net of related expenses
    9,134       7,036       26,407       20,354  
Investment related losses, net
    (367 )     (46 )     (937 )     (123 )
Other revenues
    2,105       1,243       6,515       4,734  
     
Total revenues
    251,348       186,783       658,270       511,580  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    197,827       134,177       499,974       376,399  
Policy acquisition costs and other insurance expenses
    22,833       20,658       75,620       70,230  
Other operating expenses
    13,448       11,570       39,495       30,234  
     
Total benefits and expenses
    234,108       166,405       615,089       476,863  
 
                               
Income before income taxes
  $ 17,240     $ 20,378     $ 43,181     $ 34,717  
     
Income before income taxes decreased by $3.1 million in the third quarter of 2007 and increased by $8.5 million for the nine months ended September 30, 2007, as compared to the same periods in 2006. Very favorable mortality in the third quarter of 2006 led to a challenging comparison to the current quarter, which also experienced modestly favorable mortality experience. Favorable results from operations throughout the segment, primarily due to increased net premiums, contributed to the increase in income before income taxes for the first nine months of 2007 compared to the same period in 2006. Favorable foreign currency exchange fluctuations resulted in an increase to income before income taxes totaling approximately $1.5 million and $2.4 million for the third quarter and first nine months of 2007, respectively.
Net premiums grew $61.9 million, or 34.7%, during the current quarter, and $139.7 million, or 28.7%, for the nine months ended September 30, 2007, as compared to the same periods in 2006. This premium growth was primarily the result of increases in the volume of business in Australia, Japan and Korea. Premiums in Australia increased by $13.2 million in the third quarter of 2007, and $42.8 million for the nine months ended September 30, 2007, as compared to the same periods in 2006. Premiums in Japan increased by $8.8 million in the third quarter of 2007, and $51.5 million for the nine months ended September 30, 2007 as compared to the same periods in 2006. Premiums in Korea increased by $22.5 million in the third quarter of 2007, and $27.0 million for the nine months ended September 30, 2007 as compared to the same periods in 2006. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and can fluctuate from period to period.
A portion of the net premiums for the segment in each period presented represents reinsurance of critical illness coverage. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Reinsurance of critical illness in the Asia Pacific operations is offered primarily in South Korea, Australia and Hong Kong. Net premiums earned from this coverage totaled $35.0 million and $90.9 million during the third quarter and first nine months of 2007, respectively, compared to $12.6 million and $47.4 million during the third quarter and first nine months of 2006, respectively. Foreign currencies in certain significant markets, particularly the Australian and New Zealand dollars, have strengthened against the U.S. dollar during the first nine months of 2007. The overall effect of changes in local Asia Pacific segment currencies was an increase in net premiums of approximately $13.6 million and $27.6 million for the third quarter and first nine months of 2007, respectively.
Net investment income increased $2.1 million in the current quarter compared to the prior-year quarter, and $6.1 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. This increase was primarily due to growth in the invested assets in Australia. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital

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levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.
Other revenues increased by $0.9 million for the third quarter of 2007, as compared to the same period in 2006, and increased by $1.8 million for the nine months ended September 30, 2007, as compared to the same period in 2006. The primary source of other revenues in 2007 and 2006 has been fees from financial reinsurance treaties. Prior to 2007, a portion of the fee income generated by certain Asia Pacific financial reinsurance treaties was reflected in the U.S. financial reinsurance segment. Beginning in 2007, all of the fee income from the Asia Pacific-based financial reinsurance treaties is included within the Asia Pacific segment with reimbursement to the U.S. segment for costs incurred by U.S. personnel.
Loss ratios were 82.3% and 75.1% for the third quarter of 2007 and 2006, respectively, and 79.8% and 77.4% for the nine months ended September 30, 2007 and September 30, 2006, respectively. The increased loss ratio for the third quarter of 2007 was largely due to more favorable mortality experience in 2006. Loss ratios will fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 9.5% during the third quarter of 2007, as compared to 11.6% for the third quarter of 2006. Policy acquisition costs and other insurance expenses as a percentage of net premiums were 12.1% during the nine months ended September 30, 2007, as compared to 14.4% for the nine months ended September 30, 2006. The ratio of policy acquisition costs and other insurance expenses as a percentage of net premiums will generally decline as the business matures, however, the percentage does fluctuate periodically due to timing of client company reporting and variations in the mixture of business being reinsured.
Other operating expenses decreased to 5.6% of net premiums in the third quarter of 2007, as compared to 6.5% for the third quarter of 2006. Operating expenses were 6.3% of net premiums for the nine months ended September 30, 2007 and 6.2% in the comparable prior-year period. The timing of premium flows and the level of costs associated with the entrance into and development of new markets in the growing Asia Pacific segment may cause other operating expenses as a percentage of net premiums to fluctuate over periods of time.
CORPORATE AND OTHER
Corporate and Other revenues include investment income from invested assets not allocated to support segment operations and undeployed proceeds from the Company’s capital raising efforts, in addition to unallocated investment related gains and losses. Corporate expenses consist of the offset to capital charges allocated to the operating segments within the policy acquisition costs and other insurance expenses line item, unallocated overhead and executive costs, and interest expense related to debt and the $225.0 million of 5.75% Company-obligated mandatorily redeemable trust preferred securities. Additionally, Corporate and Other includes results from RGA Technology Partners, Inc., a wholly-owned subsidiary that develops and markets technology solutions for the insurance industry, the Company’s Argentine privatized pension business, which is currently in run-off, an insignificant amount of direct insurance operations in Argentina and the investment income and expense associated with the Company’s collateral finance facility.

