2021
Annual Report
To Our Shareholders:
RGA is a strong and resilient company, and the work we do to provide financial protection to millions of
people around the world has never been more important. In 2021, even with an estimated $1.4 billion in
COVID-19-related claim costs, RGA still produced meaningful earnings and, importantly, enabled our
clients to support their policyholders amid widespread uncertainty and loss.
As the only global reinsurer focused exclusively on life and health, RGA brings focus and a differentiated
business to meet clients’ specific needs. In 2021, we maintained our leadership positions in all major
markets, deepened client relationships, and improved our brand by combining the capacity of RGA’s
global technical expertise with empowered local teams to deliver customized, innovative reinsurance
solutions. RGA partnered with clients to advance future-focused initiatives in areas such as product
development, underwriting, data analytics, and capital management. RGA experts also served as thought
leaders for the industry, sharing insights and research reports to create new business opportunities and
propel the industry forward. In 2021, RGA was ranked #1 for the 11th consecutive year on NMG
Consulting’s Global All Respondent Business Capability Index, based on feedback from life and health
insurance companies worldwide.
RGA generated net income of $617 million in 2021, or $9.04 per diluted share. This result at a time of
industry-wide financial stress speaks to the strength of RGA’s business model, which is supported by a
strong balance sheet, a balanced capital management strategy, and a quality investment portfolio.
RGA’s diversified global platform again proved resilient as strong performance in some parts of the
business offset underperformance in other areas. Global Financial Solutions (“GFS”) enjoyed an
exceptional year, generating $931 million in pre-tax income, a 47% year-over-year increase fueled by
positive results across all regions. RGA deployed $543 million in capital on in-force transactions in 2021,
the company’s highest-ever annual capital deployment. Organic new business activity remained strong
as growing consumer demand for insurance protection helped produce record highs in annual net
premiums of $12.5 billion and total revenues of $16.7 billion. RGA ended 2021 well-positioned for future
growth, with an active pipeline of financial solutions transactions and favorable market dynamics for
growth in traditional business lines.
I
U.S. and Latin American operations had an estimated $839 million in COVID-19-related claim costs and
reported a pre-tax loss of $25 million in 2021. The region saw continued strong performance in group,
individual health, and asset-intensive business lines. Traditional new business production increased
14%, adding expected material long-term earnings. Market leadership in underwriting, which has long
been a signature strength for RGA, reached new heights as U.S. underwriters reviewed a record number
of facultative cases and introduced a range of innovative services. For asset-intensive business,
favorable overall experience and higher variable investment income augmented positive results on the
year, which featured a large annuity reinsurance transaction with a major member-owned fraternal
financial services organization.
In Canada, total revenues increased by 15% to reach $1.5 billion, while pre-tax income totaled $143
million in 2021 compared to $155 million in 2020, a decrease attributed primarily to COVID-19 impacts.
RGA remains a trusted partner for clients in the market and was ranked #1 by ceding companies on NMG
Consulting’s 2021 All Respondent Business Capability Index in Canada, earning this recognition for the
12th time in the last 13 years.
In Europe, Middle East, and Africa (“EMEA”), an excellent year for GFS helped offset COVID-19 impacts
in traditional business lines to produce overall pre-tax income of $64 million. Total revenues increased
by 16% to reach a record-high $2.4 billion. GFS results reflected favorable longevity experience as well
as growth in this business, most notably through three large transactions executed in the Netherlands.
Annual pre-tax income for GFS in EMEA increased 17% and surpassed $300 million for the first time.
EMEA traditional business showed strong new business momentum. In collaboration with RGAX
colleagues, the team advanced digital distribution initiatives across the region to connect clients to new
channels for reaching underserved populations.
Asia Pacific overcame COVID-19-related headwinds to generate $88 million in pre-tax income. Asia
Pacific financial solutions business built on the momentum of recent years to deliver strong results,
increasing pre-tax income by 66% to reach $98 million. Traditional lines experienced a pre-tax loss of
$10 million, primarily driven by COVID-19-related claims in India. Business growth fueled by product
innovation remained a key differentiator for RGA in the region as teams across markets and across
disciplines collaborated to provide holistic client solutions. RGA was recognized by Asia Insurance
Review as “Life Reinsurer of the Year” at the 2021 Asia Insurance Industry Awards.
II
Throughout 2021, RGA also maintained a focus on our commitments to environmental, social, and
governance (“ESG”) issues. We pledged to make RGA operations net zero in greenhouse gas emissions
by 2026, and we continued to embed ESG criteria in our investment processes. We also increased our
philanthropic support, funded groundbreaking medical research through the Longer Life Foundation, and
expanded and launched a range of initiatives across the organization to accelerate RGA’s commitment
to diversity, equity, and inclusion.
Collectively, RGA’s accomplishments from 2021 demonstrate a business enterprise built to withstand
short-term challenges to deliver long-term success. Many of RGA’s businesses performed well, while
those that were directly impacted by the pandemic produced otherwise strong underlying results. It is a
testament to our diversified global platform, client-focused strategy, and resilient business model that
RGA delivered positive earnings in 2021. RGA’s success is powered by our people, and amid ongoing
disruption in 2021, RGA teams continued to execute our strategy, deliver for our clients, and live up to
our purpose to make financial protection accessible to all.
Anna Manning
President and Chief Executive Officer
III
This 2021 Annual Report contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 including, among others, statements relating to projections of
the strategies, earnings, revenues, income or loss, ratios, future financial performance, and growth
potential of RGA (which we refer to in the previous paragraphs as “we,” “us” or “our”). The words “intend,”
“expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” "believe,” and other similar expressions
also are intended to identify forward-looking statements. Forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and
actual results, performance, and achievements could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements. See “Item 7 - Management’s Discussion
and Analysis of Financial Condition and Results of Operations – Cautionary Note Regarding Forward-
Looking Statements” of RGA’s Annual Report on Form 10-K, included herein.
IV
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 2021
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction
of incorporation or organization)
43-1627032
(I.R.S. Employer
Identification No.)
16600 Swingley Ridge Road, Chesterfield, Missouri
(Address of principal executive offices)
63017
(Zip Code)
Registrant’s telephone number, including area code: (636) 736-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01
6.20% Fixed-To-Floating Rate Subordinated
Debentures due 2042
5.75% Fixed-To-Floating Rate Subordinated
Debentures due 2056
Trading Symbol(s)
RGA
Name of each exchange on which registered
New York Stock Exchange
RZA
RZB
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
Indicate by check mark whether the registrant is a shell company. Yes ☐ No x
The aggregate market value of the stock held by non-affiliates of the registrant, based upon the closing sale price of the
common stock on June 30, 2021, as reported on the New York Stock Exchange was approximately $7.8 billion.
As of January 31, 2022, 67,189,921 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference certain information from the Registrant’s Definitive Proxy Statement for
the Annual Meeting of Shareholders (the “Proxy Statement”) to be held in May 2022, to be filed by the Registrant with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the year ended December 31,
2021.
2
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
Item
1
1A
1B
2
3
4
5
6
7
7A
8
9
9A
9B
10
11
12
13
14
15
16
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholders Matters, and Issuer Purchases of
Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Page
4
22
36
36
36
36
37
38
39
87
88
159
159
161
161
163
163
163
163
164
164
3
Item 1. BUSINESS
A.
Overview
Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on
December 31, 1992. The consolidated financial statements herein include the assets, liabilities, and results of operations of
RGA and its subsidiaries, all of which are wholly owned, and is referred to as the “Company”, “we”, “us” and “our” in this
Annual Report on Form 10-K.
The Company is a leading global provider of traditional life and health reinsurance and financial solutions with
operations in the U.S., Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. 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 and/or investment risks underwritten by the ceding company. Reinsurance is
designed to:
i.
reduce the net amount at risk 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 risk;
ii.
enhance the ceding company’s financial strength and surplus position;
iii. stabilize operating results by leveling fluctuations in the ceding company’s loss experience; and
iv. assist the ceding company in meeting applicable regulatory requirements.
The Company has the following geographic-based and business-based operational segments:
• U.S. and Latin America;
• Canada;
• Europe, Middle East and Africa (“EMEA”);
• Asia Pacific; and
• Corporate and Other.
Geographic-based operations are further segmented into traditional and financial solutions businesses. The Company’s
segments primarily write traditional reinsurance and financial solutions business that is wholly or partially retained in one or
more of RGA’s reinsurance subsidiaries. See “Segments” for more information concerning the Company’s operating segments.
Impacts of the COVID-19 Pandemic on RGA’s Business
The COVID-19 global pandemic and the response thereto continued to result in increases in mortality, morbidity and
other insurance risks during 2021. The global financial markets have stabilized since the beginning of the pandemic; however,
they continue to be in a state of uncertainty due to COVID-19, including an increase in inflation, supply chain issues and the
continued disruption and shutdown of businesses resulting in uncertainty in the global financial markets, all of which impacted
the Company’s financial performance in 2021. The extent to which the Company’s future results continue to be affected by
COVID-19 will largely depend on, among other factors, country-specific circumstances, measures by public and private
institutions, the impact of new variants of the virus, and vaccination levels globally. Given these many variables, the Company
cannot reliably predict the future impact of the pandemic on its business, results of operations and financial condition. For a
further discussion of the risks, uncertainties and actions taken in response to COVID-19, refer to Item 1A "Risk Factors" and
Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations.”
Traditional Reinsurance
Traditional reinsurance includes individual and group life and health, disability, long-term care and critical illness
reinsurance.
• Life reinsurance primarily refers to reinsurance of individual or group-issued term, whole life, universal life, and joint
and last survivor insurance policies.
• Health and disability reinsurance primarily refers to reinsurance of individual or group health policies.
• Long-term care reinsurance provides benefits in the event a person is no longer able to perform some specified
activities of daily living.
• Critical illness reinsurance provides a benefit in the event of the diagnosis of a pre-defined critical illness.
4
Traditional reinsurance is written on a facultative or automatic treaty basis. Facultative reinsurance is individually
underwritten by the reinsurer for each policy to be reinsured, with the pricing and other terms established based upon rates
negotiated in advance. Facultative reinsurance is normally purchased by ceding companies for medically impaired lives,
unusual risks, or liabilities in excess of the binding limits specified in their automatic reinsurance treaties.
An automatic reinsurance treaty provides that the ceding company will cede risks to a reinsurer on specified blocks of
policies where the underlying policies meet the ceding company’s underwriting criteria. In contrast to facultative reinsurance,
the reinsurer does not approve each individual policy being reinsured. 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 to the reinsurer 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, modified coinsurance or
coinsurance with funds withheld.
•
•
Yearly renewable term treaty – The reinsurer assumes primarily the mortality or morbidity risk.
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 and coinsurance with funds withheld – Differ from coinsurance arrangements in that the assets
supporting the reserves are retained by the ceding company.
Generally, the amount of life and health reinsurance ceded is stated on 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 may vary by the age or underwriting classification of the insured, the product, and other factors. Under quota share
reinsurance, the ceding company states its retention in terms of a fixed percentage of the risk with the remainder to be ceded to
one or more reinsurers up to the maximum binding limit.
Many reinsurance agreements include recapture rights that 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 or in some cases due to deterioration in the financial
condition or ratings of the reinsurer. Recapture of business previously ceded does not affect premiums ceded prior to the
recapture of such business, but would reduce premiums in subsequent periods. 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 that is considered
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; (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; and (iv) the ceding company is sometimes required to pay a fee to the
reinsurer upon recapture. In addition, when a ceding company recaptures reinsured policies, the reinsurer generally releases the
reserves it maintained to support the recaptured portion of the policies.
Financial Solutions
Financial solutions include longevity reinsurance, asset-intensive reinsurance, capital solutions and stable value
products.
Asset-Intensive Reinsurance
Asset-intensive reinsurance refers to transactions with a significant investment component, which qualify as
reinsurance under U.S. generally accepted accounting principles (“GAAP”). Asset-intensive reinsurance allows the Company’s
clients to manage their investment risk and available capital to pursue new growth opportunities.
An ongoing partnership with clients is important with asset-intensive reinsurance because of the active management
involved in this type of reinsurance. This active management includes investment decisions, investment and claims
management, and the determination of non-guaranteed elements. Some examples of asset-intensive reinsurance are: fixed
deferred annuities, immediate/payout annuities, indexed annuities, unit-linked variable annuities, universal life, corporate-
owned life insurance and bank-owned life insurance, unit-linked variable life, immediate/payout annuities, whole life, disabled
life reserves, and extended term insurance.
Longevity Reinsurance
RGA’s longevity reinsurance products are reinsurance contracts from which the Company earns premium for
assuming the longevity risk of pension plans and other annuity products that have been insured by third parties. In many
countries, companies are increasingly interested in reducing their exposure to longevity risk related to employee retirement
benefits and individual annuities. This concern comes from both the absolute size of the risk and also through the volatility that
5
changes in life expectancy can have on their reported earnings. In addition, insurance companies that offer lifetime annuities are
seeking ways to manage their current exposure, while also recognizing the potential to take on more risk from employers and
individuals.
The Company has entered into transactions on existing longevity business for clients in the U.S., Europe and Canada.
These have been arrangements with traditional insurance companies, as well as customized arrangements for banks dealing with
pension schemes.
Stable Value Products
The Company provides guaranteed investment contracts to retirement plans that include investment-only, stable value
wrap products. The assets are owned by the trustees of such plans, who invest the assets under the terms of investment
guidelines to which the Company agrees. The contracts contain a guarantee of a minimum rate of return on participant balances
supported by the underlying assets, and a guarantee of liquidity to meet certain participant-initiated plan cash flow
requirements.
Capital Solutions
Capital solutions includes financial reinsurance and fee-based transactions which assist ceding companies in meeting
applicable regulatory requirements by enhancing the ceding companies’ financial strength and regulatory surplus position.
Financial reinsurance and fee-based transactions do not qualify as reinsurance under GAAP due to the remote-risk nature of the
transactions and are reported in accordance with deposit accounting guidelines or other applicable accounting guidelines.
B.
Corporate Structure
As a holding company, RGA is separate and distinct from its subsidiaries and has no significant business operations of
its own. Therefore, it relies on capital raising efforts, interest income on undeployed corporate investments and dividends from
its insurance companies and other subsidiaries as the principal source of cash flow to meet its obligations, pay dividends and
repurchase common stock. Information regarding the cash flow and liquidity needs of RGA may be found in Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.
Regulation
The following table provides the jurisdiction of the regulatory authority for RGA’s primary operating and captive
subsidiaries:
Subsidiary
Regulatory Authority Jurisdiction
RGA Reinsurance Company (“RGA Reinsurance”)
Parkway Reinsurance Company (“Parkway Re”)
Rockwood Reinsurance Company (“Rockwood Re”)
Castlewood Reinsurance Company (“Castlewood Re”)
Chesterfield Reinsurance Company (“Chesterfield Re”)
Reinsurance Company of Missouri, Incorporated (“RCM”)
Timberlake Reinsurance Company II (“Timberlake Re”)
RGA Life Reinsurance Company of Canada (“RGA Canada”)
RGA Reinsurance Company (Barbados) Ltd. (“RGA Barbados”)
RGA Americas Reinsurance Company, Ltd. (“RGA Americas”)
Manor Reinsurance, Ltd. (“Manor Re”)
RGA Atlantic Reinsurance Company Ltd. (“RGA Atlantic”)
RGA Worldwide Reinsurance Company, Ltd. (“RGA Worldwide”)
RGA Global Reinsurance Company, Ltd. (“RGA Global”)
RGA Reinsurance Company of Australia Limited (“RGA Australia”)
RGA International Reinsurance Company dac (“RGA International”)
Missouri
Missouri
Missouri
Missouri
Missouri
Missouri
South Carolina
Canada
Barbados
Bermuda
Barbados
Barbados
Barbados
Bermuda
Australia
Ireland
RGA Reinsurance Company of South Africa, Limited (“RGA South Africa”)
Aurora National Life Assurance Company (“Aurora National”)
Omnilife Insurance Company, Limited
South Africa
California
United Kingdom
Certain of the Company’s subsidiaries are subject to regulations in the other jurisdictions in which they are licensed or
authorized to do business. Insurance laws and regulations, among other things, establish minimum capital requirements and
limit the amount of dividends, distributions, and intercompany payments that affiliates can make without regulatory approval.
Additionally, insurance laws and regulations impose restrictions on the amounts and types of investments that insurance
companies may hold. New capital standards (discussed below) are being developed and are likely to be applied to one or more
6
of the Company’s subsidiaries to either require more capital and/or limit the extent to which some forms of existing capital may
be counted in an evaluation of financial strength by its regulators.
U.S. Regulation
Insurance Regulation
The insurance laws and regulations, as well as the level of supervisory authority that may be exercised by the various
state insurance departments, vary by jurisdiction. These laws and regulations 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. This includes the
power to pre-approve the execution or modification of contractual arrangements.
