1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1998
REGISTRATION NO. 333-51777
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact name of Registrant as specified in its charter)
MISSOURI 43-1627032
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
660 MASON RIDGE CENTER DRIVE, ST. LOUIS, MISSOURI 63141-8557, (314) 453-7300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
JACK B. LAY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
REINSURANCE GROUP OF AMERICA, INCORPORATED
660 Mason Ridge Center Drive
St. Louis, Missouri 63141-8557
(314) 453-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
THOMAS C. ERB, ESQ. JAMES L. NOUSS, JR., ESQ.
TOM W. ZOOK, ESQ. R. RANDALL WANG, ESQ.
LEWIS, RICE & FINGERSH, L.C. BRYAN CAVE LLP
500 N. Broadway, Suite 2000 211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2147 St. Louis, Missouri 63102-2750
(314) 444-7600 (314) 259-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Non-Voting Common Stock, par value
$0.01 per share................. 5,300,000(1) $54.6875(1) $333,320,312.50(1)(2) $98,329.50(1)
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights... (1)(3) (1)(3) (3) (3)
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a). $5,035.75 submitted herewith. $93,293.75 previously
submitted.
(2) Includes 795,000 shares subject to the Underwriters' over-allotment option.
(3) Each share of Non-Voting Common Stock issued also represents one Preferred
Stock Purchase Right. Preferred Stock Purchase Rights cannot trade
separately from the underlying Non-Voting Common Stock and, therefore, do
not carry a separate price, or necessitate an additional registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED MAY 11, 1998
5,300,000 SHARES
REINSURANCE GROUP OF AMERICA, INCORPORATED
REINSURANCE GROUP OF AMERICA, INCORPORATED LOGO
NON-VOTING COMMON STOCK
------------------------
The 5,300,000 shares of non-voting common stock, par value $0.01 per share
(the "Non-Voting Common"), offered hereby (the "Offering") are being sold by
Reinsurance Group of America, Incorporated ("RGA"). The Non-Voting Common is a
newly created class of non-voting stock of RGA which is substantially similar to
its common stock, par value $0.01 per share (the "Voting Common"), except that
it has no voting rights other than as required by Missouri law and includes
features intended to reduce the possibility that the holders thereof could be
treated unfairly in the event of certain changes in control of RGA. See
"Description of Capital Stock -- Non-Voting Common." GenAmerica Corporation
beneficially owns approximately 64% of the Voting Common. See "Principal
Stockholders."
There is currently no public market for the Non-Voting Common. The
Non-Voting Common has been approved for listing on the New York Stock Exchange
(the "NYSE") under the symbol RGA.A, subject to official notice of issuance. It
is anticipated that the trading prices of the Non-Voting Common will approximate
the trading prices of the Voting Common. No assurances, however, can be given in
such regard. On May 8, 1998, the last reported sale price of the Voting Common,
listed on the NYSE under the symbol RGA, was $54.69 per share. See "Price Range
of Capital Stock and Dividends."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NON-VOTING COMMON
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
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(1) RGA has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $700,000, including $25,000 payable
to A.G. Edwards & Sons, Inc. for services rendered as a qualified
independent underwriter, all of which are payable by RGA. See
"Underwriting."
(3) RGA has granted to the Underwriters an option, exercisable within 30 days of
the date hereof, to purchase up to an additional 795,000 shares of
Non-Voting Common from RGA solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Non-Voting Common are offered by the Underwriters, as
specified herein, subject to prior sale, when, as and if issued to and accepted
by them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Non-Voting Common will be made on
or about , 1998.
A.G. EDWARDS & SONS, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
CONNING & COMPANY
The date of this Prospectus is , 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE VOTING
COMMON OR THE NON-VOTING COMMON, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY
BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER
OF INSURANCE OF THE STATE OF NORTH CAROLINA NOR HAS THE COMMISSIONER RULED UPON
THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
-------------------------
Missouri insurance laws and regulations provide that no person may acquire
control of RGA, and thus indirect control of its Missouri insurance subsidiary,
RGA Reinsurance Company, unless such person has provided certain required
information to the Missouri Department of Insurance and such acquisition is
approved by the Director of Insurance of the State of Missouri (the "Missouri
Director of Insurance") after a public hearing. Under Missouri insurance laws
and regulations, any person acquiring 10% or more of the outstanding voting
stock of a corporation is presumed to have acquired control of that corporation
and its subsidiaries. Canadian insurance laws and regulations provide that no
person may acquire control of or a significant interest in RGA, and thus
indirect control of, or an indirect significant interest in, its Canadian
insurance subsidiary, RGA Life Reinsurance Company of Canada, unless such person
has provided certain required information to the Canadian Minister of Finance
and such acquisition is approved by such Minister. Under Canadian insurance laws
and regulations, "significant interest" means the direct or indirect beneficial
ownership of shares representing 10% or more of a given class, while "control"
of an insurance company is presumed to exist when a person beneficially owns or
controls an entity that beneficially owns shares representing more than 50% of
the votes entitled to be cast for the election of directors and such votes are
sufficient to elect a majority of the directors of the insurance company.
Although the Non-Voting Common offered hereby is not expected to constitute
"voting stock" for purposes of the foregoing provisions, such stock is
convertible on a share-for-share basis into Voting Common of RGA under certain
limited circumstances and, in the event of any such conversion, the shares
offered hereby would constitute "voting stock" for purposes of the foregoing
provisions. See "Description of Capital Stock -- Non-Voting Common -- Conversion
of Non-Voting Common."
FORWARD-LOOKING STATEMENTS
The statements included or incorporated in this Prospectus regarding future
financial performance and results and the other statements that are not
historical facts are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements may include, but are not limited to, projections of
earnings, revenues, income or loss, capital expenditures, plans for future
operations and financing needs or plans, as well as assumptions relating to the
foregoing. The words "intend," "expect," "project," "estimate," "predict,"
"anticipate," "should," "believe" and 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. Factors that could cause actual results to differ
materially (the "Cautionary Statements") include, but are not limited to, (i)
the absence of an existing public market for the Non-Voting Common and
uncertainty as to the levels of future trading activity or prices for such
shares, (ii) general economic conditions affecting the demand for insurance and
reinsurance in the Company's (as hereinafter defined) current and planned
markets, (iii) material changes in mortality and claims experience, (iv)
competitive factors and competitors' responses to the Company's initiatives, (v)
successful execution of the Company's entry into new markets, (vi) successful
development and introduction of new products, (vii) the stability of governments
and economies in foreign markets, (viii) fluctuations in U.S. and foreign
interest rates and securities and real estate markets, (ix) the success of the
Company's clients, including General American Life Insurance Company ("General
American") and its affiliates, (x) changes in laws, regulations and accounting
standards applicable to RGA and its subsidiaries, and (xi) other risks and
uncertainties described in this Prospectus and in RGA's other filings with the
Securities and Exchange Commission (the "Commission"). Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements. Investors are cautioned not to place
undue reliance on such statements, which speak only as of the date hereof. The
Company undertakes no obligation to release publicly any revisions to these
forward-looking statements after the completion of this Offering to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
(i)
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements and Notes thereto set forth elsewhere in this Prospectus or
incorporated by reference in this Prospectus. The principal subsidiaries of RGA
are RGA Reinsurance Company ("RGA Reinsurance") and RGA Life Reinsurance Company
of Canada ("RGA Canada"). The term "Company," as used herein, refers
collectively to RGA and its direct and indirect subsidiaries. Unless otherwise
indicated, the information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
RGA, through its operating subsidiaries, is one of the largest life
reinsurers in North America. At March 31, 1998, the Company had assets of $5.1
billion, stockholders' equity of $521.1 million and assumed reinsurance in force
of $253.4 billion. The Company's core North American life reinsurance business
serves as the platform for its business strategy of further expansion into
selected domestic and international markets. Over the past five years, the
Company has produced a strong and consistent record of growth and profitability,
with revenue and net income (excluding the accident and health pool charge in
1997) growing at compound annual rates of approximately 24% and 18%,
respectively.
The Company's approach to the North American market, which represented
approximately 76% of net premiums in 1997, has been to (i) focus on large, high
quality life insurers as clients, (ii) provide superior facultative underwriting
and competitive automatic reinsurance capacity, and (iii) deliver responsive and
flexible service to its clients. Management believes it is the largest
facultative life reinsurer in North America. The Company conducted business with
79 of the 100 largest U.S. and 32 of the 40 largest Canadian life insurance
companies in 1997, with no one client representing more than 7% of consolidated
gross premiums.
The Company has also developed its capacity and expertise in
non-traditional reinsurance, which includes asset-intensive products and
financial reinsurance. In 1997, the Company's North American non-traditional
reinsurance business earned $12.8 million or approximately 13% of income before
income taxes and minority interest (excluding the accident and health pool
charge). The Company's non-traditional business currently includes reinsurance
of stable value products, bank-owned life insurance and annuities.
The Company leverages its underwriting expertise and industry knowledge as
it expands into selected international markets. Its operations outside North
America currently include direct and reinsurance business from joint ventures
and subsidiaries in Latin America, Australia, Malaysia and the United Kingdom,
as well as reinsurance of life products and related coverages offered
principally in Hong Kong and Japan through RGA Reinsurance.
RGA Reinsurance has an "AA" claims paying rating from Standard & Poor's
("S&P") and an "A+" claims paying rating from A.M. Best and Company, Inc. ("A.M.
Best"). The S&P and A.M. Best claims paying ratings are based upon an insurance
company's ability to pay policyholder obligations and are not directed toward
the protection of investors. In addition, RGA has an "A" long-term debt rating
from S&P.
During 1997, the Company made a strategic decision to cease marketing
accident and health reinsurance and to place its existing portfolio into runoff.
While this business contributed approximately 11% of reinsurance premiums for
1997, the Company does not expect the termination of this business to materially
affect future results. Management intends to redirect its focus to its core
North American and emerging businesses.
The Company believes that the following trends in the insurance industry
are increasing the demand for life reinsurance.
- INCREASED CAPITAL SENSITIVITY. Regulatory environment and competitive
business pressures are causing life insurers to reinsure as a means to
(i) manage risk-based capital by shifting mortality and other risks and
distribution costs to reinsurers, (ii) release capital to pursue new
businesses, and (iii) unlock the capital supporting, and value embedded
in, non-core product lines.
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5
- CONSOLIDATION AND REORGANIZATION WITHIN THE INDUSTRY. The number of
merger and acquisition transactions within the U.S. life insurance
industry increased to 136 in 1997, from 63 in 1993. Management believes
that U.S. reorganizations of life insurers (such as demutualizations) and
international consolidation will continue to increase. As reinsurance
products are increasingly used to finance these transactions and manage
risk, demand for the Company's products is expected to increase.
- CHANGING DEMOGRAPHICS OF INSURED POPULATIONS. The aging of the population
in North America is increasing demand for financial products among "baby
boomers" who are concerned about protecting their peak income stream and
are considering retirement and estate planning. This trend is likely to
result in increased demand for annuity products and life insurance
policies, larger face amounts of life insurance policies and higher
mortality risk taken by life insurers, all of which should cause such
insurers to seek reinsurance products.
BUSINESS STRATEGY
The Company continues to follow its two-part business strategy to
capitalize on industry trends and to achieve its goal of producing consistent
revenue and earnings growth.
- CONTINUE GROWTH OF CORE NORTH AMERICAN BUSINESS. The Company's strategy
includes continuing to grow each of the following components of its North
American operations:
-- FACULTATIVE REINSURANCE. The Company intends to maintain its leading
position as a facultative underwriter in North America by emphasizing
its high underwriting standards, prompt response on quotes,
competitive pricing, capacity and flexibility in meeting customer
needs.
-- AUTOMATIC REINSURANCE. The Company intends to expand its already
significant presence in the North American automatic reinsurance
market by using its recognized mortality expertise and breadth of
products and services to gain additional market share.
-- IN FORCE BLOCK REINSURANCE. The Company anticipates increased
opportunities to grow its business of reinsuring "in force block"
insurance, as insurers seek to exit various non-core businesses and
increase financial flexibility in order to, among other things,
redeploy capital and pursue merger and acquisition activity.
- CONTINUE EXPANSION INTO SELECTED MARKETS. The Company's strategy includes
building upon the expertise and relationships developed from its core
North American business platform to continue its expansion into selected
markets, including:
-- NON-TRADITIONAL REINSURANCE. The Company intends to continue
leveraging its existing client relationships and reinsurance
expertise to create customized non-traditional reinsurance products
and solutions. Industry trends, particularly the increased pace of
consolidation and reorganization among life insurance companies and
changes in product distribution, are expected to create significant
growth opportunities for non-traditional reinsurance.
-- OTHER INTERNATIONAL. Management believes that international markets
offer substantial opportunities for growth, and has capitalized on
this opportunity by establishing a presence in selected markets. The
Company uses its reinsurance expertise, facultative underwriting
abilities and market knowledge as it continues to enter mature and
emerging insurance markets.
------------------------
RGA's principal executive office is located at 660 Mason Ridge Center
Drive, St. Louis, Missouri 63141-8557, and its telephone number is (314)
453-7300.
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THE OFFERING
Non-Voting Common offered by
RGA......................... 5,300,000 shares(1)
Non-Voting Common outstanding
after Offering.............. 5,300,000 shares(1)(2)
Voting Common outstanding
after Offering.............. 25,228,880 shares(3)
Use of proceeds............... RGA intends to use the net proceeds from the
Offering for general corporate purposes. See
"Use of Proceeds."
New York Stock Exchange
symbol........................ The Non-Voting Common has been approved for
listing on the NYSE under the symbol RGA.A,
subject to official notice of issuance. The
Voting Common is currently traded on the NYSE
under the symbol RGA.
- -------------------------
(1) Does not include up to 795,000 shares of Non-Voting Common subject to the
Underwriters' over-allotment option.
(2) The number of outstanding shares of Non-Voting Common shown herein assumes
that RGA's Restated Articles of Incorporation will be amended as proposed at
RGA's Annual Meeting of Stockholders on May 27, 1998. See "Description of
Capital Stock."
(3) Based upon the number of shares of Voting Common outstanding as of May 1,
1998. Does not include 960,314 shares of Voting Common subject to
outstanding stock options and employee benefit plans and 360,035 shares that
were available for additional awards under such plans.
TERMS OF NON-VOTING COMMON
The powers, preferences and rights of the Voting Common and the Non-Voting
Common, and the qualifications, limitations and restrictions thereof, are in all
respects identical, except as otherwise required by law or expressly provided in
RGA's Restated Articles of Incorporation. See "Description of Capital Stock."
No voting rights.............. The Non-Voting Common will not entitle the
holder thereof to any voting rights, except as
otherwise required by law.
Dividends and other
distributions................. The Non-Voting Common is equal to the Voting
Common relative to dividends and other
distributions in cash, property, or shares of
stock of RGA (including distributions in
connection with any recapitalization), subject
to certain exceptions described herein. In no
event will shares of either Voting Common or
Non-Voting Common be split, subdivided or
combined unless the other is proportionately
split, subdivided or combined.
Business combinations;
dissolution................... In the event of a merger, consolidation,
combination or similar transaction of RGA with
another entity (whether or not RGA is the
surviving entity) or in the event of a
liquidation, dissolution or winding up of RGA,
the holders of Non-Voting Common will be
entitled to receive the same per share
consideration as the per share consideration,
if any, received by holders of Voting Common in
that transaction. Any capital stock, however,
that holders of Non-Voting Common become
entitled to receive in any merger,
consolidation, combination or similar
transaction may have terms substantially
similar to the terms of the Non-Voting Common
itself.
3
7
Other Non-Voting Common
protections................. The terms of the Non-Voting Common include two
"protection" provisions designed to reduce the
possibility that holders of Non-Voting Common
could be treated unfairly in the event that a
person attempts to acquire control of RGA. The
first provision seeks to prevent a person who
has crossed a certain ownership threshold from
gaining control of RGA by acquiring Voting
Common without buying Non-Voting Common. Under
this provision, anyone who acquires more than
15% of the outstanding Voting Common after May
27, 1998 (the "Effective Date") and does not
acquire a percentage of the Non-Voting Common
outstanding at least equal to the percentage of
Voting Common that the person acquired above
the 15% threshold will not be allowed to vote
the Voting Common acquired in excess of the 15%
level. The second provision is an "equitable
price" requirement which is intended to prevent
a person seeking to acquire control of RGA from
paying a discounted price for the Non-Voting
Common required to be purchased by the
acquiring person under the first provision.
Conversion.................... The Non-Voting Common will be automatically
converted into Voting Common on a
share-for-share basis if (i) as a result of the
existence of the Non-Voting Common, the Voting
Common or the Non-Voting Common or both becomes
excluded from trading on all principal national
securities exchanges and also is excluded from
quotation on The Nasdaq Stock Market's National
Market or any other comparable national
quotation system then in use, or (ii) at any
time the number of outstanding shares of Voting
Common as reflected on RGA's stock transfer
books falls below 10% of the aggregate number
of outstanding shares of Voting Common and
Non-Voting Common.
Shareholder Rights Plan....... Rights under RGA's Shareholder Rights Plan, as
amended, also will attach to the Non-Voting
Common. See "Description of Capital
Stock -- Preferred Stock Purchase Rights."
4
8
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------ -------- ------ ------ ------ ------
(UNAUDITED)
INCOME STATEMENT DATA:
Net premiums............................ $ 270.0 $205.4 $ 835.5 $674.9 $570.0 $451.7 $379.9
Net investment income................... 63.7 41.8 188.3 136.8 90.1 71.3 60.3
Realized investment gains, net.......... 0.9 0.4 0.3 0.9 -- 0.8 3.6
Other revenue........................... 6.5 4.2 47.4 17.4 8.0 1.9 2.7
-------- ------ -------- ------ ------ ------ ------
Total revenues...................... 341.1 251.8 1,071.5 830.0 668.1 525.7 446.5
Income before income taxes and minority
interest.............................. 24.9 2.9(1) 84.1(1) 87.1 74.6 64.4 54.9
Net income.............................. $15.9 $ 2.8(1) $54.6(1) $55.1 $47.3 $40.4 $34.1
Basic earnings per share................ $0.63 $0.11(1) $2.15(1) $2.18 $1.87 $1.57 $1.50
Diluted earnings per share.............. $0.62 $0.11(1) $2.13(1) $2.17 $1.87 $1.57 $1.50
Cash dividends per share................ $0.06 $0.05 $0.23 $0.20 $0.17 $0.16 $0.08
Weighted average diluted shares (in
thousands)............................ 25,505 25,629 25,604 25,410 25,292 25,728 22,736
DECEMBER 31,
MARCH 31, ------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
BALANCE SHEET DATA:
Invested assets................. $ 3,973.6 $ 3,634.0 $ 2,272.0 $ 1,405.5 $ 1,016.6 $ 920.6
Total assets.................... 5,074.9 4,673.6 2,893.7 1,989.9 1,394.3 1,249.6
Policy liabilities.............. 3,994.0 3,558.7 2,068.6 1,408.3 1,043.9 886.5
Total debt...................... 117.0 106.8 106.5 -- -- --
Stockholders' equity............ 521.1 499.3 425.6 376.9 276.8 279.4
OTHER FINANCIAL DATA:
Assumed ordinary life
reinsurance business in
force......................... $253,434.7 $227,259.7 $168,339.3 $153,861.2 $142,374.0 $114,666.4
Assumed new business
production.................... 32,164.4 75,861.9 37,905.5 35,997.7 43,203.3 24,670.7
Book value per share(2)......... $17.72 $17.14 $15.60 $13.63 $11.87 $10.71
Statutory capital and
surplus(3).................... 267.7 274.6 277.2 249.4 232.7 240.5
Return on equity, as
adjusted(4)................... 14.2% 15.7% 14.6% 14.6% 13.7% 12.0%
- -------------------------
(1) Includes the effect of the $18.0 million charge for accident and health
insurance pool reserve increase. For the year ended December 31, 1997,
excluding the effect of the charge, income before taxes and minority
interest, net income, basic earnings per share and diluted earnings per
share would have been $102.1 million, $65.0 million, $2.55 per share and
$2.53 per share, respectively.
(2) Book value per share is calculated by dividing end of period stockholders'
equity (excluding unrealized investment gains and losses) by end-of-period
common shares outstanding.
(3) Amounts have been derived from the statements filed with the regulatory
authorities in the country where the operating subsidiary is domiciled. The
primary subsidiaries are RGA Reinsurance Company which files with the
Missouri Department of Insurance and RGA Life Reinsurance Company of Canada
which files with the Office of the Superintendent of Financial Institutions
in Canada.
(4) Return on equity, as adjusted, is calculated by dividing net income
(excluding the accident and health pool charge in 1997 and realized
investment gains) by average stockholders' equity for the period (which is
the simple average of beginning- and end-of-period stockholders' equity
excluding unrealized investment gains and losses).
5
9
RISK FACTORS
Prospective investors should consider, in addition to the information set
forth under "Forward-Looking Statements" and elsewhere in this Prospectus, the
following matters in evaluating an investment in the Non-Voting Common offered
hereby.
NON-VOTING COMMON SHARES
The Non-Voting Common has no voting rights other than those required by
Missouri law and is convertible into Voting Common only under certain limited
circumstances described herein. Consequently, holders of Non-Voting Common will
not be entitled to elect directors or vote on other matters customarily decided
by stockholders, such as mergers, consolidations or the sale of all or
substantially all of the Company's assets. See "Description of Capital
Stock -- Non-Voting Common -- Voting Matters."
CONTROL BY GENAMERICA CORPORATION
GenAmerica Corporation beneficially owns approximately 64% of the Voting
Common and individuals employed by or associated with GenAmerica Corporation
hold a majority of the seats on RGA's Board of Directors. GenAmerica Corporation
is a wholly owned subsidiary of General American Mutual Holding Company and is
the parent corporation of General American. Upon consummation of the Offering,
GenAmerica Corporation will continue to have the power, because of the voting
power of the shares of Voting Common held by it, to elect RGA's Board of
Directors, and to substantially influence business combination transactions. For
financial reporting purposes, GenAmerica Corporation will include its share of
the Company's net income or loss in its consolidated financial statements. RGA's
Board of Directors, including members who are also affiliated with GenAmerica
Corporation, may consider not only the short-term and long-term impact of
operating decisions on the Company, but also the impact of such decisions on
GenAmerica Corporation and its affiliates, including General American. See
"Management," "Principal Stockholders," "Certain Relationships and Related
Transactions" and "Description of Capital Stock."
NO PRIOR TRADING HISTORY
The Non-Voting Common is a newly created class of non-voting stock of RGA
and no public market currently exists for such stock. The public offering price
for the Non-Voting Common was determined through negotiations between RGA and
representatives of the Underwriters and may not be indicative of the market
price for the Non-Voting Common following the Offering. See "Underwriting" for a
discussion of factors considered in determining the public offering price.
Although the Non-Voting Common has been approved for listing on the NYSE, upon
official notice of issuance, there can be no assurance that an active trading
market will develop after the Offering or, if developed, that such a market will
be sustained. It also is possible that the Non-Voting Common will trade at
prices that differ from those of the Voting Common. If the Voting Common were to
trade at a premium to the Non-Voting Common, subsequent issuances of Non-Voting
Common, instead of Voting Common, in connection with a public or private
offering, an acquisition or other transaction could have a greater dilutive
effect on stockholders because such an acquisition or transaction would require
more shares to deliver the same aggregate value. To minimize dilution of voting
power to existing stockholders, RGA may be more likely to issue shares of
Non-Voting Common than Voting Common in the future to raise equity, finance
acquisitions or fund employee benefit plans.
6
10
USE OF PROCEEDS
The purpose of the Offering is to support the continued growth of the
Company's business and to maintain its capital structure. The net proceeds to be
received by RGA from the Offering (at an assumed public offering price of
$54.69), after deducting the underwriting discount and concessions and estimated
offering expenses, are estimated to be approximately $276,825,000 (approximately
$318,454,000 if the over-allotment option is exercised in full). RGA intends to
use the net proceeds from the Offering for general corporate purposes. Pending
their use for such purposes, the net proceeds will be invested primarily in
investment grade securities.
PRICE RANGE OF CAPITAL STOCK AND DIVIDENDS
The Voting Common is listed for trading on the NYSE under the symbol RGA
and the Non-Voting Common has been approved for listing on the NYSE under the
symbol RGA.A, subject to official notice of issuance. The Non-Voting Common is a
new issue of stock for RGA and, as a result, it does not have any trading or
dividend history. The following table sets forth the high and low sales prices
and cash dividends declared per share of Voting Common for the periods indicated
(as adjusted for the three-for-two stock split effected August 29, 1997). The
Offering relates to shares of Non-Voting Common.
VOTING COMMON
-----------------------------------
PRICE RANGE
--------------------
HIGH LOW DIVIDENDS
------- ------- ---------
YEAR ENDED DECEMBER 31, 1996
First quarter................................... $27.417 $22.583 $0.047
Second quarter.................................. 27.750 24.417 0.047
Third quarter................................... 29.500 24.583 0.053
Fourth quarter.................................. 33.000 28.833 0.053
YEAR ENDED DECEMBER 31, 1997
First quarter................................... $32.833 $29.917 $0.053
Second quarter.................................. 38.333 31.083 0.053
Third quarter................................... 41.583 37.500 0.060
Fourth quarter.................................. 46.438 37.813 0.060
YEAR ENDED DECEMBER 31, 1998
First quarter................................... $51.188 $38.375 $0.060
Second quarter (through May 8, 1998)............ 54.688 47.250 0.060
As of May 8, 1998, there were approximately 139 holders of record of the
Voting Common. The last reported sales price of the Voting Common on the NYSE on
May 8, 1998 was $54.69 per share. The Offering relates to shares of Non-Voting
Common.
The holders of the Voting Common and the Non-Voting Common will be entitled
to receive ratably any cash dividends as may be declared by RGA's Board of
Directors. See "Description of Capital Stock -- Non-Voting Common -- Dividends
and Other Distributions." The declaration and payment of future dividends to
holders of the Voting Common and the Non-Voting Common will be at the discretion
of RGA's Board of Directors and will depend upon RGA's earnings and financial
condition, capital requirements of its subsidiaries, insurance regulatory
condition and considerations and such other factors as RGA's Board of Directors
may deem relevant.
As a holding company, RGA is ultimately dependent upon its subsidiaries to
provide funding for its operating expenses, debt service and dividends. Various
insurance laws applicable to RGA's subsidiaries limit the payment of dividends
and other distributions by such subsidiaries to RGA and may therefore limit the
ability of RGA to make dividend payments. See
"Business -- Regulation -- Restrictions on Dividends and Distributions."
7
11
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at March 31, 1998, and as adjusted to reflect the sale by RGA of
5,300,000 shares of Non-Voting Common (at an assumed public offering price of
$54.69) offered hereby (assuming no exercise of the Underwriters' over-allotment
option), after deducting the underwriting discount and concessions and estimated
offering expenses.
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
Long-term debt.............................................. $106,991 $106,991
-------- --------
Stockholders' equity:
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued or outstanding..... -- --
Common Stock, par value $.01 per share; 75,000,000 shares
authorized, 26,049,375 shares issued and
outstanding(1)(3)...................................... 261 261
Non-Voting Common Stock, par value $.01 per share;
20,000,000 shares authorized, 5,300,000 shares issued
(as adjusted)(2)(3).................................... -- 53
Additional paid-in capital................................ 265,021 541,793
Accumulated other comprehensive income.................... 65,779 65,779
Retained earnings......................................... 211,080 211,080
-------- --------
Total stockholders' equity before treasury
stock........................................... 542,141 818,966
Less cost of 820,895 shares reacquired and held in
treasury............................................... 21,075 21,075
-------- --------
Total stockholders' equity........................ 521,066 797,891
-------- --------
Total capitalization........................................ $628,057 $904,882
======== ========
- -------------------------
(1) Does not include 960,314 shares of Voting Common subject to outstanding
stock options and employee benefit plans and 360,035 shares that were
available for additional awards under such plans.
(2) Does not include up to shares of Non-Voting Common subject to the
Underwriters' over-allotment option.
(3) The number of authorized shares of Voting Common and Non-Voting Common shown
herein assumes that RGA's Restated Articles of Incorporation will be amended
as proposed at RGA's Annual Meeting of Stockholders on May 27, 1998. See
"Description of Capital Stock."
8
12
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
The selected consolidated financial data presented below for, and as of the
end of, each of the years in the five-year period ended December 31, 1997, have
been prepared in accordance with generally accepted accounting principles for
stock life companies. The selected consolidated financial data for the three
months ended March 31, 1998, and 1997, was derived from the unaudited
consolidated financial statements of the Company. The Company believes that the
unaudited consolidated financial statements include all adjustments (consisting
only of normal recurring adjustments) necessary for the period. Results for the
three months ended March 31, 1998, are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
The following selected financial data should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto incorporated by
reference in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
INCOME STATEMENT DATA:
Revenues:
Net premiums............................. $ 270.0 $ 205.4 $ 835.5 $ 674.9 $ 570.0 $ 451.7 $ 379.9
Net investment income.................... 63.7 41.8 188.3 136.8 90.1 71.3 60.3
Realized investment gains, net........... 0.9 0.4 0.3 0.9 -- 0.8 3.6
Other revenue............................ 6.5 4.2 47.4 17.4 8.0 1.9 2.7
------- ------- ------- ------- ------- ------- -------
Total revenues......................... 341.1 251.8 1,071.5 830.0 668.1 525.7 446.5
Benefits and Expenses:
Claims and other policy benefits......... 217.3 158.9 640.1 505.7 430.0 329.4 276.4
Interest credited........................ 34.5 19.1 92.0 54.7 33.8 28.8 24.7
Accident and health pool charge.......... -- 18.0 18.0 -- -- -- --
Policy acquisition costs and other
insurance expenses..................... 46.9 40.5 176.5 136.5 98.1 78.6 70.9
Other operating expenses................. 15.5 10.5 53.0 39.8 31.6 24.5 19.6
Interest expense......................... 2.0 1.9 7.8 6.2 -- -- --
------- ------- ------- ------- ------- ------- -------
Total benefits and expenses............ 316.2 248.9 987.4 742.9 593.5 461.3 391.6
Income before income taxes and minority
interest............................... 24.9 2.9(1) 84.1(1) 87.1 74.6 64.4 54.9
Income tax expense....................... 8.8 -- 28.8 31.7 27.1 23.7 20.2
Minority interest........................ 0.2 0.1 0.7 0.3 0.2 0.3 0.6
------- ------- ------- ------- ------- ------- -------
Net income............................... $ 15.9 $ 2.8(1) $ 54.6(1) $ 55.1 $ 47.3 $ 40.4 $ 34.1
======= ======= ======= ======= ======= ======= =======
Basic earnings per share................. $ 0.63 $ 0.11(1) $ 2.15(1) $ 2.18 $ 1.87 $ 1.57 $ 1.50
Diluted earnings per share............... 0.62 0.11(1) 2.13(1) 2.17 1.87 1.57 1.50
Cash dividends per share................. 0.06 0.05 0.23 0.20 0.17 0.16 0.08
Weighted average diluted shares (in
thousands)............................. 25,505 25,629 25,604 25,410 25,292 25,728 22,736
DECEMBER 31,
MARCH 31, --------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
BALANCE SHEET DATA:
Invested assets................. $ 3,973.6 $ 3,634.0 $ 2,272.0 $ 1,405.5 $ 1,016.6 $ 920.6
Total assets.................... 5,074.9 4,673.6 2,893.7 1,989.9 1,394.3 1,249.6
Policy liabilities.............. 3,994.0 3,558.7 2,068.6 1,408.3 1,043.9 886.5
Long-term debt.................. 107.0 106.8 106.5 -- -- --
Total debt...................... 117.0 106.8 106.5 -- -- --
Stockholders' equity............ 521.1 499.3 425.6 376.9 276.8 279.4
OTHER FINANCIAL DATA:
Assumed ordinary life
reinsurance business in
force......................... $253,434.7 $227,259.7 $168,339.3 $153,861.2 $142,374.0 $114,666.4
Assumed new business
production.................... 32,164.4 75,861.9 37,905.5 35,997.7 43,203.3 24,670.7
Book value per share(2)......... $17.72 $17.14 $15.60 $13.63 $11.87 $10.71
Statutory capital and
surplus(3).................... 267.7 274.6 277.2 249.4 232.7 240.5
Return on equity, as
adjusted(4)................... 14.2% 15.7% 14.6% 14.6% 13.7% 12.0%
(footnotes appear on following page)
9
13
- -------------------------
(1) Includes the effect of the $18.0 million charge for accident and health
insurance pool reserve increase. For the year ended December 31, 1997,
excluding the effect of the charge, income before taxes and minority
interest, net income, basic earnings per share, and diluted earnings per
share would have been $102.1 million, $65.0 million, $2.55 per share and
$2.53 per share, respectively.
(2) Book value per share is calculated by dividing end of period stockholders'
equity (excluding unrealized investment gains and losses) by end of the
period common shares outstanding.
(3) Amounts have been derived from the statements filed with the regulatory
authorities in the country where the operating subsidiary is domiciled. The
primary subsidiaries are RGA Reinsurance Company which files with the
Missouri Department of Insurance and RGA Life Reinsurance Company of Canada
which files with the Office of the Superintendent of Financial Institutions
in Canada.
(4) Return on equity, as adjusted, is calculated by dividing net income
(excluding the accident and health pool charge in 1997 and realized
investment gains) by average stockholders' equity for the period (which is
the simple average of beginning and end of the period stockholders' equity
excluding unrealized investment gains and losses).
10
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data' included elsewhere in this Prospectus and the
Consolidated Financial Statements of the Company (and the Notes thereto)
incorporated by reference in this Prospectus. On August 29, 1997, RGA effected a
three-for-two stock split on the Voting Common. All share information is
presented herein on a post-split basis, except where otherwise indicated.
OVERVIEW
The Company derives revenues primarily from renewal premiums from existing
reinsurance treaties, new business premiums from existing or new reinsurance
treaties, and income earned on invested assets, as well as direct insurance
premiums from its Latin American subsidiaries.
The Company's primary business is life reinsurance, which involves
reinsuring life insurance policies that are often in force for the lifetime of
the underlying individual insureds, 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, voluntary surrenders of
underlying life insurance policies, lapses of underlying policies, deaths of
underlying insureds, and the exercise of recapture options.
Most of the Company's existing life reinsurance treaties provide for
contractual increases in premium rates. These premium increases are constructed
to offset expected increases in claims associated with insureds' advancing ages.
New business premiums during each of the last three years have contributed more
than $120.0 million to total net premiums for each period. "New business" refers
to reinsurance resulting from newly issued underlying policies or blocks of
existing business, regardless of whether the reinsurance is associated with new
or existing treaties.
Insurance in force for the Company increased $26.1 billion to $253.4
billion at March 31, 1998, from $227.3 billion at December 31, 1997. New
business production for the three months ended March 31, 1998, totaled $32.2
billion, compared to $10.0 billion for the three months ended March 31, 1997.
New business production for 1997 totaled $75.9 billion compared to $37.9 billion
in 1996 and $36.0 billion in 1995. Significant growth in new business in U.S.
and Latin American operations contributed to most of this increase.
As is customary in the reinsurance business, life insurance clients
continually update, refine, and revise reinsurance information provided to the
Company. Such revised information is used by the Company in the preparation of
its financial statements and the financial effects resulting from the
incorporation of revised data are reflected in income currently.
The Company's profitability primarily depends on the volume and amount of
death claims incurred. While death claims are reasonably predictable over a
period of many years, claims become less predictable over shorter periods and
are subject to fluctuation from quarter to quarter and year to year. RGA
Reinsurance has catastrophe insurance coverage issued by an insurer rated "A" by
A.M. Best that provides benefits of up to $100.0 million per occurrence for
claims involving three or more deaths in a single accident, with a deductible of
$1.5 million per occurrence. This coverage is terminable annually on 90 days
notice and is ultimately provided through a pool of seventeen unaffiliated
insurers. The Company believes such catastrophe insurance coverage is adequate
to protect it from risks of multiple deaths of lives reinsured by policies with
RGA Reinsurance in a single accident. Additionally, the Company's practice is to
limit its retention to $2.5 million on any one insured life.
The Company has foreign currency risk on business conducted in foreign
currency to the extent that the exchange rate of the foreign currency is subject
to adverse change over time. The Company's Canadian operations transact business
in Canadian dollars. The exchange rate from Canadian to U.S. currency was
0.7045, 0.6992, 0.7297, and 0.7344 at March 31, 1998, and at December 31, 1997,
1996, and 1995, respectively. The Company's Latin American operations primarily
conduct business in Chilean pesos and Argentine dollars. The exchange rate from
these currencies to the U.S. currency remained relatively stable during the
first quarter of 1998 and during 1997, 1996, and 1995. The business generated
from the Asia Pacific
11
15
region is primarily denominated in U.S. dollars and Australian dollars and the
Company was not materially affected by the decline in the foreign exchange rates
within the Asia Pacific region during 1997.