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    For the three months ended   For the nine months ended
    September 30,   September 30,
(dollars in thousands)   2007   2006   2007   2006
     
Revenues:
                               
Net premiums
  $ 1,038     $ 468     $ 2,265     $ 1,485  
Investment income, net of related expenses
    26,616       19,167       70,847       37,962  
Investment related gains (losses), net
    247       387       (11,568 )     3,362  
Other revenues
    1,484       2,673       7,084       4,790  
     
Total revenues
    29,385       22,695       68,628       47,599  
 
                               
Benefits and expenses:
                               
Claims and other policy benefits
    189       54       217       (977 )
Interest credited
          77             830  
Policy acquisition costs and other insurance expenses
    (8,172 )     (7,432 )     (27,395 )     (26,162 )
Other operating expenses
    10,610       11,643       34,066       35,044  
Interest expense
    9,860       15,103       53,545       46,884  
Collateral finance facility expense
    13,047       13,136       38,940       13,413  
     
Total benefits and expenses
    25,534       32,581       99,373       69,032  
 
                               
Income (loss) before income taxes
  $ 3,851     $ (9,886 )   $ (30,745 )   $ (21,433 )
     
Income before income taxes was $3.9 million for the three months ended September 30, 2007, compared to a loss before income taxes of $9.9 million in the comparable prior-year period. The loss before income taxes increased $9.3 million for the first nine months of 2007 compared to the prior year. The increase in income before taxes for the third quarter is primarily due to lower interest expense combined with additional investment income, while the increase in the loss before income taxes for the first nine months is primarily due to an increase in investment related losses. The decrease in interest expense for the third quarter is due to the reversal of $9.4 million in accrued interest expense associated with certain tax positions, which were favorably resolved during the quarter, as required under FIN 48. The increase in investment income for the third quarter is largely due to the investment of the proceeds from the issuance of $300 million in senior notes in March 2007. Contributing to the increase in investment income in the first nine months of 2007 is the impact of the Company’s investment of the proceeds from its collateral finance facility in June 2006, which is largely offset by the recognition of collateral finance facility expense. Investment income and investment related gains are the result of an allocation to other segments based upon average assets and related capital levels deemed appropriate to support their business volumes. The increase in investment related losses for the first nine months of 2007 is primarily due to the recognition of a $10.5 million currency translation loss in the first quarter related to the Company’s decision to sell its direct insurance operations in Argentina. The increase in interest expense for the nine months is largely related to the issuance of the aforementioned $300 million senior notes.
Discontinued Operations
The discontinued accident and health operations reported a loss, net of taxes, of $4.3 million for the third quarter of 2007 compared to a loss, net of taxes, of $1.5 million for the third quarter of 2006. During the third quarter of 2007, the Company commuted approximately $24.9 million of its obligations associated with its discontinued accident and health operations contributing $3.0 million to the loss for the period. As of September 30, 2007 amounts in dispute or subject to audit exceed the Company’s reserves by approximately $18.6 million. The calculation of the claim reserve liability for the entire portfolio of accident and health business requires management to make estimates and assumptions that affect the reported claim reserve levels. Management must make estimates and assumptions based on historical loss experience, changes in the nature of the business, anticipated outcomes of claim disputes and claims for rescission, and projected future premium run-off, all of which may affect the level of the claim reserve liability. Due to the significant uncertainty associated with the run-off of this business, net income in future periods could be affected positively or negatively.