Require insurance companies to meet certain solvency standards and asset tests, to maintain minimum standards of
financial strength and to file certain reports with regulatory authorities (including information concerning their capital
structure, ownership and financial condition).
Subject insurers to potential assessments for amounts paid by guarantee funds.
RGA Reinsurance, Chesterfield Re and RCM are subject to the state of Missouri’s adoption of the National
Association of Insurance Commissioners (“NAIC”) Model Audit Rule, which requires an insurer to have an annual audit by an
independent certified public accountant, provide an annual management report of internal control over financial reporting, file
the resulting reports with the Director of Insurance and maintain an audit committee. Aurora National is subject to similar
regulation by the State of California.
The Insurance Holding Company System Regulatory Acts in the U.S. permit the Missouri regulator to request and
consider similar information in its regulation of the solvency of and capital standards for RGA Reinsurance, Chesterfield Re
and RCM. In addition, the California regulator is permitted to request and consider in its regulation of the solvency of and
capital standards for Aurora National, information about the operations of other subsidiaries of RGA and the extent to which
contagion risk posed by those operations may also exist.
In addition, RGA is subject to a supervisory college, conducted by its group supervisor the Missouri Department of
Commerce and Insurance (“MDCI”). The supervisory college is comprised of insurance regulators of the major jurisdictions in
which RGA has established insurance branches and subsidiaries. Since the inception of the supervisory college in October
2012, the MDCI has conducted regular in-person supervisory college meetings in addition to numerous regulator-only
conference calls. These meetings bring about requests for information from RGA’s regulators as they monitor RGA’s solvency,
governance and overall management. While the supervisory college has the ability to impose limitations on the activities of the
insurance subsidiaries of RGA, particularly since RGA has been designated by its group supervisor as an Internationally Active
Insurance Group (“IAIG”), no such limitations have been imposed to date. The existence of the supervisory college generally
helps RGA’s regulators understand its business to a greater degree and encourages a more global view by RGA of its own
regulation.
RGA’s reinsurance subsidiaries are required to file statutory financial statements in each jurisdiction in which they are
licensed and may be subject to onsite, periodic examinations by the insurance regulators of the jurisdictions in which each is
licensed, authorized, or accredited. To date, none of the regulators’ reports related to the Company’s periodic examinations
have contained 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, which is also true outside of the U.S. In the U.S., however, the NAIC Model Law on Credit for
Reinsurance, which has been adopted in most states, imposes certain requirements for an insurer to take reserve credit for risk
ceded to a reinsurer. Generally, the reinsurer is required to be licensed, accredited or certified in the insurer’s state of domicile
or the reinsurer must be domiciled in a jurisdiction that is found by the U.S. regulators to observe standards established in the
U.S. – E.U. Covered Agreement. Otherwise the reinsurer must post security for reserves transferred to the reinsurer in the
form of letters of credit or assets placed in trust. The option for a U.S. domiciled insurer to obtain credit for the reserves it cedes
to a reinsurer domiciled in a jurisdiction that observes standards established in the U.S. – E.U. Covered Agreement is termed
ceding reinsurance to a “reciprocal reinsurer.” Insurers ceding business to reciprocal reinsurers are permitted to take reserve
credit without the reinsurer having to establish security. The NAIC Life and Health Reinsurance Agreements Model Regulation,
which has been adopted in most states, imposes additional requirements for insurers to claim reserve credit for reinsurance
ceded (excluding yearly renewable term 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. Outside of the U.S., rules for reinsurance and requirements for minimum risk transfer are less specific and are less
likely to be published as rules, but nevertheless standards can be imposed to varying extents.
7
U.S. Valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX), implemented beginning
in 2002 for various types of life insurance business, significantly increased the level of reserves that U.S. life insurance and life
reinsurance companies must hold on their statutory financial statements for various types of life insurance business, primarily
certain level premium term life products. The reserve levels required under Regulation XXX are normally in excess of reserves
required under GAAP. In situations where primary insurers have reinsured business to reinsurers that are unlicensed and
unaccredited in the U.S., the reinsurer must provide collateral equal to its reinsurance reserves in order for the ceding company
to receive statutory financial statement credit. Reinsurers have historically utilized letters of credit for the benefit of the ceding
company, or have placed assets in trust for the benefit of the ceding company, or have used other structures as the primary
forms of collateral. An exception to this requirement is expected to exist for reinsurance ceded to reciprocal reinsurers.
RGA Reinsurance is the primary subsidiary of the Company subject to Regulation XXX. In order to manage the effect
of Regulation XXX on its statutory financial statements, RGA Reinsurance has retroceded a majority of Regulation XXX
reserves to unaffiliated and affiliated unlicensed reinsurers and special purpose reinsurers, or captives. RGA Reinsurance’s
statutory capital may be significantly reduced if the unaffiliated or affiliated reinsurer is unable to provide the required
collateral to support RGA Reinsurance’s statutory reserve credits and RGA Reinsurance cannot find an alternative source for
the collateral. The NAIC has requirements for life insurers using special purpose reinsurers. While RGA Reinsurance’s reserve
financing arrangements using special purpose reinsurers or “captive reinsurers” are permitted, the rules place limitations on
RGA Reinsurance’s ability to utilize captive reinsurers to finance reserve growth related to future business. Such limitations
have caused the Company to utilize alternative retrocession strategies, primarily involving the use of a certified reinsurer as
discussed below.
Based on the growth of the Company’s business and the pattern of reserve levels under Regulation XXX associated
with term life business and other statutory reserve requirements, the amount of ceded reserve credits is expected to grow, albeit,
with the implementation of principles-based reserves in the U.S. growth is expected at slower rates than in the immediate past.
This growth will require the Company to obtain additional letters of credit, put additional assets in trust, or utilize other funding
mechanisms to support reserve credits. If the Company is unable to support the reserve credits, the regulatory capital levels of
several of its subsidiaries may be significantly reduced, while the regulatory capital requirements for these subsidiaries would
not change. The reduction in regulatory capital could affect the Company’s ability to write new business and retain existing
business.
Affiliated captives are commonly used in the insurance industry to help manage statutory reserve and collateral
requirements and are often domiciled in the same state as the insurance company that sponsors the captive. The NAIC has
analyzed the insurance industry’s use of affiliated captive reinsurers to satisfy certain reserve requirements and has adopted
measures to promote uniformity in both the approval and supervision of such reinsurers. Current standards addressing the use of
captive reinsurers allow captives organized prior to 2016 to continue in accordance with their currently approved plans. New
standards imposed upon the use of captive insurers for transactions after 2015 increase costs and add complexity to the use of
captive insurers. As a result, the Company may need to alter the type and volume of business it reinsures, increase prices on
those products, raise additional capital to support higher regulatory reserves or implement higher cost strategies.
In the U.S., the introduction of the certified reinsurer has provided an alternative way to manage regulatory reserves
and collateral requirements. In 2014, RGA Americas was designated as a certified reinsurer by the MDCI. This designation
allows the Company to retrocede business to RGA Americas in lieu of using captives for collateral requirements. Beginning in
2017, the NAIC approved principles-based reserving for U.S. insurers; however, implementation required approval by the
states. To achieve this, the NAIC amended the standard valuation law to adopt life principles-based reserving (PBR) that was
effective January 1, 2017, allowing a three-year adoption period. The Company adopted PBR in 2020, and PBR reserves are
determined based on the terms of the reinsurance agreement which may differ from those of the direct policies. The Company
has chosen not to establish captives subject to the new regulations as it evaluates the impact of the regulations on new captives,
and how these new captives fit into the Company’s overall risk management and financing programs.
Reinsurers may place assets in trust to satisfy collateral requirements for certain treaties. In addition, the Company
holds securities in trust to satisfy collateral requirements under certain third-party reinsurance treaties. Under certain conditions
in some treaties, the Company may be obligated to move reinsurance from one subsidiary of RGA to another subsidiary, post
additional collateral for the ceding insurer or allow the ceding insurer to cancel the reinsurance. These conditions include
change in control, level of capital or ratings of the subsidiary, insolvency, nonperformance under a treaty, or loss of the
subsidiary’s reinsurance license. If the Company is ever required to perform under these obligations, the risk to the consolidated
company under the reinsurance treaties would not change; however, additional capital may be required due to the change in
jurisdiction of the subsidiary reinsuring the business and may create a strain on liquidity, possibly causing a reduction in
dividend payments or hampering the Company’s ability to write new business or retain existing business. In the event that a
treaty is terminated, the future profits related to the terminated treaty may be lost.
8
RGA Reinsurance, Chesterfield Re, Parkway Re, Rockwood Re, Castlewood Re and RCM prepare statutory financial
statements in conformity with accounting practices prescribed or permitted by the State of Missouri. Timberlake Re prepares
statutory financial statements in conformity with accounting practices prescribed or permitted by the State of South Carolina.
Aurora National prepares its statutory financial statements in conformity with accounting practices prescribed or permitted by
the State of California. Each of these states require domestic insurance companies to prepare their statutory financial statements
in accordance with the NAIC Accounting Practices and Procedures manual subject to any deviations permitted by each state’s
insurance commissioner. The Company’s non-U.S. subsidiaries are subject to the regulations and reporting requirements of
their respective countries of domicile.
Capital Requirements
Risk-Based Capital (“RBC”) guidelines promulgated by the NAIC are applicable to RGA Reinsurance, RCM, Aurora
National, and Chesterfield Re, and identify minimum capital requirements based upon business levels and asset mix. These
subsidiaries maintain capital levels in excess of the amounts required by the applicable guidelines. Timberlake Re, Parkway Re,
Rockwood Re and Castlewood Re’s capital requirements are determined solely by their licensing orders issued by their states of
domicile. Pursuant to its licensing order issued by the South Carolina Department of Insurance, Timberlake Re only calculates
RBC as a means of demonstrating its ability to pay principal and interest on its surplus note issued to Timberlake Financial,
L.L.C. (“Timberlake Financial”). It is not otherwise subject to the RBC guidelines. Similarly, Parkway Re, Rockwood Re and
Castlewood Re are not subject to the requirements of the NAIC’s RBC guidelines. A decline in the RBC of one or more of the
Company’s U.S. insurers can cause the appearance of less capitalization in its U.S. insurers, individually, or when considered as
a group.
While the NAIC is still developing its group capital calculation and has not yet articulated the ways in which it intends
U.S. states to use the calculation, the calculation is expected to be used to assess the adequacy of capital within an insurance
group domiciled in the U.S., particularly for groups such as RGA that are designated an IAIG by the group supervisor. The
Company cannot currently predict the effect that any proposed or future group capital standard will have on its financial
condition or operations or the financial condition or operations of its subsidiaries.
Regulations in international jurisdictions also require certain minimum capital levels, and subject the companies
operating in such jurisdictions, to oversight by the applicable regulatory bodies. RGA’s subsidiaries meet the minimum capital
requirements in their respective jurisdictions. The International Association of Insurance Supervisors continues work on its
insurance capital standard. While the insurance capital standard is a model for capital standards and not a standard that must be
followed on its own in any jurisdiction, it is likely to influence capital requirements for insurers around the world and may lead
to a need for additional capital in one or more of RGA’s subsidiaries. The Company cannot predict the effect that any proposed
or future legislation or rulemaking in the countries in which it operates may have on the financial condition or operations of the
Company or its subsidiaries.
Insurance Holding Company Regulations
RGA Reinsurance, Chesterfield Re and RCM are subject to regulation under the insurance and insurance holding
company statutes of Missouri. Aurora National is subject to regulation under the insurance and insurance holding company
statutes of California. These insurance holding company laws and regulations generally require insurance and reinsurance
subsidiaries of insurance holding companies to register and file with the home state regulator certain reports describing, among
other information, capital structure, ownership, financial condition, certain intercompany transactions, and general business
operations. The insurance holding company statutes and regulations also require prior approval of, or in certain circumstances,
prior notice to the home state regulator of, certain material intercompany transfers of assets, as well as certain transactions
between insurance companies, their parent companies and affiliates.
Under current Missouri and California insurance laws and regulations, no person may acquire any voting security or
security convertible into a voting security of an insurance holding company, such as RGA, if as a result of the acquisition such
person would “control” the insurance holding company. “Control” is presumed to exist under Missouri and California law if a
person directly or indirectly owns or controls 10% or more of the voting securities of another person. Changes in control of an
insurer are not permitted under the laws of these states unless: (i) certain filings are made with the home state regulator,
(ii) certain requirements are met, including a public hearing, and (iii) approval or exemption is granted by the home state
regulator. Additionally, revisions to the insurance holding company regulations of Missouri and California require increased
disclosure to regulators of matters within the RGA group of companies.
Restrictions on Dividends and Distributions
Current Missouri law, applicable to RCM and its subsidiaries, RGA Reinsurance and Chesterfield Re, permits the
payment of dividends or distributions by each company that together with dividends or distributions paid during the preceding
twelve months by that company do not exceed the greater of (i) 10% of the insurer’s statutory capital and surplus as of the
preceding December 31, or (ii) the insurer’s statutory net gain from operations for the preceding calendar year. Any proposed
9
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 Director of the MDCI. Additionally,
dividends may be paid only to the extent the insurer has unassigned surplus (as opposed to contributed surplus). The regulatory
limitations and other restrictions described herein could limit the Company’s financial flexibility in the future should it choose
to or need to use subsidiary dividends as a funding source for its obligations. See Note 11 – “Financial Condition and Net
Income on a Statutory Basis” in the Notes to Consolidated Financial Statements for additional information on the Company’s
dividend restrictions.
The California Insurance Holding Company Act defines an extraordinary dividend consistent with the definition found
in the Missouri Insurance Holding Company Act and imposes an identical restriction upon the ability of Aurora National to pay
dividends to RGA Reinsurance. In contrast to both the Missouri and the California Insurance Holding Company Acts, the
NAIC Model Insurance Holding Company System Regulatory Act defines an extraordinary dividend as a dividend or
distribution that 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 if, Missouri will enact a new regulation for extraordinary
dividends.
Missouri insurance laws and regulations also require that the statutory surplus of Chesterfield Re, RCM and RGA
Reinsurance following any dividend or distribution be reasonable in relation to their outstanding liabilities and adequate to meet
their financial needs. The Director of the MDCI may call for a rescission of the payment of a dividend or distribution by these
entities that would cause their statutory surplus to be inadequate under the standards of the Missouri insurance regulations.
California insurance laws and regulations impose the same restrictions on Aurora National as to the dividends or distributions
that are made.
Pursuant to the South Carolina Director of Insurance, Timberlake Re may declare dividends subject to a minimum
Total Adjusted Capital threshold, as defined by the NAIC’s RBC regulation. As of December 31, 2021, Timberlake Re met the
minimum required threshold. Any dividends paid by Timberlake Re would be paid to Timberlake Financial, which in turn is
subject to contractual limitations on the amount of dividends it can pay to RCM.
Dividend payments from non-U.S. operations are subject to similar restrictions established by local regulators. The
non-U.S. regulatory regimes also commonly limit the dividend payments to the parent to a portion of the prior year’s statutory
income, as determined by the local accounting principles. The regulators of the Company’s non-U.S. operations may also limit
or prohibit profit repatriations or other transfers of funds to the U.S. if such transfers are deemed to be detrimental to the
solvency or financial strength of the non-U.S. operations, or for other reasons. Most of the non-U.S. operating subsidiaries are
second tier subsidiaries that are owned by various non-U.S. holding companies. The capital and rating considerations applicable
to the first tier subsidiaries may also impact the dividends paid to RGA.
Default or Liquidation
In the event that RGA defaults on any of its debt or other obligations, or becomes the subject of bankruptcy,
liquidation, or reorganization proceedings, the creditors and stockholders of RGA will have no right to proceed against the
assets of any of the subsidiaries of RGA. If any of RGA’s reinsurance subsidiaries were to be liquidated or dissolved, the
liquidation or dissolution would be conducted in accordance with the rules and regulations of the appropriate governing body in
the state or country of the subsidiary’s domicile. The creditors of any such reinsurance company, including, without limitation,
holders of its reinsurance agreements and state guaranty associations (if applicable), 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 or other payments
from the remaining assets of the liquidated or dissolved subsidiary.
Federal Regulation
Since the 2010 enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. federal
government has paid greater attention to the manner in which insurance and reinsurance is regulated, particularly when U.S.
insurers and reinsurers are doing business outside of the U.S. Under the Dodd-Frank Act, the Federal Insurance Office within
the U.S. Treasury Department has negotiated a “covered agreement” with the European Union. The covered agreement, while
promoting the recognition of U.S. state insurance regulators as group supervisors of U.S.-based global reinsurers such as RGA,
also provides for an elimination of the collateral that has to be posted by reinsurers based in the European Union, and by
NAIC’s anticipated extension of the rules, to those reinsurers based in additional jurisdictions that seek evaluation by the NAIC
for treatment comparable to that given to members of the European Union under the U.S. – E.U. Covered Agreement. The
extension of Covered Agreement treatment to additional jurisdictions will provide for the elimination of the collateral that
reinsurers domiciled in those jurisdictions must currently post in favor of U.S. ceding insurers. This agreement, coupled with
new state credit for reinsurance laws, has the potential to lower the cost at which RGA Reinsurance’s competitors are able to
provide reinsurance to U.S. insurers. Additionally under the Dodd-Frank Act, one or more of RGA’s client ceding insurers
domiciled in the U.S. may from time-to-time be designated systemically important by the Federal Reserve.