The Company has four main operational segments: U.S., Canadian, other
international and accident and health. The U.S. operations provide life
reinsurance and non-traditional reinsurance to domestic clients. Non-
traditional business includes asset-intensive and financial reinsurance.
Asset-intensive products include reinsurance of stable value products,
bank-owned life insurance and annuities. The Canadian operations provide
insurers with traditional reinsurance as well as assistance with capital
management activity. The other international operations include results from
Latin American operations, Asia Pacific operations, and Market Development
operations. Other international business includes direct and reinsurance
business from a joint venture and subsidiaries in Latin America, Australia and
the United Kingdom, as well as reinsurance of life and health products through
RGA Reinsurance. The Latin American operations include direct and reinsurance
business from a joint venture and subsidiaries in Latin America as well as
traditional reinsurance of life and health products through RGA Reinsurance.
Latin American direct business is comprised primarily of Chilean single-premium
annuities and Argentine group life and universal life products. The accident and
health operations include both domestic and international reinsurance. Due to
continuing losses emanating from certain of the Company's accident and health
operations in 1997, the strategic decision was made to exit all outside-managed
accident and health pools and cease marketing accident and health business and
to place the operation into run-off. The operational segment results do not
include the corporate investment activity, general expenses and interest expense
of RGA. See "Business -- Industry Segments."
The following tables set forth selected information concerning the
Company's four main operating segments for the indicated periods.
RESULTS OF OPERATIONS
U.S. OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
NON-TRADITIONAL
------------------------
ASSET FINANCIAL
TRADITIONAL INTENSIVE REINSURANCE TOTAL
----------- --------- ----------- --------
REVENUES:
Net premiums...................................... $180,375 $ -- $ -- $180,375
Investment income, net of related expenses........ 28,757 26,738 -- 55,495
Realized investment gains, net.................... 445 241 -- 686
Other revenue..................................... 189 -- 4,027 4,216
-------- ------- ------- --------
Total revenues................................. 209,766 26,979 4,027 240,772
BENEFITS AND EXPENSES:
Claims and other policy benefits.................. 144,468 22 -- 144,490
Interest credited................................. 10,623 23,614 -- 34,237
Policy acquisition costs and other insurance
expenses....................................... 26,211 1,042 3,120 30,373
Other operating expenses.......................... 6,382 -- -- 6,382
-------- ------- ------- --------
Total benefits and expenses.................... 187,684 24,678 3,120 215,482
-------- ------- ------- --------
Income before income taxes and minority
interest..................................... $ 22,082 $ 2,301 $ 907 $ 25,290
======== ======= ======= ========
12
16
U.S. OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
NON-TRADITIONAL
------------------------
ASSET FINANCIAL
TRADITIONAL INTENSIVE REINSURANCE TOTAL
----------- --------- ----------- --------
REVENUES:
Net premiums...................................... $145,963 $ -- $ -- $145,963
Investment income, net of related expenses........ 24,662 9,676 -- 34,338
Realized investment gains, net.................... 100 244 -- 344
Other revenue..................................... (131) -- 4,171 4,040
-------- ------- ------- --------
Total revenues................................. 170,594 9,920 4,171 184,685
BENEFITS AND EXPENSES:
Claims and other policy benefits.................. 111,010 781 -- 111,791
Interest credited................................. 10,498 8,267 -- 18,765
Policy acquisition costs and other insurance
expenses....................................... 24,284 263 3,415 27,962
Other operating expenses.......................... 4,590 -- -- 4,590
-------- ------- ------- --------
Total benefits and expenses.................... 150,382 9,311 3,415 163,108
-------- ------- ------- --------
Income before income taxes and minority
interest..................................... $ 20,212 $ 609 $ 756 $ 21,577
======== ======= ======= ========
U.S. OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
NON-TRADITIONAL
------------------------
ASSET FINANCIAL
TRADITIONAL INTENSIVE REINSURANCE TOTAL
----------- --------- ----------- --------
REVENUES:
Net premiums...................................... $554,253 $ -- $ -- $554,253
Investment income, net of related expenses........ 98,666 55,636 -- 154,302
Realized investment gains/(losses), net........... 1,816 (1,726) -- 90
Other revenue..................................... 872 -- 25,308 26,180
-------- ------- ------- --------
Total revenues................................. 655,607 53,910 25,308 734,825
BENEFITS AND EXPENSES:
Claims and other policy benefits.................. 405,590 2,414 -- 408,004
Interest credited................................. 42,564 48,102 -- 90,666
Policy acquisition costs and other insurance
expenses....................................... 89,556 1,548 14,368 105,472
Other operating expenses.......................... 20,924 -- -- 20,924
-------- ------- ------- --------
Total benefits and expenses.................... 558,634 52,064 14,368 625,066
-------- ------- ------- --------
Income before income taxes and minority
interest..................................... $ 96,973 $ 1,846 $10,940 $109,759
======== ======= ======= ========
13
17
U.S. OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
NON-TRADITIONAL
------------------------
ASSET FINANCIAL
TRADITIONAL INTENSIVE REINSURANCE TOTAL
----------- --------- ----------- --------
REVENUES:
Net premiums...................................... $486,431 $ -- $ -- $486,431
Investment income, net of related expenses........ 87,163 24,638 -- 111,801
Realized investment (losses), net................. (1,340) -- -- (1,340)
Other revenue..................................... (564) -- 16,957 16,393
-------- ------- ------- --------
Total revenues................................. 571,690 24,638 16,957 613,285
BENEFITS AND EXPENSES:
Claims and other policy benefits.................. 360,081 -- -- 360,081
Interest credited................................. 34,168 20,224 -- 54,392
Policy acquisition costs and other insurance
expenses....................................... 80,667 3,044 12,841 96,552
Other operating expenses.......................... 17,768 -- -- 17,768
-------- ------- ------- --------
Total benefits and expenses.................... 492,684 23,268 12,841 528,793
-------- ------- ------- --------
Income before income taxes and minority
interest..................................... $ 79,006 $ 1,370 $ 4,116 $ 84,492
======== ======= ======= ========
U.S. OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
NON-TRADITIONAL
------------------------
ASSET FINANCIAL
TRADITIONAL INTENSIVE REINSURANCE TOTAL
----------- --------- ----------- --------
REVENUES:
Net premiums....................................... $414,133 $ -- $ -- $414,133
Investment income, net of related expenses......... 73,093 866 -- 73,959
Realized investment gains, net..................... 640 -- -- 640
Other revenue...................................... (318) -- 7,742 7,424
-------- ---- ------ --------
Total revenues.................................. 487,548 866 7,742 496,156
BENEFITS AND EXPENSES:
Claims and other policy benefits................... 311,974 -- -- 311,974
Interest credited.................................. 33,023 768 -- 33,791
Policy acquisition costs and other insurance
expenses........................................ 65,526 34 6,037 71,597
Other operating expenses........................... 15,367 -- -- 15,367
-------- ---- ------ --------
Total benefits and expenses..................... 425,890 802 6,037 432,729
-------- ---- ------ --------
Income before income taxes and minority
interest...................................... $ 61,658 $ 64 $1,705 $ 63,427
======== ==== ====== ========
14
18
CANADIAN OPERATIONS
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------
1998 1997 1997 1996 1995
------- ------- -------- ------- -------
REVENUES:
Net premiums................................ $25,026 $18,835 $ 83,563 $63,118 $49,248
Investment income, net of related
expenses................................. 5,158 3,764 16,321 12,722 11,064
Realized investment gains/(losses), net..... 236 -- 109 2,419 (198)
Other revenue............................... 272 71 20,152 290 201
------- ------- -------- ------- -------
Total revenues........................... 30,692 22,670 120,145 78,549 60,315
BENEFITS AND EXPENSES:
Claims and other policy benefits............ 23,115 14,742 74,972 48,983 36,683
Interest credited........................... 245 342 1,293 287 --
Policy acquisition costs and other insurance
expenses................................. 2,855 3,169 22,411 10,161 8,087
Other operating expenses.................... 1,803 1,423 6,387 5,682 4,665
------- ------- -------- ------- -------
Total benefits and expenses.............. 28,018 19,676 105,063 65,113 49,435
------- ------- -------- ------- -------
Income before income taxes and minority
interest............................... $ 2,674 $ 2,994 $ 15,082 $13,436 $10,880
======= ======= ======== ======= =======
OTHER INTERNATIONAL
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
LATIN AMERICA
---------------------- ASIA OTHER TOTAL
DIRECT REINSURANCE PACIFIC MARKETS INTERNATIONAL
------- ----------- ------- ------- -------------
REVENUES:
Net premiums............................. $13,451 $13,366 $10,453 $ 406 $ 37,676
Investment income, net of related
expenses.............................. 1,582 488 420 37 2,527
Other revenue............................ 73 -- 1,535 54 1,662
------- ------- ------- ------- --------
Total revenues........................ 15,106 13,854 12,408 497 41,865
BENEFITS AND EXPENSES:
Claims and other policy benefits......... 12,116 12,284 5,553 306 30,259
Interest credited........................ 30 -- -- -- 30
Policy acquisition costs and other
insurance expenses.................... 978 372 4,837 122 6,309
Other operating expenses................. 1,628 966 1,758 1,051 5,403
Interest expense......................... -- -- 100 45 145
------- ------- ------- ------- --------
Total benefits and expenses........... 14,752 13,622 12,248 1,524 42,146
------- ------- ------- ------- --------
Income/(loss) before income taxes and
minority interest................... $ 354 $ 232 $ 160 $(1,027) $ (281)
======= ======= ======= ======= ========
15
19
OTHER INTERNATIONAL
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
LATIN AMERICA
---------------------- ASIA OTHER TOTAL
DIRECT REINSURANCE PACIFIC MARKETS INTERNATIONAL
------- ----------- ------- ------- -------------
REVENUES:
Net premiums............................. $15,098 $ 2,668 $ 6,248 $ 63 $ 24,077
Investment income, net of related
expenses.............................. 1,140 407 326 4 1,877
Realized investment gains, net........... -- -- 15 -- 15
Other revenue............................ 14 -- -- -- 14
------- ------- ------- ------- --------
Total revenues........................ 16,252 3,075 6,589 67 25,983
BENEFITS AND EXPENSES:
Claims and other policy benefits......... 13,883 2,108 3,916 176 20,083
Interest credited........................ 15 -- -- -- 15
Policy acquisition costs and other
insurance expenses.................... 1,099 74 2,360 40 3,573
Other operating expenses................. 1,225 531 1,480 410 3,646
Interest expense......................... -- -- 115 -- 115
------- ------- ------- ------- --------
Total benefits and expenses........... 16,222 2,713 7,871 626 27,432
------- ------- ------- ------- --------
Income/(loss) before income taxes and
minority interest................... $ 30 $ 362 $(1,282) $ (559) $ (1,449)
======= ======= ======= ======= ========
OTHER INTERNATIONAL
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
LATIN AMERICA
---------------------- ASIA OTHER
DIRECT REINSURANCE PACIFIC MARKETS TOTAL
------- ----------- ------- ------- --------
REVENUES:
Net premiums.............................. $56,460 $11,730 $36,591 $ 2,170 $106,951
Investment income, net of related
expenses............................... 7,067 1,701 1,730 378 10,876
Realized investment gains, net............ -- -- 14 -- 14
Other revenue............................. 185 -- -- 332 517
------- ------- ------- ------- --------
Total revenues......................... 63,712 13,431 38,335 2,880 118,358
BENEFITS AND EXPENSES:
Claims and other policy benefits.......... 53,181 10,327 21,164 1,755 86,427
Interest credited......................... 82 -- -- -- 82
Policy acquisition costs and other
insurance expenses..................... 3,820 329 15,616 479 20,244
Other operating expenses.................. 6,553 2,962 6,119 3,680 19,314
Interest expense.......................... -- -- 468 -- 468
------- ------- ------- ------- --------
Total benefits and expenses............ 63,636 13,618 43,367 5,914 126,535
------- ------- ------- ------- --------
Income/(loss) before income taxes and
minority interest.................... $ 76 $ (187) $(5,032) $(3,034) $ (8,177)
======= ======= ======= ======= ========
16
20
OTHER INTERNATIONAL
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
LATIN AMERICA
---------------------- ASIA OTHER
DIRECT REINSURANCE PACIFIC MARKETS TOTAL
------- ----------- ------- ------- -------
REVENUES:
Net premiums............................... $41,672 $5,130 $21,066 $ 287 $68,155
Investment income, net of related
expenses................................ 3,722 1,400 1,013 -- 6,135
Realized investment (losses)/gains, net.... -- -- -- -- --
Other revenue.............................. 36 1 -- -- 37
------- ------ ------- ------- -------
Total revenues.......................... 45,430 6,531 22,079 287 74,327
BENEFITS AND EXPENSES:
Claims and other policy benefits........... 39,492 3,122 11,641 170 54,425
Interest credited.......................... 27 -- -- -- 27
Policy acquisition costs and other
insurance expenses...................... 1,379 169 9,808 52 11,408
Other operating expenses................... 4,434 1,214 4,536 1,850 12,034
Interest expense........................... -- -- 484 -- 484
------- ------ ------- ------- -------
Total benefits and expenses............. 45,332 4,505 26,469 2,072 78,378
------- ------ ------- ------- -------
Income/(loss) before income taxes and
minority interest..................... $ 98 $2,026 $(4,390) $(1,785) $(4,051)
======= ====== ======= ======= =======
OTHER INTERNATIONAL
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
LATIN AMERICA
---------------------- ASIA OTHER
DIRECT REINSURANCE PACIFIC MARKETS TOTAL
------- ----------- ------- ------- -------
REVENUES:
Net premiums................................ $33,794 $12,292 $12,735 $ -- $58,821
Investment income, net of related
expenses................................. 2,050 986 (231) -- 2,805
Realized investment (losses)/gains, net..... -- -- -- -- --
Other revenue............................... (30) 1 -- -- (29)
------- ------- ------- ---- -------
Total revenues........................... 35,814 13,279 12,504 -- 61,597
BENEFITS AND EXPENSES:
Claims and other policy benefits............ 30,654 8,024 9,096 -- 47,774
Interest credited........................... 5 -- -- -- 5
Policy acquisition costs and other insurance
expenses................................. 2,276 90 2,392 -- 4,758
Other operating expenses.................... 3,299 1,264 2,706 -- 7,269
Interest expense............................ -- -- -- -- --
------- ------- ------- ---- -------
Total benefits and expenses.............. 36,234 9,378 14,194 -- 59,806
------- ------- ------- ---- -------
Income/(loss) before income taxes and
minority interest...................... $ (420) $ 3,901 $(1,690) $ -- $ 1,791
======= ======= ======= ==== =======
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21
ACCIDENT AND HEALTH
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
------- -------- -------- ------- -------
REVENUES:
Net premiums............................... $26,901 $ 16,497 $ 90,692 $57,182 $47,789
Investment income, net of related
expenses................................ 433 281 1,249 1,019 730
Realized investment gains/(losses), net.... -- 3 2 2 (2)
Other revenue.............................. 331 30 1,379 666 335
------- -------- -------- ------- -------
Total revenues.......................... 27,665 16,811 93,322 58,869 48,852
BENEFITS AND EXPENSES:
Claims and other policy benefits........... 19,432 12,144 70,658 42,250 33,640
Accident and health pool charge............ -- 18,000 18,000 -- --
Policy acquisition costs and other
insurance expenses...................... 7,397 5,763 28,354 18,389 13,630
Other operating expenses................... 786 549 5,652 2,350 2,280
------- -------- -------- ------- -------
Total benefits and expenses........ 27,615 36,456 122,664 62,989 49,550
------- -------- -------- ------- -------
Income/(loss) before income taxes and
minority interest..................... $ 50 $(19,645) $(29,342) $(4,120) $ (698)
======= ======== ======== ======= =======
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Income Before Income Taxes and Minority Interest. Consolidated income
before income taxes and minority interest increased $22.0 million in the first
quarter of 1998, compared to the same period in 1997. After tax diluted earnings
per share were $0.62 for the first quarter of 1998 compared with $0.11 for the
same period in 1997. After tax consolidated net income before realized capital
gains and losses increased to $15.3 million in the first quarter of 1998 from
$2.6 million in the same period in 1997.
The increase in the U.S. operations income before income taxes and minority
interest in the first quarter of 1998 compared to the same period in 1997 was
due to increased earnings on asset-intensive business resulting from growth in
fixed-maturity securities, and continued growth in the traditional business
where premiums increased 23.6%. The decrease in the Canadian operations income
before income taxes and minority interest in the first quarter of 1998 compared
to 1997 was primarily a result of an increase in claims experience during the
first quarter of 1998 compared to the same period in 1997. The other
international operations lost $0.3 million before income taxes and minority
interest in the first quarter of 1998 compared to a $1.4 million loss in 1997.
Strong growth in the Latin America and Asia Pacific business was offset by costs
associated with the development of new business in several international
markets. During the first quarter of 1997, the Company recorded an accident and
health charge of $18.0 million, $10.4 million after-tax, to increase reserves
associated with run-off claims from certain accident and health insurance pools
in which it had formerly participated. That action was a result of management's
strategic decision to exit all outside-managed accident and health pools. As of
December 31, 1997, the Company made a strategic decision to cease marketing
accident and health business and established reserves that it believes are
sufficient to handle the run-off.
Net Premiums. Consolidated net premiums increased $64.6 million, or 31.5%,
to $270.0 million in the first quarter of 1998, compared to $205.4 million for
the same period in 1997. Renewal premiums from the existing block of business,
along with new business premiums from facultative and automatic treaties
contributed to the premium increase. Business premium levels are significantly
influenced by large transactions and reporting practices of ceding companies and
therefore fluctuate from period to period.
The U.S. operations net premiums in the first quarter of 1998 increased
23.6% to $180.4 million from the prior year, attributed to premium growth on the
existing block of business, combined with strong new business premium for blocks
of business added since the first quarter of 1997.
18
22
Net premiums in the Canadian operations in the first quarter of 1998
increased 32.9% to $25.0 million in 1998. New business premiums decreased $1.2
million, while renewal premiums increased $7.4 million compared to the first
quarter of 1997. The first quarter typically includes a large amount of renewal
premium. Several of the treaties processed related to closed blocks of calendar
year new and renewal business with large renewal premiums resulting from the
strong production in December 1997. The first year premium decline was primarily
the result of strong new business production in December 1996, which increased
the first year premiums for the first quarter of 1997.
The Company's other international operations reported premiums of $37.7
million for the first quarter of 1998 compared to $24.1 million for the same
period in 1997. The 1998 premiums represented approximately $26.8 million from
Latin America, of which approximately $13.5 million was direct premium generated
in Argentina and Chile. Latin American premiums grew 50.9%, which resulted from
continued growth in Chilean single premium annuities and universal life business
in Argentina, as well as reinsurance on privatized pensions in Argentina. The
Asia Pacific operations and other markets generated $10.9 million of premiums,
predominantly through the Hong Kong contact office and Australia. Primarily as a
result of the new business generated in Australia, the Asia Pacific premiums in
the first quarter of 1998 grew 67.3% compared to the same period in the prior
year.
Accident and health operations net premiums increased 63.1% to $26.9
million in the first quarter of 1998. The increase resulted from premiums on new
contracts initiated and the renewal of existing contracts in the second half of
1997. Although the decision was made to exit all outside-managed accident and
health pools and to cease marketing accident and health business and to place
the operation into run-off at the end of 1997, several new contracts were
previously executed with an effective date of January 1, 1998. It is anticipated
that accident and health premiums will decrease in each of the next several
years. The Company estimates that future accident and health premiums compared
to 1997 premiums will remain level in 1998. On an annual basis, premiums are
expected to decrease, compared to each preceding year, by approximately 20%,
70%, 90% and 100% during 1999, 2000, 2001 and 2002, respectively.
Net Investment Income. Consolidated net investment income increased 52.2%
to $63.7 million, in the first quarter of 1998 from the same period in 1997. The
cost basis of fixed maturity securities increased $1.1 billion from the first
quarter of 1997. The increase in invested assets was a result of an increase in
operating cash flows and reinsurance transactions involving deposits for
asset-intensive products from ceding companies, primarily stable value product
deposits. The Company's stable value reinsurance is assumed from General
American, which indirectly owns approximately 64% of RGA's Voting Common. See
"Principal Stockholders." The amount of future reinsurance of the stable value
product is dependent on General American's claims-paying rating. The average
earned yield on the consolidated investment portfolio decreased to 7.06% for the
first quarter of 1998 compared to 7.22% for the same period in 1997. This
decrease in overall yield reflected the increase in assets supporting the stable
value reinsurance product that are generally of a shorter duration and carry a
lower average yield and the overall decrease in interest rates. Earnings
credited and paid to ceding companies are included in interest credited.
Realized Investment Gains/(Losses), Net. Consolidated net realized
investment gains increased $0.5 million to $0.9 million in the first quarter of
1998 from $0.4 million for the same period in the prior year. Net realized
investment gains resulted from normal activity within the Company's investment
portfolios.
Other Revenue. Consolidated other revenue increased $2.4 million in the
first quarter of 1998 to $6.6 million. Other revenue includes items such as
profit and risk fees associated with financial reinsurance, treaty recapture
fees as well as earnings in unconsolidated subsidiaries, management fee income,
and other miscellaneous income. During 1998, financial reinsurance treaties in
the U.S. operations resulted in $3.4 million in financial reinsurance fees which
were partially offset by $3.1 million of fees paid to retrocessionaires,
included in policy acquisition costs and other insurance expenses. During March
1998, the Asia Pacific operations completed a financial reinsurance transaction
that resulted in $1.3 million in financial reinsurance fee revenue which was
partially offset by fees paid to retrocessionaires. The Company's strategy
involves the assumption and subsequent retrocession of most of these financial
reinsurance treaties which resulted in amounts of $128.2 million and $132.2
million being included in other reinsurance assets and
19
23
liabilities, respectively, on the Company's consolidated balance sheets at March
31, 1998. Other revenue also included $0.8 million and $0.3 million in earnings
in unconsolidated subsidiaries for the first quarter of 1998 and 1997,
respectively.
Claims and Other Policy Benefits. Consolidated claims and other policy
benefits increased 36.9% to $217.3 million, in the first quarter of 1998. For
the first quarter of 1998, total claims and other policy benefits represented
80.5% of total net premiums compared to 77.3% for the same period in 1997. This
fluctuation was primarily a result of higher benefits and reserves in the U.S.
and Canadian operations in the first quarter of 1998 compared to the same period
in 1997. The Company expects mortality to fluctuate somewhat from period to
period but believes it is fairly constant over longer periods of time. The
Company continues to monitor mortality trends to determine the appropriateness
of reserve levels.
U.S. operations claims and other policy benefits increased 29.3% in the
first quarter of 1998, primarily as a result of increases from new business
production and higher claims experience during such period compared to the same
period in 1997. Claims and other policy benefits as a percentage of net premiums
increased to 80.1% in the first quarter of 1998 from 76.6% in the same period in
1997. This fluctuation was due to an increase in death claims as well as
reserves established for new blocks of business.
Canadian operations claims and other policy benefits increased 56.8% in the
first quarter of 1998. Claims and other policy benefits as a percentage of net
premiums increased to 92.4% to $23.1 million in the first quarter of 1998 from
78.3% in the same period in 1997. The increase as a percent of premiums was
primarily due to reserves established for new and renewal business.
The claims and other policy benefits of the other international business in
the first quarter of 1998 increased $10.2 million from the same period in the
prior year. This increase was primarily the result of reserve and policyholder
benefit increases on business from Latin American ventures and blocks of
mortality risk reinsurance of $8.4 million. These reserve increases resulted
from new business and the continued growth in the Latin American single premium
immediate annuity business in the first quarter of 1998. The Asia Pacific
operations reflected an increase of $1.6 million resulting primarily from new
business written in Australia.
Accident and health operations claims and other policy benefits increased
60.0% in the first quarter of 1998. The claims and other policy benefits for the
first quarter of 1997 do not include the $18.0 million, or $10.4 million
after-tax, accident and health pool charge taken during the first quarter of
1997, which is separately disclosed on the income statement. As a percentage of
net premiums, claims and other policy benefits decreased to 72.2% in the first
quarter of 1998 from 73.6% in the same period of 1997. The accident and health
operations reserves are subject to volatility due to the nature of risk covered
which is primarily accident risk. Reserves are calculated based upon current
information including industry estimates for certain aviation accidents. In
1997, the Company made the decision to exit all outside-managed health pools and
to cease marketing accident and health business and to place the business into
run-off.
Interest Credited. Consolidated interest credited increased $15.4 million
in the first quarter of 1998 to $34.5 million. Interest credited represents
amounts credited on the Company's asset-intensive and universal life type
products. Asset-intensive products include stable value operations, bank-owned
life insurance and annuity products. These products are primarily written in the
U.S. operations, while the Canadian operations have a small annuity block of
business and the Latin American operations have a direct universal life product
developing in Argentina. The increase in interest credited was primarily a
result of an increase of approximately $185.0 million in deposits related to
asset-intensive reinsurance from ceding companies for the first quarter of 1998
compared to the same period in 1997.
Policy Acquisition Costs and Other Insurance Expenses. Consolidated policy
acquisition costs and other insurance expenses, consisting primarily of
allowances, increased 16.0%, to $46.9 million in the first quarter of 1998. As a
percentage of net premiums, consolidated policy acquisition costs and other
insurance expenses decreased to 17.4% in the first quarter of 1998 from 19.7%
during the same period in 1997. This resulted from a change in business mix from
coinsurance to yearly renewable term reinsurance and the addition of larger
blocks of Canadian business at the end of 1997 that do not have significant
commission costs associated with
20
24
the business. Overall, policy acquisition costs and other insurance expenses
continue to fluctuate with business volume and changes in product mix from
period to period.
Policy acquisition costs and other insurance expenses as a percentage of
net premiums for the U.S. operations decreased to 16.8% in the first quarter of
1998 from 19.2% during the same period in 1997. Within the U.S. operations,
policy acquisition costs and other insurance expenses as a percentage of net
premiums for traditional business decreased to 14.5% in the first quarter of
1998 from 16.6% during the same period in 1997. This was due primarily to new
business added during 1998 which was primarily yearly renewable term products
which do not have a high level of commissions associated with the premiums. The
financial reinsurance business within the U.S. operations reflects fees of
approximately $3.1 million paid to retrocessionaires during 1998, which
represented a partial offset to the fees collected that were reflected as other
revenues.
In the Canadian operations, policy acquisition costs and other insurance
expenses as a percentage of net premiums decreased to 11.4% in the first quarter
of 1998, from 16.8% during the same period in 1997. The decrease was primarily
due to the large blocks of business added at the end of 1997 that do not have
significant commission costs associated with the business. In addition, there
was more reinsurance of yearly renewable term products during the second half of
1997 and first quarter of 1998 compared to the first quarter of 1997. This shift
in reinsurance method resulted in fewer commissions as a percent of net premiums
for the first quarter of 1998 compared to the first quarter of 1997.
Other international operations policy acquisition cost and other insurance
expenses as a percentage of net premiums increased to 16.7% in the first quarter
of 1998 from 14.8% during the same period in 1997. These percentages fluctuate
due to the timing of client company reporting and variations in the mixture of
business being written within the Latin American and Asia Pacific operations. In
addition, the financial reinsurance business within the Asia Pacific operations
reflects fees of approximately $0.6 million paid to retrocessionaires during the
first quarter of 1998, which represented a partial offset to the fees collected
that were reflected as other revenues.
Accident and health segment policy acquisition costs and other insurance
expenses as a percentage of net premiums decreased to 27.5% in the first quarter
of 1998 from 34.9% during the same period in 1997. The decrease will fluctuate
resulting from changes in the mixture of business within the accident and health
operations.
Other Operating Expenses. Consolidated other operating expenses increased
$4.9 million in the first quarter of 1998. The overall increase in operating
expenses was attributed to planned increases associated with the ongoing growth
of the Company, of which other international operations operating expenses
comprised $1.8 million of the increase in the first quarter of 1998.
Interest Expense. Consolidated interest expense during the first quarter
of 1998 related to the 7 1/4% Senior Notes issued in 1996 and the financing of a
portion of the Company's Australian reinsurance operations, RGA Australian
Holdings Pty Limited ("Australian Holdings") and interest paid on an operating
line of credit. Interest cost for the first quarter of 1998 and the first
quarter of 1997 was $2.0 million and $1.9 million, respectively. Interest
related to the Senior Notes was $1.9 million in the first quarter of 1998 and
$1.8 million in the first quarter of 1997.
Provision for Income Taxes. Consolidated income tax expense increased $8.8
million in the first quarter of 1998 as a result of higher pre-tax income.
Income tax expense from operations before realized investment gains/(losses )
and accident and health pool charge represented approximately 35.7% and 36.3% of
pre-tax income for the first quarters of 1998 and 1997, respectively. The
Company calculated a tax benefit of $7.6 million on the $18.0 million accident
and health reserve adjustment recorded in the first quarter of 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Income Before Income Taxes and Minority Interest. Consolidated income
before income taxes and minority interest decreased 3.4% in 1997. Diluted
earnings per share were $2.13 for 1997 compared with $2.17 for 1996. After tax
consolidated net income before realized capital gains and losses decreased
slightly to
21
25
$54.4 million in 1997 from $54.6 million in 1996. During the first quarter of
1997, the Company recorded a charge of $18.0 million, $10.4 million after-tax,
to increase reserves associated with run-off claims from certain accident and
health insurance pools in which it had formerly participated. That action was a
result of management's strategic decision to exit all outside-managed accident
and health pools. The charge reflects management's intent to reserve fully for
all anticipated claim payments attributed to outside-managed accident and health
pools. Due to continuing losses emanating from certain of the Company's accident
and health operations in the third and fourth quarters of 1997, the strategic
decision was made to cease marketing accident and health business and to place
the operation into run-off at year-end. The Company established an additional
$3.0 million in reserves which it believes are sufficient to handle the run-off.
In December 1997, RGA Reinsurance was notified by the holders of minority
interests in its accident and health subsidiaries of their intent to exercise
certain put options for their 49% ownership interest. Based upon the Company's
decision to cease marketing accident and health business, the Company also
established a reserve of approximately $3.0 million against the intangible asset
that will arise related to the excess of the purchase price over the fair value
of net assets acquired when put options are exercised by certain minority
interests.
The increase in the U.S. operations income before income taxes and minority
interest in 1997 compared to 1996 was due to fees earned on reinsurance
transactions and strong premium and investment income growth of 13.9% and 38.0%,
respectively. The increase in the Canadian operations income before income taxes
and minority interest in 1997 compared to 1996 was primarily a result of strong
new business production and recapture fees earned which were partially offset by
adverse mortality experienced in 1997. The other international operations lost
$8.2 million before income taxes and minority interest in 1997 compared to $4.1
million loss in 1996. The losses in the segment were due primarily to continued
price pressure in highly competitive international markets and adverse mortality
for blocks of mortality risk reinsurance from Argentina. Additionally, costs
associated with the development of new business in several international markets
still exceed the revenue base, due to the relatively recent initiation of market
development activities. The decrease in the accident and health operations
income before income taxes and minority interest in 1997 compared to 1996 was
primarily due to the accident and health charge in the first quarter, the write
off of intangibles and establishment of additional reserves in the fourth
quarter discussed above, as well as continued adverse experience on the
remainder of the business.
Net Premiums. Consolidated net premiums increased 23.8%, to $835.5 million
in 1997. Net premiums for the U.S. operations rose 13.9% in 1997. Renewal
premiums from the existing block of business, new business premiums from
facultative and automatic treaties, and premium flows from reinsurance of larger
blocks of in force business all contributed to the premium increase. Business
premium levels are significantly influenced by large transactions and reporting
practices of ceding companies from period to period.
Net premiums in the Canadian operations increased 32.4% to $83.6 million in
1997. New business premiums increased $2.0 million, while renewal premiums
increased $18.4 million during 1997. The growth in renewal premiums reflects the
normal increase of in force business and the effect of large blocks of in force
business acquired in the fourth quarter of 1996 and retained during 1997. The
effect of changes in the foreign exchange rate during 1997 was not material.
The Company's other international operations reported premiums of $107.0
million in 1997 compared to $68.2 million in 1996. The 1997 premium represented
approximately $68.2 million from Latin America, of which approximately $56.5
million was direct premium generated in Argentina and Chile. This increase
resulted from continued growth in Chilean single premium annuities and universal
life business in Argentina. The Asia Pacific operations and other markets
generated $38.8 million of premiums, predominantly through the Hong Kong contact
office and Australia.
Accident and health operations net premiums increased 58.6% to $90.7
million in 1997. The net premiums increased primarily from business written by
the Company's domestic underwriting facility. With the decision to cease
marketing this type of business, it is anticipated that accident and health
premiums will decrease in each of the next few years. The Company estimates that
future accident and health premiums compared to 1997 premiums will remain level
in 1998. Premiums will decrease, compared to each preceding year, by
approximately 20%, 70%, 90%, and 100% during 1999, 2000, 2001 and 2002,
respectively.
22
26
Net Investment Income. Consolidated net investment income increased 37.6%
in 1997. The cost basis of fixed maturity securities increased $946.7 million,
or 64.4%. The increase in invested assets was a result of an increase in
operating cash flows and reinsurance transactions involving deposits for
asset-intensive products from ceding companies, primarily stable value deposits,
of $834.3 million and $429.3 million during 1997 and 1996, respectively. The
average yield earned on investments was 7.23% in 1997 compared with 7.32% earned
in 1996. The decrease in overall yield reflected the increase in assets
supporting the stable value reinsurance product that are generally of a shorter
duration and carry a lower average yield. The asset-intensive products
investment portfolios generated approximately $55.6 million and $24.6 million of
investment income in 1997 and 1996, respectively, which was largely offset by
earnings credited and paid to ceding companies included in interest credited.
Realized Investment Gains/(Losses), Net. Consolidated net realized capital
gains decreased $0.6 million to $0.3 million in 1997. The 1997 amount included
the write down of the value of an investment by $2.5 million, which was more
than offset by capital gains within the various operating portfolios.
Other Revenue. Consolidated other revenue increased $30.0 million in 1997
to $47.4 million. Other revenue includes items such as treaty recapture fees,
profit and risk fees associated with financial reinsurance as well as earnings
in unconsolidated subsidiaries, management fee income and miscellaneous income
associated with late premium payments. During 1997, financial reinsurance
treaties resulted in $16.0 million in financial reinsurance fees which were
partially offset by fees paid to retrocessionaires of $14.4 million, included in
policy acquisition costs and other insurance expenses. The Company's strategy
involves the assumption and subsequent retrocession of these financial
reinsurance treaties which resulted in amounts of $147.2 and $148.4 being
included in other reinsurance assets and liabilities, respectively, on the
Company's consolidated balance sheets. Other revenue also included $9.3 million
in earnings in unconsolidated subsidiaries in the U.S. operations and a
recapture fee of $20.1 million for a treaty executed in the Canadian operations
during December 1997. This recapture fee included the recovery of acquisition
costs previously deferred which have been reflected in policy acquisition costs
and other insurance expenses.
Claims and Other Policy Benefits. Consolidated claims and other policy
benefits increased 26.6% in 1997. Claims and other policy benefits as a
percentage of net premiums increased to 76.6% in 1997 from 74.9% in 1996. This
increase was primarily a result of adverse experience in the Canadian and
accident and health operations in 1997 and increasing levels of other
international business. The Company expects mortality to fluctuate somewhat from
period to period, but believes it is fairly constant over longer periods of
time. The Company continues to monitor mortality trends to determine the
appropriateness of reserve levels.
U.S. operations claims and other policy benefits increased 13.3% in 1997,
primarily as a result of increases from new business production. Claims and
other policy benefits as a percentage of net premiums decreased slightly to
73.6% in 1997 from 74.0% in 1996. This decrease was due to normal short-term
fluctuations in death claims.
Canadian operations claims and other policy benefits increased 53.1% in
1997. Claims and other policy benefits as a percentage of net premiums increased
to 89.7% in 1997 from 77.6% in 1996. The increase as a percent of premiums was
primarily due to mortality results which were not as favorable as those
experienced in 1996.