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Liquidity and Capital Resources
The Holding Company
RGA is a holding company whose primary uses of liquidity include, but are not limited to, the immediate capital needs of its operating companies associated with the Company’s primary businesses, dividends paid by RGA to its shareholders, interest payments on its indebtedness, and repurchases of RGA common stock under a plan approved by the board of directors. The primary sources of RGA’s liquidity include proceeds from its capital raising efforts, interest income on undeployed corporate investments, interest income received on surplus notes with two operating subsidiaries, and dividends from operating subsidiaries. As the Company continues its expansion efforts, RGA will continue to be dependent on these sources of liquidity.
The Company believes that it has sufficient liquidity to fund its cash needs under various scenarios that include the potential risk of the early recapture of a reinsurance treaty by the ceding company and significantly higher than expected death claims. Historically, the Company has generated positive net cash flows from operations. However, in the event of significant unanticipated cash requirements beyond normal liquidity, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These options include borrowings under committed credit facilities, secured borrowings, the ability to issue long-term debt, capital securities or common equity and, if necessary, the sale of invested assets.
Cash Flows
The Company’s net cash flows provided by operating activities for the periods ended September 30, 2007 and 2006 were $601.1 million and $490.5 million, respectively. Cash flows from operating activities are affected by the timing of premiums received, claims paid, and working capital changes. The $110.6 million net increase in operating cash flows for the nine months of 2007 compared to the same period in 2006 was primarily a result of cash inflows related to premiums and investment income increasing more than cash outflows related to claims, acquisition costs, income taxes and other operating expenses. Cash from premiums and investment income increased $415.0 million and $130.3 million, respectively, and was offset by higher operating cash outlays of $434.7 million for the current nine month period. The Company believes the short-term cash requirements of its business operations will be sufficiently met by the positive cash flows generated. Additionally, the Company believes it maintains a high quality fixed maturity portfolio with positive liquidity characteristics. These securities are available for sale and could be sold if necessary to meet the Company’s short- and long-term obligations.
Net cash used in investing activities was $543.5 million and $1,167.1 million in the first nine months of 2007 and the comparable prior-year period, respectively. This decrease is largely related to the investment of the net proceeds from the Company’s collateral finance facility in 2006 partially offset by the investment of the net proceeds from the Company’s issuance of senior notes in 2007. The sales and purchases of fixed maturity securities are related to the management of the Company’s investment portfolios and the investment of excess cash generated by operating and financing activities.
Net cash provided by financing activities was $226.6 million and $793.3 million in the first nine months of 2007 and 2006, respectively. This change was due primarily to net proceeds from the Company’s collateral finance facility in 2006 partially offset by $100.0 million principal payments on debt in the same year. Net cash provided by financing activities in 2007 includes $295.3 million of the net proceeds from the Company’s issuance of senior notes in March 2007, partially offset by a $78.9 million decrease in the net borrowings under revolving credit agreements. Also contributing to the decline was a decrease in excess deposits on universal life and other investment type policies and contracts of $49.7 million.
Debt and Preferred Securities
As of September 30, 2007, the Company had $926.7 million in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements.
On September 24, 2007 the Company entered into a five-year, syndicated revolving credit facility with an overall capacity of $750.0 million, replacing its $600.0 million five-year revolving credit facility, which was scheduled to mature in September 2010. The Company may borrow cash and may obtain letters of credit in multiple currencies under the new facility. Interest on borrowings is based either on the prime, federal funds or LIBOR rates plus a base rate margin defined in the agreement. Fees payable for the credit facility depend upon the Company’s senior

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unsecured long-term debt rating. As of September 30, 2007, the Company had no cash borrowings outstanding and $305.0 million in issued, but undrawn, letters of credit under this new facility. The credit agreement is unsecured but contains affirmative, negative and financial covenants customary for financings of this type. The Company’s other credit facilities consist of a £15.0 million credit facility that expires in May 2008, with an outstanding balance of $30.7 million as of September 30, 2007, and an A$50.0 million Australian credit facility that expires in June 2011, with no outstanding balance as of September 30, 2007.
On March 6, 2007, RGA issued 5.625% Senior Notes due March 15, 2017 with a face amount of $300.0 million. These senior notes have been registered with the Securities and Exchange Commission. The net proceeds from the offering were approximately $295.3 million, a portion of which were used to pay down $50.0 million of indebtedness under a U.S. bank credit facility. The remaining net proceeds are designated for general corporate purposes. Capitalized issue costs were approximately $2.6 million.
As of September 30, 2007, the average interest rate on all long-term and short-term debt outstanding, excluding the Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company (“Trust Preferred Securities”), was 6.37%. Interest is expensed on the face amount, or $225 million, of the Trust Preferred Securities at a rate of 5.75%.
Collateral Finance Facility
In June 2006, RGA’s subsidiary, Timberlake Financial, L.L.C. (“Timberlake Financial”), issued $850.0 million of Series A Floating Rate Insured Notes due June 2036 in a private placement. The notes were issued to fund the collateral requirements for statutory reserves required by the U.S. valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX) on specified term life insurance policies reinsured by RGA Reinsurance Company. Proceeds from the notes, along with a $112.7 million direct investment by the Company, have been deposited into a series of trust accounts that collateralize the notes and are not available to satisfy the general obligations of the Company. Interest on the notes will accrue at an annual rate of 1-month LIBOR plus a base rate margin, payable monthly. The payment of interest and principal on the notes is insured through a financial guaranty insurance policy with a third party. The notes represent senior, secured indebtedness of Timberlake Financial with no recourse to RGA or its other subsidiaries. Timberlake Financial will rely primarily upon the receipt of interest and principal payments on a surplus note and dividend payments from its wholly-owned subsidiary, Timberlake Reinsurance Company II (“Timberlake Re”), a South Carolina captive insurance company, to make payments of interest and principal on the notes. The ability of Timberlake Re to make interest and principal payments on the surplus note and dividend payments to Timberlake Financial is contingent upon South Carolina regulatory approval and the performance of specified term life insurance policies with guaranteed level premiums retroceded by RGA’s subsidiary, RGA Reinsurance Company, to Timberlake Re.
Asset / Liability Management
The Company actively manages its assets using an approach that is intended to balance quality, diversification, asset/liability matching, liquidity and investment return. The goals of the investment process are to optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a cash flow and duration basis.
The Company has established target asset portfolios for each major insurance product, which represent the investment strategies intended to profitably fund its liabilities within acceptable risk parameters. These strategies include objectives for effective duration, yield curve sensitivity and convexity, liquidity, asset sector concentration and credit quality.
The Company’s liquidity position (cash and cash equivalents and short-term investments) was $604.8 million and $300.7 million at September 30, 2007 and December 31, 2006, respectively. The increase in the Company’s liquidity position from December 31, 2006 is primarily due to the timing of third quarter investment activity. Liquidity needs are determined from valuation analyses conducted by operational units and are driven by product portfolios. Periodic evaluations of demand liabilities and short-term liquid assets are designed to adjust specific portfolios, as well as their durations and maturities, in response to anticipated liquidity needs.
The Company occasionally enters into sales of investment securities under agreements to repurchase the same securities to increase the Company’s earned yield on invested assets. These transactions are reported as securitized