10
Insurers designated systemically important can be subject to the imposition of an additional layer of regulation over
already existing state regulation. While it is not currently expected that any RGA entity would be deemed to be systemically
important and become subject to this additional scrutiny, the reinsurance programs RGA maintains with the insurers so
designated as systemically important are subject to scrutiny by the Federal Reserve. While no U.S. insurers or reinsurers are
currently designated systemically important, it is possible that one or more of RGA’s clients will be given this designation in
the future leading to additional scrutiny of those clients’ reinsurance programs by the Federal Reserve.
With the potential regulation of some U.S. domiciled insurers by the U.S. government, it is possible that the scope of
the federal government’s ability to regulate insurers and reinsurers will be expanded. It is not possible to predict the effect of
such decisions or changes in law on the operation of the Company, but the Dodd-Frank Act makes it more likely than in the
past that insurance or reinsurance may be to some extent become regulated at the federal level. A shift in regulation from the
state to the federal level may bring into question the continued validity of the McCarran-Ferguson Act, which exempts the
“business of insurance” from most federal laws, including anti-trust laws. With the McCarran-Ferguson Act exemption for the
business of insurance, a reinsurer may set rate, underwriting and claims handling standards for its ceding company clients to
follow.
Environmental Considerations Related to Real Property Ownership, Development and Mortgage Investment
Federal, state and local environmental laws and regulations apply to the Company’s ownership and operation of real
property. Inherent in owning and operating real property are the risks of hidden environmental liabilities and the costs of any
required clean-up. Under the laws of certain states, contamination of a property may give rise to a lien on the property to secure
recovery of the costs of clean-up. In several states, this lien has priority over the lien of an existing mortgage against such
property. In addition, in some states and under the federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (“CERCLA”), the Company may be liable, in certain circumstances, as an “owner” or “operator,” for
costs of cleaning-up releases or threatened releases of hazardous substances at a property mortgaged to it. The Company also
risks environmental liability when it forecloses on a property mortgaged to it, although federal legislation provides for a safe
harbor from CERCLA liability for secured lenders that foreclose and sell the mortgaged real estate, provided that certain
requirements are met. However, there are circumstances in which actions taken could still expose the Company to CERCLA
liability. Application of various other federal and state environmental laws could also result in the imposition of liability on the
Company for costs associated with environmental hazards.
In addition to conducting an environmental assessment while underwriting a mortgage loan, the Company routinely
conducts environmental assessments prior to taking title to real estate through foreclosure on real estate collateralizing
mortgages that it holds. Although unexpected environmental liabilities can always arise, the Company seeks to minimize this
risk by undertaking these environmental assessments and complying with its internal procedures, and as a result, the Company
believes that any costs associated with compliance with environmental laws and regulations or any clean-up of properties would
not have a material adverse effect on the Company’s results of operations.
Environmental, Social and Governance
Insurance regulators are considering imposing new rules regarding how insurers incorporate and report about
environmental, social, and governance (“ESG”) considerations into their operational decisions, underwriting, and investment
decisions. Currently, efforts are aimed at enacting laws and regulations that focus on testing underwriting models for bias.
Other current ESG initiatives are aimed at reviewing the investment portfolios of insurers and requiring discussions regarding
ESG topics between insurers and their regulators. It is possible that rules governing insurance underwriting and factors utilized
by insurers in the selection of risks may be altered in the future in a way that impacts the profitability of RGA’s business. The
extent to which ESG concerns may impact RGA in the future is uncertain, but RGA has incorporated ESG factors and goals
into its current strategic plan, operations, and risk assessment processes.
International Regulation
RGA’s international insurance operations are principally regulated by insurance regulatory authorities in the
jurisdictions in which they are located or operate branch offices. The regulation includes minimum capital, solvency and
governance requirements. The authority of RGA’s international operations to conduct business is subject to licensing
requirements, inspections and approvals and these authorizations are subject to modification and revocation. Periodic
examinations of the insurance company books and records, financial reporting requirements, risk management processes and
governance procedures are among the techniques used by regulators to supervise RGA’s non-U.S. insurance businesses. The
regulators of RGA’s non-U.S. insurance companies, and the California Department of Insurance are also invited to be part of
the supervisory college held by the MDCI, RGA’s group supervisor.
Bermuda’s Insurance Act 1978 (the “Bermuda Insurance Act”) distinguishes between insurers carrying on long-term
business, insurers carrying on special purpose business and insurers carrying on general business. There are five classifications
of insurers carrying on long-term business, ranging from Class A insurers to Class E insurers. Taking a risk-based approach to
11
regulation that looks at the nature, scale and complexity of an insurer’s business, the Bermuda Monetary Authority (“BMA”)
typically applies less regulatory oversight to Class A captive insurers and greater regulatory oversight to Class E commercial
insurers. The Company’s subsidiaries domiciled in Bermuda are licensed for long-term business and are classified as Class E
insurers and are therefore subject to extensive regulation and supervision by the BMA. Such regulation includes rules
regarding privacy, anti-money laundering, bank secrecy, anti-corruption and foreign asset control in addition to insurance
regulation. To that end, the BMA has broad powers to regulate business activities of the Company’s Bermuda domiciled
subsidiaries, mandate capital and surplus requirements, regulate trade and claims practices and require strong enterprise risk
management and corporate governance activities.
The Company’s Bermuda subsidiaries, as Class E insurers, file annual statutory financial statements and annual
audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. within four
months of the end of each fiscal year, unless such deadline is specifically extended. The Bermuda Insurance Act prescribes
rules for the preparation of the statutory financial statements. In addition, the Company’s Bermuda subsidiaries are required to
file with the BMA a capital and solvency return along with its annual statutory financial return.
The Company’s Bermuda subsidiaries must at all times maintain a minimum margin of solvency (“MMS”) and an
enhanced capital requirement (“ECR”) in accordance with the provisions of the Bermuda Insurance Act. If either the minimum
MMS or ECR is not met then the Bermuda Insurance Act mandates certain actions and filings with the BMA including the
filing of a written report detailing the circumstances giving rise to the failure and the manner and time within which the insurer
intends to rectify the failure. The BMA has embedded an economic balance sheet (“EBS”) framework as part of the Bermuda
Solvency Capital Requirement (“BSCR”) that forms the basis for an insurer’s ECR. As Class E insurers, the Company’s
Bermuda subsidiaries’ ECR is established by reference to the Class E BSCR model, which provides a method for determining
an insurer’s capital requirements by taking into account the risk characteristics of different aspects of the insurer’s business. The
BSCR formula establishes capital requirements for different categories of risk such as fixed income investment risk, equity
investment risk, long-term interest rate/liquidity risk, currency risk, concentration risk, credit risk, operational risk and seven
categories of long-term insurance risk. Depending on the risk category, the capital requirement is either determined by applying
shocks or by applying prescribed factors, where such shocks and factors were developed by the BMA and were calibrated at
99% Tail Value-at-Risk (“TVaR”) over a one-year time horizon.
Under the Bermuda Insurance Act, the Company’s Bermuda subsidiaries are prohibited from declaring or paying a
dividend if they are not meeting their ECR or MMS requirements or if the declaration or payment of the dividend would cause
such a breach. Failing to meet the MMS requirement on the last day of any financial year prohibits a company from declaring
or paying any dividends during the next financial year without the approval of the BMA. Additional actions and filings may be
required before a company can declare and pay a dividend depending on its prior year statutory capital and surplus. The
restrictions on declaring or paying dividends and distributions under the Bermuda Insurance Act are in addition to those under
Bermuda’s Companies Act 1981 (the “Companies Act”). Under the Companies Act, the Company’s Bermuda subsidiaries may
not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing
that: (1) the company is, or would after the payment be, unable to pay its liabilities as they become due, or (2) the realizable
value of the company’s assets would thereby be less than its liabilities.
The Company’s subsidiaries domiciled in Bermuda are subject to extensive regulation and supervision by the Bermuda
Monetary Authority (“BMA”). Such regulation includes rules regarding privacy, anti-money laundering, bank secrecy, anti-
corruption and foreign asset control in addition to insurance regulation. To that end, the BMA has broad powers to regulate
business activities of the Company’s Bermuda domiciled subsidiaries, mandate capital and surplus requirements, regulate trade
and claims practices and require strong enterprise risk management and corporate governance activities. The Company’s
subsidiaries domiciled in Barbados are subject to regulation and supervision by the Financial Services Commission in
Barbados. Recently enacted economic substance requirements in Bermuda and Barbados may place additional requirements,
including reporting requirements, on the Company’s subsidiaries domiciled in those countries in order to demonstrate purpose
and governance of those entities and their operations to greater levels than required in the past.
Much like the adoption of the Dodd-Frank Act in the U.S., regulators around the world continue to consider ways to
avoid a recurrence of the causes of the 2008 – 2009 financial crisis. A group leading this effort is the Financial Stability Board
(“FSB”). The FSB consists of representatives of national financial authorities of the G20 nations. The G20 and the FSB and
related governmental bodies have developed proposals to address issues such as group supervision, capital and solvency
standards, systemic economic risk and corporate governance, including executive compensation and many other related issues
associated with the financial crisis. At the direction of the FSB, the International Association of Insurance Supervisors (“IAIS”)
has developed a model framework for the supervision of Internationally Active Insurance Groups (“IAIG”) that contemplates
“group-wide supervision” across national boundaries. RGA now qualifies as an IAIG bringing about requirements for RGA to
conduct a group-wide risk and solvency assessment to monitor and manage its overall solvency. At this time RGA cannot
predict what additional capital requirements, compliance costs or other burdens these requirements would impose on it, if
12
adopted for the evaluation of a U.S.- domiciled insurance group. There is also the potential for inconsistent or conflicting
regulation of the RGA group of companies as lawmakers and regulators in multiple jurisdictions simultaneously pursue these
initiatives.
Additionally, RGA International, operating in the European Economic Area (“EEA”), is subject to the Solvency II
measures developed by the European Insurance and Occupational Pensions Authority and will be required to abide by the
evolving risk management practices, capital standards and disclosure requirements of the Solvency II framework. Additionally,
the Company’s clients located in the EEA will need to abide by these standards in operating their insurance businesses,
including the management of their ceded reinsurance. Currently, insurers and reinsurers located in the EEA are operating under
Solvency II. The Company expects Solvency II to have a significant influence on not only the regulation of solvency measures
applied to insurers and reinsurers operating within the EEA, but the Company also expects the solvency regulation measures to
influence future regulatory structures of countries outside of the EEA, including Japan. Influences of the Solvency II – type
framework are already present in the insurance regulation of Bermuda and China and currently influence the solvency measures
imposed upon RGA Global and RGA Americas.
As a result of the 2016 Brexit referendum, under which the United Kingdom (“UK”) exited the European Union
effective January 31, 2020, the regulatory approval of RGA International as a reinsurer of insurance business written by UK
domiciled insurers remains susceptible to termination after the end of 2020. While it currently appears that any post Brexit
insurance regulation in the UK will permit the separate registration of RGA International as a branch in the UK, there exists
questions as to what requirements will be imposed upon reinsurers domiciled outside of the UK after implementation of the
Brexit initiative.
Additionally, some countries limit the amount of insurance business that can be ceded to foreign reinsurers.
Requirements of this type are proposed from time-to-time in developing markets. These forced localization requirements have
the impact of limiting the amount of reinsurance business RGA can conduct in those countries without the participation of a
local reinsurer.
RGA expects the scope and extent of regulation outside of the U.S., as well as group regulatory oversight generally, to
continue to increase.
Privacy and Cybersecurity Regulation
Various jurisdictions in which the Company’s subsidiaries and their clients operate have established laws protecting
the privacy and handling of consumers’ private data. The area of cybersecurity has also come under increased scrutiny from
insurance regulators. These laws and regulations vary country to country and state to state, but they generally require the
establishment of programs to detect and prevent unauthorized access to personal data and to mitigate theft of personal data.
They also may require the Company, among other things, to notify client insurers or individuals of any security breach
involving protected data, and to provide individuals with the right to access personal data and with the right to be forgotten.
In the U.S. the NAIC adopted the Insurance Data Security Model Law which establishes standards for data security
and for the investigation of and notification of insurance regulators of cybersecurity events involving unauthorized access to
certain private information belonging to insureds. To date, this Model Law has not been widely adopted, but the Company
expects further adoption in the future. The cybersecurity regulation in New York is applicable to many of the Company’s
clients, and it requires the Company to demonstrate the existence and soundness of its cybersecurity program to those clients.
The California Consumer Privacy Act of 2018 (“CCPA”) grants all California residents the right to know what information a
business has collected from them and the sourcing and sharing of that information. The CCPA also gives the California
consumer the right to have a business delete their personal information with some exceptions. The California restrictions, and
related exceptions became effective on January 1, 2020. The Company expects that the exceptions will apply to a significant
portion of its business. Laws and regulations similar to the New York cybersecurity regulation and the CCPA, as well as
measures similar to the NAIC’s Insurance Data Security Model Law are likely to be adopted by more U.S. states in the near
future, if not by the U.S. federal government.
In addition, new and proposed privacy and cybersecurity laws and regulations in many European and Asian countries
restrict RGA’s ability to transfer data and impose other requirements on holders of data. In Europe, the General Data Protection
Regulation (“GDPR”), which establishes uniform data privacy laws across the European Union (“EU”) is effective for all EU
member states and is extraterritorial in that it applies to EU entities, as well as entities established in the EU that offer goods or
services to data subjects in the EU or monitor consumer behavior that takes place in the EU. The GDPR anticipates the
processing of data for reinsurance and other purposes and applies standards and rules that covered entities must establish and
monitor with respect to such processing and use. Many of the restrictions enacted by jurisdictions outside of the EU either do
not anticipate the processing of data for reinsurance purposes at all or place costly restrictions on the ability of a reinsurer to
service its business by requiring processing to be done within the borders of the country in which the insured consumer resides.
Further adoptions of laws patterned after the GDPR are expected around the world.
13
Ratings
Insurer financial strength ratings, sometimes referred to as claims paying ratings, represent the opinions of rating
agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. The
Company’s insurer financial strength ratings as of the date of this filing are listed in the table below for each rating agency that
meets with the Company’s management on a regular basis. As of the date of this filing, the Standard & Poor’s (“S&P”), A.M.
Best Company (“A.M. Best”), and the Moody’s Investors Service (“Moody’s”) ratings listed below are on stable outlook.
Insurer Financial Strength Ratings
RGA Reinsurance Company
RGA Life Reinsurance Company of Canada
RGA International Reinsurance Company dac
RGA Global Reinsurance Company, Ltd.
RGA Reinsurance Company of Australia Limited
RGA Reinsurance Company (Barbados) Ltd.
RGA Americas Reinsurance Company, Ltd.
RGA Atlantic Reinsurance Company Ltd.
Omnilife Insurance Company Limited
A.M. Best (1)
A+
Moody’s (2)
A1
A+
Not Rated
Not Rated
Not Rated
Not Rated
A+
A+
Not Rated
Not Rated
Not Rated
Not Rated
Not Rated
Not Rated
Not Rated
Not Rated
Not Rated
S&P (3)
AA-
AA-
AA-
AA-
AA-
AA-
AA-
Not Rated
A+
(1) An A.M. Best insurer financial strength rating of “A+” (superior) is the second highest out of sixteen possible ratings and is assigned to companies that
have, in A.M. Best’s opinion, a superior ability to meet their ongoing insurance obligations.
(2) A Moody’s insurer financial strength rating of “A1” (good) is the fifth highest rating out of twenty-one possible ratings and indicates that Moody’s
believes the insurance company offers good financial security; however, elements may be present which suggest a susceptibility to impairment sometime
in the future.
(3) An S&P insurer financial strength rating of “AA-” (very strong) is the fourth highest rating out of twenty-two possible ratings. According to S&P’s rating
scale, a rating of “AA-” means that, in S&P’s opinion, the insurer has very strong financial security characteristics. A S&P insurer financial strength
rating of “A+” (strong) is the fifth highest rating out of twenty-two possible ratings. According to S&P’s rating scale, a rating of “A+” means that, in
S&P’s opinion, the insurer has strong financial security characteristics.
The ability to write reinsurance partially depends on a reinsurer’s financial condition and its financial strength ratings.
These ratings are based on a company’s ability to pay policyholder obligations and are not directed toward the protection of
investors. A ratings downgrade could adversely affect the Company’s ability to compete. See Item 1A – “Risk Factors” for
more on the potential effects of a ratings downgrade.