The Company's other international business comprised the remaining increase
of $32.1 million from the prior year. This increase was the result of reserve
and policyholder benefit increases on business from Latin American ventures and
blocks of mortality risk reinsurance of $20.9 million. These reserve increases
resulted from new business and the continued growth in the Latin American single
premium immediate annuity business in 1997. The Asia Pacific operations
reflected an increase of $9.5 million resulting primarily from new business
written in Australia.
Accident and health operations claims and other policy benefits increased
67.2% in 1997. These claims and other policy benefits do not include the $18.0
million, $10.4 million after-tax, accident and health pool charge taken during
the first quarter of 1997, which is separately disclosed on the income
statement. As a percentage of net premiums, claims and other policy benefits
increased to 77.9% in 1997 from 73.9% in 1996. The increase as a percent of
premiums was primarily due to an increase in reserves of approximately
23
27
$3.0 million during 1997 related to the Company's decision to cease marketing
these services and place the line into run-off. In addition, the segment
continued to experience adverse results in 1997. The accident and health
operations reserves are subject to volatility due to the nature of risk covered,
primarily accident risks. Reserves are calculated based upon current
information, including industry estimates for certain aviation accidents.
Interest Credited. Consolidated interest credited increased $37.3 million
in 1997 to $92.0 million. Interest credited represents amounts credited on the
Company's asset-intensive and universal life type products. Asset-intensive
products include stable value operations, bank-owned life insurance and annuity
products. Reinsurance of these products is primarily written in the U.S.
operations, while the Canadian operations have a small annuity block of business
and the Latin American operations have a direct universal life product in
Argentina. The increase in interest credited was a result of an increase in
reinsurance transactions involving deposits for asset-intensive products from
ceding companies.
Policy Acquisition Costs and Other Insurance Expenses. Consolidated policy
acquisition costs and other insurance expenses, consisting primarily of
allowances, increased 29.3%, to $176.5 million in 1997. As a percentage of net
premiums, consolidated policy acquisition costs and other insurance expenses
increased to 21.1% in 1997 from 20.2% in 1996 resulting from growth in financial
reinsurance transactions, partially offset by a change in business mix from
coinsurance to yearly renewable term reinsurance. Overall, policy acquisition
costs and other insurance expenses continue to fluctuate with business volume
and changes in product mix from period to period.
Policy acquisition costs and other insurance expenses as a percentage of
net premiums for the U.S. operations decreased to 19.0% in 1997 from 19.8% in
1996. Within the U.S. operations, policy acquisition costs and other insurance
expenses as a percentage of net premiums for traditional business decreased
slightly to 16.2% in 1997 from 16.6% in 1996. The financial reinsurance business
within the U.S. operations reflects fees of approximately $14.4 million paid to
retrocessionaires during 1997, which represented a partial offset to the fees
collected that are reflected as other revenues.
In the Canadian operations, policy acquisition costs and other insurance
expenses as a percentage of net premiums increased to 26.8% in 1997, from 16.1%
in 1996. The increase was primarily a result of the recovery of deferred
acquisition costs of approximately $9.5 million through a treaty recapture in
December 1997 which partially offsets the gross recapture fee reported as other
revenue. In addition, an increased use of coinsurance versus yearly renewable
term reinsurance in 1997 compared to 1996 resulted in higher commissions as a
percent of net premiums for 1997 compared to 1996.
Other international operations policy acquisitions costs and other
insurance expenses as a percentage of net premiums increased to 18.9% in 1997
from 16.7% in 1996. These percentages fluctuate due to the timing of client
company reporting and variations in the mixture of business being written within
the Latin American and Asia Pacific operations.
Accident and health operations policy acquisition costs and other insurance
expenses as a percentage of net premiums decreased to 31.3% in 1997 from 32.2%
in 1996. The decrease is not considered significant and will fluctuate resulting
from changes in the mixture of business within the accident and health
operations.
Other Operating Expenses. Consolidated other operating expenses increased
$13.2 million in 1997. The overall increase in operating expenses was attributed
to planned increases associated with the ongoing growth of the Company. Other
international operations operating expenses comprised $7.3 million of the
increase in 1997. The Company believes sustained growth in premiums will lessen
the burden of start-up expenses and expansion costs. In addition, $3.0 million
of the increase is associated with the write-off of intangibles associated with
the Company's decision to cease marketing accident and health operations.
Excluding the accident and health write-off, other operating expenses as a
percentage of total revenues decreased slightly to 4.7% in 1997 compared to 4.8%
in 1996.
Interest Expense. Consolidated interest expense during 1997 related to the
Senior Notes issued in 1996, and the financing of a portion of the Company's
Australian reinsurance operations, Australian Holdings.
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Interest cost for 1997 and 1996 was $7.8 million and $6.2 million, respectively.
Interest related to the Senior Notes was $7.3 million in 1997 and $5.7 million
in 1996.
Provision for Income Taxes. Consolidated income tax expense decreased 9.3%
in 1997 as a result of lower pre-tax income. Income tax expense from operations
before realized investment gains/(losses) and accident and health pool charge
represented approximately 35.8% and 36.3% of pre-tax income for 1997 and 1996,
respectively. The Company calculated a tax benefit of $7.6 million on the $18.0
million accident and health reserve adjustment recorded in the first quarter of
1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Income Before Income Taxes and Minority Interest. Consolidated income
before income taxes and minority interest increased 16.7% in 1996. Diluted
earnings per share were $2.17 for 1996 compared with $1.87 for 1995. After tax
consolidated net income before realized capital gains and losses increased
15.6%, to $54.6 million in 1996.
Income before income taxes and minority interest for the U.S. operations
increased to $84.5 million in 1996 due primarily to strong premium growth of
17.5% in 1996. Income before income taxes and minority interest for the Canadian
operations increased 23.5%, to $13.4 million in 1996, primarily as a result of
strong new business production and gains on investments. The other international
operations lost $4.1 million before income taxes and minority interest in 1996.
This represented approximately $2.1 million of income from Latin American
operations, offset by a loss of $4.4 million from Asia Pacific operations and
$1.8 million from other markets. The loss in the Asia Pacific operations and
other markets was attributable to the cost associated with the development of a
new operation, which more than offset the increasing premium levels during 1996.
The accident and health operations lost $4.1 million before income taxes and
minority interest in 1996 and $0.7 million in 1995. The loss in 1996 was the
result of several large claims incurred and strengthening reserves associated
with several closed blocks of business
Net Premiums. Consolidated net premiums increased 18.4%, to $674.9 million
in 1996. Net premiums for the U.S. operations rose 17.5% to $486.4 million in
1996. Renewal premiums from the existing block of business, new business
premiums from facultative and automatic treaties, and premium flows from
reinsurance of larger blocks of in force business all contributed to the premium
increase. Business premium levels are significantly influenced by large
transactions and reporting practices of ceding companies from period to period.
Net premiums in the Canadian operations increased 28.2% to $63.1 million in
1996. New business premiums increased $6.0 million, while renewal premiums
increased $7.8 million during 1996. The effect of changes in the foreign
exchange rate during 1996 was not material.
The Company's other international operations reported premiums of $68.2
million in 1996 compared to $58.8 million in 1995. The 1996 premium represented
approximately $46.8 million from Latin America, of which approximately $41.7
million was direct premium generated by business ventures in Argentina and
Chile. The remaining $21.4 million of premiums was reported from the Asia
Pacific operations and other markets, predominantly through the Hong Kong
contact office.
Accident and health operations net premiums increased 19.7% to $57.2
million in 1996. The net premiums reported from business in the United Kingdom
has more than offset premium losses incurred from cancellation of existing U.S.
treaties during 1996.
Net Investment Income. Consolidated net investment income increased 51.8%
in 1996. The cost basis of fixed maturity securities increased $650.0 million,
or 79.3%. The increase in invested assets resulted from an increase in operating
cash flows, net proceeds of $99.0 million from the 7 1/4% Senior Notes issued by
the Company during 1996, and reinsurance transactions involving deposits for
asset-intensive products from ceding companies, primarily stable value deposits,
of $429.3 million and $112.5 million during 1996 and the second half of 1995,
respectively. The average yield earned was 7.32% in 1996 compared with 7.63%
earned in 1995. The decrease in overall yield reflected the increase in assets
supporting the stable value reinsurance product that are of a shorter duration
and carry a lower average yield. The asset-intensive investment portfolio
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generated $24.6 million of investment income in 1996, which was largely offset
by earnings credited and paid to ceding companies included in interest credited.
Realized Investment Gains/(Losses), Net. Consolidated net realized capital
gains increased $0.9 million to $0.9 million in 1996. This was primarily the
result of repositioning the Company's Canadian operating portfolio to achieve a
better duration match for the assets and liabilities.
Other Revenue. Consolidated other revenue increased $9.4 million in 1996 to
$17.4 million. Other revenue includes items such as recapture fees, profit and
risk fees associated with financial reinsurance as well as earnings in
unconsolidated subsidiaries, management fee income and miscellaneous income
associated with late premium payments. During 1996, financial reinsurance
treaties resulted in $14.7 million in financial reinsurance fees which were
partially offset by fees paid to retrocessionaires of $12.8 million, included in
policy acquisition costs and other insurance expenses. Other revenue also
included $2.2 million in earnings in unconsolidated subsidiaries. The Company's
strategy involves the assumption and subsequent retrocession of these financial
reinsurance treaties which resulted in $148.7 million and $137.0 million being
included in other reinsurance assets and liabilities, respectively, on the
Company's consolidated balance sheet as of December 31, 1996.
Claims and Other Policy Benefits. Consolidated claims and other policy
benefits increased 17.6%, to $505.7 million in 1996. Consolidated claims and
other policy benefits as a percentage of net premiums decreased slightly to
74.9% in 1996, from 75.5% in 1995. This decrease was primarily a result of
changes in the mix of business during 1996. The Company expects mortality to
fluctuate somewhat from period to period, but believes it is fairly constant
over longer periods of time. The Company continues to monitor mortality trends
to determine the appropriateness of reserve levels. This fluctuation is due to
normal short-term fluctuations in death claims.
U.S. operations claims and other policy benefits increased 15.4% in 1996.
However, claims and other policy benefits as a percentage of net premiums
decreased to 74.0% in 1996 from 75.3% in 1995. This increase was due to normal
short-term fluctuations in death claims.
Canadian operations claims and other policy benefits increased 33.5% in
1996. Claims and other policy benefits as a percentage of net premiums increased
to 77.6% in 1996 from 74.5% in 1995. The increase was primarily due to mortality
results which were not as favorable as those experienced in 1995.
The Company's other international operations claims and other policy
benefits increased $6.7 million in 1996. This increase was the result of reserve
and policyholder benefit increases on business from Latin American ventures and
blocks of mortality risk reinsurance of $3.9 million. These reserve increases
resulted from new business and the change in product mix in the Latin American
division to more single premium immediate annuity business in 1996. The Asia
Pacific operations reflected an increase of $2.5 million. This increase is the
result of new business written, partially offset by refinements in reserve
calculations.
Accident and health operations claims and other policy benefits increased
25.6% in 1996. As a percentage of net premiums, claims and other policy benefits
increased to 73.9% in 1996, from 70.4% in 1995. The increase was primarily due
to overall strengthening of claim liabilities on several closed blocks of
business. The accident and health operations reserves are subject to volatility
due to the nature of risk covered, primarily accident risks and reporting lags
which are normal for the industry. Reserves are calculated based upon current
information, including industry estimates for certain aviation accidents.
Interest Credited. Consolidated interest credited increased $20.9 million
in 1996 to $54.7 million. Interest credited represents amounts credited on the
Company's asset-intensive and universal life type products. Asset-intensive
products include stable value operations, bank-owned life insurance and annuity
products. Reinsurance on these products is primarily written in the U.S.
operations, while the Canadian operations have a small annuity block of business
and the Latin American operations have a direct universal life product in
Argentina. The increase in interest credited was a result of an increase in
reinsurance transactions involving deposits for asset-intensive products from
ceding companies.
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Policy Acquisition Costs and Other Insurance Expenses. Consolidated policy
acquisition costs and other insurance expenses, consisting primarily of
allowances, increased 39.2%, to $136.5 million in 1996. As a percentage of net
premiums, policy acquisition costs and other insurance expenses increased to
20.2% in 1996 from 17.2% in 1995 resulting from growth in financial reinsurance
transactions, partially offset by a change in business mix from coinsurance to
yearly renewable term reinsurance. Overall, policy acquisition costs and other
insurance expenses continue to fluctuate with business volume and changes in
product mix from period to period.
Policy acquisition costs and other insurance expenses as a percentage of
net premiums for the U.S. operations increased to 19.8% in 1996 from 17.3% in
1995. Within the U.S. operations, policy acquisition costs and other insurance
expenses as a percentage of net premiums for traditional business increased
slightly to 16.6% in 1996 from 15.8% in 1995. The financial reinsurance business
within the U.S. operations reflects fees of approximately $12.8 million paid to
retrocessionaires, which represents an offset to the fees collected that are
reflected as other revenues.
In the Canadian operations, policy acquisition costs and other insurance
expenses as a percentage of net premiums decreased to 16.1% in 1996, from 16.4%
in 1995. The decrease was a result of several factors, including the mix of
business written during the past several years which continued to transition to
a yearly renewable term basis from a coinsurance basis. Business written on a
yearly renewable term basis has significantly lower commissions than business
written on a coinsurance basis.
Other international operations policy acquisition costs and other insurance
expenses as a percentage of net premiums increased to 16.7% in 1996 from 8.1% in
1995. These percentages fluctuate due to the timing of client company reporting
and the continuing refinement of deferred acquisition cost and policy benefit
reserve calculations.
Accident and health operations policy acquisition costs and other insurance
expenses as a percentage of net premiums increased to 32.2% in 1996 from 28.5%
in 1995. The increase was a result of a continued transition in the mix of
business during 1996. During 1996, a larger percentage of business continued to
be written on a quota share basis resulting in higher commissions.
Other Operating Expenses. Consolidated other operating expenses increased
$8.3 million in 1996. The overall increase in operating expenses was attributed
to planned increases associated with the ongoing growth of the Company, of which
other international operations operating expenses comprised $4.8 million of the
increase. Other operating expenses as a percentage of total revenues remained
relatively stable at 4.8% compared to 4.7% in 1995.
Interest Expense. Consolidated interest expense during 1996 related to the
issuance of $100.0 million of Senior Notes by RGA on March 19, 1996, and the
financing of a portion of the Company's Australian reinsurance operations,
Australian Holdings. Interest cost for 1996 was $6.2 million with $5.7 million
related to Senior Notes.
Provision for Income Taxes. Consolidated income tax expense increased 16.7%
in 1996 as a result of higher pre-tax income. The Company's effective tax rate
was 36.4% for 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
RGA is a holding company which has as its principal assets interests in its
subsidiaries. RGA's liquidity, including the amount of dividends and interest
and principal payments that the Company can pay, will depend in part on the
operations of its reinsurance subsidiaries. The transfer of funds from the
subsidiaries to RGA is subject to applicable insurance laws and regulations. See
"Business -- Regulation -- Restrictions on Dividends and Distributions."
In 1996, RGA issued $100.0 million of 7 1/4% Senior Notes. Interest is
payable semiannually on April 1 and October 1 with the principal amount due on
April 1, 2006. The net proceeds from the offering of approximately $98.9 million
have been utilized to finance the continuing development of the Company's
operations. Australian Holdings established a line of credit with an outstanding
balance at December 31, 1997
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and 1996, of $7.8 million and $7.6 million, respectively. The Company also has
access to a $25.0 million line of credit. During the first quarter of 1998,
$10.0 million was drawn upon that line. This liability is included in other
liabilities on the balance sheet at March 31, 1998.
RGA began repurchasing shares in the open market in May 1997, to enable RGA
to satisfy obligations under its stock option program. Purchases were made in
the open market from time to time, at the then prevailing market price, or
through negotiated transactions. As of December 31, 1997, 322,562 shares had
been repurchased since May 1997. RGA has not repurchased shares since December
31, 1997.
The sources of funds of RGA's operating subsidiaries consist of premiums
received from ceding insurers, investment income, and proceeds from sales and
redemption of investments. Premiums are generally received in advance of related
claims payments. Funds are applied primarily to policy claims and benefits,
operating expenses, income taxes, and investment purchases. As of March 31,
1998, and December 31, 1997, RGA Reinsurance had statutory capital and surplus
of $243.9 million and $249.3 million, respectively. The maximum amount available
for payment of dividends in 1998 by RGA Reinsurance under Missouri law, without
the prior approval of the Missouri Director of Insurance, is $24.9 million. RGA
Canada's statutory capital was $64.9 million and $64.5 million at March 31,
1998, and December 31, 1997, respectively. The maximum amount available for
dividends by RGA Canada under the Canadian Minimum Continuing Capital and
Surplus Requirements ("MCCSR") was $15.5 million at December 31, 1997. Dividend
payments from other subsidiaries and joint ventures are subject to regulations
in the country of domicile. The Company's ability to service debt and pay
dividends is dependent on operations and the receipt of dividends from
subsidiaries.
The Company's net cash flows from consolidated operating activities for the
three months ended March 31, 1998, and 1997, was $19.9 and $91.6, respectively,
and for the years ended December 31, 1997, 1996, and 1995, were $432.7 million,
$256.7 million, and $171.0 million, respectively. Because the Company's
traditional reinsurance business provides positive cash flow, the Company's
traditional reinsurance liabilities generally are not subject to
disintermediation risk, and because the reinsured treaties offer no withdrawal
options and require no return of premium if canceled or allowed to lapse, the
Company historically has had more than sufficient funds to pay claims and
expenses. The Company expects any future increase in the need for liquidity due
to relatively large policy loans or unanticipated material claim levels would be
met first by operating cash flows and then by selling fixed-maturity securities
or short-term investments.
The Company's asset-intensive products are primarily supported by
investments in fixed-maturity securities. Investment guidelines are established
to structure the investment portfolio based upon the type, duration and behavior
of products in the liability portfolio so as to achieve targeted levels of
profitability. The Company manages the asset-intensive business to provide a
targeted spread between the interest rate earned on investments and the interest
rate credited to underlying liabilities. The Company periodically reviews models
projecting different interest rate scenarios and their impact on profitability.
Effective December 31, 1993, the National Association of Insurance
Commissioners ("NAIC") adopted risk-based capital ("RBC") statutory requirements
for U.S.-based life insurance companies. These requirements measure statutory
capital and surplus needs based on the risks associated with a company's mix of
products and investment portfolio. In December 1992, guidelines on MCCSR became
effective for Canadian insurance companies. These guidelines prescribe surplus
requirements and take into account both assets and liabilities in establishing
solvency margins. At December 31, 1997, statutory capital and surplus of RGA
Reinsurance significantly exceeded all RBC thresholds and RGA Canada's capital
levels significantly exceeded any MCCSR requirements. All of the Company's
insurance operating subsidiaries exceed the minimum capital requirements in
their respective jurisdictions as of December 31, 1997. See "Business --
Regulation."
INVESTMENTS
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. All investment portfolios are reviewed by the Board of
Directors of RGA. In addition, the investment portfolios of the international
subsidiaries are periodically reviewed by their respective Boards of Directors.
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 manage-
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ment. The Company's asset/liability duration matching differs between U.S. and
Canadian operating segments. The target duration for the U.S. investments is
currently a range between four and seven years, with individual investments all
along the maturity spectrum. Based on Canadian reserve requirements, a portion
of the Canadian liabilities is strictly matched with long duration Canadian
assets, with the remaining assets invested to maximize the total rate of return,
given the characteristics of the corresponding liabilities and Company liquidity
needs. For the first quarter ended March 31, 1998 and for the year ended
December 31, 1997, the Company's earned yield on fixed-maturity securities was
7.06% and 7.23%, respectively.
The Company's fixed-maturity securities are invested primarily in U.S.
Treasuries, Canadian government securities, public and private corporate bonds,
and mortgage and asset-backed securities. As of March 31, 1998, and December 31,
1997, more than 98% 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.
Private placement bonds are issued in negotiated transactions between
lenders and borrowers and are not registered with the Commission. While less
liquid than public securities, private placements often contain investment
characteristics favorable to investors, including more stringent financial
covenants, additional call protection, and higher yields than similar public
securities.
The largest asset class in which fixed maturities were invested was
mortgage-backed securities, which represented 26.1% and 24.4% of total invested
assets as of March 31, 1998, and December 31, 1997, respectively. Approximately
58% of these securities were invested in the investment portfolio supporting
stable value reinsurance. Investors are compensated primarily for reinvestment
risk rather than credit quality risk. To mitigate prepayment volatility, the
Company primarily invests in senior, intermediate, average-life tranches of
agency and whole loan collateralized mortgage obligations. All of the Company's
mortgage-backed securities are investment-grade, with an average S&P rating of
AA as of December 31, 1997.
As of March 31, 1998, and December 31, 1997, mortgage loans represented
approximately 4.7% and 4.6%, respectively, of the Company's invested assets,
which consisted of approximately $109.3 million and $91.8 million, respectively,
in U.S. mortgages and $76.1 million and $73.7 million, respectively, in Chilean
mortgage-related instruments, including real estate leasing, mortgage drafts,
and mortgage loans. The Company invests primarily in mortgages on commercial
offices and retail locations. The Company's domestic mortgage loans generally
range in size from $0.3 million to $7.3 million, with the average mortgage loan
investment as of March 31, 1998, and December 31, 1997, being approximately $3.0
million. The Company's Chilean mortgage instruments are generally less than $1.0
million, with the average less than $100,000. The mortgage loan portfolio is
diversified by geographic region and property type as discussed further in Note
4 to the Consolidated Financial Statements incorporated by reference in this
Prospectus.
As of March 31, 1998, and December 31, 1997, 11.9% and 13.2%, respectively,
of the Company's invested assets consisted of policy loans. These 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 policy loan interest rates are determined by the
provisions of the treaties in force and the underlying policies. 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.
The Company utilizes derivative financial instruments to improve the
management of the investment related risks. The Company uses both
exchange-traded and customized, over-the-counter derivative financial
instruments. RGA Reinsurance has established minimum credit quality standards
for counterparties and seeks to obtain collateral or other credit supports. The
Company limits its total financial exposure to counterparties. The Company's use
of exchange-traded and customized, over-the-counter derivative financial
instruments is currently not significant.
The invested assets of RGA, RGA Reinsurance, RGA Reinsurance Company
(Barbados) Ltd. ("RGA Barbados"), Australian Holdings, and RGA Canada are
managed by Conning Asset Management Company, an indirect subsidiary of Conning
Corporation which is an indirect majority owned subsidiary of General American.
The investments of BHIF America Seguros de Vida, S.A. ("BHIF America"), RGA
Reinsurance Company Chile, S.A. ("RGA Chile"), General American Argentina
Seguros de Vida, S.A. (formerly
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Manantial Seguros de Vida, S.A.) ("Manantial"), and RGA Holdings Limited (U.K.)
("RGA UK") were managed by the staffs of those entities.
FOREIGN CURRENCY EXPOSURE
The Company is subject to foreign currency translation, transaction, and
net income exposure. The Company generally does not hedge the foreign currency
translation exposure related to its investment in foreign subsidiaries as it
views these investments to be long-term. Translation differences resulting from
translating foreign subsidiary balances to U.S. dollars are reflected in equity.
The Company generally does not hedge the foreign currency exposure of its
subsidiaries transacting business in currencies other than their functional
currency (transaction exposure). Currently, the Company believes its foreign
currency transaction exposure is not material to the consolidated results of
operations. Net income exposure which may result from the strengthening of the
U.S. dollar to foreign currencies will adversely affect results of operations
since the income earned in the foreign currencies is worth less in U.S. dollars.
When evaluating investments in foreign countries, the Company considers the
stability of the political and currency environment. Devaluation of the currency
after an investment decision has been made will affect the value of the
investment when translated to U.S. dollars for financial reporting purposes.
INFLATION
The primary, direct effect on the Company of inflation is the increase in
operating expenses. A large portion of the Company's operating expenses consists
of salaries, which are subject to wage increases at least partly affected by the
rate of inflation. The rate of inflation also has an indirect effect on the
Company. To the extent that a government's policies to control the level of
inflation result in changes in interest rates, the Company's investment income
is affected.
YEAR 2000
Many of the Company's data processing systems require modifications to
enable them to process dates including the year 2000 and beyond. The Company has
established a plan to address the Year 2000 issue and that work is progressing
on schedule. It is anticipated that testing and resolution will be completed
according to the Company's plan. During the years of 1998 and 1999, the Company
expects to direct certain internal and external resources to the Year 2000
effort. The Company does not believe the net effect of these efforts will
materially affect the Company's consolidated financial statements during the
1998 and 1999 period. The Company also relies on information from external
parties such as ceding companies and retrocessionaires. The Company could be
adversely affected by those companies' compliance with the Year 2000 issue over
which the Company has no direct control. The Company is currently working with
its clients to identify their Year 2000 compliance positions and will follow-up
with clients on potential interface problems.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," effective for years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. The most significant items of
comprehensive income are net income, the change in unrealized gains and losses
on securities, and the change in foreign currency translation. Both items
historically have been reported as a component of stockholders' equity. The
adoption of SFAS No. 130 does not affect results of operations or financial
position, but affects their presentation and disclosure. The Company has adopted
SFAS No. 130 as of January 1, 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," effective
for years beginning after December 15, 1997. SFAS No. 131 requires that a public
company report financial and descriptive information about its reportable
operating segments pursuant to criteria that differ from current accounting
practice. Operating segments, as defined, are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision-maker in deciding how to allocate resources and in
assessing performance. The adoption of SFAS No. 131 will not affect the
Company's results of operations or financial position, but will affect the
disclosure of segment information. The Company plans to adopt SFAS No. 131
during 1998, however SFAS No. 131 need not be applied to interim financial
information in the initial year of its application.
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BUSINESS
The following sets forth certain selected information from Item 1
"Business" contained in RGA's Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated by reference in this Prospectus, and
does not purport to be a complete description thereof. Investors are encouraged
to review such Form 10-K for additional information regarding the Company.
GENERAL
RGA, through its operating subsidiaries, is one of the largest life
reinsurers in North America. At March 31, 1998, the Company had assets of $5.1
billion, stockholders' equity of $521.1 million and reinsurance in force of
$253.4 billion. The Company's core North American life reinsurance business
serves as the platform for its business strategy of further expansion into
selected domestic and international markets. Over the past five years, the
Company has produced a strong and consistent record of growth and profitability,
with revenue and net income (excluding the accident and health pool charge in
1997) growing at compound annual rates of approximately 24% and 18%,
respectively.
The Company's approach to the North American market, which represented
approximately 76% of net premiums in 1997, has been to (i) focus on large, high
quality life insurers as clients, (ii) provide superior facultative underwriting
and competitive automatic reinsurance capacity, and (iii) deliver responsive and
flexible service to its clients. Management believes it is the largest
facultative life reinsurer in North America. The Company conducted business with
79 of the 100 largest U.S. and 32 of the 40 largest Canadian life insurance
companies in 1997, with no one client representing more than 7% of consolidated
gross premiums.
The Company has also developed its capacity and expertise in
non-traditional reinsurance, which includes asset-intensive products and
financial reinsurance. In 1997, the Company's North American non-traditional
reinsurance business earned $12.8 million or approximately 13% of income before
income taxes and minority interest (excluding the accident and health pool
charge). The Company's non-traditional business currently includes reinsurance
of stable value products, bank-owned life insurance and annuities.
The Company leverages its underwriting expertise and industry knowledge as
it expands into selected international markets. Its operations outside North
America currently include direct and reinsurance business from joint ventures
and subsidiaries in Latin America, Australia, Malaysia and the United Kingdom,
as well as reinsurance of life products and related coverages offered
principally in Hong Kong and Japan through RGA Reinsurance.
RGA Reinsurance has an "AA" claims paying rating from S&P and an "A+"
claims paying rating from A.M. Best. The S&P and A.M. Best claims paying ratings
are based upon an insurance company's ability to pay policyholder obligations
and are not directed toward the protection of investors. In addition, RGA has an
"A" long-term debt rating from S&P.
During 1997, the Company made a strategic decision to cease marketing
accident and health reinsurance and to place its existing portfolio into runoff.
While this business contributed approximately 11% of reinsurance premiums for
1997, the Company does not expect the termination of this business to materially
affect future results. Management intends to redirect its focus to its core
North American and emerging businesses.
The Company believes that the following trends in the insurance industry
are increasing the demand for life reinsurance.
- INCREASED CAPITAL SENSITIVITY. Regulatory environment and competitive
business pressures are causing life insurers to reinsure as a means to
(i) manage risk-based capital by shifting mortality and other risks and
distribution costs to reinsurers, (ii) release capital to pursue new
businesses, and (iii) unlock the capital supporting, and value embedded
in, non-core product lines.
- CONSOLIDATION AND REORGANIZATION WITHIN THE INDUSTRY. The number of
merger and acquisition transactions within the U.S. life insurance
industry increased to 136 in 1997, from 63 in 1993. Management believes
that U.S. reorganizations of life insurers (such as demutualizations) and
international consolidation will continue to increase. As reinsurance
products are increasingly used to
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finance these transactions and manage risk, demand for the Company's
products is expected to increase.
- CHANGING DEMOGRAPHICS OF INSURED POPULATIONS. The aging of the population
in North America is increasing demand for financial products among "baby
boomers" who are concerned about protecting their peak income stream and
are considering retirement and estate planning. This trend is likely to
result in increased demand for annuity products and life insurance
policies, larger face amounts of life insurance policies and higher
mortality risk taken by life insurers, all of which should cause such
insurers to seek reinsurance products.
BUSINESS STRATEGY
The Company continues to follow its two-part business strategy to
capitalize on industry trends and to achieve its goal of producing consistent
revenue and earnings growth.
- CONTINUE GROWTH OF CORE NORTH AMERICAN BUSINESS. The Company's strategy
includes continuing to grow each of the following components of its North
American operations:
-- FACULTATIVE REINSURANCE. The Company intends to maintain its leading
position as a facultative underwriter in North America by emphasizing
its high underwriting standards, prompt response on quotes,
competitive pricing, capacity and flexibility in meeting customer
needs.
-- AUTOMATIC REINSURANCE. The Company intends to expand its already
significant presence in the North American automatic reinsurance
market by using its recognized mortality expertise and breadth of
products and services to gain additional market share.
-- IN FORCE BLOCK REINSURANCE. The Company anticipates increased
opportunities to grow its business of reinsuring "in force block"
insurance, as insurers seek to exit various non-core businesses and
increase financial flexibility in order to, among other things,
redeploy capital and pursue merger and acquisition activity.
- CONTINUE EXPANSION INTO SELECTED MARKETS. The Company's strategy includes
building upon the expertise and relationships developed from its core
North American business platform to continue its expansion into selected
markets, including:
-- NON-TRADITIONAL REINSURANCE. The Company intends to continue
leveraging its existing client relationships and reinsurance
expertise to create customized non-traditional reinsurance products
and solutions. Industry trends, particularly the increased pace of
consolidation and reorganization among life insurance companies and
changes in product distribution, are expected to create significant
growth opportunities for non-traditional reinsurance.
-- OTHER INTERNATIONAL. Management believes that international markets
offer substantial opportunities for growth, and has capitalized on
this opportunity by establishing a presence in selected markets. The
Company often uses its reinsurance expertise, facultative
underwriting abilities and market knowledge as it continues to enter
mature and emerging insurance markets.
REINSURANCE OVERVIEW
Reinsurance is an arrangement under which an insurance company, the
"reinsurer," agrees to indemnify another insurance company, the "ceding
company," for all or a portion of the insurance risks underwritten by the ceding
company. Reinsurance is designed to (i) reduce the net liability on individual
risks, thereby enabling the ceding company to increase the volume of business it
can underwrite, as well as increase the maximum risk it can underwrite on a
single life or risk, (ii) stabilize operating results by leveling fluctuations
in the ceding company's loss experience, (iii) assist the ceding company to meet
applicable regulatory requirements, and (iv) enhance the ceding company's
financial strength and surplus position.
Life reinsurance primarily refers to reinsurance of individual term life
insurance policies, whole life insurance policies, universal life insurance
policies, and joint and survivor insurance policies. Ceding
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companies typically contract with more than one company to reinsure their
business. Reinsurance may be written on an indemnity or an assumption basis.
Indemnity reinsurance does not discharge a ceding company from liability to the
policyholder; a ceding company is required to pay the full amount of its
insurance obligations regardless of whether it is entitled or able to receive
payments from its reinsurers. In the case of assumption reinsurance, the ceding
company is discharged from liability to the policyholder, with such liability
passed to the reinsurer. Reinsurers also may purchase reinsurance, known as
retrocession reinsurance, to cover their own risk exposure. Reinsurance
companies enter into retrocession agreements for reasons similar to those that
cause primary insurers to purchase reinsurance.
Reinsurance may be written on a facultative basis or an automatic treaty
basis. Facultative reinsurance is individually underwritten by the reinsurer for
each policy to be reinsured, with the pricing and other terms established at the
time the policy is underwritten based upon rates negotiated in advance.
Facultative reinsurance normally is purchased by insurance companies for
medically impaired lives, unusual risks, or liabilities in excess of binding
limits on their automatic treaties.
An automatic reinsurance treaty provides that the ceding company will cede
risks to a reinsurer on specified blocks of business where the underlying
policies meet the ceding company's underwriting criteria. In contrast to
facultative reinsurance, the reinsurer does not approve each individual risk.
Automatic reinsurance treaties generally provide that the reinsurer will be
liable for a portion of the risk associated with the specified policies written
by the ceding company. Automatic reinsurance treaties specify the ceding
company's binding limit, which is the maximum amount of risk on a given life
that can be ceded automatically and that the reinsurer must accept. The binding
limit may be stated either as a multiple of the ceding company's retention or as
a stated dollar amount.
Facultative and automatic reinsurance may be written as yearly renewable
term, coinsurance, or modified coinsurance, which vary with the type of risk
assumed and the manner of pricing the reinsurance. Under a yearly renewable term
treaty, the reinsurer assumes only the mortality or morbidity risk. Under a
coinsurance arrangement, depending upon the terms of the contract, the reinsurer
may share in the risk of loss due to mortality or morbidity, lapses, and the
investment risk, if any, inherent in the underlying policy. Modified coinsurance
differs from coinsurance only in that the assets supporting the reserves are
retained by the ceding company while the risk is transferred to the reinsurer.
Generally, the amount of life reinsurance ceded under facultative and
automatic reinsurance agreements is stated on either an excess or a quota share
basis. Reinsurance on an excess basis covers amounts in excess of an agreed-upon
retention limit. Retention limits vary by ceding company and also vary by age
and underwriting classification of the insured, product, and other factors.
Under quota share reinsurance, the ceding company states its retention in terms
of a fixed percentage of the risk that will be retained, with the remainder up
to the maximum binding limit to be ceded to one or more reinsurers.
Reinsurance agreements, whether facultative or automatic, may provide for
recapture rights on the part of the ceding company. Recapture rights permit the
ceding company to reassume all or a portion of the risk formerly ceded to the
reinsurer after an agreed-upon period of time (generally 10 years), subject to
certain other conditions. Recapture of business previously ceded does not affect
premiums ceded prior to the recapture of such business.
The potential adverse effects of recapture rights are mitigated by the
following factors: (i) recapture rights vary by treaty and the risk of recapture
is a factor which is taken into account when pricing a reinsurance agreement;
(ii) ceding companies generally may exercise their recapture rights only to the
extent they have increased their retention limits for the reinsured policies;
and (iii) ceding companies generally must recapture all of the policies eligible
for recapture under the agreement in a particular year if any are recaptured,
which prevents a ceding company from recapturing only the most profitable
policies. In addition, when a ceding company increases its retention and
recaptures reinsured policies, the reserves maintained by the reinsurer to
support the recaptured portion of the policies are released by the reinsurer.
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RATINGS
The ability of RGA Reinsurance to write reinsurance for its own account
will depend on its financial condition and its ratings. A.M. Best, an
independent insurance company rating organization, has rated RGA Reinsurance
"A+." A.M. Best's ratings are based upon an insurance company's ability to pay
policyholder obligations and are not directed toward the protection of
investors. A.M. Best's ratings for insurance companies currently range from
"A++" to "F," and some companies are not rated. Publications of A.M. Best
indicate that "A+" and "A++" ratings are assigned to those companies which, in
A.M. Best's opinion, have achieved superior overall performance when compared to
the standards established by A.M. Best and generally have demonstrated a strong
ability to meet their policyholder obligations over a long period of time. In
evaluating a company's financial strength and operating performance, A.M. Best
reviews the company's profitability, leverage, and liquidity as well as its
spread of risk, the quality and appropriateness of its reinsurance program, the
quality and diversification of its assets, the adequacy of its policy or loss
reserves, the adequacy of its surplus, its capital structure, management's
experience and objectives, and policyholders' confidence.