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lending obligations within other liabilities. There were $62.6 million of these agreements outstanding at September 30, 2007 and there were no agreements outstanding at December 31, 2006.
Future Liquidity and Capital Needs
Based on the historic cash flows and the current financial results of the Company, subject to any dividend limitations which may be imposed by various insurance regulations, management believes RGA’s cash flows from operating activities, together with undeployed proceeds from its capital raising efforts, including interest and investment income on those proceeds, interest income received on surplus notes with two operating subsidiaries, and its ability to raise funds in the capital markets, will be sufficient to enable RGA to make dividend payments to its shareholders, to make interest payments on its senior indebtedness, trust preferred securities and junior subordinated notes, repurchase RGA common stock under the board of director approved plan and meet its other obligations.
A general economic downturn or a downturn in the equity and other capital markets could adversely affect the market for many annuity and life insurance products. Because the Company obtains substantially all of its revenues through reinsurance arrangements that cover a portfolio of life insurance products, as well as annuities, its business would be harmed if the market for annuities or life insurance were adversely affected.
Investments
The Company had total cash and invested assets of $16.3 billion and $14.8 billion at September 30, 2007 and December 31, 2006, respectively. All investments made by RGA and its subsidiaries conform to the qualitative and quantitative limits prescribed by the applicable jurisdiction’s insurance laws and regulations. In addition, the boards of directors of the various operating companies periodically review the investment portfolios of their respective subsidiaries. RGA’s board of directors also receives reports on material investment portfolios. The Company’s investment strategy is to maintain a predominantly investment-grade, fixed maturity portfolio, to provide adequate liquidity for expected reinsurance obligations, and to maximize total return through prudent asset management. The Company’s earned yield on invested assets, excluding funds withheld, was 6.00% in the third quarter of 2007, compared with 5.79% for the third quarter of 2006. See “Note 4 — Investments” in the Notes to Consolidated Financial Statements of the 2006 Annual Report for additional information regarding the Company’s investments.
The Company’s fixed maturity securities are invested primarily in commercial and industrial bonds, public utilities, U.S. and Canadian government securities, as well as mortgage- and asset-backed securities. As of September 30, 2007, approximately 97.2% of the Company’s consolidated investment portfolio of fixed maturity securities was investment grade. Important factors in the selection of investments include diversification, quality, yield, total rate of return potential and call protection. The relative importance of these factors is determined by market conditions and the underlying product or portfolio characteristics. Cash equivalents are invested in high-grade money market instruments. The largest asset class in which fixed maturities were invested was in corporate securities, including commercial, industrial, finance and utility bonds, which represented approximately 54.8% of fixed maturity securities as of September 30, 2007 and had an average Standard and Poor’s (“S&P”) rating of “A”. The Company owns floating rate securities that represent approximately 19.0% of the total fixed maturity securities at September 30, 2007. These investments have a higher degree of income variability than the other fixed income holdings in the portfolio due to the floating rate nature of the interest payments. The Company holds these investments to match specific floating rate liabilities primarily reflected in the condensed consolidated balance sheets as collateral finance facility.
Within the fixed maturity security portfolio, the Company holds approximately $463.9 million in asset-backed securities at September 30, 2007, which include credit card and automobile receivables, home equity loans, manufactured housing bonds and collateralized bond obligations. The Company’s asset-backed securities are diversified by issuer and contain both floating and fixed rate securities. In addition to the risks associated with floating rate securities, principal risks in holding asset-backed securities are structural, credit and capital market risks. Structural risks include the securities’ priority in the issuer’s capital structure, the adequacy of and ability to realize proceeds from collateral, and the potential for prepayments. Credit risks include consumer or corporate credits such as credit card holders, equipment lessees, and corporate obligors. Capital market risks include general level of interest rates and the liquidity for these securities in the marketplace. As of September 30, 2007, the Company held investments in securities with subprime mortgage exposure with an amortized cost totaling $270.4 million and an estimated fair value of $255.0 million. Those amounts include exposure to subprime mortgages

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through securities held directly in the Company’s investment portfolios as well as securities backing the Company’s funds withheld at interest investment. The securities are highly rated with a weighted average S&P credit rating of “AA”. Additionally, the Company has largely avoided investing in securities originated in the second half of 2005 and beyond, which management believes was a period of lessened underwriting quality. The majority of the Company’s holdings are originations from 2005 and prior periods. In light of the high credit quality of the portfolio, the Company does not expect to realize any material losses despite the recent increase in default rates and market concern over future performance of this asset class. The following table presents a summary of the securities by rating (dollars in thousands):
                         