Underwriting
Automatic. The Company’s 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 ensures that the underwriting standards, procedures and guidelines of its ceding companies
are priced appropriately and consistent with the Company’s expectations. To this end, the Company conducts periodic reviews
of the ceding companies’ underwriting and claims personnel and procedures.
Facultative. The Company has developed underwriting policies, procedures and standards with the objective of
controlling the quality of business written as well as its pricing. The Company’s underwriting process emphasizes close
collaboration between its underwriting, actuarial, and administration 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. These policies, procedures, and standards are documented in electronic
underwriting manuals made available to all the Company’s underwriters. The Company regularly performs internal reviews of
both its underwriters and underwriting process.
The Company’s management determines whether to accept facultative reinsurance business on a prospective insured
by reviewing the application, medical information and other underwriting information appropriate to the age of the prospective
insured and the face amount of the application. An assessment of medical and financial history follows with decisions based on
underwriting knowledge, manual review and consultation with the Company’s medical directors as necessary. Many facultative
applications involve individuals with multiple medical impairments, such as heart disease, high blood pressure, and diabetes,
which require a complex underwriting/mortality assessment. The Company employs medical directors and medical consultants
to assist its underwriters in making these assessments.
Pricing
The Company has pricing actuaries dedicated in every geographic market and in every product category who develop
reinsurance treaty rates following the Company’s policies, procedures and standards. Biometric assumptions are based
primarily on the Company’s own mortality, morbidity and persistency experience, reflecting industry and client-specific
14
experience. Economic and asset-related pricing assumptions are based on current and long-term market conditions and are
developed by actuarial and investment personnel with appropriate experience and expertise. The Company’s view of short- and
long-term risks are reflected in pricing consistent with its internal capital model. For transactional business with material day-
one invested assets there is diligence on the expected asset portfolio that is reflected in the pricing assumption. For transactional
business focusing on tail risk the Company has policies and procedures related to views on transaction-specific tail risk events.
A transaction process ensures that the business reflects the input of internal areas of expertise in deal teams and has procedures
for escalation based on the size and nature of the risks. Management has established a high-level oversight of the processes and
results of these activities, which includes peer reviews in every market as well as centralized procedures and processes for
reviewing and auditing pricing activities.
Operations
The Company’s business has been primarily obtained directly, rather than through brokers. The Company has an
experienced sales and marketing staff that works to provide responsive service and maintain existing relationships.
The Company’s administration, auditing, valuation and finance departments are responsible for treaty compliance
auditing, financial analysis of results, generation of internal management reports, and periodic audits of administrative and
underwriting practices. A significant effort is focused on periodic audits of administrative and underwriting practices, and treaty
compliance of clients.
The Company’s claims departments review and verify reinsurance claims, obtain the information necessary to evaluate
claims, and arrange 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 Company. In addition, the claims departments monitor both specific claims and the overall claims
handling procedures of ceding companies.
Customer Base
The Company provides reinsurance products primarily to the largest life insurance companies in the world. In 2021,
the Company’s five largest clients generated approximately $2.7 billion or 20% of the Company’s gross premiums and other
revenues. In addition, thirty-one other clients each generated annual gross premiums and other revenues of $100 million or
more, and the aggregate gross premiums and other revenues from these clients represented approximately 46% of the
Company’s gross premiums and other revenues. No individual client generated 10% or more of the Company’s total gross
premiums and other revenues. For the purpose of this disclosure, companies that are within the same insurance holding
company structure are combined.
Competition
New reinsurance opportunities continue to be highly price competitive; however, companies that consistently win
business are financially strong, provide flexible terms and conditions, have a positive reputation, deliver excellent service, and
demonstrate execution certainty and a long-term commitment to the business underwritten. The Company competes globally
with other reinsurance companies, traditional insurance providers, private equity firms and other financial services companies.
Human Capital Resources
The Company continuously strives to fulfill its purpose; to make financial protection accessible to all. The Company’s
global team of approximately 3,500 employees consistently develop innovative solutions for its clients, deliver long-term
returns for its investors, and create a meaningful impact in the communities where its employees live and work. Driving the
Company’s success is a shared commitment to pursue work that matters, to serve an industry with a strong social mission, and
to create sustainable long-term value for all its stakeholders.
The Company’s purpose has been especially evident while it protects the financial security of individuals and families
affected by COVID-19. Hundreds of millions of people worldwide rely on the financial protection that insurance companies
provide in times of uncertainty, and the Company remains committed to helping its clients fulfill its industry’s noble purpose.
Effects of COVID-19 on the Company’s Workforce
The majority of the Company’s global employees continue to be remote workers, making remote work the norm
throughout 2021. While where employees work has changed, the Company’s employees continue to be committed and highly
productive, remaining connected and engaged.
Throughout 2021, the Company maintained its focus on the physical and mental wellbeing of its employees. The
Company continued to focus on a broad Care Strategy to ensure a sense of community and enhance collaboration among the
Company’s global teams while working remotely and social distancing. The Company’s Care Strategy addressed diverse topics;
15
from physical and mental health and wellness (professionally and personally), to working effectively in a virtual world, to
managing dispersed teams and finding the right work/life balance.
The Company’s Culture
The Company’s people, the way they work and the culture they cultivate are all key differentiators. The Company’s
employees describe RGA as a collaborative, results-driven, customer-centric, and an ethical organization.
Work at the Company is undertaken in an environment of high collaboration, which encourages innovation and
entrepreneurship and demands the highest integrity. The Company’s practice of combining technical expertise with curiosity
and creativity, in partnership with its clients, defines the way it works internally and externally.
From the beginning, the Company was built on trust. Nearly 50 years later, trusted relationships – starting with its
employees and extending to its clients, partners, and investors – remain the foundation of its success. In 2021, RGA’s company-
wide engagement survey demonstrated its employees’ trust in what it does. Trust throughout the global workforce at the
Company rated in the 90th percentile among the hundreds of other companies participating in the survey, which was conducted
by a globally recognized workforce consulting firm. The Company honors its commitments to its employees, who in turn
enable the Company to fulfill its commitments to its clients, shareholders, and society.
The Company’s engagement score was equal when comparing genders globally. The overall engagement score for
U.S. employees in under-represented groups was a one percentage point better than the overall U.S. average. Results from the
global engagement survey, together with the Company’s retention rates, highlight the commitment of the Company’s Board of
Directors and executive leadership team to its employees and its employees’ commitment to the Company.
Talent Attraction, Retention and Development
As a global reinsurer, the Company’s continued growth and vitality is built on attracting, selecting, developing and
retaining exceptional talent in order to execute its strategy and to continue producing innovative solutions for its clients. The
Company’s focus on employee retention has resulted in a three-year average annual voluntary attrition rate of 6.8% globally.
The Company’s hybrid approach to flexible work arrangements (“WorkWise”), prioritizes meeting business
requirements while accommodating personal work styles in how, when, and where its employees work. Living RGA’s purpose
and fulfilling its commitments to partners, employees and employee’s communities is its priority. WorkWise strengthens the
Company’s ability to attract and retain individuals to the organization. The many ways that the Company’s teams connect,
whether remote, hybrid, or in-person, reflect its culture and commitment to growth and innovation.
The Company invests significant resources to create and sustain a learning environment, ensuring its employees at all
levels continue to develop professionally throughout their career with the Company. While technical expertise is critical, the
Company also focuses on the development of highly effective interpersonal and leadership skills.
Compensation and Benefits and Pay Equity
The Company is committed to fostering a company culture that is inclusive, collaborative, and socially responsible.
The Company is strengthened by its diverse workforce and recognizes that its employees are its greatest asset.
The Company’s compensation programs, comprised of salary together with short and long-term incentives, strike a
balance between external market competitiveness and internal equity, balancing global consistency with local market variations.
This balance is achieved through consistent application of program standards on a global basis, while targeting compensation at
competitive levels in the markets where it competes for talent.
The Company’s benefit programs are an integral part of its employees’ total reward package. Benefits are aligned with
local market practices and include healthcare, retirement and savings, education assistance, flexible work programs, employee
assistance programs, wellness programs, and parental leave programs, amongst others.
The Company has long been committed to ensuring equal pay for equal work. The Company-wide pay equity study,
conducted by a third-party consultant, considered the average pay of females to males in comparable roles. The study analyzed
the pay practices of all U.S. and non-U.S. employees in countries with more than 50 employees, representing approximately
90% of RGA’s employees worldwide. Each year the results vary slightly due to changes in the employee population. Results
dropped slightly this year with women paid 99.4% of what men are paid for comparable jobs. In addition, in the U.S., when
using the same methodology of comparable roles, the average non-Caucasian to Caucasian pay ratio was 100.0%.
The Company is committed to gender and racial pay equity and will continue to review pay equity annually, and take
action as required, to ensure its compensation programs remain aligned with its commitment to diversity, equity, and inclusion.
Ensuring the Company’s compensation practices are equitable is imperative to maintain the Company’s culture and to ensure
fair treatment of its employees.
16
Corporate Social Responsibility, Diversity, Equity and Inclusion
The Company believes that creating long-term value for its stakeholders implicitly requires enacting and executing
sustainable business practices and strategies that, while delivering competitive returns, also take into account environmental,
social and governance ("ESG") issues. The Company strives to govern itself in a sustainable manner that recognizes the need
for strong governance, effective management systems and robust controls alongside its long-term operational goals and
strategies. The Company understands that it has a responsibility to monitor and control its ecological and societal impact and
adopt responsible practices on ESG issues in addition to its obligations regarding corporate strategy, risks, opportunities, and
performance.
The Company strives to cultivate an environment in which diverse backgrounds, experiences, and perspectives are
welcomed and employees feel comfortable and encouraged to discuss diversity, equity, and inclusion topics. The Company’s
diversity, equity, and inclusion initiatives are focused in four areas: (i) enabling an inclusive workplace; (ii) attracting, retaining
and engaging a diverse workforce; (iii) fostering diverse partnerships in the communities where the Company operates; and (iv)
ensuring accountability and responsibility throughout the Company. 100% of the Company’s global employees have
undertaken Everyday (Unconscious) Bias training, and 82% of its senior leaders have completed the Company’s Inclusive
Leadership course. The Company has integrated diversity, equity, and inclusion training into its leadership development
offerings and expanded education offerings to include Mitigating Bias in Interviewing, Psychological Safety, and new manager
training. The Company’s education and accountability initiatives are the foundation of its efforts to promote diversity, equity,
and inclusion.
The Company’s Diversity, Equity and Inclusion Councils proactively leverage diverse teams around the world and
serve as thought leaders for the Company to advance diversity, equity, and inclusion. They work to implement the Company’s
diversity, equity, and inclusion strategy and policies and advise on the Company’s diversity, equity, and inclusion needs and the
progress of these initiatives globally.
C.
Segments
The Company obtains substantially all of its revenues through reinsurance agreements that cover a portfolio of life and
health insurance products, including term life, credit life, universal life, whole life, group life and health, joint and last survivor
insurance, critical illness, disability, longevity as well as asset-intensive (e.g., annuities), financial reinsurance and other capital
motivated solutions. Generally, the Company, through various subsidiaries, has provided reinsurance for mortality, morbidity,
lapse and investment-related risks associated with such products. With respect to asset-intensive products, the Company has
also provided reinsurance for investment-related risks.
Additional information regarding the operations of the Company’s segments and geographic operations is contained in
Note 15 – “Segment Information” in the Notes to Consolidated Financial Statements.
U.S. and Latin America Operations
The U.S. and Latin America operations market traditional life and health reinsurance, reinsurance of asset-intensive
products, financial reinsurance and other capital motivated solutions, primarily to U.S. life insurance companies.
Traditional Reinsurance
The U.S. and Latin America Traditional segment provides individual and group life and health reinsurance, including
long term care, to domestic clients for a variety of products through yearly renewable term agreements, coinsurance, and
modified coinsurance. 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. Reinsurance premiums are paid in accordance with the treaty,
regardless of the premium mode for the underlying primary insurance. This business is made up of facultative and automatic
treaty business.
Automatic business is generated pursuant to treaties that generally require the underlying policies to meet the ceding
company’s underwriting criteria, although in certain cases such policies may be rated substandard. In contrast to facultative
reinsurance, reinsurers do not engage in underwriting assessments of each risk assumed through an automatic treaty.
As the Company does not apply its underwriting standards to each policy ceded to it under automatic treaties, the U.S.
and Latin America operations generally require ceding companies to retain a portion of the business written on an automatic
basis, thereby increasing the ceding companies’ incentives to underwrite risks with due care and, when appropriate, to contest
claims diligently.
The U.S. and Latin America 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
17
characteristics of the proposed insured). The U.S. and Latin America 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 also serves as an effective means of expanding the
U.S. and Latin America operations’ automatic business.
Only a portion of approved facultative applications ultimately result in reinsurance, as 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 Company tracks the percentage
of declined and placed facultative applications on a client-by-client basis and generally works with clients to seek to maintain
such percentages at levels deemed acceptable. As the Company applies its underwriting standards to each application submitted
to it facultatively, it generally does not require ceding companies to retain a portion of the underlying risk when business is
written on a facultative basis.
In addition, several of the Company’s U.S. and Latin America 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.
Financial Solutions – Asset-Intensive Reinsurance
The Company’s U.S. and Latin America Asset-Intensive operations primarily concentrate on the investment risk
within underlying annuities and other investment oriented products. These reinsurance agreements are mostly structured as
coinsurance, with some on a coinsurance with funds withheld, or modified coinsurance of primarily investment risk such that
the Company recognizes profits or losses primarily from the spread between the investment earnings and amounts credited on
the underlying contract liabilities.
The Company also provides guaranteed investment contracts to retirement plans that include investment-only, stable
value wrap products. The assets are owned by the trustees of such plans, who invest the assets under the terms of investment
guidelines to which the Company agrees. The contracts contain a guarantee of a minimum rate of return on participant balances
supported by the underlying assets, and a guarantee of liquidity to meet certain participant-initiated plan cash flow
requirements.
The Company primarily targets highly rated, financially secure companies as clients for asset-intensive business.
These companies may wish to limit their own exposure to certain products or blocks of business. Ongoing asset/liability
analysis is required for the management of asset-intensive business. The Company’s analysis is a cross discipline analysis
between the Company’s underwriting, actuarial, investment and other departments throughout the organization and is
completed in conjunction with an asset/liability analysis performed by the ceding companies.
Financial Solutions – Capital Solutions
The Company’s U.S. and Latin America Capital Solutions operations assist ceding companies in meeting applicable
regulatory requirements while enhancing their financial strength and regulatory surplus position. The Company assumes
regulatory insurance liabilities from the ceding companies. In addition, the Company has committed to provide statutory reserve
or asset support to third parties by funding loans or assuming real estate leases if certain defined events occur. Generally, such
amounts are offset by receivables from ceding companies that are repaid by the future regulatory profits from the reinsured
block of business. The Company structures its financial reinsurance and other capital solution transactions so that the projected
future profits of the underlying reinsured business significantly exceed the amount of regulatory surplus provided to the ceding
company.
The Company primarily targets highly rated insurance companies for capital solutions business. A careful analysis is
performed before providing any regulatory surplus enhancement to the ceding company. This analysis is intended to ensure that
the Company understands the risks of the underlying insurance product and that the transaction has a high likelihood of being
repaid through the future regulatory profits of the underlying business. If the future regulatory profits of the business are not
sufficient to repay the Company or if the ceding company becomes financially distressed and is unable to make payments under
the treaty, the Company may incur losses. A staff of actuaries and accountants track experience for each treaty on a quarterly
basis in comparison to models of expected results.
Customer Base
The U.S. and Latin America operations market life reinsurance and financial solutions primarily to U.S. life insurance
companies. The treaties underlying this business 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 2021, the five largest clients generated approximately $1.7 billion or 24% of U.S. and Latin America
operation’s gross premiums and other revenues. In addition, 50 other clients each generated annual gross premiums and other
revenues of $20 million or more, and the aggregate gross premiums from these clients represented approximately 68% of U.S.
18
and Latin America operation’s gross premiums and other revenues. For the purpose of this disclosure, companies that are within
the same insurance holding company structure are combined.
Canada Operations
The Company operates in Canada primarily through RGA Canada. RGA Canada employs its own underwriting,
actuarial, claims, pricing, accounting, systems, marketing and administrative staff in offices located in Montreal and Toronto.
Traditional Reinsurance
RGA Canada assists clients with capital management and mortality and morbidity risk management and is primarily
engaged in individual life reinsurance, and to a lesser extent creditor, group life and health, critical illness and disability
reinsurance, through yearly renewable term and coinsurance agreements. Creditor insurance covers the outstanding balance on
personal, mortgage or commercial loans in the event of death, disability or critical illness and is generally shorter in duration
than individual life insurance.
The business is generally composed of facultative and automatic treaty business. Automatic business is generated
pursuant to treaties that generally require the underlying policies to meet the ceding company’s underwriting criteria, although
in certain cases such policies may be rated substandard. In contrast to facultative reinsurance, reinsurers do not engage in
underwriting assessments of each risk assumed through an automatic treaty.