Additionally, RGA Reinsurance has received an "AA" rating from S&P and an
"A1" rating from Moody's Investor Services ("Moody's") for claims-paying
ability. These ratings are based upon an insurance company's ability to pay
policyholder obligations and are not directed toward the protection of
investors, and represent S&P's third highest rating and Moody's fifth highest
rating. RGA has an "A" long-term debt rating from S&P, which represents S&P's
third highest rating classification and "A3" long-term debt rating from Moody's,
which represents Moody's third highest rating classification. A security rating
is not a recommendation to buy, sell or hold securities, it is subject to
revision or withdrawal at any time by the assigning rating organization, and
each rating should be evaluated independently of any other rating.
CORPORATE STRUCTURE
RGA is a holding company, the principal assets of which consist of the
common stock of RGA Reinsurance and RGA International Ltd., formerly G.A.
Canadian Holdings, Ltd. ("RGA International"), as well as investments in several
other subsidiaries or joint ventures. The primary source of funds for RGA to
make dividend distributions is dividends paid to RGA by RGA Reinsurance and RGA
International, securities maintained in its investment portfolio, and its
ability to raise additional capital. RGA Reinsurance's principal source of funds
is derived from current operations. RGA International's principal source of
funds is dividends on its equity interest in RGA Canada Management Company, Ltd.
("RGA Canada Management"), whose principal source of funds is dividends paid by
RGA Canada. RGA Canada's principal source of funds is derived from current
operations.
INDUSTRY SEGMENTS
The Company's reinsurance and insurance operations are classified into four
main operational segments: U.S., Canadian, other international markets, and
accident and health. The U.S. operations provide life reinsurance and
non-traditional reinsurance to domestic clients. The Canadian operations provide
insurers with traditional reinsurance as well as assistance with capital
management activity. Other international business includes direct and
reinsurance business from a joint venture and subsidiaries in Latin America,
Australia, and the United Kingdom, as well as reinsurance of life and health
products through RGA Reinsurance. Of the other international segment, 35.7% and
52.8% of first quarter 1998 and 1997 net premiums, respectively, related to
direct insurance. The accident and health operations include both domestic and
international reinsurance.
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The following tables set forth selected information concerning assumed
reinsurance business in force and new business volume for the Company's U.S.,
Canadian and other international segments for the indicated periods. The term
"in force" refers to face amounts or net amounts at risk and is not applicable
to the accident and health segment and the term "volume" refers to face amounts
or net amounts at risk and is not applicable to the accident and health segment.
Reinsurance business in force reflects the addition or acquisition of new
reinsurance business, offset by terminations (e.g., voluntary surrenders of
underlying life insurance policies, lapses of underlying policies, deaths of
insureds, the exercise of recapture options, changes in foreign exchange, and
any other changes in the amount of insurance in force). As a result of
terminations, assumed in force amounts at risk of $16.9 billion, $23.5 billion,
and $24.5 billion were released in 1997, 1996, and 1995, respectively.
REINSURANCE BUSINESS IN FORCE BY SEGMENT
(DOLLARS IN BILLIONS)
DECEMBER 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
------ ----- ------ ----- ------ -----
U.S. operations................................ $171.7 75.5 $137.3 81.6 $127.9 83.1
Canadian operations............................ 27.7 12.2 22.7 13.4 17.3 11.2
Other international operations................. 27.9 12.3 8.3 5.0 8.7 5.7
------ ----- ------ ----- ------ -----
Total.......................................... $227.3 100.0 $168.3 100.0 $153.9 100.0
====== ===== ====== ===== ====== =====
NEW BUSINESS VOLUME BY SEGMENT
(DOLLARS IN BILLIONS)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
------ ----- ------ ----- ------ -----
U.S. operations................................ $50.2 66.1 $27.0 71.2 $27.7 76.9
Canadian operations............................ 8.0 10.5 6.9 18.2 4.2 11.7
Other international operations................. 17.7 23.4 4.0 10.6 4.1 11.4
----- ----- ----- ----- ----- -----
Total.......................................... $75.9 100.0 $37.9 100.0 $36.0 100.0
===== ===== ===== ===== ===== =====
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The following table provides certain summary information regarding the
Company's industry segments for the periods indicated:
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
U.S. operations:
Net premiums..................... $ 180,375 $ 145,963 $ 554,253 $ 486,431 $ 414,133
Total revenues................... 240,772 184,685 734,825 613,285 496,156
Income before income taxes and
minority interest............. 25,290 21,577 109,759 84,492 63,427
Total assets..................... 4,060,307 2,475,374 3,730,158 2,250,654 1,559,811
Canadian operations:
Net premiums..................... $ 25,026 $ 18,835 $ 83,563 $ 63,118 $ 49,248
Total revenues................... 30,692 22,670 120,145 78,549 60,315
Income before income taxes and
minority interest............. 2,674 2,994 15,082 13,436 10,880
Total assets..................... 613,491 327,276 580,599 321,314 247,432
Other international operations:
Net premiums..................... $ 37,676 $ 24,077 $ 106,951 $ 68,155 $ 58,821
Total revenues................... 41,865 25,983 118,358 74,327 61,597
Income/(loss) before income taxes
and minority interest......... (281) (1,449) (8,177) (4,051) 1,791
Total assets..................... 300,819 187,676 267,606 170,656 103,590
Accident and health operations:
Net premiums..................... $ 26,901 $ 16,497 $ 90,692 $ 57,182 $ 47,789
Total revenues................... 27,665 16,811 93,322 58,869 48,852
Income/(loss) before income taxes
and minority interest......... 50 (19,645) (29,342) (4,120) (698)
Total assets..................... 87,749 58,694 84,839 48,818 53,656
U.S. OPERATIONS
Traditional Business. The Company's U.S. life reinsurance business, which
totaled 66.8% of the first quarter 1998 net premiums and 66.3%, 72.1%, and
72.7%, of the Company's net premiums in 1997, 1996, and 1995, respectively,
consists of the reinsurance of various types of life insurance products. This
business has been accepted under many different rate scales, with rates often
tailored to suit the underlying product and the needs of the ceding company.
Premiums typically vary for smokers and non-smokers, males and females, and may
include a preferred underwriting class discount. Regardless of the premium mode
for the underlying primary insurance, reinsurance premiums are generally paid
annually. This business is made up of facultative and automatic treaty business.
In addition, several of the Company's U.S. clients have purchased life
insurance policies insuring the lives of their executives. These policies have
generally been issued to fund deferred compensation plans and have been
reinsured with the Company. As of December 31, 1997, reinsurance of such
policies was reflected in interest sensitive contract reserves of approximately
$775.5 million and policy loans of $480.2 million.
The U.S. facultative reinsurance operation involves the assessment of the
risks inherent in (i) multiple impairments, such as heart disease, high blood
pressure, and diabetes; (ii) cases involving large policy face amounts; and
(iii) financial risk cases, i.e., cases involving policies disproportionately
large in relation to the financial characteristics of the proposed insured. The
U.S. operations marketing efforts have focused on developing facultative
relationships with client companies because management believes facultative
reinsurance represents a substantial segment of the reinsurance activity of many
large insurance companies and has been an effective means of expanding the U.S.
operations automatic business. In 1997, 1996, and 1995, approximately 39.6%,
39.1%, and 38.3% respectively, of the U.S. gross premiums were written on a
facultative
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basis. The U.S. operations have emphasized personalized service and prompt
response to requests for facultative risk assessment.
Only a portion of approved facultative applications result in paid
reinsurance. This is because applicants for impaired risk policies often submit
applications to several primary insurers, which in turn seek facultative
reinsurance from several reinsurers; ultimately, only one insurance company and
one reinsurer are likely to obtain the business. The U.S. operations track the
percentage of declined and placed facultative applications on a client-by-client
basis and generally work with clients to seek to maintain such percentages at
levels the U.S. operations deem acceptable.
Mortality studies by RGA Reinsurance have shown that the U.S. operations'
facultative mortality experience is comparable to its automatic mortality
experience relative to expected mortality rates. Because the U.S. operations
apply its underwriting standards to each application submitted to it
facultatively, the U.S. operations generally do not require ceding companies to
retain any portion of the underlying risk when business is written on a
facultative basis.
Automatic business, including financial reinsurance treaties, is generated
pursuant to treaties which generally require that the underlying policies meet
the ceding company's underwriting criteria, although a number of such policies
may be rated substandard. In contrast to facultative reinsurance, reinsurers do
not engage in underwriting assessments of the risks assumed through an automatic
treaty. Automatic business tends to be very price-competitive; however, clients
are likely to give favorable consideration to their existing reinsurers.
Because RGA Reinsurance does not apply its underwriting standards to each
policy ceded to it under automatic treaties, the U.S. operations generally
require ceding companies to keep their full retention when business is written
on an automatic basis, thereby increasing the ceding companies' incentives to
underwrite risks with due care and, when appropriate, to contest claims
diligently.
Non-Traditional Business. The Company also provides non-traditional
reinsurance of asset-intensive products and financial reinsurance.
Asset-intensive business includes the reinsurance of stable value products,
bank-owned life insurance, and annuities. The budget proposal recently submitted
to Congress by the Clinton Administration includes certain provisions which, if
enacted in the form proposed, would increase taxes on the owners of certain
corporate-owned and bank-owned life insurance. If these or similar proposed tax
changes were enacted into law, they could adversely affect the Company; however,
the Company does not consider the reinsurance of such policies to be a material
part of its business. The Company earns investment income on the deposits
underlying the asset-intensive products which is largely offset by earnings
credited and paid to the ceding companies. Financial reinsurance assists ceding
companies in meeting applicable regulatory requirements and enhances ceding
companies' financial strength and regulatory surplus position. The Company
provides ceding companies financial reinsurance by committing cash or assuming
insurance liabilities. Generally, such amounts are offset by receivables from
ceding companies which are supported by the future profits from the reinsured
block of business. The Company earns a return based on the amount of outstanding
reinsurance.
Customer Base. The U.S. reinsurance operation markets life reinsurance
primarily to the largest U.S. life insurance companies and had treaties with 79
of the top 100 companies during 1997. These treaties generally are terminable by
either party on 90 days written notice, but only with respect to future new
business; existing business generally is not terminable, unless the underlying
policies terminate or are recaptured. In 1997, 32 clients had annual gross
premiums of $5 million or more and the aggregate gross premiums from these
clients represented approximately 76.7% of 1997 U.S. life gross premiums.
In 1997, no U.S. client accounted for more than 10% of the Company's
consolidated gross premiums. One client, however, accounted for more than 10% of
the Company's U.S. operations gross premiums. Also, three clients ceded more
than 5% of U.S. life gross premiums. Together they ceded $167.7 million, or
24.4%, of U.S. operations gross premiums in 1997.
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During 1997, $243.9 million of U.S. operations net premium related to
facultative business. The U.S. life operations accepted facultative business
from over 100 U.S. clients in 1997, and has been receiving facultative business
from most of these clients for an average of 10 years.
Risk Management. Prior to January 1, 1996, RGA Reinsurance's practice was
to retain up to $2 million of liability on any one life for all life
reinsurance. Effective January 1, 1996, RGA Reinsurance increased this retention
limit to up to $2.5 million. RGA Reinsurance has a number of retrocession
arrangements whereby certain business in force is retroceded on a quota share or
facultative basis. All of the U.S. retrocessionaires under such arrangements
were rated "A-" or better by A.M. Best as of December 31, 1996. RGA Reinsurance
also retrocedes business to foreign reinsurers. In these instances, additional
security in the form of letters of credit or trust assets have been given by
such retrocessionaires as additional security in favor of RGA Reinsurance. 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.
RGA Reinsurance has never experienced a default in connection with its
retrocession arrangements, nor has it experienced any difficulty in collecting
claims recoverable from its retrocessionaires; however, no assurance can be
given as to the future performance of such retrocessionaires or as to
recoverability of any such claims.
RGA Reinsurance has catastrophe insurance coverage issued by an insurer
rated "A" by A.M. Best that provides benefits of up to $100 million per
occurrence for claims involving three or more deaths in a single accident, with
a deductible of $1.5 million per occurrence. This coverage is terminable
annually on 90 days notice and is ultimately provided through a pool of
seventeen unaffiliated insurers. The Company believes such catastrophe insurance
coverage is adequate to protect the Company from the risks of multiple deaths of
lives reinsured by policies with RGA Reinsurance in a single accident. Several
large corporate plans reinsured by RGA Reinsurance cover aggregate amounts
substantially in excess of these limits, however.
Operations. During 1997, substantially all gross U.S. life business was
obtained directly, rather than through brokers. The U.S. operations have an
experienced marketing staff which works to maintain existing relationships and
to provide responsive service.
The U.S. operations auditing and accounting department is responsible for
treaty compliance auditing, financial analysis of results, generation of
internal management reports, and periodic audits of administrative practices and
records. A significant effort is focused on periodic audits of administrative
and underwriting practices, records, and treaty compliance of reinsurance
clients.
The U.S. operations claims department (i) reviews and verifies reinsurance
claims, (ii) obtains the information necessary to evaluate claims, (iii)
determines the Company's liability with respect to claims, and (iv) arranges for
timely claims payments. Claims are subjected to a detailed review process to
ensure that the risk was properly ceded, the claim complies with the contract
provisions, and the ceding company is current in the payment of reinsurance
premiums to the U.S. life operation. The claims department also investigates
claims generally for evidence of misrepresentation in the policy application and
approval process. In addition, the claims department monitors both specific
claims and the overall claims handling procedure of ceding companies.
Claims personnel work closely with their counterparts at client companies
to attempt to uncover fraud, misrepresentation, suicide, and other situations
where the claim can be reduced or eliminated. By law, the ceding company cannot
contest claims made after two years of the issuance of the underlying insurance
policy. By developing good working relationships with the claims departments of
client companies, major claims or problem claims can be addressed early in the
investigation process. Claims personnel review material claims presented to RGA
Reinsurance in detail to find potential mistakes such as claims ceded to the
wrong reinsurer and claims submitted for improper amounts.
CANADIAN OPERATIONS
Canadian life reinsurance business represented 9.3% of the first quarter
1998 net premiums and 10.0%, 9.4%, and 8.6%, of RGA's net premiums in 1997,
1996, and 1995, respectively. In 1997, the Canadian life
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operations wrote $8.0 billion in new business. Approximately 85% of the 1997
Canadian new business was written on an automatic basis. During 1997, the
Canadian operations began supporting preferred underwriting products, added
creditor business, and began offering reinsurance of critical illness coverage.
These new products and continued growth in traditional reinsurance have
contributed to the overall increase in business.
Clients included 32 of the 40 largest Canadian life insurers in 1997, with
no single client representing more than 10% of the Company's consolidated net
premium in 1997 and the two largest clients representing less than 5% of
consolidated gross premiums. The Canadian life operations compete with a small
number of individual and group life reinsurers. The Canadian life operations
compete primarily on the basis of price, service, and financial strength.
RGA Canada's policy is to retain up to C$100,000 of individual life and up
to C$100,000 of Accidental Death and Dismemberment liability on any one life.
RGA Canada retrocedes amounts in excess of its retention mostly to RGA
Reinsurance through General American in accordance with certain retrocession
agreements which are described under Item 1 "Business -- Corporate
Structure -- Historical Review" in RGA's Annual Report on Form 10-K for the year
ended December 31, 1997, which is incorporated by reference in this Prospectus.
Retrocessions are arranged through RGA Reinsurance's retrocession pool. RGA
Canada has never experienced a default in connection with its retrocession
arrangements, nor has it experienced any difficulty in collecting claims
recoverable from its retrocessionaires. No assurance can be given, however, as
to the future performance of such retrocessionaires or as to the recoverability
of any such claims.
RGA Canada maintains a staff of 51 people at the Montreal office and eleven
people in an office in Toronto as of December 31, 1997. RGA Canada employs its
own underwriting, actuarial, claims, pricing, accounting, systems, marketing and
administrative staff.
RGA's Canadian life reinsurance business was originally conducted by
General American. General American entered the Canadian life reinsurance market
in 1978 and was primarily engaged in the retrocession business, writing only a
small amount of business with primary Canadian insurers. In April 1992, General
American, through RGA Canada, purchased the life reinsurance assets and business
of National Reinsurance Company of Canada ("National Re"), including C$26.0
million of Canadian life reinsurance gross in force premiums. National Re had
been engaged in the life reinsurance business in Canada since 1972, writing
reinsurance on a direct basis with primary Canadian insurers. Accordingly, the
acquisition represented a significant expansion of General American's Canadian
life reinsurance business.
OTHER INTERNATIONAL
The other international segment includes the Latin American operations,
Asia Pacific operations, and Market Development operations. Beginning in 1994,
the Company started various international initiatives that continued to develop
during 1997. In Chile, the Company is represented by a 50% investment in BHIF
America, a Chilean insurance company, and a 100% investment in RGA Chile, a life
reinsurance company. The Company owns 100% of Manantial, an Argentine insurance
company. In addition, RGA Reinsurance has provided reinsurance on mortality risk
reinsurance associated with the privatization of the Argentine pension system.
The Company has a presence in the Asia Pacific region with a licensed branch
office in Hong Kong and a representative office in Tokyo. The Company also
established subsidiary companies in Australia in January 1996; namely,
Australian Holdings, a wholly-owned holding company, and RGA Reinsurance Company
of Australia Limited ("RGA Australia"), a wholly-owned life reinsurance company.
In addition, RGA Reinsurance provides direct reinsurance to several companies
within the Asia Pacific region. The Company's Market Development operations
provide marketing support for operations in existing and potential future
markets.
Other international life reinsurance business represented 13.9% of the
first quarter 1998 net premiums and 12.8%, 10.1%, and 10.3% of the Company's
consolidated net premiums in 1997, 1996, and 1995, respectively. No single
client in the other international segment represented more than 10% of the
Company's consolidated net premium for 1997.
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For other international business, RGA Reinsurance retains up to $2.5
million for U.S., Canadian, Australian, and New Zealand currency-denominated
business. For other currencies and based on countries with higher risk factors,
RGA Reinsurance systematically reduces its retention. The Chilean subsidiaries
have a policy of ceding business in excess of approximately $22,000, while the
Argentine subsidiary cedes business in excess of $40,000. RGA Australia has a
retrocession arrangement with RGA Reinsurance in which life risks above $100,000
Australian dollars are retroceded to RGA Reinsurance. On an aggregate basis
among all of its subsidiaries, the Company does not retain more than $2.5
million on any one life.
BHIF America and RGA Chile maintain staffing of 30 people at the head
offices in Santiago, Chile as of December 31, 1997. Manantial maintains a staff
of 30 people in Buenos Aires, Argentina as of December 31, 1997. These
subsidiaries employ their own underwriting, actuarial, claims, pricing,
accounting, systems, marketing and administrative staff. Within Asia Pacific,
six people were on staff in the Hong Kong office, four people were on staff in
the Tokyo office, and RGA Australia maintained a staff of twelve people in
Sydney. The Hong Kong and Tokyo offices primarily provide marketing and
underwriting service to the direct life insurance companies with other service
support provided directly by RGA Reinsurance operations.
Mature insurance markets that are experiencing regulatory changes present
opportunities for the Company. For example, changes in the Australian regulatory
environment prompted RGA to establish a subsidiary there. The experience and
knowledge that RGA gained in the Canadian regulatory environment has been
valuable in Australia, which has a similar regulatory structure. RGA Australia
directly maintains its own underwriting, actuarial, claims, pricing, accounting,
systems, marketing and administration service with additional support provided
by RGA Reinsurance operations.
ACCIDENT AND HEALTH
The Company's accident and health reinsurance business represented 10.0%,
10.9%, 8.5%, and 8.4% of the Company's net premiums in the first quarter of 1998
and the years 1997, 1996, and 1995, respectively. Due to continuing losses
emanating from certain of the Company's accident and health operations in 1997,
the strategic decision was made to exit all outside-managed accident and health
pools and cease marketing accident and health business and to place the
operation into run-off. The Company estimates that future accident and health
premiums compared to 1997 premiums will remain level in 1998. Premiums will
decrease at varying rates through 2002.
For additional information regarding the Company's accident and health
reinsurance business, see Item 1 "Business -- Industry Segments" in RGA's Annual
Report on Form 10-K for the year ended December 31, 1997, which is incorporated
by reference in this Prospectus.
UNDERWRITING
FACULTATIVE
Senior management has developed underwriting guidelines, policies, and
procedures with the objective of controlling the quality of life business
written as well as its pricing. The underwriting process emphasizes close
collaboration among its underwriting, actuarial, and operations departments.
Management periodically updates these underwriting policies, procedures, and
standards to account for changing industry conditions, market developments, and
changes occurring in the field of medical technology; however, no assurance can
be given that all relevant information has been analyzed or that additional
risks will not materialize. These policies, procedures, and standards are
documented in an on-line underwriting manual.
The Company determines whether to accept facultative reinsurance business
on a prospective insured by reviewing the client company's applications and
medical requirements, and assessing financial information and any medical
impairments. Most facultative applications involve a prospective insured with
multiple impairments, such as heart disease, high blood pressure, and diabetes,
requiring a difficult underwriting assessment. To assist its underwriters in
making this assessment, RGA Reinsurance employs two full-time and one part-time
medical director, as well as one medical consultant.
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AUTOMATIC
Management determines whether to write automatic reinsurance business by
considering many factors, including the types of risks to be covered; the ceding
company's retention limit and binding authority, product, and pricing
assumptions; and the ceding company's underwriting standards, financial strength
and distribution systems. For automatic business, the Company endeavors to
ensure that the underwriting standards and procedures of its ceding companies
are compatible with its own underwriting standards and procedures. To this end,
the Company conducts periodic reviews of the ceding companies' underwriting and
claims personnel and procedures.
FINANCIAL REINSURANCE
The financial reinsurance provided by the Company is repaid by the future
profit stream associated with the reinsured block of business. The Company
structures its financial reinsurance transactions so that the future profits of
the underlying reinsured business conservatively exceed the amount of regulatory
surplus provided to the ceding company.
AIDS
Since 1987, the U.S. and Canadian life insurance industries have
implemented the practice of antibody blood testing to detect the presence of the
HIV virus associated with Acquired Immune Deficiency Syndrome ("AIDS"). Prior to
the onset of routine antibody testing, it was possible for applicants with AIDS
to purchase significant amounts of life insurance. Since 1987, the guidelines
used by the U.S. operations have required ceding companies to conduct HIV
testing for life insurance risks at or above $100,000. Since 1987, the accepted
Canadian industry practice is to conduct HIV testing for life insurance risks
over C$100,000.
The Company believes that the antibody test for AIDS is effective. No
assurance can be given, however, that additional AIDS-related death claims
involving insureds who test negative for AIDS at the time of underwriting will
not arise in the future. The Company believes that its primary exposure to the
AIDS risk is related to business issued before the onset of AIDS antibody
testing in 1987. Each year, this business represents a smaller portion of the
Company's reinsurance in force.
COMPETITION
The Company operates in an intensely competitive environment. Reinsurers
compete on the basis of many factors, including financial strength, pricing and
other terms and conditions of reinsurance agreements, reputation, service, and
experience in the types of business underwritten. The U.S. and Canadian life
reinsurance markets are served by numerous international and domestic
reinsurance companies. The Company believes that RGA Reinsurance's primary
competitors in the U.S. life reinsurance market are currently Transamerica
Occidental Life Insurance Company, Swiss Re Life of America, Security Life of
Denver, Life Reassurance Corporation of America, and Lincoln National
Corporation. Within the reinsurance industry, however, competition can change
from year to year. The Company believes that RGA Canada's major competitors in
the Canadian life reinsurance market are Swiss Re Life Canada and Munich
Reinsurance Company of Canada.
The other international life operations compete with subsidiaries of
several U.S. individual and group life insurers and reinsurers and other
internationally-based insurers and reinsurers, some of which are larger and have
access to greater resources than the Company. Competition is primarily on the
basis of price, service, and financial strength.
REGULATION
RGA Reinsurance, RGA Canada, BHIF America, RGA Chile, Manantial, RGA
Barbados, RGA Bermuda, RGA Australia, and RGA UK are regulated by authorities in
Missouri, Canada, Chile, Argentina, Barbados, Bermuda, Australia, and the United
Kingdom, respectively. RGA Reinsurance is subject to regulations in the other
jurisdictions in which it is licensed or authorized to do business. Insurance
laws and
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regulations, among other things, establish minimum capital requirements and
limit the amount of dividends, distributions, and intercompany payments
affiliates can make without prior regulatory approval. Missouri law imposes
restrictions on the amounts and type of investments insurance companies like RGA
Reinsurance may hold.
GENERAL
The insurance laws and regulations, as well as the level of supervisory
authority that may be exercised by the various insurance departments, vary by
jurisdiction but generally grant broad powers to supervisory agencies or
regulators to examine and supervise insurance companies and insurance holding
companies with respect to every significant aspect of the conduct of the
insurance business, including approval or modification of contractual
arrangements. These laws and regulations generally require insurance companies
to meet certain solvency standards and asset tests, to maintain minimum
standards of business conduct, and to file certain reports with regulatory
authorities, including information concerning their capital structure,
ownership, and financial condition, and subject insurers to potential
assessments for amounts paid by guarantee funds.
RGA Reinsurance and RGA Canada are required to file annual or quarterly
statutory financial statements in each jurisdiction in which they are licensed.
Additionally, RGA Reinsurance and RGA Canada are subject to periodic examination
by the insurance departments of the jurisdictions in which each is licensed,
authorized, or accredited. The most recent examination of RGA Reinsurance by the
Missouri Department of Insurance was for the year ended December 31, 1995. The
result of this examination contained no material adverse findings. RGA Canada,
which was formed in 1992, was reviewed by the Canadian Superintendent of
Financial Institutions during 1997. The result of this examination contained no
material adverse findings.
RGA Australia is required to file a quarterly statistical return and annual
financial statement with the Insurance and Superannuation Commission of
Australia ("ISC"). RGA Australia is subject to additional reviews by the ISC on
an as required basis. In August 1997, RGA Australia was reviewed by the ISC with
no material adverse findings.
RGA Barbados is required to file an annual financial statement with the
Office of the Supervisor of Insurance of Barbados.
Manantial as a direct life insurance company is required to file annual and
quarterly statutory financial statements in Argentina which are reviewed by
external auditors and filed with the Superintendencia de Seguros de la Nacion
("Superintendencia-Argentina"). Additionally, Manantial is subject to periodic
examination by the Superintendencia-Argentina. The most recent examination by
the Superintendencia-Argentina was in March 1997. The results of this
examination were discussed with management and all adjustments were reflected
during 1997.
BHIF America and RGA Chile are required to file annual and quarterly
regulatory financial statements in Chile which are reviewed by external auditors
annually and filed with the Superintendencia de Valores y Seguros de Chile
("Superintendencia-Chile"). The most recent examination by the
Supeintendencia-Chile was during 1997. The result of this examination contained
no material adverse findings.
Although some of the rates and policy terms of U.S. direct insurance
agreements are regulated by state insurance departments, the rates, policy
terms, and conditions of reinsurance agreements generally are not subject to
regulation by any regulatory authority. The NAIC Model Law on Credit for
Reinsurance, which has been adopted in most states, imposes, however, certain
requirements for an insurer to take reserve credit for reinsurance ceded to a
reinsurer. Generally, the reinsurer is required to be licensed or accredited in
the insurer's state of domicile, or security must be posted for reserves
transferred to the reinsurer in the form of letter of credit or assets placed in
trust. The NAIC Life and Health Reinsurance Agreements Model Regulation, which
has been passed in most states, imposes additional requirements for insurers to
claim reserve credit for reinsurance ceded (excluding yearly renewable term
("YRT") reinsurance and non-proportional reinsurance). These requirements
include bona fide risk transfer, an insolvency clause, written agreements, and
filing of reinsurance agreements involving in force business, among other
things.
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In recent years, the NAIC and insurance regulators increasingly have been
re-examining existing laws and regulations and their application to insurance
companies. In particular, this re-examination has focused on insurance company
investment and solvency issues and, in some instances, has resulted in new
interpretation of existing law, the development of new laws, and the
implementations of non-statutory guidelines. The NAIC has formed committees and
appointed advisory groups to study and formulate regulatory proposals on such
diverse issues as the use of surplus debentures, accounting for reinsurance
transactions, and the adoption of risk-based capital rules. It is not possible
to predict the future impact of changing state and federal regulation on the
operations of the Company or its subsidiaries.
The NAIC and insurance regulators are in the process of reexamining
existing laws and regulations and their application to insurance companies. In
particular, this reexamination has focused on insurance company investment and
solvency issues and, in some instances, has resulted in new interpretations of
existing law, the development of new laws and the implementation of nonstatutory
guidelines. The NAIC has formed committees and appointed advisory groups to
study and formulate regulatory proposals on diverse issues. As part of this
review, the NAIC recently adopted the Valuation of Life Insurance Policies Model
Regulation (the "Model Regulation").
If adopted in its current form, the Model Regulation will have the greatest
impact on level term life insurance products with current premiums guaranteed
for more than five years. Companies with these products generally will have to
increase reserves above the current levels or limit the period of guaranteed
premiums to five years. The Model Regulation also will impact the reserve
requirements for other increasing premium products, deficiency reserves and
certain benefit guarantees in universal life products. The Model Regulation will
not impact the financial statements of the Company prepared in accordance with
GAAP; however, as a statutory accounting principle, the Model Regulation may
impact the statutory financial statements of the subsidiaries.
In addition to the above regulatory changes being reexamined and considered
by the NAIC, the NAIC is in the process of codifying statutory accounting
principles. The purpose of such codification is to establish a uniform set of
accounting rules and regulations for use by insurance companies in financial
report preparation in connection with financial reporting to regulatory
authorities. The Company is unable to determine what impact, if any, this
codification will have on its subsidiaries' statutory surplus requirements.
CAPITAL REQUIREMENTS
Guidelines on MCCSR became effective for Canadian insurance companies in
December 1992, and RBC guidelines promulgated by the NAIC became effective for
U.S. companies in 1993. The MCCSR risk-based capital guidelines, which are
applicable to RGA Canada, prescribe surplus requirements and take into account
both assets and liabilities in establishing solvency margins. The RBC
guidelines, applicable to RGA Reinsurance, similarly identify minimum capital
requirements based upon business levels and asset mix. Both RGA Canada and RGA
Reinsurance maintain capital levels in excess of the amounts required by the
applicable guidelines. Regulations in Chile, Argentina, Australia, Barbados and
Bermuda, also require certain minimum capital levels, and subject the companies
operating there to oversight by the applicable regulatory bodies. The Company's
subsidiaries in Chile, Argentina, Australia, Barbados, and Bermuda meet the
minimum capital requirements in their respective jurisdiction. The Company
cannot predict the effect that any proposed or future legislation or rule-making
in the countries in which the Company operates may have on the financial
condition or operations of the Company or its subsidiaries.
INSURANCE HOLDING COMPANY REGULATIONS
RGA is regulated in Missouri as an insurance holding company. The Company
is subject to regulation under the insurance and insurance holding company
statutes of Missouri. The Missouri insurance holding company laws and
regulations generally require insurance and reinsurance subsidiaries of
insurance holding companies to register with the Missouri Department of
Insurance and to file with the Missouri Department of Insurance certain reports
describing, among other information, their capital structure, ownership,
financial condition, certain intercompany transactions, and general business
operations. The Missouri insurance holding
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company statutes and regulations also require prior approval of, or in certain
circumstances, prior notice to the Missouri Department of Insurance of certain
material intercompany transfers of assets, as well as certain transactions
between insurance companies, their parent companies and affiliates.
Under Missouri insurance laws and regulations, unless (i) certain filings
are made with the Missouri Department of Insurance, (ii) certain requirements
are met, including a public hearing, and (iii) approval or exemption is granted
by the Missouri Director of Insurance, no person may acquire any voting security
or security convertible into a voting security of an insurance holding company,
such as RGA, which controls a Missouri insurance company, or merge with such a
holding company, if as a result of such transaction such person would "control"
the insurance holding company. "Control" is presumed to exist under Missouri law
if a person directly or indirectly owns or controls 10% or more or the voting
securities of another person.
Certain state legislatures have considered or enacted laws that alter, and
in many cases increase, state regulation of insurance holding companies. In
recent years, the NAIC and state legislators have begun re-examining existing
laws and regulations, specifically focusing on insurance company investments and
solvency issues, risk-based capital guidelines, intercompany transactions in a
holding company system, and rules concerning extraordinary dividends.
Canadian insurance laws and regulations do not contain automatic
registration and reporting requirements applicable to insurance holding
companies, although such companies, together with all affiliates of a Canadian
insurance company, may be required to supply such information to the Canadian
Superintendent of Financial Institutions upon request.
Transactions whereby a person or entity would acquire control of or a
significant interest in, or increase (by more than an insignificant amount) its
existing interest in, a Canadian insurance company are subject to the prior
approval of the Canadian Minister of Finance. "Significant interest" in an
insurance company means the beneficial ownership of shares representing 10% or
more of a given class, while "control" of an insurance company is presumed to
exist when a person beneficially owns shares representing more than 50% of the
votes entitled to be cast for the election of directors and such votes are
sufficient to elect a majority of the directors of the insurance company. Any
transaction or series of transactions with the same person involving the
acquisition or disposition by a Canadian insurance company of assets (other than
the payment of dividends) the aggregate value of which, over a twelve-month
period, exceeds 10% of such company's total assets are also subject to the prior
approval of the Canadian Superintendent of Financial Institutions.
In addition, Canadian insurance laws and regulations generally prohibit
transactions between insurance companies and related parties, with certain
specified exceptions. Permitted related-party transactions must be on terms that
are at least as favorable to the insurance company as market terms and
conditions, and are subject to the approval of the insurance company's conduct
review committee. Reinsurance agreements with related parties are also
restricted unless (i) the reinsurance is taken out in the ordinary course of
business and (ii) the related party is either a Canadian insurance company or a
foreign insurance company duly registered in Canada.
RESTRICTIONS ON DIVIDENDS AND DISTRIBUTIONS
Certain state legislatures have considered or enacted laws that alter, and
in many cases increase, state regulation of insurance holding companies. In
recent years, the NAIC and state legislators have begun re-examining existing
laws and regulations, specifically focusing on insurance company investments and
solvency issues, risk-based capital guidelines, intercompany transactions in a
holding company system, and rules concerning extraordinary dividends.
Current Missouri law (applicable to RGA and RGA Reinsurance) permits the
payment of dividends or distributions which, together with dividends or
distributions paid during the preceding twelve months, do not exceed the greater
of (i) 10% of statutory capital and surplus as of the preceding December 31, or
(ii) statutory net gain from operations for the preceding calendar year. Any
proposed dividend in excess of this amount is considered an "extraordinary
dividend" and may not be paid until it has been approved, or a 30-day waiting
period has passed during which it has not been disapproved, by the Missouri
Director of Insurance. In
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addition, dividends may be paid only to the extent the insurer has earned
surplus (as opposed to contributed surplus). For example, the maximum amount
available for payment of dividends in 1998 by RGA Reinsurance under Missouri
law, without the prior approval of the Missouri Director of Insurance, is $24.9
million.
In contrast to current Missouri law, the NAIC Model Insurance Holding
Company Act (the "Model Act") defines an extraordinary dividend as a dividend or
distribution which, together with dividends or distributions paid during the
preceding twelve months, exceeds the lesser of (i) 10% of statutory capital and
surplus as of the preceding December 31, or (ii) statutory net gain from
operations for the preceding calendar year. The Company is unable to predict
whether, when, or in what form Missouri will enact a new measure for
extraordinary dividends. The maximum amount available for payment on dividends
in 1998 by RGA Reinsurance under the Model Act without prior approval of the
Missouri Director of Insurance would have been $12.1 million at December 31,
1997.
In addition to the foregoing, Missouri insurance laws and regulations
require that the statutory surplus of RGA Reinsurance following any dividend or
distribution be reasonable in relation to its outstanding liabilities and
adequate to meet its financial needs. The Missouri Director of Insurance may
bring an action to enjoin or rescind the payment of a dividend or distribution
by RGA Reinsurance that would cause its statutory surplus to be inadequate under
the standards of Missouri.