S&P Rating   Amortized Cost     Fair Value     % of Fair Value
AAA
  $ 117,789     $ 115,212       45.3 %
AA
    110,002       102,557       40.2 %
A
    41,430       36,075       14.1 %
BBB
    1,215       1,121       0.4 %
 
                 
Total
  $ 270,436     $ 254,965       100.0 %
 
                 
The Company monitors its fixed maturity securities to determine impairments in value and evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the market value has been below amortized cost, compliance with covenants, general market conditions and industry sector, current intent and ability to hold securities and various other subjective factors. Based on management’s judgment, securities determined to have an other-than-temporary impairment in value are written down to fair value. The Company recorded $4.7 million in other-than-temporary write-downs on fixed maturity securities for the nine months ending September 30, 2007. The Company recorded $1.1 million in other-than-temporary write-downs on fixed maturity securities for the nine months ending September 30, 2006. During the nine months ended September 30, 2007, the Company sold fixed maturity securities and equity securities with a fair value of $910.1 million, which were below amortized cost, at a loss of $32.1 million. Generally, such losses are insignificant in relation to the cost basis of the investment and are largely due to changes in interest rates from the time the security was purchased. The securities are classified as available-for-sale in order to meet the Company’s operational and other cash flow requirements. The Company does not engage in short-term buying and selling of securities to generate gains or losses.
The following table presents the total gross unrealized losses for 1,302 fixed maturity securities and equity securities as of September 30, 2007, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):
                 
    At September 30, 2007
    Gross Unrealized        
    Losses     % of Total
Less than 20%
  $ 164,044       94.9 %
20% or more for less than six months
    8,830       5.1 %
20% or more for six months or greater
           
 
           
Total
  $ 172,874       100.0 %
 
           
While all of these securities are monitored for potential impairment, the Company’s experience indicates that the first two categories do not present as great a risk of impairment, and often, fair values recover over time. These securities have generally been adversely affected by overall economic conditions, primarily an increase in the interest rate environment.
The following tables present the estimated fair values and gross unrealized losses for the 1,302 fixed maturity securities and equity securities that have estimated fair values below amortized cost as of September 30, 2007. These investments are presented by class and grade of security, as well as the length of time the related market value has remained below amortized cost.

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    As of September 30, 2007
    Equal to or greater than
    Less than 12 months   12 months   Total
            Gross           Gross           Gross
    Estimated Fair   Unrealized   Estimated Fair   Unrealized   Estimated Fair   Unrealized
(dollars in thousands)   Value   Loss   Value   Loss   Value   Loss
Investment grade securities:
                                               
Commercial and industrial
  $ 647,958     $ 22,218     $ 346,806     $ 14,616     $ 994,764     $ 36,834  
Public utilities
    263,391       8,341       98,250       5,937       361,641       14,278  
Asset-backed securities
    335,899       13,580       58,127       3,625       394,026       17,205  
Canadian and Canadian provincial governments
    237,113       13,273                   237,113       13,273  
Mortgage-backed securities
    993,463       16,379       402,377       9,993       1,395,840       26,372  
Finance
    1,068,813       38,418       97,160       3,761       1,165,973       42,179  
U.S. government and agencies
                695       7       695       7  
State and political subdivisions
    29,924       672       17,258       564       47,182       1,236  
Foreign governments
    195,966       5,045                   195,966       5,045  
             
Investment grade securities
    3,772,527       117,926       1,020,673       38,503       4,793,200       156,429  
             
 
                                               
Non-investment grade securities:
                                               
Commercial and industrial
    74,954       3,045       31,987       1,418       106,941       4,463  
Finance
    9,141       1,393                   9,141       1,393  
Public utilities
    22,049       529       1,531       36       23,580       565  
             
Non-investment grade securities
    106,144       4,967       33,518       1,454       139,662       6,421  
             
Total fixed maturity securities
  $ 3,878,671     $ 122,893     $ 1,054,191     $ 39,957     $ 4,932,862     $ 162,850  
             
Equity securities
  $ 104,895     $ 8,486     $ 15,211     $ 1,538     $ 120,106     $ 10,024  
             
The Company believes that the analysis of each security whose price has been below market for twelve months or longer indicates that the financial strength, liquidity, leverage, future outlook and/or recent management actions support the view that the security was not other-than temporarily impaired as of September 30, 2007. The unrealized losses are primarily a result of changes in interest rates and credit spreads and the long-dated maturities of the securities.
The Company’s mortgage loan portfolio consists principally of investments in U.S.-based commercial offices and retail locations. The mortgage loan portfolio is diversified by geographic region and property type. All mortgage loans are performing and no valuation allowance has been established as of September 30, 2007.
Policy loans present no credit risk because the amount of the loan cannot exceed the obligation due the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. Because policy loans represent premature distributions of policy liabilities, they have the effect of reducing future disintermediation risk. In addition, the Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.
Funds withheld at interest comprised approximately 28.5% and 27.9% of the Company’s cash and invested assets as of September 30, 2007 and December 31, 2006, respectively. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company, and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheet. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances with amounts owed to the Company from the ceding company. Interest accrues to these assets at rates defined by the