RGA Canada generally requires ceding companies to retain a portion of the business written on an automatic basis,
thereby increasing the ceding companies’ incentives to underwrite risks with due care and, when appropriate, to contest claims
diligently.
Facultative reinsurance involves the assessment of the risks from a medical and financial perspective. RGA Canada is
recognized as a leader in facultative reinsurance, and this has served to maintain a strong market share on automatic business.
RGA Canada supports over half the companies active in the living benefits and group insurance markets. Solid claims
management expertise and innovative product development capabilities support a growing share of these markets.
Financial Solutions
The Company’s Canada Financial Solutions operations primarily concentrates on the investment and longevity risk
within underlying annuities and other investment oriented products. These reinsurance agreements are mostly structured as
coinsurance, with some on a coinsurance with funds withheld, or modified coinsurance of primarily investment risk such that
the Company recognizes profits or losses primarily from the spread between the investment earnings and amounts credited on
the underlying contract liabilities. Canada’s Financial Solutions operations also provide capital solutions to assist ceding
companies in meeting applicable regulatory requirements while enhancing their financial strength and regulatory position.
The Company primarily targets highly rated, financially secure companies as clients for its financial solutions
business. These companies may wish to limit their own exposure to certain products or blocks of business. Ongoing asset/
liability analysis is required for the management of asset-intensive business. The Company’s analysis is a cross discipline
analysis between the Company’s underwriting, actuarial, investment and other departments throughout the organization and is
completed in conjunction with an asset/liability analysis performed by the ceding companies.
Customer Base
Clients include most of the life insurers in Canada, although the number of life insurers is much smaller compared to
the U.S. In 2021, the five largest clients generated approximately $798 million or 59% of Canada operation’s gross premiums
and other revenues. In addition, 11 other clients each generated annual gross premiums and other revenues of $20 million or
more, and the aggregate gross premiums and other revenues from these clients represented approximately 35% of Canada
operation’s gross premiums and other revenues. For the purpose of this disclosure, companies that are within the same
insurance holding company structure are combined.
Europe, Middle East and Africa Operations
The Europe, Middle East and Africa (“EMEA”) operations serve clients from subsidiaries, licensed branch offices and/
or representative offices primarily located in the United Kingdom (UK), Continental Europe, the Middle East, and South
Africa. EMEA’s office in the Middle East is located in the United Arab Emirates (“UAE”).
EMEA’s operations in the UK, Continental Europe, South Africa and the Middle East employ their own underwriting,
actuarial, claims, pricing, accounting, marketing and administration staffs with additional support services provided by the
Company’s staff in other geographical locations.
19
Traditional Reinsurance
The principal types of reinsurance for this segment include individual and group life and health, critical illness,
disability and underwritten annuities. Traditional reinsurance in the UK, South Africa, Italy and Germany consists
predominantly of long term contracts, which are not terminable for existing risk without recapture or natural expiry, whereas in
other markets within the region contracts are predominantly short term, renewing annually.
Financial Solutions
The Company’s EMEA Financial Solutions segment includes longevity, asset-intensive and financial reinsurance.
Longevity reinsurance takes the form of closed block annuity reinsurance and longevity swap structures. Asset-intensive
business for this segment consists of coinsurance of payout annuities. Financial reinsurance assists ceding companies in
meeting applicable regulatory requirements while enhancing their financial strength. Financial reinsurance transactions do not
qualify as reinsurance under U.S. GAAP, due to the low risk nature of the transactions and are reported in accordance with
deposit accounting guidelines.
Customer Base
In 2021, the five largest clients generated approximately $1.0 billion or 44% of EMEA operation’s gross premiums
and other revenues. In addition, 20 other clients each generated annual gross premiums and other revenues of $20 million or
more, and the aggregate gross premiums and other revenues from these clients represented approximately 37% of EMEA
operation’s gross premiums and other revenues. For the purpose of this disclosure, companies that are within the same
insurance holding company structure are combined.
Asia Pacific Operations
The Asia Pacific operations serve clients from subsidiaries, licensed branch offices and/or representative offices
throughout Asia and Australia.
The Asian offices provide full reinsurance services with additional support services provided by the Company’s staff
in the U.S. and Canada. In addition, a regional team based in Hong Kong has been established in recent years to provide
support to the Asian offices to accommodate business growth in the region. RGA Australia employs its own underwriting,
actuarial, claims, pricing, accounting, systems, marketing, and administration service.
Traditional Reinsurance
The principal types of reinsurance for this segment written through yearly renewable term and coinsurance treaties
include:
•
•
•
•
Individual and group life and health,
Critical illness, which provides a benefit in the event of the diagnosis of pre-defined critical illness
Disability, which provides income replacement benefits in the event the policyholder becomes disabled due to accident
or illness
Superannuation which
the Australian government mandated compulsory retirement savings program.
Superannuation funds accumulate retirement funds for employees, and, in addition, typically offer life and disability
insurance coverage.
is
Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and, in
some markets, group risks.
Financial Solutions
The Asia Pacific Financial Solutions segment includes financial reinsurance, asset-intensive and certain disability, and
life and health blocks that contain material investment risks. Financial reinsurance assists ceding companies in meeting
applicable regulatory requirements while enhancing their financial strength. Financial reinsurance transactions do not qualify
as reinsurance under GAAP, due to the remote risk nature of the transactions and are reported in accordance with deposit
accounting guidelines. Asset-intensive business for this segment primarily concentrates on the investment risk within
underlying annuities and life insurance policies. Asset-intensive transactions are mostly structured to take on investment risk
such that the Company recognizes profits or losses primarily from the spread between the investment earnings and the interest
credited on the underlying annuity contract liabilities.
Customer Base
In 2021, the five largest clients generated approximately $1.4 billion or 47% of Asia Pacific operation’s gross
premiums and other revenues. In addition, 24 other clients each generated annual gross premiums and other revenues of $20
20
million or more, and the aggregate gross premiums and other revenues from these clients represented approximately 38% of
Asia Pacific operation’s gross premiums and other revenues. For the purpose of this disclosure, companies that are within the
same insurance holding company structure are combined.
Corporate and Other
Corporate and Other revenues primarily include investment income from unallocated invested assets, investment
related gains and losses and service fees. Corporate and Other expenses consist of the offset to capital charges allocated to the
operating segments within the policy acquisition costs and other insurance income line item, unallocated overhead and
executive costs, interest expense related to debt, and the investment income and expense associated with the Company’s
collateral finance and securitization transactions and service business expenses. Additionally, Corporate and Other includes
results from certain wholly-owned subsidiaries, such as RGAX and joint ventures that, among other activities, develop and
market technology, and provide consulting and outsourcing solutions for the insurance and reinsurance industries. The
Company has increased its investment and expenditures in this area in an effort to both support its clients and accelerate the
development of new solutions and services to increase customer engagement within the life insurance industry and hence
generate new future revenue streams.
D.
Financial Information About Foreign Operations
The Company’s foreign operations are primarily in Canada, Asia Pacific, EMEA and Latin America. Revenue, income
(loss) before income taxes, which include investment related gains (losses), interest expense, depreciation and amortization, and
identifiable assets attributable to these geographic regions are identified in Note 15 – “Segment Information” in the Notes to
Consolidated Financial Statements. Although there are risks inherent to foreign operations, such as currency fluctuations and
restrictions on the movement of funds, as described in Item 1A – “Risk Factors”, the Company’s financial position and results
of operations have not been materially adversely affected thereby to date.
E.
Available Information
Copies of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-
K, and amendments to those reports are available free of charge through the Company’s website (www.rgare.com) as soon as
reasonably practicable after the Company electronically files such reports with the Securities and Exchange Commission
(www.sec.gov). Information provided on such websites does not constitute part of this Annual Report on Form 10-K.
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Item 1A. RISK FACTORS
In the Risk Factors below, we refer to the Company as “we,” “us,” or “our.” Investing in our securities involves certain
risks. Any of the following risks could materially adversely affect our business, financial condition or results of operations.
These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned
under “Cautionary Note Regarding Forward-Looking Statements” in Item 7 below and the risks of our businesses described
elsewhere in this Annual Report on Form 10-K. Many of these risks are interrelated and occur under similar business and
economic conditions, and the occurrence of certain of them may in turn cause the emergence, or exacerbate the effect, of others.
Such a combination could materially increase the severity of the impact on our business, liquidity, financial condition and
results of operations.
Risks Related to COVID-19
Our business, results of operations and financial condition have been, and will likely continue to be, adversely affected
by the COVID-19 pandemic and the response thereto.
The ongoing COVID-19 pandemic has increased mortality rates in certain jurisdictions and populations. Additionally,
the COVID-19 pandemic and the response thereto has caused significant disruption in the international and U.S. economies and
financial markets and has severely impacted, and will likely continue to severely impact, global economic conditions, which
may result in substantial volatility in the global financial markets, increased unemployment and operational challenges such as
the temporary closures of businesses, sheltering-in-place directives and increased remote work protocols. Governments and
central banks around the world have reacted to the economic crisis caused by the pandemic by implementing stimulus and
liquidity programs and cutting interest rates and are considering taking similar additional actions, though it is unclear whether
any of these actions will be successful in countering the economic disruption. These reactions have increased government
liabilities and balance sheets, which has been partially responsible for inflation in the United States and other jurisdictions. As
a result, the U.S. Federal Reserve and other central banks have raised, or are considering raising interest rates. Furthermore, it
is unclear as to how governments and central banks will respond in the future given the potential economic stresses related and
unrelated to the COVID-19 pandemic, including inflation, supply chain disruptions and other economic and political issues.
Depending on the length of the pandemic, the availability, effectiveness and use of treatments and vaccines, and the extent and
success of actions by governments and central banks, the adverse mortality rates and impact on the global economy may
deepen, and our results of operations and financial condition in future quarters will continue to be adversely affected. The
COVID-19 pandemic and the response thereto has adversely affected, and/or will likely adversely affect, us in the following
areas:
Insurance risks, including mortality and morbidity claims. At this time, we cannot predict the ultimate number of
claims and financial impact resulting from the COVID-19 pandemic and the response thereto. Actual claims and financial
impact from these events could vary materially from current estimates due to several factors, including the inherent
uncertainties in making such determinations and the evolving nature of the pandemic and the availability, effectiveness and use
of treatments and vaccines. Furthermore, the long-term health consequences for individuals who have recovered from
COVID-19 and the related impact, if any, on mortality and morbidity are all unknown. Mortality or morbidity experience that is
less favorable than the assumptions used in pricing our reinsurance agreements, as a result of the COVID-19 pandemic or
otherwise, has negatively impacted and in the future could negatively impact our financial condition and results of operations.
In addition, increased economic uncertainty and increased unemployment resulting from the economic impacts of the pandemic
may result in policyholders seeking sources of liquidity and withdrawing at rates greater than previously expected. If
policyholder lapse and surrender rates significantly exceed expectations, it could have a material adverse effect on our business,
results of operations and financial condition.
Degradation of general economic conditions. The COVID-19 pandemic and the extraordinary measures put in place to
address it have caused significant economic and financial turmoil both in the U.S. and around the world. These conditions are
expected to continue in the near term and may worsen. Our results of operations, financial condition, cash flows and statutory
capital position are materially affected by conditions in the global capital markets and economy generally. Depending on the
length of the pandemic, the availability, effectiveness and use of treatments and vaccines, and the extent and success of actions
by governments and central banks to counter the economic disruption, the adverse impact on the global economy may deepen,
and our business, results of operations and financial condition will continue to be adversely affected.
Investment results. Our investment portfolio (and, specifically, the valuations of investment assets we hold) has been,
and may continue to be, adversely affected as a result of market developments from the COVID-19 pandemic and uncertainty
regarding its outcome and related impacts on the economy. Moreover, changes in interest rates, reduced liquidity in the
financial markets or a continued slowdown in U.S. or global economic conditions have and in the future may also adversely
affect the values and cash flows of these assets. Our corporate fixed income portfolio has been and in the future may be
adversely impacted by delayed principal or interest payments, ratings downgrades, increased bankruptcies and credit spread
widening in distressed industries and individual companies. Our investments in mortgage loans and mortgage-backed securities
22
have been and in the future could be negatively affected by delays or failures of borrowers to make payments of principal and
interest when due or delays or moratoriums on foreclosures or enforcement actions with respect to delinquent or defaulted
mortgages. Further, a continued low interest rate environment, including as a result of market developments from
the COVID-19 pandemic and the response thereto, would continue to put downward pressure on the average yield earned on
our investments, negatively impacting our investment income and results of operations in the future. Market dislocations,
decreases in observable market activity or unavailability of information, in each case, arising from the pandemic, may restrict
our access to key inputs used to derive certain estimates and assumptions made in connection with financial reporting or
otherwise, including estimates and changes in long term macro-economic assumptions relating to accounting for current
expected credit losses, more commonly referred to as “CECL.”
Capital, liquidity and collateral. The severe impact on global economic conditions caused by the COVID-19 pandemic
and the response thereto has negatively impacted and in the future could negatively impact our financial condition, including
possible constraints on our capital and liquidity, as well as an increased cost of capital and possible changes or downgrades to
our credit ratings. The current disruptions, uncertainty and volatility in the capital and credit markets may limit our access to
capital, and limit the availability of collateral, required to operate our business, most significantly our reinsurance operations.
The availability of collateral and the related cost of such collateral affects the type and volume of business we reinsure and
could increase our costs.
Possible ratings downgrade. A downgrade in our ratings or in the ratings of our reinsurance subsidiaries, whether
caused by company-specific factors or factors related to the COVID-19 pandemic, general economic conditions and/or the
insurance industry could adversely affect us. A downgrade in the rating of RGA or any of our rated subsidiaries could increase
our cost of capital and adversely affect our ability to raise capital to facilitate operations and growth. Upon certain downgrade
events, some of our reinsurance contracts would either permit our client ceding insurers to terminate such reinsurance contracts
or require us to post collateral to secure our obligations under these reinsurance contracts, either of which could negatively
impact our ability to conduct business and our results of operations. Any downgrade in the ratings of our reinsurance
subsidiaries could also adversely affect their ability to sell products, retain existing business and compete for attractive
acquisition opportunities. Actions taken by ratings agencies, including as a result of the COVID-19 pandemic, the response
thereto and the significant economic and financial turmoil caused thereby, may result in a material adverse effect on our
business, results of operations and financial condition.
Adverse legislative or regulatory action. Government actions, both in the U.S. and internationally, to address and
contain the impact of the COVID-19 pandemic may adversely affect us. Such actions could result in additional regulation or
restrictions affecting the conduct of our business in the future. For example, our clients may be subject to legislative and
regulatory action that impacts their ability to collect premiums or cancel policies, which may affect our clients’ performance
under reinsurance agreements with us. It is also possible that changes in economic conditions and steps taken by governments
in response to COVID-19 could require an increase in taxes, which would adversely impact our results of operations.
Premiums and other income. We expect the impact of COVID-19 on general economic activity to negatively impact
our premiums, fee income and market-related revenues. The pandemic and government directives around the world responding
thereto has negatively impacted and in the future may further negatively impact our ability to generate new business premiums
and may delay our planned entry into, or expansion of, investments in new and emerging markets.
Operations. We are taking precautions to protect the safety and well-being of our employees, service providers and
clients. However, no assurance can be given that the steps being taken will be adequate or appropriate. Our operations could be
disrupted if key members of our senior management or a significant percentage of our workforce, or the workforce of our
service providers or clients, are unable to continue to work because of illness, government directives or otherwise. Having
shifted to remote work arrangements, we may experience reductions in our operating effectiveness and face increased
operational risk, including but not limited to cybersecurity attacks or data security incidents. In addition, we rely on the
performance of others, including our insurance company clients, retrocessionaires and service providers, and their failure to
perform in a satisfactory manner as a result of the COVID-19 pandemic and the response thereto could negatively affect our
operations
As a result of the above risks, COVID-19 and the response thereto could continue to materially and adversely impact
our business, results of operation and financial condition. The extent to which COVID-19, and the related global economic
crisis, will affect our businesses, results of operations and financial condition, and capital and liquidity over time, will depend
on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and
any recovery period, the availability, effectiveness and use of treatments and vaccines, future actions taken by governmental
authorities, central banks and other third parties in response to the pandemic, and the effects on our clients, counterparties,
employees and third-party service providers. Moreover, the effects of COVID-19 and the response thereto will heighten the
other risks described below and in any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K.
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We utilize assumptions, estimates and models to evaluate the potential impact on our business, results of operations and
financial condition as a result of the COVID-19 pandemic and the response thereto. If actual events differ materially
from those assumptions, estimates or models, our potential exposure to mortality claims and investment portfolio losses
could be materially higher than those reflected in our capital plans, and our business, financial condition, and results of
operations could be materially adversely affected.