There are no express restrictions on the declaration of dividends by RGA
International, RGA Canada Management, or RGA Canada under Canadian insurance
laws and regulations. RGA Canada must, however, give notice of any dividend to
the Superintendent of Financial Institutions of Canada at least ten days prior
to the date of payment. In addition, the Canadian MCCSR guidelines consider both
assets and liabilities in establishing solvency margins, the effect of which
could limit the maximum amount of dividends that may be paid by RGA Canada. RGA
Canada's ability to declare and pay dividends in the future will be affected by
its continued ability to comply with such guidelines. The maximum amount
available for payment of dividends by RGA Canada to RGA Canada Management under
the Canadian MCCSR guidelines was $15.5 million at December 31, 1997.
DEFAULT OR LIQUIDATION
In the event of a default on any debt that may be incurred by RGA or the
bankruptcy, liquidation, or other reorganization of RGA, the creditors and
stockholders of RGA will have no right to proceed against the assets of RGA
Reinsurance, RGA Canada, or other insurance or reinsurance company subsidiaries
of RGA. If RGA Reinsurance were to be liquidated, such liquidation would be
conducted by the Missouri Director of Insurance as the receiver with respect to
such insurance company's property and business. If RGA Canada were to be
liquidated, such liquidation would be conducted pursuant to the general laws
relating to the winding-up of Canadian federal companies. In both cases, all
creditors of such insurance company, including, without limitation, holders of
its reinsurance agreements and, if applicable, the various state guaranty
associations, would be entitled to payment in full from such assets before RGA,
as a direct or indirect stockholder, would be entitled to receive any
distributions made to it prior to commencement of the liquidation proceedings,
and, if the subsidiary was insolvent at the time of the distribution,
stockholders of RGA might likewise be required to refund dividends subsequently
paid to them.
If RGA Australia were to be liquidated, such liquidation would be conducted
pursuant to the general laws relating to winding-up of Australian insurance
companies as prescribed in the Australian Life Insurance Act 1995 and conducted
in accordance with the Corporations Law of the State or internal territory under
which RGA Australia was incorporated. The assets of RGA Australia would then be
applied by specific priority as specified in the Corporations Law of the State.
FEDERAL REGULATION
Discussions continue in the Congress of the United States concerning the
future of the McCarran-Ferguson Act, which exempts the "business of insurance"
from most federal laws, including anti-trust laws, to the extent such business
is subject to state regulation. Judicial decisions narrowing the definition of
what
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constitutes the "business of insurance" and repeal or modification of the
McCarran-Ferguson Act may limit the ability of the Company, and RGA Reinsurance
in particular, to share information with respect to matters such as
rate-setting, underwriting, and claims management. It is not possible to predict
the effect of such decisions or change in the law on the operation of the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GenAmerica Corporation and its affiliates generated less than 4.2% of U.S.
operations gross premiums in 1997, 1996, and 1995, exclusive of the retrocession
agreements between RGA Reinsurance and General American described in Item 13
"Certain Relationships and Related Transactions" in RGA's Annual Report on Form
10-K for the year ended December 31, 1997, which is incorporated by reference in
this Prospectus. The Company has direct policies and reinsurance agreements with
General American and certain of its subsidiaries. These agreements are
terminable by either party on 90 days' written notice with respect to new
business only. The Company received gross premiums pursuant to these agreements
of approximately $32.1 million in 1997. The stable value products reinsured by
the Company are also General American products. Deposits from stable value
products totaled approximately $483.0 million and $429.3 million during 1997 and
1996, respectively. In addition, the Company entered into annuity reinsurance
transactions during the second quarter of 1997 with Cova Financial Services Life
Insurance Company, an indirect subsidiary of GenAmerica Corporation. Deposits
related to this business were $124.4 million as of December 31, 1997.
Under separate investment advisory agreements, Conning Asset Management
Company, an indirect wholly-owned subsidiary of Conning Corporation, which is an
indirect majority-owned subsidiary of GenAmerica Corporation, manages certain
investment portfolios of RGA, RGA Reinsurance, Australia Holdings, and RGA
Barbados and services commercial mortgages on behalf of RGA Reinsurance. Each of
the investment advisory agreements is terminable by either party on 90 days'
written notice. For its services, Conning Asset Management Company receives an
annual fee of 0.09% of the average quarterly book value of the portfolios
managed and 0.22% of mortgage loans serviced. This fee is payable quarterly in
arrears. The Company made payments to Conning Asset Management Company of
approximately $1.7 million for such investment advisory services in 1997. As
part of its investment advisory services, Conning Asset Management Company also
originates commercial mortgages on behalf of RGA Reinsurance. Conning Asset
Management Company generally receives a fee associated with the origination of
such loans in the amount of 1% of the loan balance, which is paid by the
borrower. During 1997, Conning Asset Management Company originated approximately
$74.4 million of mortgage loans on behalf of RGA Reinsurance. Separate from the
investment advisory agreements, Conning & Company, an indirect wholly-owned
subsidiary of Conning Corporation manages a series of private investment funds
in which RGA has invested from time to time. Conning & Company receives a
management fee and a specified percentage of the funds' net gains, which are
paid by the funds. RGA's investments in such funds totaled approximately $1.4
million as of December 31, 1997.
The Company conducts its business primarily from premises leased by RGA
Reinsurance from General American. RGA Reinsurance made rental payments to
General American principally for office space and equipment of approximately
$1.6 million in 1997.
RGA, RGA Reinsurance, RGA Canada and certain other subsidiaries of RGA also
are parties to various other agreements with General American, including
retrocession agreements, marketing agreements, tax allocation and tax sharing
agreements and administrative services agreements. These agreements and certain
other relationships with others are described under Item 13 "Certain
Relationships and Related Transactions" in RGA's Annual Report on Form 10-K for
the year ended December 31, 1997, which is incorporated by reference in this
Prospectus. The foregoing does not purport to be a description of all such
agreements and relationships.
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MANAGEMENT
The following table lists the directors and certain executive officers of
the Company and certain subsidiaries as indicated below:
NAME AGE TITLE
---- --- -----
Richard A. Liddy..................... 62 Chairman of the Board of the Company
A. Greig Woodring.................... 46 President, Chief Executive Officer of the Company
David B. Atkinson.................... 44 Executive Vice President and Chief Operating Officer of
the Company
Bruce E. Counce...................... 53 Executive Vice President and Chief Operating Officer of
the Company
Jack B. Lay.......................... 43 Executive Vice President and Chief Financial Officer of
the Company
Andre St-Amour....................... 47 President and Chief Executive Officer of RGA Canada
Graham S. Watson..................... 48 Executive Vice President and Chief Marketing Officer of
the Company
J. Cliff Eason....................... 50 Director
Bernard A. Edison.................... 70 Director
Stuart I. Greenbaum.................. 61 Director
William A. Peck, M.D................. 64 Director
Leonard M. Rubenstein................ 52 Director
William P. Stiritz................... 63 Director
H. Edwin Trusheim.................... 70 Director
Richard A. Liddy is Chairman of the Board of the Company. He also serves as
President, Chief Executive Officer and Chairman of the Board of General American
Life Insurance Company, and President and Chairman of GenAmerica Corporation and
General American Mutual Holding Company. From 1982 through 1988, he was Senior
Vice President and Executive Vice President of Continental Corporation, and
President, Financial Services Group of Continental Insurance Company. He is also
Chairman of the Board of General American Capital Company and The Walnut Street
Funds, Inc., each a registered investment company, and is a director of Ameren
Corporation, Brown Group, Inc., Conning Corporation and Ralston Purina Company.
Mr. Liddy is also Chairman of Cova Corporation, Paragon Life Insurance Company,
Security Equity life Insurance Company and Security Mutual Life Insurance
Company of New York, and a number of other subsidiaries and affiliates of
General American Mutual Holding Company.
A. Greig Woodring is President, Chief Executive Officer, and director of
the Company. Mr. Woodring also is an executive officer of General American Life
Insurance Company. Prior to the formation of RGA, Mr. Woodring had headed
General American's reinsurance business since 1986. He also serves as a director
and officer of a number of the Company's subsidiaries. Before joining General
American Life Insurance Company, Mr. Woodring was an actuary at United Insurance
Company.
David B. Atkinson has been Executive Vice President and Chief Operating
Officer of the Company since January 1997. He is also President and Chief
Executive Officer of RGA Reinsurance. He served as Executive Vice President and
Chief Operating Officer, U.S. Operations of the Company from 1995 to 1996 and
Executive Vice President and Chief Financial Officer from 1993 to 1994. Prior to
the formation of RGA, Mr. Atkinson served as Reinsurance Operations Vice
President of General American. Mr. Atkinson joined General American in 1987 as
Second Vice President and was promoted to Vice President later the same year.
Prior to joining General American, he served as Vice President and Actuary of
Atlas Life Insurance Company from 1981 to 1987, as Chief Actuarial Consultant at
Cybertek Computer Products from 1979 to 1981, and in a
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variety of actuarial positions with Occidental Life Insurance Company of
California from 1975 to 1979. Mr. Atkinson also serves as a director and officer
of certain RGA subsidiaries.
Bruce E. Counce has been Executive Vice President and Chief Corporate
Operating Officer of the Company since January 1997. He served as Executive Vice
President, U.S. Traditional Reinsurance from 1993 to 1997. Prior to the
formation of RGA, Mr. Counce served as Reinsurance Sales and Marketing Vice
President for General American. After joining General American in 1967, Mr.
Counce joined the Reinsurance Division in 1980 in a sales capacity and held a
series of increasingly responsible positions leading to his current position.
Jack B. Lay is Executive Vice President and Chief Financial Officer of the
Company. Prior to joining the Company in 1994, Mr. Lay served as Second Vice
President and Associate Controller at General American. In that position, he was
responsible for all accounting and exterial financial reporting as well as
merger and acquisition support. Before joining General American in 1991, Mr. Lay
was a partner in the financial services practice with the St. Louis office of
KPMG Peat Marwick LLP. Mr. Lay also served as director and officer of certain
RGA subsidiaries.
Andre St-Amour is President and Chief Executive Officer of RGA Canada and
Chief Agent for the General American Life Insurance Company Canadian Branch.
Prior to January 1995, he was President and Chief Operating Officer. Mr.
St-Amour joined RGA Canada in 1992 when the company acquired the reinsurance
business of National Re. Mr. St-Amour served as Executive Vice President, Life
Division, of National Re from 1989 to 1991. Prior to joining National Re, Mr.
St-Amour served in a variety of actuarial positions with Canadian National
Railways and Laurentian National Insurance Company.
Graham S. Watson is Executive Vice President and Chief Marketing Officer of
RGA. Upon joining RGA in 1996, Mr. Watson was President and Chief Executive
Officer of RGA Australia. Prior to joining RGA, Mr. Watson was the President and
CEO of Intercedent Limited in Canada and has held various positions of
increasing responsibility for other life insurance companies. Mr. Watson also
serves as a director and officer of certain RGA subsidiaries.
J. Cliff Eason has been the President-SBC International Operations of SBC
Communications, Inc. since March 1998. Prior to that he served as President and
Chief Executive Officer of Southwestern Bell Telephone Company since February
1996. Mr. Eason was President and Chief Executive Officer of Southwestern Bell
Communications, Inc. ("SBC") from July 1995 through January 1996; President of
Network Services of Southwestern Bell Telephone Company from July 1993 through
June 1995; and President of Southwestern Bell Telephone Company of the Midwest
from 1992 to 1993. He held various other positions with SBC and its subsidiaries
prior to 1992, including President of SBC Communications, Inc. from 1991 to
1992.
Bernard A. Edison was the President of Edison Brothers Stores, Inc. from
1968 through his retirement in 1987. He also served as a director and Chairman
of the Finance Committee of the Board of Directors of Edison Brothers Stores,
Inc. until 1989, and as director emeritus from 1989 through 1996. Mr. Edison is
also a director of Anheuser-Busch Companies, Inc., GenAmerica Corporation,
General American Life Insurance Company, and General American Mutual Holding
Company.
Stuart I. Greenbaum has been the Dean of John M. Olin School of Business at
Washington University since July 1995. Prior to such time, he spent 20 years at
the Kellogg Graduate School of Management at Northwestern University where he
was Director of the Banking Research Center and the Norman Strunk Distinguished
Professor of Financial Institutions. Mr. Greenbaum has served on the Federal
Savings and Loan Advisory Council and the Illinois Task Force on Financial
Services, and has been a consultant for the American Bankers Association, the
Bank Administration Institute, the Comptroller of the Currency, the Federal
Reserve System, and the Federal Home Loan Bank System, among others. He is also
a director of Stifel Financial Corp.
William A. Peck, M.D., has been the Executive Vice Chancellor for Medical
Affairs and Dean of the School of Medicine of Washington University since 1989.
From 1976 to 1989, he was Physician in Chief of The Jewish Hospital of St.
Louis. He is also a director of Allied Health Care Products, Inc., Angelica
Corporation, Hologic, Inc., and Magna Bancorp, Inc.
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Leonard M. Rubenstein is Chief Executive Officer and Chairman of Conning
Corporation and its indirect subsidiary, Conning Asset Management Company, a
registered investment advisor. Conning Corporation is a majority-owned
subsidiary of General American Life Insurance Company. Conning & Company, an
indirect wholly-owned subsidiary of Conning Corporation, is one of the
representatives of the Underwriters. See "Underwriting." He served as Executive
Vice President of Investments for General American Life Insurance Company from
1991 to January 1997 and as Treasurer from 1991 to 1995. From 1984 to 1991, he
served as Vice President of General American Life Insurance Company. He is
Treasurer of General American Capital Company, a registered investment company.
William P. Stiritz has been the Chief Executive Officer, President and
Chairman of Agribrands International, Inc., which is in the animal feeds and
agricultural products business, since the company was spun-off from Ralston
Purina Company ("Ralston") on April 1, 1998. He was Chief Executive Officer and
President of Ralston from 1982 until 1997 and held various other positions with
Ralston since 1963. He is Chairman of the Board of Ralston and Ralcorp Holdings,
Inc. and is a director of Angelica Corporation, Ball Corporation, GenAmerica
Corporation, General American Life Insurance Company, General American Mutual
Holding Company, The May Department Stores Company, and Vail Resorts, Inc.
H. Edwin Trusheim retired as Chairman of General American Life Insurance
Company in 1995 where he was Chief Executive Officer until his retirement in
1992. He served as President of General American Life Insurance Company from
1979 to 1988 and was elected Chief Executive Officer in 1981 and Chairman of the
Board in 1986. He is also a director of Angelica Corporation, GenAmerica
Corporation, General American Life Insurance Company, General American Mutual
Holding Company, Laclede Gas Company, RehabCare Corporation, and Venture Stores,
Inc.
For information regarding RGA's other executive officers, see Item 10
"Directors and Executive Officers of the Registrant" in RGA's Annual Report on
Form 10-K for the year ended December 31, 1997, which is incorporated by
reference in this Prospectus.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain stock ownership information, as of
March 31, 1998, with respect to each person known to the Company to be the
beneficial owner of 5% or more of the Company's outstanding Voting Common. The
Offering relates to Non-Voting Common and no shares of such class are currently
outstanding.
VOTING COMMON
-----------------------------
SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------ --------
GenAmerica Corporation
700 Market Street
St. Louis, Missouri 63101............................. 16,087,500(1) 63.8%
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07102-3777......................... 1,251,700(2) 5.0%
- -------------------------
(1) GenAmerica Corporation is a wholly-owned subsidiary of General American
Mutual Holding Company ("GAMHC"). Shares beneficially owned by GenAmerica
Corporation are held by Equity Intermediary Company, a wholly-owned
subsidiary of General American Life Insurance Company ("General American").
General American is a wholly-owned subsidiary of GenAmerica Corporation. Mr.
Liddy is also a director and executive officer of GAMHC, GenAmerica
Corporation and General American, and Mr. Woodring is an executive officer
of General American. Messrs. Edison, Stiritz, and Trusheim are directors of
GAMHC, GenAmerica Corporation and General American. Mr. Rubenstein is the
Chairman and Chief Executive Officer of Conning Corporation, a
majority-owned indirect subsidiary of GenAmerica Corporation. These
individuals disclaim beneficial ownership of the shares beneficially owned
by GenAmerica Corporation.
(2) Based upon information provided to the Company by The Prudential Insurance
Company of America as of April 24, 1998. Sole voting and dispositive power
over 661,650 shares, based upon Amendment No. 4 to Schedule 13G filed by the
security holder with the Commission on February 10, 1998.
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DESCRIPTION OF CAPITAL STOCK
The following summary is subject to the more detailed provisions of RGA's
Restated Articles of Incorporation, as amended, and RGA's Bylaws, and does not
purport to be complete and is qualified in its entirety by reference thereto.
The following summary also assumes that the proposed amendment to the Restated
Articles of Incorporation is approved by RGA's stockholders at the Annual
Meeting of Stockholders on May 27, 1998.
GENERAL
The authorized capital stock of RGA consists of 75,000,000 shares of Voting
Common, par value $0.01 per share, 20,000,000 shares of Non-Voting Common, par
value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01
per share. See "Capitalization" for information regarding the number of shares
of Voting Common outstanding and the number of shares of Non-Voting Common that
would be outstanding prior to and after completion of the Offering. See "--
Preferred Stock Purchase Rights" and "--Certain Charter and Bylaw Provisions"
for a discussion of certain provisions that may have an anti-takeover effect.
NON-VOTING COMMON
The rights, powers and limitations of the Voting Common and the Non-Voting
Common are set forth in full in Article Three of RGA's Restated Articles of
Incorporation. The shares of Non-Voting Common to be issued upon consummation of
the Offering will be, when issued, fully paid and non-assessable.
VOTING MATTERS
The Non-Voting Common will not entitle the holder thereof to any votes
except as otherwise required by law. Consequently, holders of Non-Voting Common
will not be entitled to elect directors or vote on other matters customarily
decided by stockholders, such as mergers, consolidations or the sale of all or
substantially all of RGA's assets. The Non-Voting Common is, however,
convertible into Voting Common under certain limited circumstances described
under "-- Conversion of Non-Voting Common." Under the General and Business
Corporation Law of Missouri, as currently in effect, holders of Non-Voting
Common will be entitled to vote as a class upon a proposed amendment to the
Company's Restated Articles of Incorporation if the amendment would: (i)
increase or decrease the aggregate number of authorized shares of the Non-Voting
Common, (ii) increase or decrease the par value of the Non-Voting Common, (iii)
create a new class of shares having rights and preferences prior or superior to
the Non-Voting Common, (iv) increase the rights and preferences or the number of
authorized shares of any class having rights and preferences prior or superior
to the Non-Voting Common, or (v) alter or change the powers, preferences, or
special rights of the Non-Voting Common so as to affect the Non-Voting Common
adversely. A merger or consolidation involving RGA, in and of itself, is not
deemed to involve a proposed amendment to the Restated Articles of Incorporation
for these purposes.
On matters brought before the stockholders of the Company, each holder of
Voting Common is entitled to one vote for each share of Voting Common held.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Non-Voting Common is equal to the Voting Common in respect to dividends
and other distributions in cash, property, or shares of stock of RGA (including
distributions in connection with any recapitalization), except as described
below. The declaration of any payment of cash dividends is solely within the
discretion of RGA's Board of Directors, and there can be no assurance that such
dividends will be declared and paid with any regularity. See "Price Range of
Capital Stock and Dividends." Dividends or other distributions payable in shares
of RGA will be made to all holders of Voting Common and Non-Voting Common and
will be made only (i) in shares of Non-Voting Common to the holders of Voting
Common and to the holders of Non-Voting Common, (ii) in shares of Voting Common
to the holders of Voting Common and in shares of Non-Voting Common to the
holders of Non-Voting Common, or (iii) in any other authorized class or series
of
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capital stock to the holders of both classes of common stock, regardless of the
fair market value of such shares received in payment of such dividend or other
distribution. In addition, dividends or other distributions payable on the
Voting Common and Non-Voting Common in convertible securities or securities
giving the holder a right to acquire shares of Voting Common or Non-Voting
Common ("Options"), other than rights issued pursuant to stockholder rights
plans of the type entitling holders of rights other than an "acquiring person"
to purchase shares or other securities at a below-market price if certain events
occur (which rights may be distributed as a dividend pursuant to such a plan
upon shares of either class of Voting Common or Non-Voting Common without a
corresponding dividend distribution upon shares of the other), will be made to
all holders of Voting Common and Non-Voting Common and may be made (1) in
securities convertible into Voting Common or Options to acquire Voting Common to
the record holders of Voting Common and to record holders of Non-Voting Common,
or (2) in securities convertible into Voting Common or Options to acquire Voting
Common to the record holders of Voting Common and in securities convertible into
Non-Voting Common and Options to acquire Non-Voting Common to the record holders
of the Non-Voting Common. In no event will either Voting Common or Non-Voting
Common be split, subdivided or combined unless the other is proportionately
split, subdivided or combined.
CONVERSION OF NON-VOTING COMMON
Except as described below, the Non-Voting Common will not be convertible
into Voting Common or any other security of RGA.
The Non-Voting Common will be automatically converted into Voting Common on
a share-for-share basis if, as a result of the existence of the Non-Voting
Common, the Voting Common or the Non-Voting Common or both becomes excluded from
trading on all principal national securities exchanges and also is excluded from
quotation on The Nasdaq Stock Market's National Market or any other comparable
national quotation system then in use. In addition, if at any time the number of
outstanding shares of Voting Common as reflected on RGA's stock transfer books
falls below 10% of the aggregate number of outstanding shares of Voting Common
and Non-Voting Common, then all the outstanding shares of Non-Voting Common will
be automatically converted into shares of Voting Common, on a share-for-share
basis. For purposes of the immediately preceding sentence, any shares of Voting
Common or Non-Voting Common repurchased by RGA will no longer be deemed
"outstanding" from and after the date of repurchase.
In the event of any such conversion of the Non-Voting Common, certificates
that formerly represented outstanding shares of Non-Voting Common will
thereafter be deemed to represent a like number of shares of Voting Common, and
all shares of Voting Common and Non-Voting Common authorized by RGA's Restated
Articles of Incorporation will be deemed to be shares of Voting Common.
BUSINESS COMBINATIONS; DISSOLUTION
In the event of a merger, consolidation, combination or similar transaction
of RGA with another entity (whether or not RGA is the surviving entity) or in
the event of a liquidation, dissolution or winding up of RGA, the holders of
Non-Voting Common will be entitled to receive the same per share consideration
as the per share consideration, if any, received by holders of Voting Common in
that transaction. Any capital stock, however, that holders of Non-Voting Common
become entitled to receive in any merger, consolidation, combination or similar
transaction may have terms substantially similar to the terms of the Non-Voting
Common itself. Thus the surviving entity in any such transaction could have a
dual-class capital structure like that of RGA and could upon the consummation of
the merger or consolidation give voting shares to the holders of Voting Common
and non-voting shares to the holders of Non-Voting Common.
OTHER NON-VOTING COMMON PROTECTIONS
Article Three of RGA's Restated Articles of Incorporation includes a
two-pronged "Non-Voting Common Protection" provision designed with the intention
of reducing the possibility that the holders of the Non-Voting Common could be
treated unfairly in the event that a person attempts to acquire control of or to
take over RGA. The provision may also have an anti-takeover effect.
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The first prong of the Non-Voting Common Protection provision seeks to
prevent a person who has crossed a certain ownership threshold from gaining
control of RGA by acquiring Voting Common without buying Non-Voting Common.
Anyone who acquires more than 15% of the outstanding Voting Common after May 27,
1998 (the "Effective Date") and does not acquire a percentage of the Non-Voting
Common outstanding at least equal to the percentage of Voting Common that the
person acquired above the 15% threshold will not be allowed to vote the Voting
Common acquired in excess of the 15% level. For example, if a person acquires
20% of the outstanding Voting Common after the Effective Date but acquires no
Non-Voting Common, that person would be unable to vote the 5% of the Voting
Common acquired in excess of the 15% threshold. The inability of the person to
vote the excess Voting Common will continue under RGA's Restated Articles of
Incorporation until such time as a sufficient number of shares of Non-Voting
Common have been acquired by the person that the requirements of the Non-Voting
Common Protection provision have been satisfied.
The second prong of the Non-Voting Common Protection provision is an
"Equitable Price" requirement. It is intended to prevent a person seeking to
acquire control of RGA from paying a discounted price for the Non-Voting Common
required to be purchased by the acquiring person under the first prong of the
Non-Voting Common Protection provision. Under the Restated Articles of
Incorporation, an equitable price has been paid for shares of Non-Voting Common
only when they have been acquired at a price at least equal to the greater of
(i) the highest per share price paid by the acquiring person, in cash or in
non-cash consideration, for any Voting Common acquired within the 60-day periods
preceding and following the acquisition of the Non-Voting Common, or (ii) the
highest closing market sale price of a share of Voting Common during the 30-day
period preceding the acquisition of the Non-Voting Common. The value of any
non-cash consideration will be determined by RGA's Board of Directors acting in
good faith. The highest closing market sale price of a share of Voting Common
will be the highest closing sale price on the Composite Tape for the NYSE-Listed
Stocks or such other securities exchange or other quotation system then
constituting the principal trading market for either the Voting Common or the
Non-Voting Common. In the event that no quotations are available, the highest
closing market sale price will be the fair market value of a share of Voting
Common during such 30-day period as determined by RGA's Board of Directors
acting in good faith. As a practical matter, a person seeking to acquire control
of RGA would have to buy the Voting Common and Non-Voting Common at virtually
the same time and at the same price, as might occur in a tender offer, in order
to ensure that the acquiring person would be able to vote the Voting Common
acquired in excess of the 15% threshold.
The Non-Voting Common Protection provision does not prevent any person or
group from acquiring a significant or controlling interest in RGA, provided such
person or group complies with the Non-Voting Common Protection provision or
incurs suspension of the voting rights of excess shares of Voting Common
acquired as provided by the Non-Voting Common Protection feature. The Non-Voting
Common Protection provision could make an acquisition of a significant or
controlling interest in RGA more expensive than if such requirement did not
exist. Consequently, a person or group might be deterred from acquiring a
significant or controlling interest in RGA as a result of such requirement.
Under the Non-Voting Common Protection provision, an acquisition of Voting
Common would be deemed to include any shares that a person acquires directly or
indirectly, in one transaction or a series of transactions, or with respect to
which that person acts or agrees to act in concert with any other person. Unless
there are affirmative attributes of concerted action, however, "acting or
agreeing to act in concert with any other person" will not include actions taken
or agreed to be taken by persons acting in their official capacities as
directors or officers of RGA or actions by persons merely because they are
related by blood or marriage. Also, an acquisition of Voting Common will not be
deemed to include (i) shares acquired pursuant to contracts existing prior to
the Effective Date, (ii) shares acquired by bequest or inheritance, by operation
of law upon the death of any individual, or by any other transfer without
valuable consideration, including a gift that is made in good faith and not for
purposes of circumventing the Non-Voting Common Protection provision, (iii)
shares acquired upon issuance or sale by RGA, (iv) shares acquired by operation
of law (including a merger or consolidation effected for the purpose of
recapitalizing any person, including RGA, or reincorporating any person,
including RGA, in another jurisdiction but excluding a merger or consolidation
for the purpose of acquiring another person), and (v) shares acquired by a plan
of RGA qualified under
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Section 401(a) of the Internal Revenue Code of 1986, as amended, or acquired by
reason of a distribution from such a plan. Thus, for example, the exercise of
options that were granted under any stock option plan of RGA prior to the
Effective Date would not be considered acquisitions for purposes of the
Non-Voting Common Protection provision because the exercise would be pursuant to
a preexisting contract.
The Non-Voting Common Protection provision will not apply to (i) any
increase in a holder's percentage ownership of Voting Common resulting solely
from a change in the total number of shares of Voting Common outstanding as the
result of a repurchase of Voting Common by the Company since the last date on
which that holder acquired Voting Common, or (ii) transfers of Voting Common
from General American Mutual Holding Company, the ultimate parent of General
American ("GAMHC"), or any direct or indirect subsidiary of GAMHC, to GAMHC or
any direct or indirect subsidiary of GAMHC. The Non-Voting Common Protection
provision also provides that to the extent that the voting power of any shares
of Voting Common cannot be exercised pursuant to the provision, those shares of
Voting Common will not be included in the determination of the voting power of
RGA for any purposes under the Restated Articles of Incorporation or under the
Missouri General and Business Corporation Law.
TRANSFERABILITY; TRADING MARKET
Like the existing Voting Common, the Non-Voting Common will be freely
transferable, and except for federal and state securities law restrictions on
directors, officers and other affiliates of RGA and on persons holding
"restricted" stock, RGA's stockholders will not be restricted in their ability
to sell or transfer shares of Non-Voting Common. Application has been made to
list the shares of Non-Voting Common on the NYSE under the symbol RGA.A, subject
to official notice of issuance.
POSSIBLE DILUTION
It is possible that the Voting Common will trade at a premium compared to
the Non-Voting Common. The Board of Directors has included certain Non-Voting
Common Protection features in Article Three of the Restated Articles of
Incorporation which may help to reduce or eliminate the economic reasons for the
Voting Common to trade at a premium compared to the Non-Voting Common, although
no assurance can be given in such regard. If the Voting Common were to trade at
a premium to the Non-Voting Common, subsequent issuances of Non-Voting Common,
instead of Voting Common, in connection with a public or private offering, an
acquisition or other transaction could have a greater dilutive effect on
stockholders because such an acquisition or transaction would require more
shares to deliver the same aggregate value. To minimize dilution of voting power
to existing stockholders, RGA may be more likely to issue shares of Non-Voting
Common than Voting Common in the future to raise equity, finance acquisitions or
fund employee benefit plans.
ISSUANCES AND REPURCHASES OF STOCK
Article Three of the Restated Articles of Incorporation expressly
authorizes the Board of Directors to authorize RGA to issue and sell all or any
part of any class of stock therein or thereafter authorized, from time to time,
and at such time or times, in such amounts and manner to such persons, firms,
associations or corporations, and for such consideration, whether in cash,
property or otherwise, as the Board of Directors from time to time, in its
discretion, determines whether or not greater consideration could be received
upon the issue or sale of the same number of shares of another class, and as
otherwise permitted by law.
Article Three of the Restated Articles of Incorporation also expressly
authorizes the Board of Directors to authorize RGA to purchase from time to time
shares of any one class or any combination of classes of common stock without
regard to differences among them in price and other terms under which such
shares may be purchased. The Board of Directors, therefore, could authorize RGA
to purchase Voting Common even if the consideration which would be paid by
purchasing Non-Voting Common would be less.
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PREEMPTIVE RIGHTS
The Non-Voting Common will not carry any preemptive rights enabling a
holder to subscribe for or receive shares of any class of RGA's stock or any
other securities convertible into shares of any class of RGA's stock.
VOTING COMMON
All of the outstanding shares of Voting Common are fully paid and
nonassessable. Subject to the prior rights of the holders of any shares of
preferred stock which subsequently may be issued and outstanding, the holders of
Voting Common are entitled to receive dividends as and when declared by the
Board of Directors out of funds legally available therefor, and, in the event of
liquidation, dissolution, or winding up of RGA, to share ratably in all assets
remaining after payment of liabilities. Each holder of Voting Common is entitled
to one vote for each share held of record on all matters presented to a vote of
stockholders, including the election of directors. Holders of Voting Common have
no cumulative voting rights or preemptive rights to purchase or subscribe for
any stock or other securities and there are no conversion rights or redemption
or sinking fund provisions with respect to such stock. Additional shares of
authorized Voting Common may be issued without stockholder approval, subject to
applicable rules of the NYSE.
PREFERRED STOCK
The authorized preferred stock of RGA is available for issuance from time
to time at the discretion of RGA's Board of Directors without stockholder
approval. The Board of Directors has the authority to prescribe for each series
of preferred stock it establishes the number of shares in that series, the
dividend rate, and the voting rights, conversion privileges, redemption and
liquidation rights, if any, and any other rights, preferences, and limitations
of the particular series. Depending upon the rights of such preferred stock, the
issuance of preferred stock could have an adverse effect on holders of Voting
Common and Non-Voting Common by delaying or preventing a change of control of
RGA, making removal of the present management of RGA more difficult, or
resulting in restrictions upon the payment of dividends and other distributions
to the holders of Voting Common and Non-Voting Common. Except as otherwise
contemplated by the Rights Plan described, RGA presently has no intention to
issue any shares of preferred stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Upon completion of the Offering, there will be approximately 48,450,000
shares of Voting Common, 14,700,000 shares of Non-Voting Common, and 10,000,000
shares of preferred stock available for future issuance by RGA without
stockholder approval, subject to applicable rules of the NYSE. These additional
shares may be issued for a variety of corporate purposes, including raising
additional capital, corporate acquisitions, and employee benefit plans. Except
as contemplated by the RGA Flexible Stock Plan, the Rights Plan, and other
possible employee benefit or stock purchase plans, RGA does not currently have
any plans to issue additional shares of Voting Common or preferred stock. See
"-- Preferred Stock Purchase Rights."
One of the effects of the existence of unissued and unreserved Voting
Common, Non-Voting Common and preferred stock may be to enable the Board of
Directors to issue shares to persons friendly to current management, which could
render more difficult or discourage an attempt to obtain control of RGA by means
of a merger, tender offer, proxy contest, or otherwise, and thereby protect the
continuity of RGA's management and possibly deprive the stockholders of
opportunities to sell their shares of Voting Common and Non-Voting Common at
prices higher than the prevailing market prices. Such additional shares also
could be used to dilute the stock ownership of persons seeking to obtain control
of RGA pursuant to the operation of the Rights Plan or otherwise. See also "--
Certain Charter and Bylaw Provisions."
PREFERRED STOCK PURCHASE RIGHTS
Under RGA's Shareholder Rights Plan, the Board of Directors has authorized
the issuance of one preferred stock purchase right (a "Right") for each
outstanding share of Voting Common and, effective upon consummation of the
Offering, for each outstanding share of Non-Voting Common. Except as set forth
below,
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each Right, when exercisable, entitles the registered holder to purchase from
RGA one one-hundred fiftieth (as adjusted for the three-for-two stock split in
August 1997) of a share of Series A Junior Participating Preferred Stock, $.01
par value, (the "Series A Preferred Stock"), at a price of $130 per one
one-hundredth of a share (the "Purchase Price"), subject to adjustment. The
terms of the Rights are set forth in a certain Rights Agreement, as amended,
between RGA and Chase Mellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agreement"). The summary of the terms of the Rights set forth herein is
qualified in its entirety by reference to the Rights Agreement.
Currently, no separate Rights certificates represent the Rights. Until the
earlier of (i) ten business days following the first to occur of (a) a public
announcement that, without the prior written consent of RGA, a person or group
of affiliated or associated persons, other than General American (and its
subsidiaries and affiliates) and certain subsidiaries or employee benefit or
compensation plans of RGA (an "Acquiring Person") has acquired, or obtained the
right to acquire, 20% or more of the voting power of all securities of RGA then
outstanding generally entitled to vote for the election of directors of RGA
("Voting Power"), or (b) the date on which RGA first has notice or otherwise
determines that a person has become an Acquiring Person (the "Stock Acquisition
Date"), or (ii) ten business days (or such later date as may be determined by
the Board of Directors, but in no event later than such time as any person
becomes an Acquiring Person) following the commencement of a tender offer or
exchange offer, without the prior written consent of RGA, for 20% or more of the
Voting Power of RGA (the earlier of the dates in clause (i) or (ii) above being
called the "Distribution Date"), the Rights will be evidenced by RGA's
outstanding Voting Common and Non-Voting Common certificates. Notwithstanding
the foregoing, an Acquiring Person shall not include any person or group who
inadvertently becomes the beneficial owner of 20% or more of the Voting Power,
as long as such person or group, if requested, promptly enters into an
irrevocable commitment to, and promptly does, divest enough shares to get below
the 20% threshold.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with RGA's Voting Common and Non-Voting
Common. Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), new Voting Common or Non-Voting Common certificates
issued upon transfer, new issuance or issuance from RGA's treasury will contain
a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
the surrender for transfer of any of the Company's outstanding Voting Common or
Non-Voting Common certificates will also constitute the transfer of the Rights
associated with the Voting Common or Non-Voting Common represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of Voting Common and Non-Voting Common as of the close of
business on the Distribution Date and such separate certificates alone will then
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 15, 2003, unless earlier redeemed or exchanged by RGA, as
described below.