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treaty terms. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. The underlying portfolios also include options related to equity indexed annuity products. The market value changes associated with these investments has caused some volatility in reported investment income. This is largely offset by a corresponding change in interest credited, with minimal impact on income before taxes. To mitigate risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance. Ceding companies with funds withheld at interest had a minimum A.M. Best rating of “A”.
Other invested assets represented approximately 1.7% and 1.5% of the Company’s cash and invested assets as of September 30, 2007 and December 31, 2006, respectively. Other invested assets include common stock, preferred stocks, restricted cash and cash equivalents and limited partnership interests. The Company did not record an other-than-temporary write-down on its investments in limited partnerships in the first nine months of 2007. The Company recorded other-than-temporary writedowns of $3.1 million on its investments in limited partnerships in the nine months ended September 30, 2006.
Contractual Obligations
Future policy benefits and other policy claims and benefits increased since December 31, 2006 by $3,459.7 million and $223.6 million, respectively, to $26,102.2 million and $2,050.4 million at September 30, 2007, respectively. The Company’s commitment to fund limited partnerships has increased since December 31, 2006 by $78.0 million to $110.7 million at September 30, 2007. Additionally, the Company’s obligation for long-term debt, including interest, increased primarily due to the March 2007 issuance of senior notes as previously discussed. There were no other material changes in the Company’s contractual obligations from that reported in the 2006 Annual Report.
Mortality Risk Management
In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or retrocessionaires under excess coverage and coinsurance contracts. In the U.S., the Company retains a maximum of $6.0 million of coverage per individual life. In certain limited situations, due to the acquisition of in force blocks of business, the Company has retained more than $6.0 million per individual policy. In total, there are 46 such cases of over-retained policies, for amounts averaging $2.7 million over the Company’s normal retention limit. The largest amount over retained on any one life is $12.1 million. For other countries, particularly those with higher risk factors or smaller books of business, the Company systematically reduces its retention. The Company has a number of retrocession arrangements whereby certain business in force is retroceded on an automatic or facultative basis.
The Company maintains a catastrophe insurance program (“Program”) that renews on September 7th of each year. The current Program began September 7, 2007, and covers events involving 10 or more insured deaths from a single occurrence. The Company retains the first $10 million in claims, the Program covers the next $40 million in claims, and the Company retains all claims in excess of $50 million. The Program covers reinsurance programs world-wide and includes losses due to acts of terrorism, including terrorism losses due to nuclear, chemical and/or biological events. The Program excludes losses from earthquakes occurring in California. The Program is insured by nine insurance companies and Lloyd’s Syndicates, with no single entity providing more than $10 million of coverage.
Counterparty Risk
In the normal course of business, the Company seeks to limit its exposure to reinsurance contracts by ceding a portion of the reinsurance to other insurance companies or reinsurers. Should a counterparty not be able to fulfill its obligation to the Company under a reinsurance agreement, the impact could be material to the Company’s financial condition and results of operations.
Generally, RGA’s insurance subsidiaries retrocede amounts in excess of their retention to RGA Reinsurance Company (“RGA Reinsurance”), RGA Reinsurance Company (Barbados) Ltd., or RGA Americas Reinsurance Company, Ltd. External retrocessions are arranged through the Company’s retrocession pools for amounts in excess of its retention. As of September 30, 2007, all retrocession pool members in this excess retention pool reviewed by the A.M. Best Company were rated “A-”, the fourth highest rating out of fifteen possible ratings, or better. The Company also retrocedes most of its financial reinsurance business to other insurance companies to alleviate the strain on statutory surplus created by this business. For a majority of the retrocessionaires that are not

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rated, letters of credit or trust assets have been given as additional security in favor of RGA Reinsurance. In addition, the Company performs annual financial and in force reviews of its retrocessionaires to evaluate financial stability and performance.
The Company has never experienced a material default in connection with retrocession arrangements, nor has it experienced any material difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future performance of such retrocessionaires or as to the recoverability of any such claims.
The Company relies upon its clients to provide timely, accurate information. The Company may experience volatility in its earnings as a result of erroneous or untimely reporting from its clients. The Company works closely with its clients and monitors this risk in an effort to minimize its exposure.
Market Risk
Market risk is the risk of loss that may occur when fluctuations in interest and currency exchange rates and equity and commodity prices change the value of a financial instrument. Both derivative and nonderivative financial instruments have market risk so the Company’s risk management extends beyond derivatives to encompass all financial instruments held that are sensitive to market risk. The Company is primarily exposed to interest rate risk and foreign currency risk.
Interest rate risk arises from many of the Company’s primary activities, as the Company invests substantial funds in interest-sensitive assets and also has certain interest-sensitive contract liabilities. The Company manages interest rate risk and credit risk to maximize the return on the Company’s capital effectively and to preserve the value created by its business operations. As such, certain management monitoring processes are designed to minimize the impact of sudden and sustained changes in interest rates on fair value, cash flows, and net interest income.
The Company is subject to foreign currency translation, transaction, and net income exposure. The Company generally does not hedge the foreign currency translation exposure related to its investment in foreign subsidiaries as it views these investments to be long-term. Translation differences resulting from translating foreign subsidiary balances to U.S. dollars are reflected in equity. The Company generally does not hedge the foreign currency exposure of its subsidiaries transacting business in currencies other than their functional currency (transaction exposure).
There has been no significant change in the Company’s quantitative or qualitative aspects of market risk during the quarter ended September 30, 2007 from that disclosed in the 2006 Annual Report.
New Accounting Standards
Effective January 1, 2007 the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company’s financial statements. FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made.
As a result of implementation of FIN 48, the Company recognized a $17.3 million increase in the liability for unrecognized tax benefits, a $5.3 million increase in the interest liability for unrecognized tax benefits, and a corresponding reduction to the January 1, 2007 balance of retained earnings of $22.6 million. The Company’s total amount of unrecognized tax benefits upon adoption of FIN 48 was $196.3 million. The Company reclassified, at adoption, $9.1 million of current tax liabilities to the liability for unrecognized tax benefits. The Company also reclassified, at adoption, $169.9 million of deferred income tax liabilities to the liability for unrecognized tax benefits for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate if recognized was $26.4 million. The Company also had $29.8 million of accrued interest, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense.