We utilize assumptions, estimates and models to evaluate the potential impact on our business, results of operations
and financial condition as a result of COVID-19 and the response thereto, including developing scenarios to evaluate our
potential exposure to mortality claims, potential investment portfolio losses and other risks associated with our assets and
liabilities. The scenarios and related analyses are subject to various assumptions, professional judgment, uncertainties and the
inherent limitations of any statistical analysis, including the use and quality of historical internal and industry data.
Consequently, actual losses may differ materially from what the scenarios may illustrate. This potential difference could be
even greater for events with limited or unmodelled annual frequency, such as COVID-19 and the response thereto.
More specifically, we evaluate our potential exposure to mortality claims by developing a range of scenarios involving
assumptions and estimates relating to a number of variables, such as country-specific circumstances, measures by public and
private institutions, impacts of COVID-19 on all other causes of death, the development and timing of effective treatments for
COVID-19 and the effectiveness and adoption of vaccines for COVID-19, comorbidities, number of deaths by region or
country (and the variability thereof), the duration and pattern of the pandemic, geography-specific institutional and individual
mitigation efforts, medical capacity, and other factors. We also estimated adjustments to reflect, among other factors, the
favorable age distribution of our insured population and the better health profile and socio-economic status of insured lives as
compared to the general population. However, a number of other factors have not been considered, such as smoking status,
residential population density, geography-specific testing and interventions and their effectiveness or geography, culture or
other country-specific factors. Further, the scenarios do not consider impacts on morbidity claims. Each assumption, estimate or
risk not included in the scenarios introduces uncertainty. We also evaluate potential losses from our investment portfolio due to
the pandemic based on stress scenarios based on assumptions and estimates relating to a range of factors that are subject to
significant uncertainties, including, among others, the magnitude and duration of the economic downturn, ratings downgrades,
bankruptcies and credit spread widening. In addition, we may not achieve the earnings generation that we expect, and we may
not be able to issue additional debt or access other capital management tools on terms satisfactory to us, or at all. Actual events
may differ materially from those assumptions and estimates; consequently, we could incur losses exceeding those reflected in
our scenarios and related analysis, and our business, financial condition, and results of operations could be materially adversely
affected.
We are operating in an unprecedented period of uncertainty, and while we are attempting to evaluate how the
COVID-19 pandemic is impacting general population deaths, whether specifically attributed to COVID-19 or otherwise, and
how such deaths will translate into mortality claims for our business over time, we are unable to predict the number of
COVID-19 deaths that will ultimately occur worldwide, in any particular geography or in our insured population, or potential
losses in our investment portfolio. Further, we do not currently have enough information to ascertain the likelihood of the
assumptions or estimates related to our mortality and investment loss scenarios. Accordingly, any of our scenarios do not
represent forecasts or projections of actual future events or performance. They should not be construed as financial guidance,
and should not be relied on as such.
As a result of the factors, uncertainties and contingencies described above, our reliance on assumptions, estimates and
data used to evaluate our potential exposure to mortality claims and potential losses from our investment portfolio related to the
COVID-19 pandemic are subject to a high degree of uncertainty that could result in actual losses that are materially different
from those reflected in the scenarios used to develop our capital plans, and our business, financial condition, and results of
operations could be materially adversely affected.
Risks Related to Our Business
We make assumptions when pricing our products relating to mortality, morbidity, lapsation, investment returns and
expenses, and significant deviations in experience could negatively affect our financial condition and results of
operations.
Our life reinsurance contracts expose us to mortality, morbidity and lapse risk. Our risk analysis and underwriting
processes are designed with the objective of controlling the quality of the business and establishing appropriate pricing for the
risks we assume. Among other things, these processes rely heavily on our underwriting, our analysis of mortality, longevity and
morbidity trends, lapse rates, expenses and our understanding of medical impairments and their effect on mortality, longevity or
morbidity.
We expect mortality, longevity, morbidity and lapse experience to fluctuate somewhat from period to period, but
believe they should remain reasonably predictable over a period of many years. Mortality, longevity, morbidity or lapse
experience that is less favorable than the rates that we used in pricing a reinsurance agreement may cause our net income to be
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less than otherwise expected because the premiums we receive for the risks we assume may not be sufficient to cover the claims
and profit margin. Furthermore, even if the total benefits paid over the life of the contract do not exceed the expected amount,
unexpected increases in the incidence of deaths or illness can cause us to pay more benefits in a given reporting period than
expected, adversely affecting our net income in any particular reporting period. Likewise, adverse experience could impair our
ability to offset certain unamortized deferred acquisition costs and adversely affect our net income in any particular reporting
period. We perform annual tests to establish that deferred policy acquisition costs remain recoverable at all times. These tests
require us to make a significant number of assumptions. If our financial performance significantly deteriorates to the point
where a premium deficiency exists, a cumulative charge to current operations will be recorded, which may adversely affect our
net income in a particular reporting period.
We regularly review our reserves and associated assumptions as part of our ongoing assessment of our business
performance and risks. If we conclude that our reserves are insufficient to cover actual or expected policy and contract benefits
and claim payments as a result of changes in experience, assumptions or otherwise, we would be required to increase our
reserves and incur charges in the period in which we make the determination. The amounts of such increases may be significant
and this could materially adversely affect our financial condition and results of operations and may require us to generate or
fund additional capital in our businesses.
Our financial condition and results of operations may also be adversely affected if our actual investment returns and
expenses differ from our pricing and reserve assumptions. Changes in economic conditions may lead to changes in market
interest rates or changes in our investment strategies, either of which could cause our actual investment returns and expenses to
differ from our pricing and reserve assumptions.
Changes in accounting standards may adversely affect our reported results of operations and financial condition.
The Company’s consolidated financial statements are prepared in conformity with GAAP. If we are required to adopt
revised accounting standards in the future, it may adversely affect our reported results of operations and financial condition. For
a discussion of the impact of accounting pronouncements issued but not yet implemented, see “New Accounting
Pronouncements” in Note 2 – “Significant Accounting Principles and Pronouncements” in the Notes to the Consolidated
Financial Statements. In August 2018, the Financial Accounting Standards Board issued guidance that will significantly change
the accounting for long-duration insurance contracts. This guidance will become effective for the Company on January 1, 2023.
We are still evaluating the impact this guidance will have on our consolidated financial statements, but it will likely have a
material impact on our reported profitability, financial position and financial ratios. In addition, the required adoption of new
accounting standards may result in significant incremental costs associated with initial implementation and ongoing
compliance.
Our reinsurance subsidiaries are highly regulated, and changes in these regulations could negatively affect our business.
Our reinsurance subsidiaries are subject to government regulation in each of the jurisdictions in which they are
licensed or authorized to do business. Governmental agencies have broad administrative power to regulate many aspects of the
reinsurance business, which may include reinsurance terms and capital adequacy. These agencies are concerned primarily with
the protection of policyholders and their direct insurers rather than shareholders or holders of debt securities of reinsurance
companies. Moreover, insurance laws and regulations, among other things, establish minimum capital requirements and limit
the amount of dividends, tax distributions and other payments our reinsurance subsidiaries can make without prior regulatory
approval, and impose restrictions on the amount and type of investments we may hold.
We operate in the United States and in many jurisdictions around the world. We are subject to the laws and insurance
regulations of the United States. Additionally, a substantial portion of our operations occur outside of the U.S. These
international businesses are subject to the insurance, tax and other laws and regulations in the countries in which they are
organized and in which they operate. These laws and regulations may apply heightened scrutiny to non-domestic companies,
which can adversely affect our operations, liquidity, profitability and regulatory capital. Foreign governments and regulatory
bodies from time to time consider legislation and regulations that could subject us to new or different requirements and such
changes could negatively impact our operations in the relevant jurisdictions. See “Item 1. Business – B. Corporate Structure –
Regulation” for a summary of certain U.S. state and federal laws and foreign laws and regulations applicable to our business.
Our failure to comply with these and other laws and regulations could subject us to penalties from governmental or self-
regulatory authorities, costs associated with remedying any such failure or related claims, harm to our business relationships
and reputation, or interrupt our operations, any of which could negatively impact our financial position and results of
operations.
A downgrade in our ratings or in the ratings of our reinsurance subsidiaries could adversely affect our ability to
compete.
Our financial strength and credit ratings are important factors in our competitive position. Rating organizations
periodically review the financial performance and condition of insurers, including our reinsurance subsidiaries. These ratings
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are based on an insurance company’s ability to pay its obligations and are not directed toward the protection of investors.
Rating organizations assign ratings based upon several factors. While most of the factors considered relate to the rated
company, some of the factors relate to general economic conditions and circumstances outside the rated company’s control. The
various rating agencies periodically review and evaluate our capital adequacy in accordance with their established guidelines
and capital models. In order to maintain our existing ratings, we may commit from time to time to manage our capital at levels
commensurate with such guidelines and models. If our capital levels are insufficient to fulfill any such commitments, we could
be required to reduce our risk profile by, for example, retroceding some of our business or by raising additional capital by
issuing debt, hybrid or equity securities. Additionally, rating agencies may make changes in their capital models and rating
methodologies, which could increase the amount of capital required to support our ratings. In December 2021 S&P announced
proposed changes to its rating methodologies. The proposed changes have not been finalized. Thus, the impact, if any, that
these changes may have on our ratings is unknown. Any such actions could have a material adverse impact on our earnings and
financial condition or materially dilute our shareholders’ equity ownership interests.
Any downgrade in the ratings of our reinsurance subsidiaries could adversely affect their ability to sell products, retain
existing business, and compete for attractive acquisition opportunities. The ability of our subsidiaries to write reinsurance is
influenced by their ratings. Ratings are subject to revision or withdrawal at any time by the assigning rating organization. A
rating is not a recommendation to buy, sell or hold securities, and each rating should be evaluated independently of any other
rating.
We believe that the rating agencies consider the financial strength and flexibility of a parent company and its
consolidated operations when assigning a rating to a particular subsidiary of that company. A downgrade in the rating or
outlook of RGA, among other factors, could adversely affect our ability to raise and then contribute capital to our subsidiaries
for the purpose of facilitating their operations and growth. A downgrade could also increase our own cost of capital. For
example, the facility fee and interest rate for our syndicated revolving credit facility are based on our senior long-term debt
ratings. A decrease in those ratings could result in an increase in costs for that credit facility and others. Also, if there is a
downgrade in the rating of RGA, or any of our rated subsidiaries, some of our reinsurance contracts would either permit our
client ceding insurers to terminate such reinsurance contracts or require us to post collateral to secure our obligations under
these reinsurance contracts. Accordingly, we believe a ratings downgrade of RGA, or any of our rated subsidiaries, could
negatively impact our ability to conduct business.
We cannot assure you that actions taken by ratings agencies would not result in a material adverse effect on our
business, financial condition or results of operations. In addition, it is unclear what effect, if any, a ratings change would have
on the price of our securities in the secondary market.
The availability and cost of collateral, including letters of credit, asset trusts and other credit facilities, as well as
regulatory changes relating to the use of captive insurance companies, could adversely affect our business, financial
condition or results of operations.
Regulatory reserve requirements in various jurisdictions in which we operate may be significantly higher than the
reserves required under GAAP. Accordingly, we reinsure, or retrocede, business to affiliated and unaffiliated reinsurers to
reduce the amount of regulatory reserves and capital we are required to hold in certain jurisdictions.
As described in “Item 1. Business – B. Corporate Structure – Regulation – U.S. Regulation”, Regulation XXX and
principles-based reserves (commonly referred to as PBR) requires U.S. life insurance companies to hold a relatively high level
of regulatory reserves on their financial statements for various types of life insurance business. Based on the assumed growth
rate in our current business plan and the increased level of regulatory reserves associated with some of this business, we expect
the amount of our required regulatory reserves and our need to finance these reserves may continue to grow. Changes in laws
and regulations and our ability to retrocede certain business may impact our reserving requirements and thus our financial
condition and results of operations.
As a general matter, for us to reduce regulatory reserves on business that we retrocede, the affiliated or unaffiliated
reinsurer must provide an equal amount of regulatory-compliant collateral. The availability of collateral and the related cost of
such collateral in the future could affect the type and volume of business we reinsure and could increase our costs. We may
need to raise additional capital to support higher regulatory reserves, which could increase our overall cost of capital. If we, or
our retrocessionaires, are unable to obtain or provide sufficient collateral to support our statutory ceded reserves, we may be
required to increase regulatory reserves. In turn, this reserve increase could significantly reduce our statutory capital levels and
adversely affect our ability to satisfy required regulatory capital levels, unless we are able to raise additional capital to
contribute to our operating subsidiaries. Furthermore, term life insurance is a particularly price-sensitive product, and any
increase in insurance premiums charged on these products by life insurance companies, in order to compensate them for the
increased statutory reserve requirements or higher costs of insurance they face, may result in a significant loss of volume in
their life insurance operations, which could, in turn, adversely affect our life reinsurance operations. We cannot assure you that
we will be able to implement actions to mitigate the effect of increasing regulatory reserve requirements.
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In addition, we maintain credit and letter of credit facilities with various financial institutions as a potential source of
collateral and excess liquidity. Our ability to utilize these facilities is conditioned on our satisfaction of covenants and other
requirements contained in the facilities. Our ability to utilize these facilities is also subject to the continued willingness and
ability of the lenders to provide funds or issue letters of credit. Our failure to comply with the covenants in these facilities, or
the failure of the lenders to meet their commitments, would restrict our ability to access these facilities when needed, adversely
affecting our liquidity, financial condition and results of operations.
Changes in the equity markets, interest rates and volatility affect the profitability of variable annuities with guaranteed
living benefits that we reinsure, which may have a material adverse effect on our business and profitability.
We reinsure variable annuity products that include guaranteed minimum living benefits. These include guaranteed
minimum withdrawal benefits, guaranteed minimum accumulation benefits and guaranteed minimum income benefits. The
amount of reserves related to these benefits is based on their fair value and is affected by changes in equity markets, interest
rates and volatility. Accordingly, strong equity markets, increases in interest rates and decreases in volatility will generally
decrease the fair value of the liabilities underlying the benefits.
Conversely, a decrease in the equity markets along with a decrease in interest rates and an increase in volatility will
generally result in an increase in the fair value of the liabilities underlying the benefits, which increases the amount of reserves
that we must carry. Such an increase in reserves would result in a charge to our earnings in the quarter in which we increase our
reserves. We maintain a customized dynamic hedging program that is designed to mitigate the risks associated with income
volatility around the change in reserves on guaranteed benefits. However, hedge positions may not be effective to fully offset
changes in the carrying value of the guarantees due to, among other things, the time lag between changes in such values and
corresponding changes in the hedge positions, high levels of volatility in the equity and derivatives markets, extreme swings in
interest rates, unexpected contract holder behavior, and divergence between the performance of the underlying funds and
hedging indices. These factors, individually or collectively, may have a material adverse effect on our liquidity, capital levels,
financial condition or results of operations.
RGA is an insurance holding company, and our ability to pay principal, interest and dividends on securities is limited.
RGA is an insurance holding company, with our principal assets consisting of the stock of our reinsurance company
subsidiaries, and substantially all of our income is derived from those subsidiaries. Our ability to pay principal and interest on
any debt securities or dividends on any preferred or common stock depends, in part, on the ability of our reinsurance company
subsidiaries, our principal sources of cash flow, to declare and distribute dividends or advance money to RGA. We are not
permitted to pay common stock dividends or make payments of interest or principal on securities that rank equal or junior to
our subordinated debentures and junior subordinated debentures, until we pay any accrued and unpaid interest on such
debentures. Our reinsurance company subsidiaries are subject to various statutory and regulatory restrictions, applicable to
insurance companies generally, that limit the amount of cash dividends, loans and advances that those subsidiaries may pay to
us. Covenants contained in certain of our debt agreements also restrict the ability of certain subsidiaries to pay dividends and
make other distributions or loans to us. In addition, we cannot assure you that more stringent dividend restrictions will not be
adopted, as discussed above under “Our reinsurance subsidiaries are highly regulated, and changes in these regulations could
negatively affect our business.”
As a result of our insurance holding company structure, upon the insolvency, liquidation, reorganization, dissolution or
other winding-up of one of our reinsurance subsidiaries, all creditors of that subsidiary would be entitled to payment in full out
of the assets of such subsidiary before we, as shareholder, would be entitled to any payment. Our subsidiaries would have to
pay their direct creditors in full before our creditors, including holders of common stock, preferred stock or debt securities of
RGA, could receive any payment from the assets of such subsidiaries.
We are exposed to foreign currency risk.
We are a multi-national company with operations in numerous countries and, as a result, are exposed to foreign
currency risk to the extent that exchange rates of foreign currencies are subject to adverse change over time. The U.S. dollar
value of our net investments in foreign operations, our foreign currency transaction settlements and the periodic conversion of
the foreign-denominated earnings to U.S. dollars (our reporting currency) are each subject to adverse foreign exchange rate
movements. A significant portion of our revenues and our fixed maturity securities available-for-sale are denominated in
currencies other than the U.S. dollar. We use hedging strategies and foreign-denominated revenues and investments to fund
foreign-denominated expenses and liabilities when possible to mitigate exposure to foreign currency fluctuations, but these
mitigation efforts may not be successful.