The Purchase Price payable, and the number of shares of Series A Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series A Preferred Stock, (ii) upon the distribution to holders of Series A
Preferred Stock of rights or warrants to subscribe for shares of Series A
Preferred Stock or securities convertible into Series A Preferred Stock at less
than the then current market price of the Series A Preferred Stock, or (iii)
upon the distribution to holders of Series A Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends out of
earnings or retained earnings or dividends payable in Series A Preferred Stock)
or of convertible securities, subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights and the number of one one-hundred
fiftieths of a share of Series A Preferred Stock issuable upon exercise of each
Right are also subject to adjustment in the event of a stock split of the Voting
Common or Non-Voting Common payable in Voting Common or Non-Voting Common, as
the case may be, or a stock dividend on the Voting Common or Non-Voting Common
payable in Voting Common
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or Non-Voting Common, as the case may be, or subdivisions, consolidations or
combinations of the Voting Common or Non-Voting Common occurring, in any such
case, prior to the Distribution Date.
In the event that, following the Distribution Date, RGA is acquired in a
merger or other business combination transaction where RGA is not the surviving
corporation or where the Voting Common or Non-Voting Common is exchanged or
changed or 50% or more of RGA's assets or earning power is sold (in one
transaction or a series of transactions), proper provision will be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise of the Right and payment of the Purchase Price, that number of shares
of capital stock of the surviving or purchasing company (or, in certain cases,
one of its affiliates) which at the time of such transaction would have a market
value of two times the Purchase Price (such right being called the "Merger
Right").
In the event that any person becomes an Acquiring Person ("Flip-in Event"),
proper provision will be made so that each holder of a Right will thereafter
have the right to receive upon exercise that number of shares (or fractional
shares) of Voting Common (or, in certain cases, equivalent securities) having a
market value of two times the Purchase Price (such right being called the
"Subscription Right"). The Rights will not, however, become exercisable
following a Flip-in Event as described above until such time as the Rights are
no longer redeemable by RGA as described below.
Any Rights that are beneficially owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person will become null and void upon
the occurrence of any of the events giving rise to the exercisability of the
Subscription Right or the Merger Right and any holder of such Rights will have
no right to exercise such Rights from and after the occurrence of such an event
insofar as they relate to the Subscription Right or the Merger Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the Voting Power of
RGA and prior to the acquisition by such person or group of 50% or more of the
Voting Power of RGA, the Board of Directors of RGA may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, for, in the case of holders of Voting Common, additional
shares of Voting Common at an exchange ratio of one share of Voting Common per
Right or, in the case of holders of Non-Voting Common, additional shares of
Non-Voting Common at the exchange ratio of one share of Non-Voting Common per
Right. The RGA Board of Directors may also exchange the Rights (other than
Rights which have become void), in whole or in part, for shares of Series A
Preferred Stock at an exchange ratio of one one-hundred fiftieth of a share of
Series A Preferred Stock (or of a share of a class or series of RGA's preferred
stock having equivalent rights, preferences and privileges), per Right (subject
to adjustment).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional shares will be issued (other than fractions
which are integral multiples of one one-hundred fiftieth of a share of Series A
Preferred Stock). In lieu of fractional shares, an adjustment in cash will be
made based on the market price of the stock on the last trading date prior to
the date of exercise.
At any time until the date a person becomes an Acquiring Person, RGA may
elect to redeem the Rights in whole, but not in part, at a price of $0.0067 per
Right. Immediately upon the action of the Board of Directors electing to redeem
the Rights, RGA will make announcement thereof, and the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
The Series A Preferred Stock purchasable upon exercise of the Rights will
not be redeemable and will be junior to any other series of preferred stock RGA
may issue (unless otherwise provided in the terms of such stock). Each share of
Series A Preferred Stock will have a preferential dividend in an amount equal to
the greater of $1.00 per share or 150 times any dividend declared on each share
of Non-Voting Common or Voting Common. In the event of liquidation, the holders
of Series A Preferred Stock will receive a preferred liquidation payment equal
to the greater of $100.00 or 150 times the payment made per each share of Non-
Voting Common or Voting Common. Each share of Series A Preferred Stock will have
150 votes, voting together with the shares of Voting Common. In the event of any
merger, consolidation or other transaction in
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which shares of Voting Common or Non-Voting Common are exchanged, each share of
Series A Preferred Stock will be entitled to receive 150 times the amount and
type of consideration received per share of Voting Common or Non-Voting Common.
The rights of the Series A Preferred Stock as to the dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary anti-dilution provisions. Fractional shares of Series A Preferred
Stock in integral multiples of one one-hundred fiftieth of a share of Series A
Preferred Stock will be issuable; however, RGA may elect to distribute
depositary receipts in lieu of such fractional shares. In lieu of fractional
shares other than fractions that are multiples of one one-hundred fiftieth of a
share, an adjustment in cash will be made based on the market price of the
Series A Preferred Stock on the last trading date prior to the date of exercise.
Because of the nature of the Series A Preferred Stock's voting, dividend
and liquidation features, the value of the one one-hundred fiftieth of a share
of Series A Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Voting Common or Non-Voting Common.
The Board of Directors of RGA retains a broad ability to amend or
supplement the Rights Agreement without the consent of the holders of the
Rights, except that from and after such time as any person becomes an Acquiring
Person no such amendment may adversely affect the interests of the holders of
the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of RGA, including, without limitation, the right to vote
or to receive dividends.
Shareholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Series A Preferred
Stock or other consideration as set forth above.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire RGA without a
condition to such an offer that a substantial number of the Rights be acquired
or the Rights be redeemed or otherwise not apply. RGA's ability to amend the
Rights Agreement may, depending upon the circumstances, increase or decrease the
anti-takeover effects of the Rights. The Rights do not prevent the Board of
Directors of RGA from approving in advance any merger or other business
combination since the Rights may be redeemed by the Board of Directors as
described above.
CERTAIN CHARTER AND BYLAW PROVISIONS
RGA's Restated Articles of Incorporation and Bylaws provide for a
classified Board of Directors, limit the right of stockholders to remove
directors or change the size of the Board of Directors, to fill vacancies on the
Board of Directors, to act by written consent and to call a special meeting of
stockholders, and require a higher percentage of stockholders than would
otherwise be required to amend, alter, change, or repeal the provisions of the
Restated Articles of Incorporation and Bylaws discussed below. The Restated
Articles of Incorporation also provide that the Bylaws may be amended only by
the majority vote of the Board of Directors; thus stockholders will not be able
to amend the Bylaws without first amending the Restated Articles of
Incorporation. The foregoing provisions, which are summarized below, may have
the effect of discouraging certain types of transactions that involve an actual
or threatened change of control of RGA. Reference is made to the full text of
the Restated Articles of Incorporation and Bylaws and the following summary is
qualified in its entirety by such reference.
Size of Board, Election of Directors, Classified Board, Removal of
Directors and Filling Vacancies. The Restated Articles of Incorporation provide
that the number of directors to constitute the initial board of directors will
be three and thereafter the number of directors will be fixed from time to time
as provided in the Bylaws. The Bylaws provide for a Board of Directors of at
least three directors and permit the Board of Directors to increase the number
of Directors. In accordance with the Bylaws, the Board of Directors has fixed
the number of directors at ten. The Restated Articles of Incorporation further
provide that the Bylaws may be amended only by majority vote of the Board of
Directors.
Only holders of Voting Common may nominate a candidate for director. In
order for such a stockholder to nominate a candidate for director, the Restated
Articles of Incorporation require that timely notice be given to RGA in advance
of the meeting. Ordinarily, such notice must be given not less than 60 days nor
more than 90 days before the meeting (but if RGA gives less than 70 days' notice
of the meeting, then the stockholder
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must give such notice within ten days after notice of the meeting is mailed or
other public disclosure of the meeting is made). The stockholder filing the
notice of nomination must describe various matters regarding the nominee,
including such information as name, address, occupation, and shares held. The
Restated Articles of Incorporation do not permit cumulative voting in the
election of directors. Accordingly, the holders of a majority of the then
outstanding shares of voting stock can elect all the directors of the class then
being elected at that meeting of stockholders.
The Restated Articles of Incorporation and Bylaws provide that the Board
shall be divided into three classes, with the classes to be as nearly equal in
number as possible, and that one class shall be elected each year and serve for
three-year term.
Missouri law provides that, unless a corporation's articles of
incorporation provide otherwise, the holders of a majority of the corporation's
voting stock may remove any director from office. The Restated Articles of
Incorporation provide that, except as described below, a director may be removed
by stockholders only "for cause" and with the approval of the holders of 85% of
RGA's voting stock.
Missouri law further provides that, unless a corporation's articles of
incorporation or bylaws provide otherwise, all vacancies on a corporation's
board of directors, including any vacancies resulting from an increase in the
number of directors, may be filled by the vote of a majority of the remaining
directors even if that number is less than a quorum. The Restated Articles of
Incorporation provide that, subject to the rights, if any, of the holders of any
class of preferred stock then outstanding and except as described below,
vacancies may be filled only by the vote of a majority of the remaining
directors.
The classification of directors, the inability to vote shares cumulatively,
the advance notice requirements for nominations, and the provisions in the
Restated Articles of Incorporation that limit the ability of stockholders to
increase the size of the Board or to remove directors and that permit the
remaining directors to fill any vacancies on the Board will have the effect of
making it more difficult for stockholders to change the composition of the
Board. As a result, at least two annual meetings of stockholders may be required
for the stockholders to change a majority of the directors, whether or not a
change in the Board would be beneficial to RGA and its stockholders and whether
or not a majority of RGA's stockholders believes that such change would be
desirable.
Limitations on Stockholder Action by Written Consent; Limitations on
Calling Stockholder Meetings. As required to Missouri law, the Bylaws provide
that any action by written consent of stockholders in lieu of a meeting must be
unanimous. Under the Restated Articles of Incorporation, except as described
below, stockholders are not permitted to call special meetings of stockholders
or to require the Board to call a special meeting of stockholders, and a special
meeting of stockholders may be called only by a majority of the entire Board of
Directors, the Chairman of the Board or the President.
Only holders of Voting Common may bring a proposal before a stockholder
meeting. In order for such a stockholder to bring a proposal before a
stockholder meeting, the Restated Articles of Incorporation require that timely
notice be given to RGA in advance of the meeting. Ordinarily, such notice must
be given at least 60 days but not more than 90 days before the meeting (but if
RGA gives less than 70 days' notice of the meeting, then the stockholder must
give such notice within ten days after notice of the meeting is mailed or other
public disclosure of the meeting is made). Such notice must include a
description of the proposal, the reasons therefor, and other specified matters.
The Board may reject any such proposals that are not made in accordance with
these procedures or that are not a proper subject for stockholder action in
accordance with the provisions of applicable law.
The provision of the Bylaws requiring unanimity for stockholder action by
written consent gives all the stockholders of RGA entitled to vote on a proposed
action the opportunity to participate in such action and will prevent the
holders of a majority of the voting power of RGA from using the written consent
procedure to take stockholder action. Moreover, no stockholder may force a
stockholder consideration of a proposal over the opposition of the Board of
Directors by calling a special meeting of stockholders or forcing consideration
of such a proposal.
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These provisions are designed in part to make it more difficult and
time-consuming to obtain majority control of the Board of Directors of RGA or
otherwise bring a matter before stockholders without the Board's consent, and
thus reduce the vulnerability of RGA to an unsolicited takeover proposal. These
provisions are designed to enable RGA to develop its business in a manner which
will foster its long-term growth, with the threat of a takeover not deemed by
the Board to be in the best interests of RGA and its stockholders and the
potential disruption entailed by such a threat reduced to the extent
practicable. On the other hand, these provisions may have an adverse effect on
the ability of stockholders to influence the governance of RGA and the
possibility of stockholders receiving a premium above market price for the
securities from a potential acquirer who is unfriendly to management. In
addition, The General and Business Corporation Law of Missouri also contains
certain provisions which may have such an effect, including control share
acquisition and business combination statutes.
TRANSFER AGENT
The transfer agent and registrar for the Non-Voting Common, the Voting
Common and the Rights is Chase Mellon Stockholder Services, L.L.C.
STOCKHOLDER INFORMATION
RGA will deliver to the holders of Non-Voting Common the same proxy
statements, annual reports, and other information and reports that it delivers
to the holders of Voting Common.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF NON-VOTING COMMON
The following discussion concerns the material United States federal income
tax consequences of the ownership and disposition of shares of Non-Voting Common
applicable to Non-U.S. Holders of shares of Non-Voting Common. In general, a
"Non-U.S. Holder" is any holder other than (i) a citizen or resident of the
U.S., (ii) a corporation, partnership or an entity that is taxed as a
partnership created or organized in the U.S. or under the laws of the U.S. or
any political subdivision thereof, (iii) an estate whose income is includable in
gross income for U.S. federal income tax purposes regardless of its source, or
(iv) a trust for which a court within the U.S. is able to exercise primary
supervision over the administration of the trust, and for which one or more U.S.
persons have the authority to control all substantial decisions of the trust.
The discussion is based on current provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), applicable final and temporary Treasury
Regulations ("U.S. Treasury Regulations"), judicial authority, and current
administrative rulings and pronouncements of the U.S. Internal Revenue Service
("IRS") and upon the facts concerning RGA as of the date hereof. There can be no
assurance that the IRS will not take a contrary view, and no ruling from the IRS
has been or will be sought by RGA. Legislative, judicial, or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to Non-U.S.
Holders.
This discussion does not address all aspects of federal income taxation and
does not address any aspects of federal estate taxation or of state, local or
foreign tax laws. The discussion does not consider any specific facts or
circumstances that may apply to a particular Non-U.S. Holder (including the fact
that in the case of a Non-U.S. Holder that is a partnership, partners should be
aware that the U.S. tax consequences of holding and disposing of shares of
Non-Voting Common may be affected by certain determinations made at the
partnership level). Accordingly, prospective investors are urged to consult
their tax advisors regarding the U.S. federal, state, local and non-U.S. income,
estate and other tax consequences of holding and disposing of shares of
Non-Voting Common.
TAXATION OF DIVIDENDS AND DISPOSITIONS
Dividends on Non-Voting Common. Subject to the discussion below, dividends,
if any (see "Price Range of Capital Stock and Dividends"), paid to a Non-U.S.
Holder generally will be subject to United States withholding tax at a 30% rate
(or a lower rate as may be prescribed by an applicable tax treaty) unless the
dividends are effectively connected with a trade or business of the Non-U.S.
Holder within the U.S. Dividends effectively connected with such trade or
business will generally not be subject to withholding (if the Non-U.S. Holder
complies with applicable IRS reporting requirements) and generally will be
subject to U.S. federal income tax on a net income basis at regular graduated
rates. In the case of a Non-U.S. Holder that is a corporation, such effectively
connected income also may be subject to the branch profits tax (which is
generally imposed on a foreign corporation on the deemed repatriation from the
U.S. of effectively connected earnings and profits) at a 30% rate (or a lower
rate as may be prescribed by an applicable tax treaty). Under currently
effective U.S. Treasury Regulations, dividends paid on or before December 31,
1999 to an address outside the U.S. are presumed to be paid to a resident of
such country for purposes of the withholding tax, absent knowledge that such
presumption is not warranted. Under interpretations of currently effective U.S.
Treasury Regulations, the same presumption applies to determine the
applicability of a reduced rate of withholding under a tax treaty. Thus,
Non-U.S. Holders receiving dividends at addresses outside the U.S. are not
currently required to file tax forms to obtain the benefit of reduced
withholding at an applicable treaty rate. Recently finalized U.S. Treasury
Regulations applicable to dividends paid after December 31, 1999 (the "Final
Regulations") generally provide that the status of a payee as a Non-U.S. Holder
would be made based upon a withholding certificate. In addition, the Final
Regulations establish certain presumptions (which differ from those discussed
above) upon which RGA may generally rely to determine whether, in the absence of
certain documentation, a holder should be treated as a Non-U.S. Holder for
purposes of the 30% withholding tax described above. The presumptions would not
apply for purposes of granting a reduced rate of withholding under a treaty.
Under the Final Regulations, to obtain a reduced rate of withholding under a
treaty, a
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Non-U.S. Holder will generally be required either (i) to provide an IRS Form W-8
certifying such Non-U.S. Holder's entitlement to benefits under a treaty
together with, in certain circumstances, additional information, or (ii) satisfy
certain other applicable certification requirements. The Final Regulations also
provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty and for purposes of the 30% withholding tax
described above, dividends paid to a Non-U.S. Holder that is an entity should be
treated as paid to the entity or those holding an interest in that entity.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.
Dispositions of Non-Voting Common. Generally, a Non-U.S. Holder will not be
subject to U.S. federal income tax with respect to gain realized upon the
disposition of such holder's shares of Non-Voting Common unless (i) (a) the gain
is effectively connected with a trade or business carried on by the Non-U.S.
Holder within the U.S. (in which case the branch profits tax may also apply), or
(b) if a tax treaty applies, the gain is attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder, (ii) in the case of a Non-U.S.
Holder who is a non-resident alien individual who holds the shares of Non-Voting
Common as a capital asset, such holder is present in the U.S. for a period
aggregating 183 days or more in the taxable year of the disposition, and either
(a) such Non-U.S. Holder has a "tax home" (as specifically defined for U.S.
federal income tax purposes) in the U.S. (unless the gain from the disposition
is attributable to an office or other fixed place of business maintained by such
Non-U.S. Holder in a foreign country and a foreign tax equal to at least 10% of
such gain has been paid to a foreign country), or (b) the gain from the
disposition is attributable to an office or other fixed place of business
maintained by such Non-U.S. Holder in the U.S., (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates, or (iv) RGA is or has been a "U.S. real property holding
corporation" for federal income tax purposes (which RGA does not believe that it
is or is likely to become) and, assuming that the Non-Voting Common is deemed
for tax purposes to be "regularly traded on an established securities market,"
the Non-U.S. Holder held, at any time during the five-year period ending on the
date of disposition (or such shorter period that such shares were held),
directly or indirectly, more than five percent of the Non-Voting Common.
Non-U.S. Holders should consult applicable tax treaties, which might result in a
U.S. federal income tax treatment on the sale or other disposition of Non-Voting
Common different than as described above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Dividends on Non-Voting Common. RGA must report annually to the IRS and to
each Non-U.S. Holder the amount of dividends paid to and the tax withheld, if
any, with respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced by an applicable tax treaty or if
withholding was not required because the dividends were effectively connected
with a trade or business in the U.S. of the Non-U.S. Holder. Copies of these
information returns may also be available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the
Non-U.S. Holder resides. Dividends paid on or before December 31, 1999 to a
holder at an address outside the U.S. (unless RGA has knowledge that the holder
is a U.S. person) or dividends paid on or before December 31, 1999 that are
subject to U.S. withholding tax at the 30% statutory rate or at a reduced tax
treaty rate, and dividends that are effectively connected with the conduct of a
trade or business in the U.S. (if certain certification and disclosure
requirements are met) will generally not be subject to backup withholding of
U.S. federal income tax or information reporting. In general, backup withholding
at a rate of 31% and information reporting will apply to dividends paid on or
before December 31, 1999 on shares of Non-Voting Common to holders that are not
"exempt recipients," as defined in the U.S. Treasury Regulations, and fail to
provide to RGA in the manner required, certain identifying information (such as
the holder's name, address and taxpayer identification number). Generally,
individuals are not exempt recipients. For dividends paid after December 31,
1999, the Final Regulations provide certain presumptions and other rules under
which Non-U.S. Holders may be subject to backup withholding and related
information reporting in the absence of required certifications.
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Dispositions of Non-Voting Common. The payment of the proceeds from the
disposition of shares of Non-Voting Common by or through the U.S. office of a
broker will be subject to information reporting and backup withholding at a rate
of 31% unless the holder, under penalties of perjury, certifies, among other
things, its status as a Non-U.S. Holder, or otherwise establishes an exemption.
Generally, the payment of the proceeds from the disposition of shares of
Non-Voting Common outside the U.S. by or through a non-U.S. office of a broker
will not be subject to backup withholding and will not be subject to information
reporting. In the case of the payment of proceeds from the disposition of shares
of Non-Voting Common outside the U.S. by or through a non-U.S. office of a
broker that is a U.S. person or a "U.S.-related person", existing regulations
require information reporting (but not backup withholding) on the payment unless
the broker receives a statement from the owner, signed under penalties of
perjury, certifying, among other things, its status as a Non-U.S. Holder, or the
broker has documentary evidence in its files that the owner is a Non-U.S.
Holder, the broker has no actual knowledge to the contrary and certain other
requirements are satisfied. For tax purposes, a "U.S.-related person" is (i) a
"controlled foreign corporation" for U.S. federal income tax purposes, (ii) a
foreign person 50% or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the broker has been in existence)
is derived from activities that are effectively connected with the conduct of a
U.S. trade or business, or (iii) effective after December 31, 1999, certain
brokers that are foreign partnerships with U.S. partners or that are engaged in
a U.S. trade or business. For proceeds from the disposition of Non-Voting Common
after December 31, 1999, the Final Regulations provide more detailed rules
concerning such documentation.
Backup withholding is not an additional tax. Any amounts withheld from a
payment to a Non-U.S. Holder under the backup withholding rules will be allowed
as a credit against such holder's U.S. federal income tax liability and may
entitle such holder to a refund, provided that the required information is
timely furnished to the IRS. Non-U.S. Holders should consult their tax advisors
regarding the application of these rules to their particular situations, the
availability of an exemption therefrom and the procedures for obtaining such an
exemption, if available.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among RGA
and A.G. Edwards & Sons, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, Chase Securities Inc. and
Conning & Company, as the representatives for the several underwriters (the
"Representatives"), RGA has agreed to sell to the underwriters named below (the
"Underwriters"), and the Underwriters have severally agreed to purchase from
RGA, the respective number of shares of Non-Voting Common set forth opposite
their respective names below:
NUMBER OF
SHARES OF
NON-VOTING
UNDERWRITER COMMON
----------- ----------
A.G. Edwards & Sons, Inc....................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Morgan Stanley & Co. Incorporated...........................
Chase Securities Inc........................................
Conning & Company...........................................
---------
Total............................................. 5,300,000
=========
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares of Non-Voting
Common offered hereby, if any are taken.
The Underwriters propose to offer the shares of Non-Voting Common in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus and in part to certain securities dealers at such price less
a concession of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
brokers and dealers. After the shares of Non-Voting Common are released for sale
to the public, the offering price and the selling terms may from time to time be
varied by the Representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 795,000
additional shares of Non-Voting Common solely to cover over-allotments, if any.
If the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 5,300,000 shares of
Non-Voting Common offered hereby and the Company will be obligated, pursuant to
the option to sell such shares to the Underwriters.
RGA, one of its outside directors and GenAmerica Corporation have agreed to
enter into lock-up agreements pursuant to which they will agree that they will
not, for 90 days, 45 days and 90 days, respectively, from and after the date of
this Prospectus, sell, offer to sell, or otherwise dispose of, directly or
indirectly, any shares of capital stock of RGA (other than shares issuable
pursuant to a plan for employees or shareholders in effect on the date of this
Prospectus, and Voting Common issuable on conversion of securities or exercise
of warrants or options outstanding on the date of this Prospectus) without the
prior written consent of A.G. Edwards & Sons, Inc.
Prior to the Offering, there has been no public market for the Non-Voting
Common. The price of the shares of Non-Voting Common has been negotiated between
RGA and the Representatives. In addition to prevailing market conditions, among
the factors considered in determining the offering price of the shares of
Non-Voting Common were the trading history and price of RGA's Voting Common, the
absence of voting
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rights of the Non-Voting Common, the Company's historical financial performance,
estimates of the business potential and earning prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to the market valuations of companies in similar business.
The Representatives have informed RGA that the Underwriters do not intend
to confirm sales to any accounts over which they exercise discretionary
authority.
In connection with the Offering, the Underwriters and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Non-Voting Common or Voting
Common. These transactions may include over-allotment and stabilizing
transactions and purchases, effected in accordance with Rule 104 of Regulation
M, to cover short positions created by the Underwriters in connection with the
Offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the
Non-Voting Common or Voting Common; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of shares
of Non-Voting Common or Voting Common than they are required to purchase from
RGA in the Offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to broker-dealers in respect of the Non-Voting
Common or Voting Common sold in the Offering may be reclaimed by the
Underwriters if such Non-Voting Common or Voting Common is repurchased by the
Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Non-Voting
Common or Voting Common, which may be higher than the price that might otherwise
prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
Conning & Company is an indirect wholly-owned subsidiary of Conning
Corporation, which is an indirect majority-owned subsidiary of GenAmerica
Corporation. See "Principal Stockholders." Conning Asset Management Company,
which is a wholly-owned subsidiary of Conning & Company, provides asset
management and mortgage origination services for the Company. See "Management's
Discussion and Analysis -- Investments" and "Business -- Certain Relationships
and Related Transactions." A director of the parent corporation of Chase
Securities Inc. is also a board member of The Prudential Insurance Company of
America, a beneficial owner of more than 5% of the Voting Common. See "Principal
Stockholders." Certain of the Underwriters or their affiliates have, from time
to time, performed investment and commercial banking and other services for the
Company and GenAmerica or their affiliates in the ordinary course of business
and have received fees in connection therewith.
Because of the relationship between RGA and Conning & Company, this
Offering is being conducted pursuant to National Association of Securities
Dealers, Inc. (the "NASD") Conduct Rule 2720. In accordance with these
provisions, A.G. Edwards & Sons, Inc. is acting, and assuming the responsibility
of acting, as qualified independent underwriter ("QIU"), and the offering price
of the Non-Voting Common offered hereby will be no higher than that recommended
by the QIU. The Company has agreed to pay the QIU $25,000 for the acting as a
qualified independent underwriter. The QIU has participated in the preparation
of the Registration Statement of which this Prospectus is a part and has
performed due diligence with respect thereto.
RGA has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The validity of the Non-Voting Common being offered hereby will be passed
upon for RGA by Lewis, Rice & Fingersh, L.C., St. Louis, Missouri, and by James
E. Sherman, Esq., General Counsel and Secretary of RGA, and certain legal
matters related to the Offering will be passed upon for the Underwriters by
Bryan Cave LLP, St. Louis, Missouri. Mr. Sherman is also an employee and
Associate General Counsel of General American and is an officer and/or a member
of the Board of Directors of various of RGA's subsidiaries. A partner of Bryan
Cave LLP serves as a director of GenAmerica Corporation and General American.
Bryan
65
69
Cave LLP, from time to time, serves as counsel to General American and certain
of its affiliates including the Company.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements and schedules are incorporated by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
RGA is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's Regional Offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may be found on the Commission's web site address,
http://www.sec.gov. Such reports, proxy statements and information also can be
inspected at the office of the NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits, referred to herein as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act with respect to the Non-Voting Common being offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Non-Voting Common being offered
hereby, reference is made to the Registration Statement which can be inspected
at the public reference facilities at the offices of the Commission set forth
above. Any statements contained herein concerning the provision of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such reference is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by RGA (File No. 1-11848) with the Commission
pursuant to the Exchange Act are incorporated by reference herein and made a
part hereof: (1) RGA's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended on Form 10-K/A-1 filed with the Commission on
April 8, 1998, (2) RGA's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, (3) the description of Non-Voting Common contained in RGA's
Registration Statement on Form 8-A filed with the Commission on May 5, 1998,
including any amendments or reports filed for the purpose of updating such
description, and (4) the description of the preferred stock purchase rights
contained in RGA's Registration Statement on Form 8-A filed with the Commission
on April 7, 1993, as amended on Form 8-A/ A filed with the Commission on April
28, 1993, including any amendments or reports filed for the purpose of updating
such description.
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70
All documents filed by RGA with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of this Offering of the Non-Voting Common shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents, unless any such document shall
expressly state that it is not to be incorporated by reference. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or any amendment or supplement hereto.
RGA undertakes to provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents. Requests for such documents should be directed
to: Reinsurance Group of America, Incorporated, 660 Mason Ridge Center Drive,
St. Louis, Missouri 63141-8557, Attention Jack B. Lay, Executive Vice President
and Chief Financial Officer, telephone number (314) 453-7300.
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71
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
----
Forward Looking Statements............. (i)
Prospectus Summary..................... 1
Risk Factors........................... 6
Use of Proceeds........................ 7
Price Range of Capital Stock and
Dividends............................ 7
Capitalization......................... 8
Selected Consolidated Financial Data... 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 11
Business............................... 31
Management............................. 47
Principal Stockholders................. 50
Description of Capital Stock........... 51
Certain U.S. Federal Income Tax
Considerations for Non-U.S. Holders
of Non-Voting Common................. 61
Underwriting........................... 64
Legal Matters.......................... 65
Experts................................ 66
Available Information.................. 66
Incorporation of Certain Documents by
Reference............................ 66
======================================================
======================================================
5,300,000 SHARES
RGA LOGO
NON-VOTING COMMON STOCK
------------------------
PROSPECTUS
, 1998
------------------------
A.G. EDWARDS & SONS, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
CONNING & COMPANY
======================================================
72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following (except SEC, NASD and New York Stock Exchange fees) are
estimates of the other expenses of issuance and distribution:
SEC Registration Fee........................................ $ 98,329.50
NASD Filing Fee............................................. 30,500.00
New York Stock Exchange, Inc. Listing Fee................... 56,463.00
Blue Sky Qualification Fees and Expenses.................... 15,000.00
Accounting Fees and Expenses................................ 100,000.00
Legal Fees and Expenses..................................... 125,000.00
Printing and Engraving Expenses............................. 125,000.00
Transfer and Registrar Fees................................. 1,500.00
Miscellaneous............................................... 148,207.50
-----------
Total............................................. $700,000.00
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 351.355(1) of the Revised Statutes of Missouri provides that a
corporation may indemnify a director, officer, employee or agent of the
corporation in any action, suit or proceeding other than an action by or in the
right of the corporation, against expenses (including attorney's fees),
judgments, fines and settlement amounts actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action, had no reasonable
cause to believe his contact was unlawful. Section 351.355(2) provides that the
corporation may indemnify any such person in any action or suit by or in the
right of the corporation against expenses (including attorneys' fees) and
settlement amounts actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, except that he may not be indemnified in respect of any matter
in which he has been adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless authorized by the court.
Section 351.355(3) provides that a corporation may indemnify any such person
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the action, suit or proceeding if he has been successful
in defense of such action, suit or proceeding and if such action, suit or
proceeding is one for which the corporation may indemnify him under Section
351.355(1) or (2). Section 351.355(7) provides that a corporation shall have the
power to give any further indemnity to any such person, in addition to the
indemnity otherwise authorized under Section 351.355, provided such further
indemnity is either (i) authorized, directed or provided for in the articles of
incorporation of the corporation or any duly adopted amendment thereof or (ii)
is authorized, directed or provided for in any by-law or agreement of the
corporation which has been adopted by a vote of the stockholders of the
corporation, provided that no such indemnity shall indemnify any person from or
on account of such person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct.
The Restated Articles of Incorporation of RGA filed as Exhibit 3.1 to this
Registration Statement contain provisions indemnifying its directors, officers,
employees and agents to the extent authorized specifically by Sections
351.355(1), (2) (3) and (7). RGA has entered into indemnification contracts with
the officers and directors of RGA. The contracts provide that RGA under certain
circumstances may self-insure against directors' and officers' liabilities now
insured under the policy of insurance referred to below and will provide
indemnity to the fullest extent permitted by law against all expenses (including
attorneys' fees), judgments, fines and settlement amounts, paid or incurred in
any action or proceeding, including any act on behalf of RGA, on account of
their service as a director or officer of RGA, any subsidiary of RGA or any
other company or enterprise when they are serving in such capacities at the
request of RGA, excepting only cases
II-1
73
where the conduct of such person is adjudged to be knowingly fraudulent,
deliberately dishonest or willful misconduct.
Directors or officers of RGA who are directors or officers of General
American may also be entitled to indemnification under the provisions of an
agreement with General American providing indemnification to them since they
serve, at General American's request, as directors or officers of RGA. Such
individuals may also be covered by General American's directors' and officers'
liability insurance policy.
The form of Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement provides for the mutual indemnification of RGA and any
Underwriters, their respective controlling persons, directors and certain of
their officers, against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
General American maintains a policy of insurance under which the directors
and officers of RGA are insured, subject to the limits of the policy, against
certain losses, as defined in the policy, arising from claims made against such
directors and officers by reason of any wrongful acts, as defined in the policy,
in their respective capacities as directors or officers.
ITEM 16. EXHIBITS.
See Index to Exhibits.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the provisions
described under "Item 15 -- Indemnification of Directors and Officers" above, or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been sealed by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes: (1) That for purposes of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective; (2)
That for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; (3) That for purposes of determining any liability
under the Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (4) To deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest
annual report, to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Exchange Act; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
II-2
74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
Amendment No. 1 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of St. Louis, State of
Missouri, on May 11, 1998.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
By: /s/ JACK B. LAY
------------------------------------
Jack B. Lay
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
Amendment No. 1 to this Registration Statement has been signed on May 11, 1998,
by the following persons in the capacities indicated.
NAME TITLE/POSITION
---- --------------
* Chairman of the Board of Directors
- ------------------------------------------
Richard A. Liddy
* President, Chief Executive Officer and
- ------------------------------------------ Director (principal executive officer)
A. Greig Woodring
/s/ JACK B. LAY Executive Vice President, Chief Financial
- ------------------------------------------ Officer and Director (principal financial
Jack B. Lay and accounting officer)
* Director
- ------------------------------------------
J. Cliff Eason
* Director
- ------------------------------------------
Bernard A. Edison
* Director
- ------------------------------------------
Stuart Greenbaum
* Director
- ------------------------------------------
William A. Peck
* Director
- ------------------------------------------
Leonard M. Rubenstein
* Director
- ------------------------------------------
William P. Stiritz
* Director
- ------------------------------------------
H. Edwin Trusheim
*By /s/ JACK B. LAY
- -------------------------------------
Attorney-in-fact
II-3
75
INDEX TO EXHIBITS
NUMBER EXHIBIT
- ------ -------
1.1 Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of Reinsurance Group of
America, Incorporated, incorporated herein by reference to
Registration Statement on Form S-1 (No. 33-58960) filed on
March 2, 1993.
3.2 Bylaws of Reinsurance Group of America, Incorporated,
incorporated herein by reference to Registration Statement
on Form S-1 (No. 33-58960) filed on March 2, 1993.
3.3 Form of Amendment to Restated Articles of Incorporation of
Reinsurance Group of America, Incorporated.*
4.1 Form of Specimen Certificate for Non-Voting Common for
Reinsurance Group of America, Incorporated.*
4.2 Rights Agreement, as amended, dated as of May 4, 1993,
between Reinsurance Group of America, Incorporated and
Boatmen's Trust Company, as Rights Agent, incorporated
herein by reference to Amendment No. 1 to Form 10-Q for the
quarter ended March 31, 1997 (No. 1-11848) filed on May 21,
1997.
4.3 Second Amendment to Rights Agreement, dated as of April 22,
1998, between Reinsurance Group of America, Incorporated and
Chase Mellon Shareholder Services, L.L.C. (as successor to
Boatmen's Trust Company), as Rights Agent.*
5.1 Opinion of Lewis, Rice & Fingersh, L.C.
23.1 Consent of Lewis, Rice & Fingersh, L.C. (included as part of
Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney.*
- -------------------------
* Previously filed.
1
EXHIBIT 1.1
REINSURANCE GROUP OF AMERICA, INCORPORATED
5,300,000 SHARES
NON-VOTING COMMON STOCK
($0.01 PAR VALUE)
UNDERWRITING AGREEMENT
_______ ___, 1998
A.G. EDWARDS & SONS, INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
CHASE SECURITIES INC.
CONNING & COMPANY
As Representatives of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
The undersigned, Reinsurance Group of America, Incorporated, a Missouri
corporation (the "Company"), hereby addresses you as the representatives (the
"Representatives") of each of the persons, firms and corporations listed on
Schedule I hereto (collectively, the "Underwriters") and hereby confirms its
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to the
Underwriters 5,300,000 shares of its Non-Voting Common Stock, par value $0.01
per share (the "Non-Voting Common Stock," such shares of Non-Voting Common
Stock being herein referred to as the "Firm Shares"). Solely for the purpose
of covering over-allotments in the sale of the Firm Shares, the Company further
proposes to grant to the Underwriters the right to purchase up to an additional
795,000 shares of its Non-Voting Common Stock (the "Option Shares"), as
provided in Section 3 of this Agreement. The Firm Shares and the Option Shares
are herein sometimes referred to as the "Shares" and are more fully described
in the Prospectus hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell to
the Underwriters, and each such Underwriter agrees, severally and not jointly,
(a) to purchase from the Company, pro rata, at a purchase price of $___ per
share, the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto and (b) to purchase from the Company any
additional number of Option Shares which such Underwriter may become obligated
to purchase pursuant to Section 3 hereof.