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The Company files income tax returns in the U.S. federal jurisdiction and various state and non U.S. jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non U.S. income tax examinations by tax authorities for years before 2003.
As of September 30, 2007, the Company’s total amount of unrecognized tax benefits was $196.3 million, which is unchanged from the amount recorded as of the date of adoption. The total amount of unrecognized tax benefit included that would affect the effective tax rate, if recognized, was approximately $25.7 million, a decrease of approximately $0.7 million from the amount recorded as of the date of adoption. The net decrease was primarily due to tax issues that were effectively settled in the current quarter. As a result of these settlements, items within the liability for unrecognized tax benefits were reclassified to current and deferred taxes, as applicable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits and unrecognized tax benefits that, if recognized, would affect the effective tax rate, for the nine months ended September 30, 2007 is as follows:
                 
            Unrecognized Tax Benefits That,
    Total Unrecognized   If Recognized Would Affect the
(dollars in millions)   Tax Benefits   Effective Tax Rate
     
Balance at January 1, 2007 (date of adoption)
  $ 196.3     $ 26.4  
Additions for tax positions of prior years
           
Reductions for tax positions of prior years
    (5.8 )     (6.5 )
Additions for tax positions of current year
    5.8       5.8  
Reductions for tax positions of current year
           
Settlements with tax authorities
           
     
Balance at September 30, 2007
  $ 196.3     $ 25.7  
     
During the three months and nine months ended September 30, 2007, the Company recognized a decrease of $9.4 million and $0.7 million, respectively, in interest expense. As of September 30, 2007, the Company had $29.1 million of accrued interest related to unrecognized tax benefits. The net decrease of approximately $0.7 million from the date of adoption resulted from the resolution of effectively settled tax issues in the current quarter.
Effective January 1, 2007, the Company adopted the provisions of the FASB’s Emerging Issues Task Force (“EITF”) Issue 06-5. This issue, titled “Accounting for the Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4”, clarified that the amount of the DAC receivable beyond one year generally must be discounted to present value under Accounting Principles Board Opinion 21. The adoption of EITF Issue 06-05 did not have a material impact on the Company’s condensed consolidated financial statements.
Effective January 1, 2007, the Company adopted Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments”. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants (“AICPA”) issued related Technical Practice Aids (“TPAs”) to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. The adoption of SOP 05-1 and related TPAs did not have a material impact on the Company’s condensed consolidated financial statements.

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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 is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company’s condensed consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with certain exceptions. The Company is currently evaluating the impact of SFAS 157 on the Company’s condensed consolidated financial statements.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, among others, statements relating to projections of the strategies, earnings, revenues, income or loss, ratios, future financial performance, and growth potential of the Company. The words “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe,” and other similar expressions also are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.
Numerous important factors could cause actual results and events to differ materially from those expressed or implied by forward-looking statements including, without limitation, (1) adverse changes in mortality, morbidity, lapsation or claims experience, (2) changes in the Company’s financial strength and credit ratings or those of MetLife, Inc. (“MetLife”), the beneficial owner of a majority of the Company’s common shares, or its subsidiaries, and the effect of such changes on the Company’s future results of operations and financial condition, (3) inadequate risk analysis and underwriting, (4) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in the Company’s current and planned markets, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) market or economic conditions that adversely affect the Company’s ability to make timely sales of investment securities, (7) risks inherent in the Company’s risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (8) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (9) adverse litigation or arbitration results, (10) the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (11) the stability of and actions by governments and economies in the markets in which the Company operates, (12) competitive factors and competitors’ responses to the Company’s initiatives, (13) the success of the Company’s clients, (14) successful execution of the Company’s entry into new markets, (15) successful development and introduction of new products and distribution opportunities, (16) the Company’s ability to successfully integrate and operate reinsurance business that the Company acquires, (17) regulatory action that may be taken by state Departments of Insurance with respect to the Company, MetLife, or its subsidiaries, (18) the Company’s dependence on third parties, including those insurance companies and reinsurers to which the Company cedes some reinsurance, third-party investment managers and others, (19) the threat of natural disasters, catastrophes, terrorist attacks, epidemics or pandemics anywhere in the world where the Company or its clients do business, (20) changes in laws, regulations, and accounting standards applicable to the Company, its subsidiaries, or its business, (21) the effect of the Company’s status as an insurance holding company and regulatory restrictions on its ability to pay principal of and interest on its debt obligations, and (22) other risks and uncertainties described in this document and in the Company’s other filings with the Securities and Exchange Commission (“SEC”).
Forward-looking statements should be evaluated together with the many risks and uncertainties that affect the Company’s business, including those mentioned in this document and the cautionary statements described in the periodic reports the Company files with the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligations to update these forward-looking statements,