Our international operations involve inherent risks.
A significant portion of our net premiums come from our operations outside of the U.S. One of our strategies is to
grow these international operations. International operations subject us to various inherent risks. We may not be able to manage
the growth of these operations effectively, particularly given the recent rates of growth. Our international operations expose us
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to mortality and morbidity experience, and supply and demand for our products that are specific to these markets as well as
altered exposure to epidemic and pandemic risks that may be difficult to anticipate. In addition to the regulatory and foreign
currency risks identified above, other related risks include uncertainty arising out of foreign government sovereignty over our
international operations, potentially uncertain or adverse tax consequences (including the repatriation of earnings from our non-
U.S. subsidiaries) and potential reduction in opportunities resulting from market access restrictions.
Some of our international operations are in emerging markets where these risks are heightened, and we anticipate that
we will continue to do business in such markets. Our pricing assumptions may be less predictable in emerging markets, and
deviations in actual experience from these assumptions could impact our profitability in these markets. Additionally, lack of
legal certainty and stability in the emerging markets exposes us to increased risk of disruption and adverse or unpredictable
actions by regulators and may make it more difficult for us to enforce our contracts, which may negatively impact our business.
We cannot assure you that we will be able to manage the risks associated with our international operations effectively
or that they will not have an adverse effect on our business, financial condition or results of operations.
We depend on the performance of others, and their failure to perform in a satisfactory manner would negatively affect
us.
In the normal course of business, we seek to limit our exposure to losses from our reinsurance contracts by ceding a
portion of the reinsurance to other insurance enterprises or retrocessionaires. We cannot assure you that these insurance
enterprises or retrocessionaires will be able to fulfill their obligations to us. We are also subject to the risk that our clients will
be unable to fulfill their obligations to us under our reinsurance agreements with them.
We rely upon our insurance company clients to provide timely, accurate information. We may experience volatility in
our earnings as a result of erroneous or untimely reporting from our clients. We also rely on original underwriting decisions
made by our clients and cannot assure you that our clients’ processes will adequately control business quality or establish
appropriate pricing.
For some reinsurance agreements, the ceding company withholds and legally owns and manages assets equal to the net
statutory reserves, and we reflect these assets as funds withheld at interest on our balance sheet. If a ceding company was to
become insolvent, we would need to assert a claim on the assets supporting our reserve liabilities. We attempt to mitigate our
risk of loss by offsetting amounts for claims or allowances that we owe the ceding company with amounts that the ceding
company owes to us. We are subject to the investment performance on the withheld assets, although we do not directly control
them. We help to set, and monitor compliance with, the investment guidelines followed by these ceding companies. However,
to the extent that such investment guidelines are not appropriate, or to the extent that the ceding companies do not adhere to
such guidelines, our risk of loss could increase, which could materially adversely affect our financial condition and results of
operations. For additional information on funds withheld at interest, see “Investments – Funds Withheld at Interest” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We use the services of third parties such as asset managers, software vendors and administrators to perform various
functions that are important to our business. For instance, we have engaged third party investment managers to manage certain
assets where our investment management expertise is limited, who we rely on to provide investment advice and execute
investment transactions that are within our investment policy guidelines. Our third-party service providers rely on their
computer systems and their ability to maintain the security, confidentiality, integrity and privacy of those systems and the data
residing on such systems. Our service providers may be subject to cybersecurity attacks and may not sufficiently protect their
information technology and related data, which may impact their ability to provide us services and protect our data, which may
subject us to losses and harm our reputation. Poor performance on the part of these outside vendors could negatively affect our
operations and financial performance.
As with all financial services companies, our ability to conduct business depends on consumer confidence in the
industry and our financial strength. Actions of competitors, and financial difficulties of other companies in the industry, and
related adverse publicity, could undermine consumer confidence and harm our reputation and business.
Epidemics and pandemics, natural and man-made disasters, catastrophes and events, including terrorist attacks, could
adversely affect our business, financial condition and results of operations.
Epidemics, pandemics, such as COVID-19, as well as natural disasters, climate change and terrorist attacks, and other
catastrophes and events can adversely affect our business, financial condition and results of operations because they exacerbate
mortality and morbidity risk. The likelihood, timing, and severity of these events cannot be predicted. A pandemic or other
disaster could have a major impact on the global economy or the economies of particular countries or regions, including travel,
trade, tourism, the health system, food supply, consumption, and overall economic output. Additionally, any such events could
have a material negative impact on the financial markets, potentially impacting the value and liquidity of our invested assets,
access to capital markets and credit, and the business of our clients. In addition, a pandemic or other disaster that affected our
employees or the employees of companies with which we do business could disrupt our business operations. The effectiveness
28
of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such
an event could have a material impact on the losses we experience. These events could cause a material adverse effect on our
results of operations in any period and, depending on their severity, could also materially and adversely affect our financial
condition.
Additionally, the impact of an increase in global average temperatures could cause changes in weather patterns,
resulting in more severe and more frequent natural disasters such as forest fires, hurricanes, tornadoes, floods and storm surges
and may impact disease incidence and severity, food and water supplies and the general health of impacted populations. These
climate change trends are expected to continue in the future and may impact nearly all sectors of the economy to varying
degrees. We cannot predict the long-term impacts of climate change for the Company and our clients, but such events may
adversely impact our mortality and morbidity rates and also may impact asset prices, financial markets and general economic
conditions.
We operate in a highly competitive and dynamic industry and competition, tax law changes, an economic downturn and
other factors could adversely affect our business.
The reinsurance industry is highly competitive, and we encounter significant competition in all lines of business from
other reinsurance companies, as well as competition from other providers of financial services. Our competitors vary by
geographic market, and many of our competitors have greater financial resources than we do. Our ability to compete depends
on, among other things, pricing and other terms and conditions of reinsurance agreements, our ability to maintain strong
financial strength ratings, and our service and experience in the types of business that we underwrite.
We compete based on the strength of our underwriting operations, insights on mortality trends, our ability to efficiently
execute transactions, our client relationships and our responsive service. We believe our quick response time to client requests
for individual underwriting quotes, our underwriting expertise and our ability to structure solutions to meet clients’ needs are
important elements to our strategy and lead to other business opportunities with our clients. Our business will be adversely
affected if we are unable to maintain these competitive advantages.
The insurance and reinsurance industries are subject to ongoing changes from market pressures brought about by
customer demands, changes in law, changes in economic conditions such as interest rates and investment performance,
technological innovation, marketing practices and new providers of insurance and reinsurance solutions. Failure to anticipate
market trends or to differentiate our products and services may affect our ability to grow or maintain our current position in the
industry. A failure by the insurance industry to meet evolving consumer demands, including demands to address disparate
impacts that may exist against certain groups in insurers’ underwriting and sales models, could adversely affect the insurance
industry and our operating results. Similarly, our failure to meet the changing demands of our insurance company clients
through innovative product development, effective distribution channels and investments in technology could negatively impact
our financial performance over the long-term. Additionally, our failure to adjust our strategies in response to changing
economic conditions could impact our competitive position and have a material adverse effect on our business, financial
condition and results of operations.
If the U.S. Internal Revenue Code is revised to reduce benefits associated with the tax-deferred status of certain life
insurance and annuity products, or to increase the tax-deferred status of competing products, all life insurance companies would
be adversely affected with respect to their ability to sell such products, and, depending on grandfathering provisions, by the
surrenders of existing annuity contracts and life insurance policies. In addition, life insurance products are often used to fund
estate tax obligations. If Congress adopts legislation in the future to reduce or eliminate the estate tax, our U.S. life insurance
company customers could face reduced demand for some of their life insurance products, which in turn could negatively affect
our reinsurance business. We cannot predict whether any tax legislation impacting corporate taxes or insurance products will be
enacted, what the specific terms of any such legislation will be or whether any such legislation would have a material adverse
effect on our business, financial condition and results of operations.
A general economic downturn or a downturn in the capital markets could adversely affect the market for many life
insurance and annuity products. Factors such as consumer spending, business investment, government spending, the volatility
and strength of the capital markets, deflation and inflation affect the economic environment and thus the profitability of our
business. An economic downturn may yield higher unemployment and lower family income, corporate earnings, business
investment and consumer spending, and could result in decreased demand for life insurance and annuity products. Because we
obtain substantially all our revenues through reinsurance arrangements that cover a portfolio of life insurance products and
annuities, our business would be harmed if the market for annuities or life insurance was adversely affected. Therefore, adverse
changes in the economy could adversely affect our business, financial condition and results of operations.
We could be subject to additional income tax liabilities.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Tax laws, regulations and
administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic,
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political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for
these taxes.
The U.S. Treasury Department and the IRS continue to issue guidance under the U.S. Tax Cuts and Jobs Act of 2017
(“U.S. Tax Reform”) that may result in interpretations different from ours. Foreign governments may enact tax laws in response
to U.S. Tax Reform that could result in further changes to global taxation and materially affect our financial position and results
of operations. In addition, a number of countries are actively pursuing changes to their tax laws applicable to multinational
corporations.
Acquisitions and significant transactions involve varying degrees of risk that could affect our profitability.
We have made, and may in the future make, acquisitions, either of selected blocks of business or other companies. The
success of these acquisitions depends on, among other factors, our ability to appropriately price and evaluate the risks of the
acquired business, as well as the availability of funding sufficient to meet increased capital needs, the ability to fund cash flow
shortages that may occur if anticipated revenues are not realized or are delayed and the possibility that the value of investments
acquired in an acquisition may be lower than expected or may diminish due to credit defaults or changes in interest rates and
that liabilities assumed may be greater than expected (due to, among other factors, less favorable than expected mortality or
morbidity experience). Additionally, acquisitions may expose us to other operational challenges and various risks, including
the ability to integrate the acquired business operations and data with our systems. A failure to successfully manage the
operational challenges and risks associated with or resulting from significant transactions, including acquisitions, could
adversely affect our business, financial condition or results of operations.
Our risk management policies and procedures could leave us exposed to unidentified or unanticipated risk, which could
negatively affect our business, financial condition or results of operations.
Our risk management policies and procedures, designed to identify, monitor and manage both internal and external
risks, may not adequately predict future exposures, which could be significantly greater than expected. In addition, these
identified risks may not be the only risks facing us. Additional risks and uncertainties not currently known to us, or that we
currently deem to be immaterial, may adversely affect our business, financial condition or results of operations.
There are inherent limitations to risk management strategies because there may exist, or develop in the future, risks
that we have not appropriately anticipated or identified. If our risk management framework proves ineffective, we may suffer
unexpected losses and could be materially adversely affected. As our businesses change and the markets in which we operate
evolve, our risk management framework may not evolve at the same pace as those changes. As a result, there is a risk that new
business strategies may present risks that are not appropriately identified, monitored or managed. In times of market stress,
unanticipated market movements or unanticipated claims experience resulting from adverse mortality, morbidity or
policyholder behavior, the effectiveness of our risk management strategies may be limited, resulting in losses. In addition,
under difficult or less liquid market conditions, our risk management strategies may be less effective and/or more expensive
because other market participants may be using the same or similar strategies to manage risk under the same challenging market
conditions.
Past or future misconduct by our employees or employees of our vendors could result in violations of law, regulatory
sanctions and serious reputational or financial harm and the precautions we take to prevent and detect this activity may not be
effective. There can be no assurance that our controls and procedures designed to monitor associates’ business decisions and
prevent us from taking excessive or inappropriate risks will be effective. We review our compensation policies and practices as
part of our overall risk management program, but it is possible that our compensation policies and practices could inadvertently
incentivize excessive or inappropriate risk taking, which could harm our reputation and have a material adverse effect on our
results of operations or financial condition.
The failure in cyber or other information security systems, including a failure to maintain the security, confidentiality,
integrity or privacy of sensitive data residing on such systems, as well as the occurrence of unanticipated events affecting
our disaster recovery systems and business continuity planning, could impair our ability to conduct business effectively.
Our business is highly dependent upon the effective operation of our computer systems. The failure of our computer
systems or disaster recovery capabilities for any reason could cause significant interruptions in our operations and result in a
failure to maintain the security, confidentiality, integrity or privacy of sensitive or personal data related to our customers,
insured individuals or employees. Like other global companies, we have experienced threats to our data and systems from time
to time. However, we have not detected or identified any evidence to indicate we have experienced a material breach of
cybersecurity. Administrative and technical controls, security measures and other preventative actions we take to reduce the risk
of such incidents and protect our information technology may not be sufficient to prevent physical and electronic break-ins, and
similar disruptions from unauthorized tampering with our computer systems. Such a failure could harm our reputation, subject
us to investigations, litigation, regulatory sanctions and other claims and expenses, lead to loss of customers and revenues and
otherwise adversely affect our business, financial condition or results of operations.
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We rely on our computer systems for a variety of business functions across our global operations, including for the
administration of our business, underwriting, claims, performing actuarial analysis and maintaining financial records. We
depend heavily upon these computer systems to provide reliable service, data and reports. Upon a disaster such as a natural
catastrophe, epidemic, industrial accident, blackout, computer virus, terrorist attack or war, unanticipated problems with our
disaster recovery systems could have a material adverse impact on our ability to conduct business and on our financial
condition and results of operations, particularly if those problems affect our computer-based data processing, transmission,
storage and retrieval systems and destroy valuable data. While we maintain liability insurance for cybersecurity and network
interruption losses, our insurance may not be sufficient to protect us against all losses. In addition, if a significant number of our
managers were unavailable upon a disaster, our ability to effectively conduct business could be severely compromised. These
interruptions also may interfere with our clients’ ability to provide data and other information to us, and our employees’ ability
to perform their job responsibilities.
Failure to protect the confidentiality of information could adversely affect our reputation and have a material adverse
effect on our business, financial condition and results of operations.
Many jurisdictions in which we operate have enacted laws to safeguard the privacy and security of personal
information. Additionally, various government agencies have established rules protecting the privacy and security of such
information. These laws and rules vary greatly by jurisdiction. Some of our employees have access to personal information of
policy holders. We rely on internal controls to protect the confidentiality of this information. It is possible that an employee
could, intentionally or unintentionally, disclose or misappropriate confidential information or our data could be the subject of a
cybersecurity attack. If we fail to maintain adequate internal controls or if our employees fail to comply with our policies,
misappropriation or intentional or unintentional inappropriate disclosure or misuse of client information could occur. Such
internal control inadequacies or non-compliance could materially damage our reputation or lead to civil or criminal penalties,
which, in turn, could have a material adverse effect on our business, financial condition and results of operations. In addition,
we analyze customer data to better manage our business. There has been increased scrutiny, including from U.S. state
regulators, regarding the use of “big data” techniques. We cannot predict what, if any, actions may be taken with regard to “big
data,” but any inquiries could cause reputational harm and any limitations could have a material impact on our business,
financial condition and results of operations.
Managing key employee attraction, retention and succession is critical to our success.
Our success depends in large part upon our ability to identify, hire, retain and motivate highly skilled employees. We
would be adversely affected if we fail to adequately plan for the succession of our senior management and other key employees.
While we have succession plans and long-term compensation plans designed to retain our existing employees and attract and
retain additional qualified personnel in the future, our succession plans may not operate effectively and our compensation plans
cannot guarantee that the services of these employees will continue to be available to us.
Litigation and regulatory investigations and actions may result in financial losses or harm our reputation.
We are, and in the future may be, subject to litigation and regulatory investigations or actions in the ordinary course of
our business. A substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory
inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal costs and
otherwise have a material adverse effect on our business, financial condition and results of operations. Regulatory inquiries and
litigation may also cause volatility in the price of stocks of companies in our industry or in our stock price. Material pending
litigation and regulatory matters affecting us, if any, are discussed in Item 8. “Financial Statements and Supplementary Data –
Notes to Consolidated Financial Statements – Note 12 Commitments, Contingencies and Guarantees.”
Risks Related to Our Investments
Adverse capital and credit market conditions and access to credit facilities may significantly affect our ability to meet
liquidity needs, access to capital and cost of capital.
The capital and credit markets experience varying degrees of volatility and disruption. In some periods, the markets
have exerted downward pressure on availability of liquidity and credit capacity for certain issuers. We need liquidity to make
our benefit payments, to pay our operating expenses, interest on our debt and dividends on our capital stock and to replace
certain maturing liabilities. Without sufficient liquidity, we will be forced to curtail our operations, and our business will be
adversely affected. The principal sources of our liquidity are reinsurance premiums under reinsurance treaties and cash flows
from our investment portfolio and other assets. Sources of liquidity in normal markets also include proceeds from the issuance
of a variety of short- and long-term instruments, including medium- and long-term debt, subordinated and junior subordinated
debt securities, capital securities and common stock.