The Company will deliver definitive certificates for the Firm Shares at
the office of A.G. Edwards & Sons, Inc., [77 WATER STREET, NEW YORK, NEW YORK
ZIP CODE] ("Edwards' Office"), or such other place as you and the Company may
mutually agree upon, for the accounts of the Underwriters against payment to
the Company of the purchase price for the Firm Shares sold by them to the
several Underwriters by wire transfer or certified or bank cashiers' check in
clearing house (immediately available) funds payable to the order of the
Company and delivered to One North Jefferson Avenue, St. Louis, Missouri 63103,
or at such other place as may be agreed upon between you and the Company (the
"Place of Closing"), at 10:00 a.m., St. Louis
2
time, on ____________, 1998, or at such other time and date not later than
[FIVE (5)] full business days thereafter as you and the Company may agree, such
time and date of payment and delivery being herein called the "Closing Date."
The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior
to the Closing Date and will be in such names and denominations as you may
request at least two (2) full business days prior to the Closing Date.
It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose checks
shall not have been received prior to the Closing Date for Shares to be
purchased by such Underwriter. Any such payment by an Underwriter shall not
relieve the other Underwriters of any of their obligations hereunder.
It is understood that the Underwriters propose to offer the Shares to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.
The Company hereby confirms its engagement of A.G. Edwards & Sons, Inc.
as, and A.G. Edwards & Sons, Inc., hereby confirms its agreement with the
Company to render services as, a "qualified independent underwriter," within
the meaning of Rule 2720 of the National Association of Securities Dealers,
Inc. Conduct Rules ("Conduct Rule 2720") with respect to the offering and sale
of the Shares. A.G. Edwards & Sons, Inc., solely in its capacity as the
qualified independent underwriter and not otherwise, is referred to herein as
the "QIU." As compensation for the services of the QIU hereunder, the Company
agrees to pay the QIU $_____ on the Closing Date. The price at which the
Shares will be sold to the public will not be higher than the maximum price
recommended by the QIU.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The Company hereby
grants an option to the Underwriters to purchase from it up to 795,000 Option
Shares on the same terms and conditions as the Firm Shares; provided, however,
that such option may be exercised only for the purpose of covering any
over-allotments which may be made by them in the sale of the Firm Shares. No
Option Shares shall be sold or delivered unless the Firm Shares previously have
been, or simultaneously are, sold and delivered.
The option is exercisable on behalf of the several Underwriters by you, as
Representatives, at any time, and from time to time, before the expiration of
30 days from the date of this Agreement, for the purchase of all or part of the
Option Shares covered thereby, by notice given by you to the Company in the
manner provided in Section 13 hereof, setting forth the number of Option Shares
as to which the Underwriters are exercising the option, and the date of
delivery of said Option Shares, which date shall not be more than [FIVE (5)]
business days after such notice unless otherwise agreed to by the parties. You
may terminate the option at any time, as to any unexercised portion thereof, by
giving written notice to the Company to such effect.
You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.
Delivery of the Option Shares with respect to which the options shall have
been exercised shall be made to or upon your order at Edwards' Office (or at
such other place as you and the Company may mutually agree upon), against
payment by you of the per share purchase price to the Company by wire transfer
or certified or bank cashier's check or checks, payable in clearing house
(immediately available) funds. Such payment and delivery shall be made at
10:00 a.m.,
2
3
St. Louis time, on the date designated in the notice given by you as above
provided for (which may be the same as the Closing Date), unless some other
date and time are agreed upon, which date and time of payment and delivery are
called the "Option Closing Date." The certificates for the Option Shares so
to be delivered will be made available to you for inspection at Edwards'
Office at least one full business day prior to the Option Closing Date and
will be in such names and denominations as you may request at least two (2)
full business days prior to the Option Closing Date. On the Option Closing
Date, the Company shall provide the Underwriters such representations,
warranties, agreements, covenants, opinions, letters, certificates and other
documents with respect to the Option Shares as are required to be delivered on
the Closing Date with respect to the Firm Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. (a) The
Company represents and warrants to and agrees with each Underwriter that:
(i) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"); a registration statement
(Registration No. 333-51777) on Form S-3 with respect to the Shares and
the associated Preferred Stock Purchase Rights (the "Rights"), including
a preliminary prospectus, and such amendments to such registration
statement as may have been required to the date of this Agreement, have
been prepared by the Company pursuant to and in conformity with the
requirements of the Act, and the Rules and Regulations thereunder (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") and have been filed with the Commission under the Act.
Copies of such registration statement, including any amendments thereto,
each related preliminary prospectus (meeting the requirements of Rule 430
or 430A of the Rules and Regulations) contained therein, and the
exhibits, financial statements and schedules thereto have heretofore been
delivered by the Company to you. If such registration statement has not
become effective under the Act, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the
Company with the Commission. If such registration statement has become
effective under the Act, a final prospectus containing information
permitted to be omitted at the time of effectiveness by Rule 430A of the
Rules and Regulations will be filed promptly by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations.
The term "Registration Statement" as used herein means the registration
statement as amended at the time it becomes or became effective under the
Act (the "Effective Date"), including financial statements and all
exhibits and all documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act and, if applicable, the information
deemed to be included by Rule 430A of the Rules and Regulations. The
term "Prospectus" as used herein means (i) the prospectus as first filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations,
or (ii) if no such filing is required, the form of final prospectus
included in the Registration Statement at the Effective Date, or (iii) if
a Term Sheet or Abbreviated Term Sheet (as such terms are defined in Rule
434(b) and 434(c), respectively, of the Rules and Regulations) is filed
with the Commission pursuant to Rule 424(b)(7) of the Rules and
Regulations, the Term Sheet or Abbreviated Term Sheet and the last
Preliminary Prospectus filed with the Commission prior to the time the
Registration Statement became effective, taken together (including, in
each case, the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act). The term "Preliminary Prospectus" as
used herein shall mean a preliminary prospectus as contemplated by Rule
430 or 430A of the Rules and Regulations included at any time in the
Registration Statement. "Material Adverse Effect" shall mean any material
adverse effect on the
3
4
condition (financial or other), earnings, business or properties of the
Company and its subsidiaries, taken as a whole.
(ii) The Commission has not issued, and is not to the knowledge of
the Company threatening to issue, an order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus nor instituted
proceedings for that purpose. Each Preliminary Prospectus at its date of
issue, the Registration Statement and the Prospectus and any amendments
or supplements thereto contains or will contain, as the case may be, all
statements which are required to be stated therein by, and in all
material respects conform or will conform, as the case may be, to the
requirements of, the Act and the Rules and Regulations. Neither the
Registration Statement nor any amendment thereto, as of the applicable
Effective Date, and neither the Prospectus nor any supplement thereto
contains or will contain, as the case may be, any untrue statement of a
material fact or omits or will omit, as the case may be, to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted from
the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, information
relating to the Underwriters and furnished to the Company in writing by
or on behalf of the Underwriters expressly for use therein (as provided
in Section 12).
(iii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the Act, at the time they were
filed with the Commission, complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations adopted by the Commission
thereunder (the "1934 Act Rules and Regulations"), and, when read
together and with the other information in the Prospectus, at the time
the Registration Statement became effective and at the Closing Date, did
not or will not, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(iv) The filing of the Registration Statement and the execution and
delivery of this Agreement have been duly authorized by the Board of
Directors of the Company; this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with its
terms (except to the extent the enforceability of the indemnification and
contribution provisions of Section 7 hereof may be limited by public
policy considerations as expressed in the Act as construed by courts of
competent jurisdiction, and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting creditors' rights generally and by general principles of
equity); the issuance and sale of the Shares, together with the
associated Rights, by the Company and the execution, delivery and
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a violation of the Company's
articles of incorporation or bylaws, or result in a breach or violation
of any of the terms and provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or any of its subsidiaries
under, any statute, bond, debenture, note other evidence of indebtedness,
or any agreement, indenture, mortgage, deed of trust, sale and leaseback
arrangement, joint venture or other instrument to which the Company or
any of its subsidiaries is a party or by which they are bound or to which
any of the properties or assets of the Company or any of its subsidiaries
is subject, or any order or
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decree, or any statute, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or their properties, except to such extent as does not have
a Material Adverse Effect; no authorization, approval, consent, order,
registration or qualification of or with any court or governmental body,
authority or agency is required with respect to the Company in connection
with the transactions contemplated by this Agreement except such as may
be required under the Act or the Rules and Regulations or as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD"), The New York Stock Exchange, Inc. (the "NYSE") or under any
state securities laws in connection with the purchase and distribution of
the Shares by the Underwriters.
(v) Registration statements with respect to the Shares and the
Rights have been carefully prepared by the Company pursuant to and in
conformity with the 1934 Act and the 1934 Act Rules and Regulations, and
have been filed with the Commission under the Act, and such registration
statements have become effective under the 1934 Act or will become
effective when the Registration Statement is declared effective.
(vi) The Company and each of its subsidiaries are duly incorporated
and are validly existing as corporations in good standing under the laws
of their respective jurisdictions of incorporation, with full power and
authority (corporate and other) to own, lease and operate their
properties and conduct their business as described in the Prospectus, are
duly qualified, licensed or authorized in each other jurisdiction where
it is required to be so qualified, licensed or authorized to conduct its
business as described in the Prospectus, in each case with such
exceptions, individually or in the aggregate, as would not have a
Material Adverse Effect; the Company and each of its subsidiaries hold
all licenses, certificates, permits and approvals from all state,
federal, foreign and other regulatory authorities, and have satisfied in
all material respects the requirements imposed by regulatory bodies,
administrative agencies or other governmental bodies, agencies or
officials, that are required for the Company and its subsidiaries
lawfully to own, lease and operate its properties and conduct their
businesses as described in the Prospectus, and, each of the Company and
its subsidiaries is conducting its business in compliance
with all of the laws, rules and regulations of each jurisdiction
in which it conducts its business (including, without limitation,
insurance and insurance holding company laws, rules and regulations) in
each case with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect; the Company and each of its
subsidiaries has filed all notices, reports, documents or other
information ("Notices") required to be filed under applicable laws,
rules and regulations, including, without limitation, the insurance
laws and regulations of the State of Missouri and the insurance laws and
regulations of other jurisdictions which are applicable to it, in each
case, with such exceptions as would not have a Material Adverse Effect;
and, except as otherwise specifically described in the Prospectus,
neither the Company nor any of its subsidiaries has received any
notification from any court or governmental body, authority
or agency, including without limitation, any insurance regulatory
authority, to the effect that any additional authorization, approval,
order, consent, license, certificate, permit, registration or
qualification ("Approvals") from such regulatory authority is needed to
be obtained by any of them, in any case where it could be reasonably
expected that obtaining such Approvals or the failure to obtain such
Approvals would have a Material Adverse Effect; and, no insurance
regulatory agency or body has issued any order or decree impairing,
restricting or prohibiting the payment of dividends by any subsidiary of
the Company to its parent.
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(vii) No Notices or Approvals are required to be filed or obtained
prior to the Closing Date by the Company or any of its subsidiaries in
connection with the execution, delivery and performance of this
Agreement, the issuance and sale of the Shares, together with the
associated Rights, or the transactions contemplated hereby.
(viii) The Company is not, nor after giving effect to the offering
and sale of the Shares, will it be (i) an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company"
or a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(ix) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree. Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company and its subsidiaries taken as a
whole have not incurred any material liabilities or material obligations,
direct or contingent, other than in the ordinary course of business, or
entered into any material transactions not in the ordinary course of
business, and there has not been any material change in the capital stock
or long-term debt of the Company and its subsidiaries taken as a whole or
any material adverse change in the condition (financial or other), net
worth, business, affairs, management, prospects or results of operations
of the Company and its subsidiaries taken as a whole. The Company and
its subsidiaries have filed all necessary federal, state and foreign
income and franchise tax returns and paid all taxes shown as due thereon,
all tax liabilities are adequately provided for on the books of the
Company and its subsidiaries, and the Company and its subsidiaries have
made all necessary payroll tax payments and are current and up-to-date
with respect thereto as of the date of this Agreement, except to such
extent as would not have a Material Adverse Effect; and the Company and
its subsidiaries have no knowledge of any tax proceeding or action
pending or threatened against the Company or its subsidiaries which might
have a Material Adverse Effect.
(x) Except as described in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company or its subsidiaries is a
party before or by any court or public, regulatory or governmental agency
or body which might be expected to have a Material Adverse Effect
(individually or in the aggregate) or affect the power or ability of the
Company to perform its obligations under this Agreement; and there are no
contracts or documents of the Company or its subsidiaries which would be
required to be filed as exhibits to the Registration Statement by the Act
or by the Rules and Regulations which have not been filed as exhibits to
the Registration Statement or incorporated by reference therein.
(xi) The Company has duly and validly authorized capital stock as
described in the Prospectus; all outstanding shares of Common Stock, and
associated Rights, of the Company and the Shares, and associated Rights,
conform in all material respects, or when issued will conform in all
material respects, to the description thereof in the Prospectus and have
been, or, when issued and paid for will be, duly authorized, validly
issued, fully paid and non-assessable; and the issuance of the Shares,
and associated Rights, to be
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purchased from the Company hereunder is not subject to preemptive or
other similar rights. All corporate action required to be taken by the
Company for the authorization, issue and sale of the Shares, and
associated Rights, has been duly and validly taken.
(xii) The entities listed on Schedule II hereto are the only
subsidiaries, direct or indirect, of the Company. The Company, owns,
directly or indirectly through other subsidiaries, the percentage
indicated on Schedule II of the outstanding shares of capital stock or
other securities evidencing equity ownership of such subsidiaries, free
and clear of any security interest, claim, lien, limitation on voting
rights or encumbrances; and all of such securities have been duly
authorized, validly issued, are fully paid and non-assessable and were
not issued in violation of any preemptive or similar rights. Except as
described in the Registration Statement, there are no outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any such
shares of capital stock or other equity interest of such subsidiaries.
(xiii) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that: (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4)
the recorded accounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
thereto.
(xiv) The 1997 annual statements of each of the Company's insurance
subsidiaries and the statutory statements of admitted assets, liabilities
and surplus and statutory statements of operations included in such
statutory annual statements together with related schedules and notes,
have been prepared, in all material respects, in conformity with
statutory accounting principles or practices prescribed or permitted by
the appropriate insurance department of the jurisdiction of domicile of
each such subsidiary, and such statutory accounting practices have been
applied on a consistent basis throughout the periods involved, except as
may otherwise be indicated therein or in the notes thereto, and present
fairly, in all material respects, the statutory financial position of the
subsidiaries as of the dates thereof, and the statutory basis results of
operations of the subsidiaries for the periods covered thereby.
(xv) KPMG Peat Marwick LLP, the accounting firm which has certified
the financial statements filed with or incorporated by reference in and
as a part of the Registration Statement, is an independent public
accounting firm within the meaning of the Act and the Rules and
Regulations.
(xvi) The consolidated financial statements and schedules of the
Company, including the notes thereto, filed with (or incorporated by
reference) and as a part of the Registration Statement, comply in all
material respects with the Act and the Rules and Regulations and present
fairly the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and their consolidated
results of operations and their consolidated cash flows for the
respective periods covered thereby, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as otherwise disclosed in
the Prospectus. The selected financial data included or incorporated by
reference in the
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Registration Statement and Prospectus comply in all material respects
with the Act and the Rules and Regulations, present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements, except as otherwise
disclosed in the Prospectus. The operating and other statistical data
included or incorporated by reference in the Registration Statement and
Prospectus comply in all material respects with the Act and the Rules and
Regulations and presents fairly the information shown therein.
(xvii) Neither the Company nor any subsidiary is (i) in default with
respect to its articles of incorporation or bylaws or (ii) in default in
the performance of any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or in any
other contract, indenture, mortgage, deed of trust, sale and leaseback
arrangement, joint venture or other instrument to which it is a party;
provided that the representation in subparagraph (ii) hereof shall not
apply to defaults which would not have a Material Adverse Effect.
(xviii) Neither the Company nor any subsidiary is in violation of
any other laws, ordinances or governmental rules or regulations to which
it is subject, including, without limitation, Section 13 of the 1934 Act,
and neither the Company nor any subsidiary has failed to obtain any other
license, permit, franchise, easement, consent, or other governmental
authorization necessary to the ownership, leasing and operation of its
properties or to the conduct of its business, which violation or failure
would have a Material Adverse Effect.
(xix) Except as described in the Prospectus, the Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent licenses, trademarks, service marks and trade names
necessary to conduct the business now operated by them, and neither the
Company nor any subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to any patents,
patent licenses, trademarks, service marks or trade names which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(xx) The Company and its subsidiaries have good and marketable title
to all property owned by them, free and clear of all liens, encumbrances,
restrictions and defects except such as are described in the Prospectus
or do not interfere with the use made and proposed to be made of such
property; and any property held under lease or sublease by the Company or
its subsidiaries is held under valid, subsisting and enforceable leases
or subleases, and neither the Company nor any subsidiary has any notice
or knowledge of any material claim of any sort which has been, or may be,
asserted by anyone adverse to the Company's or any subsidiary's rights as
lessee or sublessee under any lease or sublease described above, or
affecting or questioning the Company's or any subsidiary's rights to the
continued possession of the leased or subleased premises under any such
lease or sublease in conflict with the terms thereof; except where the
failure to have such good and marketable title or valid, subsisting and
enforceable leases or subleases ,or such claim, would not have a Material
Adverse Effect.
(xxi) Except as described in the Prospectus, there is no factual
basis for any action, suit or other proceeding involving the Company or
its subsidiaries or any of their material assets for any failure of the
Company or any of its subsidiaries, or any predecessor thereof, to comply
with any requirements of federal, state or local regulation
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relating to air, water, solid waste management, hazardous or toxic
substances, or the protection of health or the environment; except where
such action, suit or other proceeding would not have a Material Adverse
Effect. Except as described in the Prospectus or as would not have
Material Adverse Effect, none of the property owned or leased by the
Company or any of its subsidiaries is, to the best knowledge of the
Company, contaminated with any waste or hazardous substances, and neither
the Company nor any of its subsidiaries may be deemed an "owner or
operator" of a "facility" or "vessel" which owns, possesses, transports,
generates or disposes of a "hazardous substance" as those terms are
defined in Section 9601 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.
(xxii) No labor disturbance exists with the employees of the Company
or its subsidiaries or is imminent which would have a Material Adverse
Effect. None of the employees of the Company and its subsidiaries is
represented by a union and, to the best knowledge of the Company and its
subsidiaries, no union organizing activities are taking place. Neither
the Company nor any of its subsidiaries has violated any federal, state
or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees, nor any applicable wage or hour laws, nor
any provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, or analogous
foreign laws and regulations, which might result in a Material Adverse
Effect.
(xxiii) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Company's Common Stock or Non-Voting Common Stock, and the Company is not
aware of any such action taken or to be taken by affiliates of the
Company.
(xxiv) All retrocessional treaties and arrangements to which the
Company is a party and which have not terminated or expired by their
terms are in full force and effect and none of the Company or any of its
subsidiaries is in violation of or in default in the performance,
observance or fulfillment of, any obligation, agreement, covenant or
condition contained therein, except to the extent that any such violation
or default could not reasonably be expected to have a Material Adverse
Effect; neither the Company nor any of its subsidiaries has received any
notice from any of the other parties to such treaties, contracts or
agreements that such other party intends not to perform such treaty,
contract or agreement in any respect that could reasonably be expected to
have a Material Adverse Effect; and, to the best knowledge of the
Company, the Company has no reason to believe that any of the other
parties to such treaties or arrangements will be unable to perform such
treaty or arrangement in any respect that could reasonably be expected to
have a Material Adverse Effect.
(xxv) The Company and each of its subsidiaries maintains insurance
covering their properties, personnel and business. Such insurance insures
against such losses and risks as are adequate in accordance with the
Company's perception of customary industry practice to protect the
Company and its subsidiaries and their businesses. Neither the Company
nor any of its subsidiaries has received notice from any insurer or agent
of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
All such insurance is outstanding and duly in force on the date hereof
and will be outstanding and duly in force on the Closing Date.
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(xxvi) The Company and its subsidiaries have made no material
changes in their insurance reserving practices since December 31, 1997,
except where such insurance reserving practices could not reasonably be
expected to have a Material Adverse Effect.
(xxvii)Except as disclosed in the Prospectus, no holder of any
security of the Company has any right to require registration of shares
of Non-Voting Common Stock, Common Stock or any other security of the
Company because of the filing of the Registration Statement or the
consummation of the transactions contemplated hereby and, except as
disclosed in the Prospectus, no person has the right to require
registration under the Act of any shares of Non-Voting Common Stock,
Common Stock or other securities of the Company. No person has the
right, contractual or otherwise, to cause the Company to permit such
person to underwrite the sale of any of the Shares. Except for this
Agreement, there are no contracts, agreements or understandings between
the Company or any of its subsidiaries and any person that would give
rise to a valid claim against the Company, its subsidiaries or any
Underwriter for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Shares. Except as
disclosed in the Prospectus, there are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments of
sale or liens related to or entitling any person to purchase or otherwise
to acquire any shares of, or any security convertible into or
exchangeable or exercisable for, the capital stock of, or other ownership
interest in, the Company.
(xxviiii) The Company is not aware of any threatened or pending
downgrading of RGA Reinsurance Company's "A+" claims-paying ability
rating from A.M. Best Company, Inc., A1 insurance financial strength
rating from Moody's Investors Service, or AA claims-paying rating from
Standard & Poor's.
(b) Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriters shall be deemed a representation and
warranty by the Company, as applicable, to each Underwriter as to the matters
covered thereby.
5. ADDITIONAL COVENANTS. The Company covenants and agrees with the
several Underwriters that:
(a) If the Registration Statement is not effective under the Act, the
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible, and it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement has
become effective. The Company (i) will prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations, if required, a
Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise or a Term Sheet or Abbreviated Term Sheet,
as applicable; (ii) will not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Underwriters shall not previously
have been advised and furnished with a copy or to which the Underwriters shall
have reasonably objected in writing or which is not in compliance with the
Rules and Regulations; and (iii) will promptly notify you after it shall have
received notice thereof of the time when any amendment to the Registration
Statement becomes effective or when any supplement to the Prospectus has been
filed.
(b) The Company will advise the Underwriters promptly, after it shall
receive notice or obtain knowledge thereof, of any request of the Commission
for amendment of the
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Registration Statement or for supplement to the Prospectus or for any
additional information, or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution or threatening of any proceedings for that
purpose, and the Company will use its best efforts to prevent the issuance of
any such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters and their counsel in
endeavoring to qualify the Shares for sale, and the Rights for issuance, under
the securities laws of such jurisdictions as they may have designated and will
make such applications, file such documents, and furnish such information as
may be necessary for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to
file such a consent or to subject itself to taxation as doing business in any
jurisdiction where it is not now so taxed. The Company will, from time to
time, file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period as the
Underwriters may reasonably request.
(d) The Company will deliver to, or upon the order of, the Underwriters,
without charge from time to time, as many copies of any Preliminary Prospectus
(including all documents incorporated by reference therein) as they may
reasonably request. The Company will deliver to, or upon the order of, the
Underwriters without charge as many copies of the Prospectus (including all
documents incorporated by reference therein), or as it thereafter may be
amended or supplemented, as they may from time to time reasonably request. The
Company consents to the use of such Prospectus by the Underwriters and by all
dealers to whom the Shares may be sold, both in connection with the offering or
sale of the Shares and for such other purposes and for such period of time
thereafter as the Prospectus is required by law to be delivered in connection
with the offering or sale of the Shares. The Company will deliver to the
Underwriters at or before the Closing Date a reasonable number of signed copies
of the Registration Statement and all amendments thereto including all exhibits
filed therewith or incorporated by reference therein and all documents
incorporated by reference in the Prospectus, and will deliver to the
Underwriters such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as they may reasonably request.
(e) If, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, any event shall occur as a result of
which, in the judgment of the Company or in your judgment or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law.
(f) The Company will make generally available to its shareholders and will
file as an exhibit in a report pursuant to the 1934 Act, as soon as it is
practicable to do so, but in any event not later than 15 months after the
Effective Date of the Registration Statement, an earnings statement in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the Effective Date of the Registration Statement, which
earnings statement shall satisfy the
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requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise the Underwriters in writing when such statement
has been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Underwriters at their principal executive offices a reasonable
number of copies of annual reports, quarterly reports, current reports and
copies of all other documents, reports and information furnished by the Company
to its shareholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or the
1934 Act. The Company will deliver to the Underwriters similar reports with
respect to any significant subsidiaries, as that term is defined in the Rules
and Regulations, which are not consolidated in the Company's financial
statements. Any report, document or other information required to be furnished
under this paragraph (g) shall be furnished as soon as practicable after such
report, document or information becomes available.
(h) The Company will apply the proceeds from the sale of the Shares as set
forth in the description under "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of Item 504 of
Regulation S-K.
(i) The Company will promptly provide you with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Shares under the Act.
(j) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of the
Company and its subsidiaries for any periods subsequent to the periods covered
by the financial statements appearing in the Registration Statement and the
Prospectus.
(k) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will not issue any press releases or other communications
directly or indirectly and will hold no press conferences with respect to the
Company or any of its subsidiaries, the financial condition, results of
operations, business, properties, assets or liabilities of the Company or any
of its subsidiaries, or the offering of the Shares, without your prior written
consent.
(l) The Company will use its best efforts to obtain approval for, and
maintain the quotation of the Shares on the NYSE.
(m) For a period of 90 days from the Effective Date, the Company will
not, directly or indirectly offer, sell, contract to sell or otherwise dispose
of any shares of the Company's Common Stock or Non-Voting Common Stock, any
securities convertible or exchangeable for Common Stock or Non-Voting Common
Stock or any other rights to acquire such shares without the prior written
consent of A.G. Edwards & Sons, Inc., except for the Shares sold hereunder and
except for sales of shares of Common Stock to the Company's employees pursuant
to the exercise of options under the Company's stock option plans outstanding
on the date of this Agreement.
(n) During any period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, the Company will promptly file all
documents required to be filed with the Commission pursuant to Sections 13, 14
or 15(d) of the 1934 Act.
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6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares, as provided herein, shall
be subject to the accuracy in all material respects, as of the date hereof and
as of the Closing Date (and, if applicable, the Option Closing Date), of the
representations and warranties of the Company contained herein, to the
performance in all material respects by the Company of its covenants and
obligations hereunder, and to the following additional conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made or should be made within the time periods
required by the Act and the Rules and Regulations. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time,
shall have been issued and no proceeding for that purpose shall have been
initiated or, to the knowledge of the Company or any Underwriter, threatened or
contemplated by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of the Underwriters.
(b) No Underwriter shall have disclosed in writing to the Company on or
prior to the Closing Date (and, if applicable, the Option Closing Date), that
the Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of fact which, in the opinion of counsel to the
Underwriters, is material, or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of James E. Sherman, Esq., General Counsel and
Secretary for the Company, addressed to you and dated the Closing Date (and,
if applicable, the Option Closing Date), to the effect that:
(i) The Company and its U.S. subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of the states in which they are incorporated, with full
power and authority (corporate and other) to own, lease and operate their
properties and conduct their business as described in the Prospectus; the
Company and its U.S. subsidiaries are duly qualified, licensed or
authorized in each other jurisdiction where it is required to be so
qualified, licensed or authorized to conduct its business as described in
the Prospectus, except where the failure to be so qualified would not
have a Material Adverse Effect.
(ii) The entities listed on Schedule II are the only subsidiaries,
direct or indirect, of the Company. The Company owns directly or
indirectly through other subsidiaries, the percentage indicated on
Schedule II of the outstanding shares of capital stock or other
securities evidencing equity ownership of such subsidiaries, and all such
securities have been duly authorized, validly issued, are fully paid and
non-assessable and, to the knowledge of such counsel, are owned by the
Company free and clear of any security interest, claim, lien, limitation
on voting rights or encumbrances and were not issued in violation of any
preemptive or similar rights; and there are no outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any such shares of
capital stock or other equity interest of such subsidiaries.
(iii) The Company has duly and validly authorized capital stock as
set forth under the caption "Capitalization" in the Prospectus; all
outstanding shares of Common
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Stock, and associated Rights, of the Company and the Shares, and
associated Rights, conform, or when issued will conform, to the
description thereof in the Prospectus under the caption "Description of
Capital Stock," and have been duly authorized, validly issued, fully paid
and non-assessable; and the issuance of the Shares, and associated
Rights, to be sold by the Company have been duly authorized and, when
delivered and paid for in accordance with this Agreement, will be validly
issued, fully paid and non-assessable. All corporate action required to
be taken by the Company for the authorization, issue and sale of the
Shares, and associated Rights, has been duly and validly taken. The
Shares, and associated Rights, are duly authorized for listing, subject
to official notice of issuance and evidence of satisfactory distribution,
on the NYSE. The form of specimen certificate representing the Shares
filed as an exhibit to the Registration Statement is in valid and
sufficient form. The holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or other similar rights under
the Company's articles of incorporation or any agreement or other
instrument to which the Company is a party, and except as described in
the Prospectus, there are no outstanding subscriptions, rights, warrants,
calls, commitments or sale or options to acquire, or instruments
convertible into or exchangeable for, shares of Voting Common Stock or
Non-Voting Common Stock.
(iv) To the knowledge of such counsel, the Company and each of its
U.S. subsidiaries hold all licenses, certificates, permits and approvals
from all state, federal, foreign and other regulatory authorities, and
have satisfied in all material respects the requirements imposed by
regulatory bodies, administrative agencies or other governmental bodies,
agencies or officials, that are required for the Company and its U.S.
subsidiaries lawfully to own, lease and operate their properties and
conduct their businesses as described in the Prospectus, and, each of the
Company and its U.S. subsidiaries is conducting its business in
compliance in all material respects with all of the laws, rules and
regulations of each jurisdiction in which it conducts its business
(including, without limitation, insurance and insurance holding company
laws, rules and regulations); the Company and each of its subsidiaries
has filed all Notices required to be filed under applicable laws, rules
and regulations, including, without limitation, the insurance laws and
regulations of the State of Missouri and the insurance laws and
regulations of other jurisdictions which are applicable to it, in each
case, with such exceptions as would not have a Material Adverse Effect;
and, except as otherwise specifically described in the Prospectus,
neither the Company nor any of its U.S. subsidiaries has received any
notification from any court or governmental body, authority or agency,
including, without limitation, any insurance regulatory authority, to the
effect that any additional Approvals from such regulatory authority is
needed to be obtained by any of them, in any case where it could be
reasonably expected that obtaining such Approvals or the failure to
obtain such Approvals would have a Material Adverse Effect.
(v) The Company and each of its U.S. subsidiaries has filed all
Notices pursuant to, and has obtained all Approvals required to be
obtained under, and has otherwise complied with all requirements of, all
applicable insurance laws and regulations (excluding insurance securities
laws other than those of the State of Missouri), in connection with the
issuance and sale of the Shares and associated Rights, in each case
(other than the insurance laws and regulations of the State of Missouri,
as to which no exception is taken) with such exceptions, individually or
in the aggregate, as would not affect the validity of the Shares and
associated Rights, their issuance or the transactions contemplated hereby
or have a Material Adverse Effect; and no such Notices or Approvals are
required to be filed or obtained by any of the U.S. subsidiaries in
connection with the execution, delivery and performance of this
Agreement, the issuance
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and sale of the Shares and associated Rights, or the transactions
contemplated hereby, in each case (other than the insurance laws of the
State of Missouri, as to which no exception is taken) with such
exceptions, individually or in the aggregate, as would not affect the
validity of the Shares or associated Rights, their issuance or the
transactions contemplated hereby or have a Material Adverse Effect.
Except as described in the Prospectus, no insurance regulatory agency or
body issued any order or decree impairing, restricting or prohibiting the
payment of dividends by any U.S. subsidiary of the Company to its parent,
other than such orders or decrees the issuance of which could not
reasonably be expected to have a Material Adverse Effect.
(vi) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and legally binding obligation
of the Company. The issuance and sale of the Shares, together with the
associated Rights, by the Company and the execution, delivery and
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a violation of the Company's
articles of incorporation or bylaws, or result in a breach or violation
of any of the terms and provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or any of its U.S.
subsidiaries under, any statute, bond, debenture, note, other evidence of
indebtedness, or any agreement, indenture, mortgage, deed of trust, sale
and leaseback arrangement, joint venture or other instrument to which the
Company or any of its U.S. subsidiaries is a party or by which they are
bound or to which any of the properties or assets of the Company or any
of its U.S. subsidiaries is subject, or any order or decree, or any
statute, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its U.S. subsidiaries or
their properties, except to such extent as does not have a Material
Adverse Effect.
(vii) The Rights have been duly authorized and validly issued and
when the Shares have been issued and delivered to and paid for by the
Underwriters pursuant to this Agreement the Rights will be fully paid and
non-assessable (subject to the terms and conditions of the Rights as
applicable to their exercise).
(viii) To the knowledge of such counsel, (A) there are no material
(individually, or in the aggregate) legal, governmental or regulatory
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or of which the business or properties of the
Company or any of its subsidiaries is the subject which are not disclosed
in the Registration Statement and Prospectus; (B) there are no contracts
or documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or filed as required; and
(C) there are no statutes, rules or regulations required to be described
in the Registration Statement or Prospectus which are not described as
required.
(ix) To the knowledge of such counsel, neither the Company nor any
U.S. subsidiary (i) is in default with respect to its articles of
incorporation or bylaws; (ii) is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any other contract,
indenture, mortgage, deed of trust, sale and leaseback arrangement, joint
venture or other instrument to which it is a party; (iii) is in violation
of any other laws, ordinances or governmental rules or regulations to
which it is subject, including, without limitation, Section 13 of the
1934 Act, or (iv) has failed to obtain any other license, permit,
franchise, easement, consent, or other governmental authorization
necessary to the
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ownership, leasing and operation of its properties or to the conduct of
its business; provided that the representations in subparagraph (ii),
(iii) and (iv) hereof shall not apply to defaults which would not have a
Material Adverse Effect..
(x) The statements made in the Prospectus under the caption
"Business-Regulation" and the [third] paragraph on the inside front cover
of the Prospectus, to the extent that they constitute summaries of
documents referred to therein or matters of law or legal conclusions,
have been reviewed by such counsel and are accurate summaries and fairly
present the information disclosed therein.
Such counsel shall confirm that during the preparation of the Registration
Statement and Prospectus, such counsel participated in conferences with the
Representatives and their counsel and with officers and representatives of the
Company, at which conferences the contents of the Registration Statement and
the Prospectus were discussed, reviewed and revised. On the basis of the
information which was developed in the course thereof, considered in light such
counsel's understanding of applicable law and the experience gained by such
counsel through his practice thereunder, such counsel shall confirm that
nothing came to his attention that would lead him to believe that either the
Registration Statement, as of the Effective Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the Prospectus or
any amendment or supplement thereto as of the Closing Date, contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than the
financial statements or other financial data as to which such counsel need
express no opinion).
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and he are entitled to so rely, (1) as to
matters involving laws of any jurisdiction other than Missouri or the United
States, upon opinions addressed to the Underwriters of other counsel
satisfactory to them and Bryan Cave LLP, and (2) as to all matters of fact,
upon certificates and written statements of the executive officers of, and
accountants for, the Company, provided such counsel shall state in his opinion
that he believes that he and the Underwriters are justified in relying thereon.
(d) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Lewis, Rice & Fingersh, special counsel for
the Company, addressed to you and dated the Closing Date (and, if applicable,
the Option Closing Date), to the effect that:
(i) The Company and its U.S. subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of the states in which they are incorporated, with full
power and authority (corporate and other) to own, lease and operate their
properties and conduct their business as described in the Prospectus; the
Company and its U.S. subsidiaries are duly qualified, licensed or
authorized in each other jurisdiction where it is required to be so
qualified, licensed or authorized to conduct its business as described in
the Prospectus, except where the failure to be so qualified would not
have a Material Adverse Effect.
(ii) The outstanding shares of capital stock of the Company's U.S.
subsidiaries have been duly authorized , validly issued, are fully paid
and non-assessable and, to the knowledge of such counsel after due
inquiry, are owned by the Company free and clear of any security
interest, claim, lien, limitation on voting rights or encumbrances and
were
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not issued in violation of any preemptive or similar rights; and there
are no outstanding subscriptions, rights, warrants, calls, commitments of
sale or options to acquire, or instruments convertible into or
exchangeable for, any such shares of capital stock or other equity
interest of such subsidiaries.