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even though the Company’s situation may change in the future. The Company qualifies all of its forward-looking statements by these cautionary statements. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to see Item 1A Risk Factors of the 2006 Annual Report.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
See “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” which is included herein.
ITEM 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective.
There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is currently a party to three arbitrations that involve its discontinued accident and health business, including personal accident business (which includes London market excess of loss business) and workers’ compensation carve-out business. The Company is also party to a threatened arbitration related to its life reinsurance business. As of September 30, 2007, the parties involved in these actions have raised claims, or established reserves that may result in claims, in the amount of $24.3 million, which is $23.5 million in excess of the amounts held in reserve by the Company. The Company generally has little information regarding any reserves established by the ceding companies, and must rely on management estimates to establish policy claim liabilities. It is possible that any such reserves could be increased in the future. The Company believes it has substantial defenses upon which to contest these claims, including but not limited to misrepresentation and breach of contract by direct and indirect ceding companies. See Note 20, “Discontinued Operations” in the Company’s consolidated financial statements accompanying the 2006 Annual Report for more information. Additionally, from time to time, the Company is subject to litigation related to employment-related matters in the normal course of its business. The Company cannot predict or determine the ultimate outcome of the pending litigation or arbitrations or provide useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome could, from time to time, have a material adverse effect on the Company’s consolidated net income in a particular quarter or year.
ITEM 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the Company’s 2006 Annual Report.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Under a board of directors approved plan, the Company may purchase at its discretion up to $50 million of its common stock on the open market. As of September 30, 2007, the Company had purchased 225,500 shares of treasury stock under this program at an aggregate price of $6.6 million. All purchases were made during 2002. The Company generally uses treasury shares to support the future exercise of options granted under its stock option plans.
ITEM 6. Exhibits
See index to exhibits.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  Reinsurance Group of America, Incorporated
 
 
  By:   /s/ A. Greig Woodring     November 2, 2007  
    A. Greig Woodring   
    President & Chief Executive Officer
(Principal Executive Officer) 
 
 
     
  By:   /s/ Jack B. Lay     November 2, 2007  
    Jack B. Lay   
    Senior Executive Vice President
& Chief Financial Officer
(Principal Financial and Accounting Officer) 
 
 

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INDEX TO EXHIBITS
     
Exhibit    
Number   Description
3.1
  Restated Articles of Incorporation, incorporated by reference to Exhibit 3.1 of Current Report on Form 8-K filed June 30, 2004.
 
   
3.2
  Bylaws of RGA, as amended, incorporated by reference to Exhibit 3.2 of Quarterly Report on Form 10-Q filed August 6, 2004.
 
   
10.1
  Credit Agreement, dated as of September 24, 2007, by and among Reinsurance Group of America, Incorporated and certain of its subsidiaries, the lenders named therein, Bank of America, N.A., as administrative agent, swing line lender and L/C Issuer, Wachovia Bank, National Association, as syndication agent, ABN Amro Bank, N.V., The Bank of New York, The Bank of Tokyo — Mitsubishi UFJ Ltd. New York Branch and KeyBank National Association, as co-documentation agents, and Banc of America Securities LLC and Wachovia Capital Markets, LLC, as co-lead arrangers and joint book managers, incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 24, 2007 (File No. 1-11848), filed September 27, 2007.
 
   
31.1
  Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

38

exv31w1
 

Exhibit 31.1
CEO CERTIFICATION
I, A. Greig Woodring, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinsurance Group of America, Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
Date: November 2, 2007  /s/ A. Greig Woodring    
  A. Greig Woodring   
  President & Chief Executive Officer   
 

 

exv31w2
 

Exhibit 31.2
CFO CERTIFICATION
I, Jack B. Lay, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinsurance Group of America, Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
Date: November 2, 2007  /s/ Jack B. Lay    
  Jack B. Lay   
  Senior Executive Vice President
& Chief Financial Officer 
 
 

 

exv32w1
 

Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Reinsurance Group of America, Incorporated and subsidiaries, (the “Company”), for the quarterly period ended September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), A. Greig Woodring, Chief Executive Officer of the Company, certifies, to his best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
Date: November 2, 2007  /s/ A. Greig Woodring    
  A. Greig Woodring   
  President & Chief Executive Officer   
 

 

exv32w2
 

Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Reinsurance Group of America, Incorporated and subsidiaries, (the “Company”), for the quarterly period ended September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jack B. Lay, Chief Financial Officer of the Company, certifies, to his best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
Date: November 2, 2007  /s/ Jack B. Lay    
  Jack B. Lay   
  Senior Executive Vice President
& Chief Financial Officer