(iii) The Company has duly and validly authorized capital stock as
described in the Prospectus; all outstanding shares of Common Stock, and
associated Rights, of the Company and the Shares, and associated Rights,
conform, or when issued will conform, to the description thereof in the
Prospectus, and have been, or, when issued and paid for will be, duly
authorized, validly issued, fully paid and non-assessable; and the
issuance of the Shares, and associated Rights, to be sold by the Company
in accordance with this Agreement is not subject to preemptive or other
similar rights. All corporate action required to be taken by the Company
for the authorization, issue and sale of the Shares, and associated
Rights, has been duly and validly taken. The Shares, and associated
Rights, are duly authorized for listing, subject to official notice of
issuance and evidence of satisfactory distribution, on the NYSE. The
form of specimen certificate representing the Shares filed as an exhibit
to the Registration Statement is in valid and sufficient form. The
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive rights under the Company's articles of
incorporation or any agreement or other instrument to which the Company
is a party, and except as described in the Prospectus, there are no
outstanding subscriptions, rights, warrants, calls, commitments or sale
or options to acquire, or instruments convertible into or exchangeable
for, shares of Voting Common Stock or Non-Voting Common Stock.
(iv) The Registration Statement has become effective under the Act;
any required filing of the Prospectus or any supplement thereto pursuant
to Rule 424(b) or otherwise has been made in the manner and within the
time period required thereby; and, to the knowledge of such counsel after
due inquiry, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Act.
(v) The Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or
issue date, comply as to form and appear on their face to be
appropriately responsive in all material respects to the requirements of
Form S-3 under the Act and the applicable Rules and Regulations (except
that such counsel need express no opinion as to the financial statements
or other financial data) and, as of the date they were filed with the
Commission, the documents incorporated by reference in the Prospectus
appear on their face to comply as to form and to be appropriately
responsive in all material respects with the requirements of the 1934 Act
and the applicable 1934 Act Rules and Regulations (except that such
counsel need express no opinion as to the financial statements or other
financial data).
(vi) The descriptions contained or incorporated by reference in the
Registration Statement and Prospectus of contracts and other documents
filed as exhibits to the Registration Statement are accurate in all
material respects; all other material agreements between the Company and
third parties expressly referenced in the Prospectus are legal, valid and
binding obligations of the Company.
(vii) No authorization, approval, consent, order, registration or
qualification of or with of any court or governmental body, authority or
agency is required with respect to the Company or any of its subsidiaries
in connection with the execution, delivery and
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performance of this Agreement, and the issuance and sale of the Shares,
and associated Rights, the transactions contemplated hereby (other than
with respect to insurance laws and regulations, as to which such counsel
need not express any opinion), except such as may be required under the
Act or the Rules and Regulations or as may be required by the NASD or
under state securities laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and legally binding
obligation of the Company. The issuance and sale of the Shares, together
with the associated Rights, by the Company and the execution, delivery
and performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a violation of the
Company's articles of incorporation or bylaws, or result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any of its
U.S. subsidiaries under, any statute, bond, debenture, note, other
evidence of indebtedness, or any agreement, indenture, mortgage, deed of
trust, sale and leaseback arrangement, joint venture or other instrument
to which the Company or any of its U.S. subsidiaries is a party or any of
by which they are bound or to which any of the properties or assets of
the Company or any of its U.S. subsidiaries is subject (each as such has
been filed by the Company as an exhibit to its Annual Report on Form 10-K
for the year ended December 31, 1997 or Quarterly Report on Form 10-Q for
the three-months ended March 31, 1998), or any order or decree, or any
statute, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its U.S. subsidiaries or
their properties (other than insurance laws and regulations, as to which
such counsel need not express an opinion), except to such extent as does
not have a Material Adverse Effect.
(ix) The Rights have been duly authorized and validly issued and
when the Shares have been issued and delivered to and paid for by the
Underwriters pursuant to this Agreement the Rights will be fully paid and
non-assessable (subject to the terms and conditions of the Rights as
applicable to their exercise).
(x) To the knowledge of such counsel, (A) there are no material
(individually, or in the aggregate) legal, governmental or regulatory
proceedings pending or threatened to which the Company or any subsidiary
is a party or of which the business or properties of the Company or any
subsidiary is the subject which are not disclosed in the Registration
Statement and Prospectus; (B) there are no contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or filed as required; and (C) there are no
statutes or regulations required to be described in the Registration
Statement or Prospectus which are not described as required.
(xi) The statements made in the Prospectus under the captions
"Business--Certain Relationships and Related Transactions," "Description
of Capital Stock," "Certain Charter and Bylaw Provisions," "Certain U.S.
Tax Considerations for Non-U.S. Holders" and _________, and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
under Item 13, "Certain Relationships and Related Transactions," to the
extent that they constitute summaries of documents referred to therein or
matters of law or legal conclusions, have been reviewed by such counsel
and are accurate summaries and fairly present the information disclosed
therein.
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(xii) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) To such counsel's knowledge, no holders of securities of the
Company have rights to the registration of such securities under the
Registration Statement pursuant to any agreement.
Such counsel shall confirm that during the preparation of the Registration
Statement and Prospectus, such counsel participated in conferences with the
Representatives and their counsel and with officers and representatives of the
Company, at which conferences the contents of the Registration Statement and
the Prospectus were discussed, reviewed and revised. On the basis of the
information which was developed in the course thereof, considered in light such
counsel's understanding of applicable law and the experience gained by such
counsel through their practice thereunder, such counsel shall confirm that
nothing came to their attention that would lead them to believe that either the
Registration Statement, as of the Effective Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or the Prospectus or
any amendment or supplement thereto as of the Closing Date, contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than the
financial statements or other financial data as to which such counsel need
express no opinion).
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, (1) as to
matters involving laws of any jurisdiction other than Missouri or the United
States, upon opinions addressed to the Underwriters of other counsel
satisfactory to them and Bryan Cave LLP, and (2) as to all matters of fact,
upon certificates and written statements of the executive officers of, and
accountants for, the Company, provided such counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon.
(e) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of _____________, Canadian counsel to the
Company, addressed to you and dated the Closing Date (and, if applicable, the
Option Closing Date), to the effect that:
(i) Each of the Company's Canadian subsidiaries has been duly
incorporated and is validly existing under the laws of its respective
jurisdiction of incorporation, with full corporate power and authority to
own, lease and operate their properties and conduct their business as
described in the Prospectus; the Company's Canadian subsidiaries are duly
qualified, licensed or authorized in each other jurisdiction where it is
required to be so qualified, licensed or authorized to conduct its
business as described in the Prospectus, except where the failure to be
so qualified would not have a Material Adverse Effect.
(ii) The execution, delivery and performance by the Company of this
Agreement, the issuance and sale of the Shares and the associated Rights,
and the consummation of the transactions contemplated hereby will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any
properties of
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the Company's Canadian subsidiaries, or an acceleration of indebtedness
pursuant to, (i) the constating documents of any of the Company's
Canadian subsidiaries, (ii) any material bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument
known to such counsel to which any of the Company's Canadian
subsidiaries is a party or by which any of them or their property is or
may be bound, (iii) any statute, rule or regulation known to such
counsel to be applicable to any of the Company's Canadian subsidiaries
or any of their assets or properties, or (iv) any judgment, order or
decree of any Canadian court or governmental agency or authority having
jurisdiction over any of the Company's Canadian subsidiaries or their
assets or properties. No consent, approval, authorization or order of,
or filing, registration, qualification, license or permit of or with,
any Canadian court or governmental agency, body or administrative agency
is required for the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
(iii) To the best knowledge of such counsel, no action has been
taken and no Canadian statute, rule or regulation or order has been
enacted, adopted or issued by any Canadian governmental agency that
prevents the issuance of the Shares or the associated Rights; no
injunction, restraining order or order of any nature by a Canadian court
of competent jurisdiction has been issued that prevents the issuance and
sale of the Shares or the associated Rights and to the best knowledge of
such counsel, no action, suit or proceeding is pending against or
affecting or threatened against, any of the Company's Canadian
subsidiaries before any court or arbitrator or any governmental body,
agency or official which, if adversely determined, would prohibit,
interfere with or adversely affect the issuance or marketability of the
Shares or the associated Rights or in any manner draw into question the
validity of this Agreement and the Shares or the associated Rights or
have a Material Adverse Effect.
(iv) To the best knowledge of such counsel, each of the Company's
Canadian subsidiaries holds all licenses, certificates, permits and
approvals from all state, federal, foreign and other regulatory
authorities, and have satisfied in all material respects the requirements
imposed by regulatory bodies, administrative agencies or other
governmental bodies, agencies or officials, that are required for the
Company's Canadian subsidiaries lawfully to own, lease and operate their
properties and conduct their businesses as described in the Prospectus,
and, each of the Company's Canadian subsidiaries is conducting its
business in compliance in all material respects with all of the laws,
rules and regulations of each jurisdiction in which it conducts its
business (including, without limitation, insurance and insurance holding
company laws, rules and regulations); each of the Company's Canadian
subsidiaries has filed all Notices required to be filed under applicable
laws, rules and regulations, including, without limitation, the insurance
laws and regulations of the jurisdictions which are applicable to it, in
each case, with such exceptions as would not have a Material Adverse
Effect; and, except as otherwise specifically described in the
Prospectus, none of the Company's subsidiaries has received any
notification from any court or governmental body, authority or agency,
including without limitation, any insurance regulatory authority, to the
effect that any additional Approvals from such regulatory authority is
needed to be obtained by any of them, in any case where it could be
reasonably expected that obtaining such Approvals or the failure to
obtain such Approvals would have a Material Adverse Effect. To the best
of such counsel's knowledge, no insurance regulatory agency or body has
issued any order or decree impairing, restricting or prohibiting the
payment of dividends by any subsidiary of the Company to its parent.
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(v) As of the Closing Date and as of the date of each Prospectus,
all of the outstanding shares of capital stock of each of the Company's
Canadian subsidiaries have been duly and validly authorized and issued
and are fully paid and non-assessable and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the
Company's Canadian subsidiaries are owned by the Company either directly
or through wholly owned subsidiaries and all such shares so held by the
Company are held free and clear of any security interest, claim, lien,
limitation on voting rights or encumbrances.
(vi) The descriptions contained in the Prospectus in the third
paragraph on the inside front cover and under the heading
"Business-Regulation," insofar as they summarize provisions of documents,
matters of Canadian law or legal conclusions, fairly summarize such
provisions of documents, matters of Canadian law or legal conclusions in
all material respects.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and shall so state therein. Such opinions
may contain customary recitals, conditions and qualifications and may state
that, as to matters of New Brunswick law it is relying on an opinion of New
Brunswick counsel, provided such counsel shall state in their opinion that they
believe that they and the Underwriters are justified in relying thereon.
(f) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Barbados counsel to the Company, addressed
to you and dated the Closing Date (and, if applicable, the Option Closing
Date), to the effect that:
(i) RGA Reinsurance Company (Barbados) Ltd. has been duly
incorporated and is validly existing under the laws of Barbados, with
full corporate power and authority to own, lease and operate their
properties and conduct its business as described in the Prospectus; RGA
Reinsurance Company (Barbados) Ltd. Is duly qualified, licensed or
authorized in each other jurisdiction where it is required to be so
qualified, licensed or authorized to conduct its business as described in
the Prospectus, except where the failure to be so qualified would not
have a Material Adverse Effect.
(ii) The execution, delivery and performance by the Company of this
Agreement, the issuance and sale of the Shares, and the consummation of
the transactions contemplated hereby and thereby will not violate,
conflict with or constitute a breach of any of the terms or provisions
of, or a default under (or an event that with notice or the lapse of
time, or both, would constitute a default), or require consent under, or
result in the imposition of a lien or encumbrance on any properties of
the RGA Reinsurance Company (Barbados) Ltd., or an acceleration of
indebtedness pursuant to, (i) the constituting documents of RGA
Reinsurance Company (Barbados) Ltd., (ii) any material bond, debenture,
note, indenture, mortgage, deed of trust or other agreement or instrument
known to such counsel to which RGA Reinsurance Company (Barbados) Ltd. is
a party or by which it or its property is or may be bound, (iii) any
statute, rule or regulation known to such counsel to be applicable to RGA
Reinsurance Company (Barbados) Ltd. or any of its assets or properties,
or (iv) any judgment, order or decree of any Barbados court or
governmental agency or authority having jurisdiction over RGA Reinsurance
Company (Barbados) Ltd. or its assets or properties. No consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any Barbados court or
governmental agency, body or administrative agency is required
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for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby.
(iii) To the best knowledge of such counsel, no action has been
taken and no Barbados statute, rule or regulation or order has been
enacted, adopted or issued by any Barbados governmental agency that
prevents the issuance of the Shares or the associated Rights; no
injunction, restraining order or order of any nature by a Barbados court
of competent jurisdiction has been issued that prevents the issuance and
sale of the Shares or the associated Rights and to the best knowledge of
such counsel, no action, suit or proceeding is pending against or
affecting or threatened against, RGA Reinsurance Company (Barbados) Ltd.
before any court or arbitrator or any governmental body, agency or
official which, if adversely determined, would prohibit, interfere with
or adversely affect the issuance or marketability of the Shares or the
associated Rights or in any manner draw into question the validity of
this Agreement and the Shares or the associated Rights or have a Material
Adverse Effect.
(iv) To the best knowledge of such counsel, RGA Reinsurance Company
(Barbados) Ltd. holds all licenses, certificates, permits and approvals
from all state, federal, foreign and other regulatory authorities, and
has satisfied in all material respects the requirements imposed by
regulatory bodies, administrative agencies or other governmental bodies,
agencies or officials, that are required for RGA Reinsurance Company
(Barbados) Ltd. lawfully to own, lease and operate its properties and
conduct its business as described in the Prospectus, and, RGA Reinsurance
Company (Barbados) Ltd. is conducting its business in compliance in all
material respects with all of the laws, rules and regulations of each
jurisdiction in which it conducts its business (including, without
limitation, insurance and insurance holding company laws, rules and
regulations); RGA Reinsurance Company (Barbados) Ltd. has filed all
Notices required to be filed under applicable laws, rules and
regulations, including, without limitation, the insurance laws and
regulations of the jurisdictions which are applicable to it, in each
case, with such exceptions as would not have a Material Adverse Effect;
and, except as otherwise specifically described in the Prospectus, RGA
Reinsurance Company (Barbados) Ltd. has not received any notification
from any court or governmental body, authority or agency, including
without limitation, any insurance regulatory authority, to the effect
that any additional Approvals from such regulatory authority is needed to
be obtained by any of it, in any case where it could be reasonably
expected that obtaining such Approvals or the failure to obtain such
Approvals would have a Material Adverse Effect. To the best of such
counsel's knowledge, no insurance regulatory agency or body has issued
any order or decree impairing, restricting or prohibiting the payment of
dividends by any subsidiary of the Company to its parent.
(v) As of the Closing Date and as of the date of each Prospectus,
all of the outstanding shares of capital stock of RGA Reinsurance Company
(Barbados) Ltd. have been duly and validly authorized and issued and are
fully paid and non-assessable and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the RGA
Reinsurance Company (Barbados) Ltd. are owned by the Company either
directly or through wholly owned subsidiaries and all such shares so held
by the Company are held free and clear of any security interest, claim,
lien, limitation on voting rights or encumbrances.
(vi) The descriptions contained in the Prospectus under the heading
"Business-Regulation," insofar as they summarize provisions of documents,
matters of Barbados law or legal
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conclusions, fairly summarize such provisions of documents, matters of
Barbados law or legal conclusions in all material respects.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and shall so state therein. Such opinions
may contain customary recitals, conditions and qualifications
(g) You shall have received on the Closing Date (and, if applicable, the
Option Closing Date), from Bryan Cave LLP, counsel to the Underwriters, such
opinion or opinions, dated the Closing Date (and, if applicable, the Option
Closing Date) with respect to the incorporation of the Company, the validity of
the Shares, the Registration Statement, the Prospectus and other related
matters as you may reasonably require; the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to review or pass on the matters referred to in this Section 6 and in
order to evidence the accuracy, completeness and satisfaction of any of the
representations, warranties or conditions herein contained.
(h) You shall have received at or prior to the Closing Date from Bryan
Cave LLP a memorandum or memoranda, in form and substance satisfactory to you,
with respect to the qualification for offering and sale by the Underwriters of
the Shares under state securities or Blue Sky laws of such jurisdictions as the
Underwriters may have designated to the Company.
(i) On the business day immediately preceding the date of this Agreement
and on the Closing Date (and, if applicable, the Option Closing Date), you
shall have received from KPMG Peat Marwick LLP, a letter or letters, dated the
date of this Agreement and the Closing Date (and, if applicable, the Option
Closing Date), respectively, in form and substance satisfactory to you,
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the published Rules and Regulations,
and the answer to Item 509 of Regulation S-K set forth in the Registration
Statement is correct insofar as it relates to them, and stating to the effect
set forth in Schedule III hereto.
(j) Except as contemplated in the Prospectus, (i) neither the Company nor
any of its subsidiaries shall have sustained since the date of the latest
audited financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and (ii) subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor any of its subsidiaries
shall have incurred any liability or obligation, direct or contingent, or
entered into transactions, and there shall not have been any change in the
capital stock or long-term debt of the Company and its subsidiaries or any
change in the condition (financial or other), net worth, business, affairs,
management, prospects or results of operations of the Company or its
subsidiaries, the effect of which, in any such case described in clause (i) or
(ii), is in your judgment so material or adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered on such Closing Date (and, if applicable, the Option Closing
Date) on the terms and in the manner contemplated in the Prospectus.
(l) There shall not have occurred any of the following: (i) a suspension
or material limitation in trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or the establishing on such exchanges
by the Commission or by such exchanges of minimum or maximum prices which are
not in force and effect on the date hereof; (ii) a
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general moratorium on commercial banking activities declared by either federal,
New York or Missouri authorities; (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares,
and the associated Rights, in the manner contemplated in the Prospectus; (iv)
any calamity or crisis, change in national, international or world affairs,
act of God, change in the international or domestic markets, or change in the
existing financial, political or economic conditions in the United States or
elsewhere, if the effect of any such event specified in this clause (iv) makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares, and associated Rights, in the manner contemplated in
the Prospectus; or (v) the enactment, publication, decree, or other
promulgation of any federal or state statute, regulation, rule, or order of
any court or other governmental authority, or the taking of any action by any
federal, state or local government or agency in respect of fiscal or monetary
affairs, if the effect of any such event specified in this clause (v) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares, and the associated Rights, in the
manner contemplated in the Prospectus.
(m) You shall have received certificates, dated the Closing Date (and, if
applicable, the Option Closing Date) and signed by the President and the Chief
Financial Officer of the Company stating that (i) they have carefully examined
the Registration Statement and the Prospectus as amended or supplemented and
all documents incorporated by reference therein and nothing has come to their
attention that would lead them to believe that either the Registration
Statement or the Prospectus, or any amendment or supplement thereto or any
documents incorporated by reference therein as of their respective effective,
issue or filing dates, contained, and the Prospectus as amended or supplemented
and all documents incorporated by reference therein and when read together with
the documents incorporated by reference therein, at such Closing Date, contains
any untrue statement of a material fact, or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, that (ii) all representations and warranties made herein by
the Company are true and correct at such Closing Date, with the same effect as
if made on and as of such Closing Date, and all agreements herein to be
performed or complied with by the Company on or prior to such Closing Date have
been duly performed or complied with by the Company.
(n) You shall have received agreements from (i) GenAmerica Corporation,
General American Life Insurance Company and Equity Intermediary Company, and
(ii) William P. Stiritz, that for a period of 90 days and 45 days,
respectively, from the Effective Date they and he, as the case may be, will
not, directly or indirectly offer, sell, contract to sell or otherwise dispose
of any shares of the Company's Common Stock or Non-Voting Common Stock, any
securities convertible or exchangeable for Common Stock or Non-Voting Common
Stock or any other rights to acquire such shares without the prior written
consent of A.G. Edwards & Sons, Inc.
(o) The Company shall not have failed, refused, or been unable, at or
prior to the Closing Date (and, if applicable, the Option Closing Date) to have
performed in all material respects any agreement on its respective part to be
performed or any of the conditions herein contained and required to be
performed or satisfied by them at or prior to such Closing Date.
(p) The Company shall have furnished to you at the Closing Date (and, if
applicable, the Option Closing Date) such further information, certificates and
documents as you may have reasonably requested.
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(r) The Shares and associated Rights shall have been approved for trading
upon official notice of issuance on the NYSE.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Bryan Cave LLP, counsel for the several Underwriters. The
Company will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you may request.
If any of the conditions specified above in this Section 6 shall not have
been satisfied at or prior to the Closing Date (and, if applicable, the Option
Closing Date) or waived by you in writing, this Agreement may be terminated by
you on notice to the Company.
7. INDEMNIFICATION. (a) The Company will indemnify and hold harmless each
Underwriter (including, without limitation, the QIU in its capacity as
qualified independent underwriter within the meaning of Conduct Rule 2720) and
each person, if any, who controls any Underwriter within the meaning of the Act
or the 1934 Act, from and against any and all losses, claims, damages, and
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, and all liabilities and expenses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or in any blue sky application or other document executed by the Company or
based on any information furnished in writing by the Company, filed in any
jurisdiction in order to qualify any or all of the Shares under the securities
laws thereof ("Blue Sky Application"), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and will reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, or such amendment or supplement, or
any Blue Sky Application in reliance upon and in conformity with written
information furnished to the Company by you or by any Underwriter through you,
expressly for use in the preparation thereof (as provided in Section 12); and
provided, further, that if any Preliminary Prospectus or the Prospectus
contained any alleged untrue statement or allegedly omitted to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading and such statement or omission shall have been corrected
in a revised Preliminary Prospectus or in the Prospectus or in an amended or
supplemented Prospectus, the Company shall not be liable to any Underwriter or
controlling person under this subsection (a) with respect to such alleged
untrue statement or alleged omission to the extent that any such loss, claim,
damage or liability of such Underwriter or controlling person results from the
fact that such Underwriter sold Shares to a person to whom there was not sent
or given, at or prior to the written confirmation of such sale, such revised
Preliminary Prospectus or Prospectus or amended or supplemented Prospectus,
provided that the Company has delivered copies thereof in requisite quantity on
a timely basis to permit such delivery or sending. This indemnity agreement
shall be in addition to any liabilities which the Company may otherwise have.
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(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement
and, each person, if any, who controls the Company within the meaning of the
Act or the 1934 Act, from and against any and all losses, claims, damages, and
liabilities, joint or several, to which the Company or any such director,
officer or controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, and liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, any amendment or supplement thereto, or
any Blue Sky Application or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, such amendment or supplement, or any
Blue Sky Application in reliance upon and in conformity with written
information furnished to the Company by any such Underwriter expressly for use
in the preparation thereof (as provided in Section 12); and will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement shall be in addition to any liabilities which the Underwriters may
otherwise have.
(c) Any party which proposes to assert the right to be indemnified under
this Section 7 shall, within ten days after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim is to be made against an indemnifying party under this Section 7, notify
each such indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party of any such action, suit or proceeding shall not
relieve such indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 7. In case any such
action, suit or proceeding shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it shall wish, jointly with any other indemnifying party, similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the employment of counsel by such indemnified
party at the expense of the indemnifying party has been authorized by the
indemnifying party, (ii) the indemnified party shall have been advised by such
counsel in a written opinion that there may be a conflict of interest between
the indemnifying party and the indemnified party in the conduct of the defense,
or certain aspects of the defense, of such action (in which case the
indemnifying party shall not
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have the right to direct the defense of such action with respect to those
matters or aspects of the defense on which a conflict exists or may exist on
behalf of the indemnified party) or (iii) the indemnifying party shall not in
fact have employed counsel to assume the defense of such action, in any of
which events such fees and expenses to the extent applicable shall be borne by
the indemnifying party. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent. Each
indemnified party, as a condition of such indemnity, shall cooperate in good
faith with the indemnifying party in the defense of any such action or claim.
(d) If the indemnification provided for in this Section 7 is for any
reason, other than pursuant to the terms thereof, judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right to appeal) to
be unavailable to an indemnified party under subsections (a), (b) or (c) above
in respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the
one hand, and the Underwriters (including, without limitation, the QIU), on the
other hand, from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault, as
applicable, of the Company, on the one hand, and the Underwriters (including,
without limitation, the QIU), on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as other relevant
equitable considerations. The relative benefits received by, as applicable,
the Company, on the one hand, and the Underwriters (including, without
limitation, the QIU), on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue statement
of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter (including, without limitation, the QIU) shall
be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
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(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability or claims that are the subject matter of
such action, suit or proceeding.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company contained in
Sections 7 and 11 herein or in certificates delivered pursuant hereto, and the
agreements of the Underwriters contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
Underwriter or any controlling person, the Company or any of its officers,
directors or any controlling persons, and shall survive delivery of the Shares
to the Underwriters hereunder.
9. SUBSTITUTION OF UNDERWRITERS. (a) If any Underwriter shall default in
its obligation to purchase the Shares which it has agreed to purchase
hereunder, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or parties
reasonably satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the Company
notifies you that it has so arranged for the purchase of such Shares, you or
the Company shall have the right to postpone the Closing Date for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any persons substituted under this Section 9 with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
as provided in subsection (a) above, the aggregate number of Shares which
remains unpurchased does not exceed one tenth of the total Shares to be sold on
the Closing Date, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the Shares which such Underwriter agreed
to purchase hereunder and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
as provided in subsection (a) above, the number of Shares which remains
unpurchased exceeds one tenth of the total Shares to be sold on the Closing
Date, or if the Company shall not exercise the right described in subsection
(b) above to require the non-defaulting Underwriters to purchase Shares of the
defaulting Underwriter or Underwriters, then this Agreement shall thereupon
terminate, without liability on the part of any non-defaulting Underwriter or
the Company except for the expenses to be borne by the Company and the
Underwriters as provided in Section 11 hereof and the
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indemnity and contribution agreements in Section 7 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. EFFECTIVE DATE AND TERMINATION. (a) This Agreement shall become
effective at 1:00 p.m., St. Louis time, on the first business day following the
effective date of the Registration Statement, or at such earlier time after
the effective date of the Registration Statement as you in your discretion
shall first release the Shares and associated Rights for offering to the
public; provided, however, that the provisions of Section 7 and 11 shall at all
times be effective. For the purposes of this Section 10(a), the Shares shall
be deemed to have been released to the public upon release by you of the
publication of a newspaper advertisement relating to the Shares or upon release
of telegrams, facsimile transmissions or letters offering the Shares for sale
to securities dealers, whichever shall first occur.
(b) This Agreement may be terminated by you at any time before it becomes
effective in accordance with Section 10(a) by notice to the Company; provided,
however, that the provisions of this Section 10 and of Section 7 and Section 11
hereof shall at all times be effective. In the event of any termination of this
Agreement pursuant to Section 9 or this Section 10(b) hereof, the Company shall
not then be under any liability to any Underwriter except as provided in
Section 7 or Section 11 hereof.
(c) This Agreement may be terminated by you at any time at or prior to the
Closing Date by notice to the Company if any condition specified in Section 6
hereof shall not have been satisfied on or prior to the Closing Date. Any such
termination shall be without liability of any party to any other party except
as provided in Sections 7 and 11 hereof.
(d) This Agreement also may be terminated by you by notice to the Company
as to any obligation of the Underwriters to purchase the Option Shares, if any
condition specified in Section 6 hereof shall not have been satisfied at or
prior to the Option Closing Date or as provided in Section 9 of this Agreement.
If you terminate this Agreement as provided in Sections 10(b), 10(c) or
10(d), you shall notify the Company by telephone or telegram, confirmed by
letter.
11. COSTS AND EXPENSES. The Company will bear and pay the costs and
expenses incident to the registration of the Shares and public offering
thereof, including, without limitation, (a) the fees and expenses of the
Company's accountants and the fees and expenses of counsel for the Company, (b)
the preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and Blue Sky Memoranda, (c) the
furnishing of copies of such documents to the Underwriters, (d) the
registration or qualification of the Shares and associated Rights for offering
and sale under the securities laws of the various states or other
jurisdictions, including the reasonable fees and disbursements of Underwriters'
counsel relating to such registration or qualification, (e) the fees payable
to the NASD and the Commission in connection with their review of the proposed
offering of the Shares, (f) all printing and engraving costs related to
preparation of the certificates for the Shares, including transfer agent and
registrar fees, (g) all initial transfer taxes, if any, (h) all fees and
expenses relating to the authorization of the Shares and associated Rights for
trading on the NYSE, (i) all travel expenses, including air fare and
accommodation expenses, of representatives of the
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Company in connection with the offering of the Shares and associated Rights and
(j) all of the other costs and expenses incident to the performance by the
Company of the registration and offering of the Shares and associated Rights;
provided, however, that the Underwriters will bear and pay the fees and
expenses of the Underwriters' counsel (other than fees and disbursements
relating to the registration or qualification of the Shares and associated
Rights for offering and sale under the securities laws of the various states or
other jurisdictions), the Underwriters' out-of-pocket expenses, and any
advertising costs and expenses incurred by the Underwriters incident to the
public offering of the Shares and associated Rights.
If this Agreement is terminated by you in accordance with the provisions
of Section 10(c), the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel to the Underwriters.
12. INFORMATION FURNISHED BY UNDERWRITERS. The statements set forth in
(i) footnotes (1) and (3) to the tables on the cover page of the Prospectus,
(ii) the last paragraph of the cover page of the Prospectus, (iii) the
"stabilization legend" on the inside front cover page of the Prospectus, and
(iv) the statements in the first, third, seventh, eighth and tenth paragraphs
and the third sentence of the sixth paragraph under the caption "Underwriting"
in the Prospectus constitute the only information furnished by or on behalf of
the Underwriters through you as such information is referred to in Section 4(a)
(ii) and Section 7 hereof.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
289-7387, or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the Company at 660
Mason Ridge Center Drive, St. Louis, Missouri 63141, facsimile number (314)
453-7464, Attention: Chief Financial Officer with a copy to the General
Counsel at facsimile number (314) 444-0510. Notice to any Underwriter pursuant
to Section 7 shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed to such Underwriter's address [AS IT APPEARS IN THE
UNDERWRITERS' QUESTIONNAIRE FURNISHED IN CONNECTION WITH THE OFFERING OF THE
SHARES OR] as [OTHERWISE] furnished to the Company.
14. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Underwriters and the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person, corporation or other entity, other than the
parties hereto and their respective successors and assigns and the controlling
persons, officers and directors referred to in Section 7, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and assigns and said controlling
persons and said officers and directors, and for the benefit of no other
person, corporation or other entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign by reason merely of
such purchase.
In all dealings with the Company under this Agreement you shall act on
behalf of each of the several Underwriters, the Company shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of the
Underwriters, made or given by you on behalf of the Underwriters, as if the
same shall have been made or given in writing by the Underwriters.
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15. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
16. PRONOUNS. Whenever a pronoun of any gender or number is used herein,
it shall, where appropriate, be deemed to include any other gender and number.
17. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company and the Underwriters.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
By: __________________________
Name:_________________________
Title:________________________
A.G. EDWARDS & SONS, INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
CHASE SECURITIES INC.
CONNING & COMPANY
Accepted in St. Louis,
Missouri as of the date
first above written, on
behalf of ourselves and each
of the several Underwriters
named in Schedule I hereto.
By A.G. EDWARDS & SONS, INC.
By:_______________________
Name:_____________________
Title:____________________
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SCHEDULE I
Name Number of Shares
---- ----------------
A.G. Edwards & Sons, Inc. _____
Donaldson, Lufkin & Jenrette Securities Corporation _____
Morgan Stanley & Co. Incorporated _____
Chase Securities Inc. _____
Conning & Company _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
_____________________ _____
Total _____
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SCHEDULE II
LIST OF SUBSIDIARIES
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SCHEDULE III
Pursuant to Section 6(j) of the Underwriting Agreement, KPMG Peat Marwick
LLP shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
Rules and Regulations thereunder.
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited by them and included or
incorporated by reference in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable Rules and Regulations with respect
to registration statements on Form S-3.
(iii) They have made a review in accordance with standards established by
the American Institute of Certified Public Accountants ("AICPA") of the
unaudited consolidated interim financial statements and selected financial data
and unaudited condensed consolitated interim statements of income, balance
sheets and statements of cash flows and other selected financial data included
in (or incorporated by reference into) the Prospectus; and on the basis of
specified procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in paragraph
(vi)(A) below comply as to form in all material respects with the applicable
accounting requirements of the Act Rules and Regulations, nothing came to their
attention that caused them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and Rules and Regulations.
(iv) The unaudited selected consolidated financial information with
respect to the results of operations and financial position of the Company for
the five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (except for certain other financial data as specifically
noted in the procedures performed) in the audited financial statements for such
five fiscal years which were included or incorporated by reference in the
Company's Annual Reports on Form 10-K or the Company's Registration Statement
on Form S-3 (File No. 333-______) for such fiscal years.
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as
a result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 303, 304, 305, 402 and 503(d), respectively, of
Regulation S-K.
(vi) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below,
performing the procedures specified by the AICPA for a review of interim
financial information as discussed in SAS No. 71, Interim Financial
Information, on the latest available interim financial statements of the
Company and its subsidiaries, inspection of the minute books of the Company and
its subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the
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Company and its subsidiaries responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) any material modifications should be made to the unaudited
statements of consolidated income, statements of consolidated
financial position and statements of consolidated cash flows
included in the Prospectus for them to be in conformity with
generally accepted accounting principles, or the unaudited
statements of consolidated income, statements of consolidated
financial position and statements of consolidated cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published Rules and Regulations thereunder;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
in the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on
a basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or investment portfolio or any increase
in the consolidated long-term debt or total debt of the Company and
its subsidiaries, or any decreases in invested assets, total
assets, policy liabilities or stockholders' equity or other items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(E) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in consolidated
net revenues or operating profit or the total or per share amounts
of consolidated net income or any other changes in any other items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period
of corresponding length specified by the Representatives, except in
each case for changes, decreases or increases which the Prospectus
discloses have occurred or may occur or which are described in such
letter.
(vii) In addition to the audit referred to in their report(s) included or
incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraph (iii) above, they have carried out
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certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives, which
are derived from the general accounting records of the Company and its
subsidiaries for the periods covered by their reports and any interim or other
periods since the latest period covered by their reports, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in agreement.
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1
EXHIBIT 5.1
LEWIS, RICE & FINGERSH, L.C.
ATTORNEYS AT LAW
500 N. BROADWAY, SUITE 2000
ST. LOUIS, MISSOURI 63102-2147
TEL (314) 444-7600
FAX (314) 241-6056
May 11, 1998
Reinsurance Group of America,
Incorporated
660 Mason Ridge Center Drive
St. Louis, Missouri 63141-8557
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
You have requested our opinion in connection with the registration of
6,095,000 shares of Non-Voting Common Stock, par value $0.01 per share, with
the Securities and Exchange Commission for Reinsurance Group of America,
Incorporated, a Missouri corporation (the "Company").
As counsel to the Company, we have participated in the preparation of
the Registration Statement on Form S-3 under the Securities Act of 1933, as
amended (the "Registration Statement") with respect to the Non-Voting Common
Stock. We have examined and are familiar with the Restated Articles of
Incorporation and Bylaws of the Company, proceedings of the Board of Directors
of the Company and such other corporate records, documents, certificates and
instruments as we have deemed necessary or appropriate in order to enable us to
render the opinion expressed below.
Based on the foregoing, we are of the opinion that the Non-Voting
Common Stock will, upon the effectiveness of the proposed amendment to the
Company's Restated Articles of Incorporation authorizing 20,000,000 shares of
Non-Voting Common Stock and the issuance and delivery of the Non-Voting Common
Stock in accordance with the terms and provisions of the Registration Statement,
be legally issued, fully paid and non-assessable.
This opinion is rendered only with respect to the laws of the United
States of America and the laws of the State of Missouri.
2
LEWIS, RICE & FINGERSH, L.C.
Reinsurance Group of America, Incorporated
May 11, 1998
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus filed as a part therof.
Very truly yours,
/s/ LEWIS RICE & FINGERSH, L.C.
Lewis Rice & Fingersh, L.C.
1
Exhibit 23.2
Independent Auditors' Consent
The Board of Directors
Reinsurance Group of America, Incorporated
We consent to the incorporation by reference in the Registration Statement
(No. 333-51777) on Form S-3 of Reinsurance Group of America, Incorporated of
our reports dated January 29, 1998, relating to the consolidated balance
sheets of Reinsurance Group of America, Incorporated and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, and all related schedules, which reports are
included in the December 31, 1997 annual report on Form 10-K of Reinsurance
Group of America, Incorporated, and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
St. Louis, Missouri
May 11, 1998