If current resources do not satisfy our needs, we may have to seek additional financing. The availability of additional
financing will depend on a variety of factors such as market conditions, the general availability of equity and credit, the volume
of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, as
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well as the possibility that customers or lenders could develop a negative perception of our long- or short-term financial
prospects. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions
against us. Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully
obtain additional financing on favorable terms, or at all.
Disruptions, uncertainty or volatility in the capital and credit markets may limit our ability to replace maturing
liabilities in a timely manner, satisfy statutory capital requirements, generate fee income and market-related revenue to meet
liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue
shorter tenor securities than we prefer, or bear an unattractive cost of capital, which could decrease our profitability and
significantly reduce our financial flexibility. Further, our ability to finance our statutory reserve requirements depends on
market conditions. If market capacity is limited for a prolonged period, our ability to obtain new funding for such purposes may
be hindered and, as a result, our ability to write additional business in a cost-effective manner may be limited or otherwise
adversely affected.
We also rely on our unsecured credit facilities, including our $850 million syndicated credit facility, as potential
sources of liquidity. Our credit facilities contain administrative, reporting, legal and financial covenants, and our syndicated
credit facility includes requirements to maintain a specified minimum consolidated net worth and a minimum ratio of
consolidated indebtedness to total capitalization. If we were unable to access our credit facilities it could materially impact our
capital position. The availability of these facilities could be critical to our credit and financial strength ratings and our ability to
meet our obligations as they come due in a market when alternative sources of credit are unavailable.
Difficult conditions in the global capital markets and the economy generally may materially adversely affect our
business, financial condition and results of operations.
Our results of operations, financial condition, cash flows and statutory capital position are materially affected by
conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world. Poor
economic conditions, volatility and disruptions in capital markets or financial asset classes and geopolitical upheaval (including
trade disputes) can have an adverse effect on our business because our investment portfolio and some of our liabilities are
sensitive to changing market factors. Additionally, disruptions in one market or asset class can also spread to other markets or
asset classes.
Concerns over U.S. fiscal policy and the trajectory of the U.S. national debt could have severe repercussions to the
U.S. and global credit and financial markets, further exacerbate concerns over sovereign debt and disrupt economic activity in
the U.S. and elsewhere. As a result, our access to, or cost of, liquidity may deteriorate. As a result of uncertainty regarding U.S.
national debt, the market value of some of our investments may decrease, and our capital adequacy could be adversely affected.
Political and economic uncertainties and weakness and disruption of the financial markets around the world, such as
geopolitical upheaval (including trade disputes) and deteriorating economic and political relationships between countries, the
solvency of certain European Union member states and of financial institutions that have significant direct or indirect exposure
to debt issued by such countries, have led and may continue to lead to concerns over capital markets access. In addition, there
are ongoing risks around the world related to interest rate fluctuations, slowing global growth, commodity prices and the
devaluation of certain currencies. These events and continuing market upheavals may have an adverse effect on us, in part
because we have a large investment portfolio and are also dependent upon customer behavior. Our revenues may decline in
such circumstances and our profit margins may erode. In addition, upon prolonged market events, such as the global credit
crisis, we could incur significant investment-related losses. Even in the absence of a market downturn, we are exposed to
substantial risk of loss due to market volatility.
If our investment strategy is unsuccessful, we could suffer losses.
The success of our investment strategy is crucial to the success of our business. We structure our investments to match
our anticipated liabilities under reinsurance treaties to the extent we believe necessary. If our calculations with respect to these
reinsurance liabilities are incorrect, or if we improperly structure our investments to match such liabilities, we could be forced
to liquidate investments prior to maturity at a significant loss.
Our investment guidelines limit non-investment grade fixed maturity securities in our investment portfolio. While any
investment carries some risk, the risks associated with lower-rated securities are greater than the risks associated with
investment grade securities. The risk of loss of principal or interest through default is greater because lower-rated securities are
usually unsecured and are often subordinated to an issuer’s other obligations. Additionally, the issuers of these securities
frequently have relatively high debt levels and are thus more sensitive to difficult economic conditions, specific corporate
developments and rising interest rates, which could impair an issuer’s capacity or willingness to meet its financial commitment
on such lower-rated securities. As a result, the market price of these securities may be quite volatile, and the risk of loss is
greater.
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The success of any investment activity is affected by general economic conditions, including the level and volatility of
interest rates and the extent and timing of investor participation in such markets, which may adversely affect the markets for
interest rate sensitive securities, mortgages and equity securities. Unexpected volatility or illiquidity in the markets in which we
directly or indirectly hold positions could adversely affect us.
Interest rate fluctuations could negatively affect the income we derive from the difference between the interest rates we
earn on our investments and interest we pay under our reinsurance contracts.
Significant changes in interest rates expose reinsurance companies to the risk of reduced investment income or actual
losses based on the difference between the interest rates earned on investments and the credited interest rates paid on
outstanding reinsurance contracts. Both rising and declining interest rates can negatively affect the income we derive from these
interest rate spreads. During periods of rising interest rates, we may be contractually obligated to reimburse our clients for the
greater amounts they credit on certain interest-sensitive products. However, we may not have the ability to immediately acquire
investments with interest rates sufficient to offset the increased crediting rates on our reinsurance contracts. During periods of
falling interest rates, our investment earnings will be lower because new investments in fixed maturity securities will likely bear
lower interest rates. We may not be able to fully offset the decline in investment earnings with lower crediting rates on
underlying annuity products related to certain of our reinsurance contracts. Our asset/liability management programs and
procedures may not reduce the volatility of our income when interest rates are rising or falling, and thus we cannot assure you
that changes in interest rates will not affect our interest rate spreads.
Changes in interest rates may also affect our business in other ways. Higher interest rates may result in increased
surrenders on interest-based products of our clients, which may affect our fees and earnings on those products. Lower interest
rates may result in lower sales of certain insurance and investment products of our clients, which would reduce the demand for
our reinsurance of these products. If interest rates remain low for an extended period, it may adversely affect our cash flows,
financial condition and results of operations.
The liquidity and value of some of our investments may become significantly diminished.
There may be illiquid markets for certain investments we hold in our investment portfolio. These include privately-
placed fixed maturity securities, options and other derivative instruments, mortgage loans, policy loans, limited partnership
interests, and real estate equity, such as real estate joint ventures and funds. Additionally, markets for certain of our investments
that are currently liquid may experience reduced liquidity during periods of market volatility or disruption. If we were forced to
sell certain of our investments into illiquid markets, prices may be lower than our carrying value in such investments. This
could result in realized losses which could have a material adverse effect on our results of operations and financial condition, as
well as our financial ratios, which could affect compliance with our credit instruments and rating agency capital adequacy
measures.
We could be forced to sell investments at a loss to cover policyholder withdrawals, recaptures of reinsurance treaties or
other events.
Some of the products offered by our insurance company customers allow policyholders and contract holders to
withdraw their funds under defined circumstances. Our reinsurance subsidiaries manage their liabilities and configure their
investment portfolios to provide and maintain sufficient liquidity to support anticipated withdrawal demands and contract
benefits and maturities under reinsurance treaties with these customers. While our reinsurance subsidiaries own a significant
amount of liquid assets, a portion of their assets are relatively illiquid. Unanticipated withdrawal or surrender activity could,
under some circumstances, require our reinsurance subsidiaries to dispose of assets on unfavorable terms, which could have an
adverse effect on us. Reinsurance agreements may provide for recapture rights on the part of our insurance company customers.
Recapture rights permit these customers to reassume all or a portion of the risk formerly ceded to us after an agreed-upon time,
usually ten years, subject to various conditions.
Recapture of business previously ceded does not affect premiums ceded prior to the recapture, but may result in
immediate payments to our insurance company customers and a charge to income for costs that we deferred when we acquired
the business but are unable to recover upon recapture. Under some circumstances, payments to our insurance company
customers could require our reinsurance subsidiaries to dispose of assets on unfavorable terms.
Defaults, downgrades or other events impairing the value of our fixed maturity securities portfolio may reduce our
earnings.
We are subject to the risk that the issuers, or guarantors, of fixed maturity securities we own may default on principal
and interest payments they owe us. Fixed maturity securities represent a substantial portion of our total cash and invested assets.
The occurrence of a major or prolonged economic downturn, acts of corporate malfeasance, widening risk spreads, or other
events that adversely affect the issuers or guarantors of these securities could cause the value of our fixed maturity securities
portfolio and our net income to decline and the default rate of the fixed maturity securities in our investment portfolio to
increase. A ratings downgrade affecting issuers or guarantors of particular securities, or similar trends that could worsen the
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credit quality of issuers, such as the corporate issuers of securities in our investment portfolio, could also have a similar effect.
With economic uncertainty, credit quality of issuers or guarantors could be adversely affected. Any event reducing the value of
these securities could have a material adverse effect on our business, financial condition or results of operations.
The defaults or deteriorating credit of other financial institutions could adversely affect us.
We have exposure to many different industries and counterparties, and routinely execute transactions with
counterparties in the financial services industry, including brokers and dealers, insurance companies, commercial banks,
investment banks, investment funds and other institutions. Many of these transactions expose us to credit risk upon default of
our counterparty. In addition, with respect to secured and other transactions that provide for us to hold collateral posted by the
counterparty, our credit risk may be exacerbated when the collateral we hold cannot be liquidated at prices sufficient to recover
the full amount of our exposure. We also have exposure to these financial institutions in the form of unsecured debt
instruments, derivative transactions and equity investments. There can be no assurance that losses or impairments to the
carrying value of these assets would not materially and adversely affect our business, financial condition or results of
operations.
Defaults on our mortgage loans or the mortgage loans underlying our investments in mortgage-backed securities and
volatility in performance of our investments in real-estate related assets may adversely affect our profitability.
A portion of our investment portfolio consists of assets linked to real estate, including mortgage loans on commercial
properties, lifetime mortgages, investments in commercial mortgage-backed securities (“CMBS”), and residential mortgage-
backed securities (“RMBS”). Delinquency and defaults by third parties in the payment or performance of their obligations
underlying these assets could reduce our investment income and realized investment gains or result in the recognition of
investment losses. Mortgage loans are stated on our balance sheet at unpaid principal balance, adjusted for any unamortized
premium or discount, deferred fees or expenses, and are net of valuation allowances established as of the balance sheet date.
Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash
flows discounted at the loan’s original effective interest rate, the value of the loan’s collateral if the loan is in the process of
foreclosure or is otherwise collateral-dependent, or the loan’s market value if the loan is being sold. CMBS and RMBS are
stated on our balance sheet at fair value. The performance of our mortgage loan investments and our investments in CMBS and
RMBS, however, may fluctuate in the future. An increase in the default rate of our mortgage loan investments or the mortgage
loans underlying our investments in CMBS and RMBS could have a material adverse effect on our financial condition or results
of operations.
Further, any geographic or sector concentration of our mortgage loans or the mortgage loans underlying our
investments in CMBS and RMBS may have adverse effects on our investment portfolios and consequently on our consolidated
results of operations or financial condition. Events or developments that have a negative effect on any particular geographic
region or sector may have a greater adverse effect on our investment portfolios to the extent that the portfolios are concentrated.
Moreover, our ability to sell assets relating to such particular groups of related assets may be limited if other market participants
are seeking to sell at the same time.
Our valuation of fixed maturity and equity securities and derivatives include methodologies, estimations and
assumptions that are subject to differing interpretations and could result in changes to investment valuations that may
have a material adverse effect on our financial condition or results of operations.
Fixed maturity, equity securities and short-term investments, which are primarily reported at fair value on the
consolidated balance sheets, represent the majority of our total cash and invested assets. As described in Item 8. “Financial
Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 6 “Fair Value of Assets and
Liabilities”, we have categorized these securities into a three-level hierarchy, based on the priority of the inputs to the
respective valuation technique.
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening
credit spreads or illiquidity, it may be difficult to value certain of our securities if trading becomes less frequent or market data
becomes less observable. There may be certain asset classes that were in active markets with significant observable data that
become illiquid due to the financial environment. As such, valuations may include inputs and assumptions that are less
observable or require greater estimation resulting in values that may be different than the value at which the investments may be
ultimately sold. Further, rapidly changing or disruptive credit and equity market conditions could materially impact the
valuation of securities as reported within our consolidated financial statements and the period-to-period changes in value could
vary significantly. Decreases in value may have a material adverse effect on our financial condition or results of operations.
The reported value of our investments, including our relatively illiquid asset classes and, at times, our high-quality,
generally liquid asset classes, do not necessarily reflect the lowest current market price for the asset. If we were forced to sell
certain of our assets in disruptive or volatile market conditions, there can be no assurance that we will be able to sell them for
the prices at which we have recorded them and we may be forced to sell them at significantly lower prices.
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The determination of the amount of allowances and impairments taken on our investments is highly subjective and
could materially affect our financial condition or results of operations.
The determination of the amount of allowances and impairments vary by investment type and is based upon our
periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and
assessments are revised as conditions change and new information becomes available. Management updates its evaluations
regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. For example, the
cost of our fixed maturity securities is adjusted for impairments in value deemed to be impaired in the period in which the
determination is made. The assessment of whether impairments have occurred is based on management’s case-by-case
evaluation of the underlying reasons for the decline in fair value. Inherent in management’s evaluation of the security are
assumptions and estimates about the operations of the issuer and its future earnings potential. There can be no assurance that
our management has accurately assessed the level of impairments taken, or allowances reflected in our financial statements and
their potential impact on regulatory capital. Furthermore, additional impairments or additional allowances may be needed in the
future.
Our investments are reflected within the consolidated financial statements utilizing different accounting bases and
accordingly we may not have recognized differences, which may be significant, between cost and fair value in our
consolidated financial statements.
Certain of our principal investments are in fixed maturity securities, short-term investments, mortgage loans, policy
loans, funds withheld at interest and other invested assets. The carrying value of such investments is described in “Investments”
in Note 2 – “Significant Accounting Polices and Pronouncements” in the Notes to Consolidated Financial Statements.
Investments not carried at fair value in our consolidated financial statements – principally, mortgage loans, policy loans, real
estate joint ventures and other limited partnerships – may have fair values that are substantially higher or lower than the
carrying value reflected in our consolidated financial statements. Each of such asset classes is regularly evaluated for
impairment under the accounting guidance appropriate to the respective asset class.
Phasing out of London Interbank Offered Rate (“LIBOR”) after 2023 may adversely affect the value of certain of our
LIBOR-based assets and liabilities.
On July 27, 2017, the Financial Conduct Authority (the “FCA”) announced that it intends to stop persuading or
compelling banks to submit London Interbank Offered Rates (“LIBOR”) after December 31, 2021. Subsequently, on March 5,
2021, the FCA announced that all LIBOR settings will either cease to be provided or no longer be representative, with some
being discontinued after December 31, 2021 and the remaining being discontinued after June 30, 2023. At this time, it is not
possible to predict how markets will respond and the effect that the discontinuation of LIBOR and the implementation of new
benchmark rates will have on new or existing financial instruments to which we have exposure. Interest rates on our LIBOR-
based and other floating-rate assets and liabilities may be adversely affected. Further, any uncertainty regarding replacements
for LIBOR as a benchmark interest rate could adversely affect the trading market for and value of LIBOR-based and other
floating-rate securities, including certain of our assets and liabilities. We do not anticipate such changes to have a material
impact on our cash flows, financial condition and result of operations.
Risks Related to Ownership of Our Common Stock
We may not pay dividends on our common stock.
Our shareholders may not receive dividends. All future payments of dividends are at the discretion of our board of
directors and will depend on our earnings, capital requirements, insurance regulatory conditions, operating conditions and such
other factors as our board of directors may deem relevant. The amount of dividends that we can pay will depend in part on the
operations of our reinsurance subsidiaries. Under certain circumstances, we may be contractually prohibited from paying
dividends on our common stock due to restrictions associated with certain of our debt securities.
Certain provisions in our articles of incorporation and bylaws, in Missouri law and in applicable insurance laws, may
delay or prevent a change in control, which could adversely affect the price of our common stock.
Certain provisions in our articles of incorporation and bylaws, as well as Missouri corporate law and state insurance
laws, may delay or prevent a change of control of RGA, which could adversely affect the price of our common stock. Our
articles of incorporation and bylaws contain some provisions that may make the acquisition of control of RGA without the
approval of our board of directors more difficult, including provisions relating to the nomination, election and removal of
directors and limitations on actions by our shareholders. In addition, Missouri law also imposes some restrictions on mergers
and other business combinations between RGA and holders of 20% or more of our outstanding common stock. These
provisions may have unintended anti-takeover effects, including to delay or prevent a change in control of RGA, which could
adversely affect the price of our common stock.
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Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the
insurance commission of the state where the domestic insurer is domiciled. Under U.S. state insurance laws and regulations,
any person acquiring 10% or more of the outstanding voting securities of a corporation, such as our common stock, is presumed
to have acquired control of that corporation and its subsidiaries. Similar laws in other countries where we operate limit our
ability to effect changes of control for subsidiaries organized in such jurisdictions without the approval of local insurance
regulatory officials. Prior to granting approval of an application to directly or indirectly acquire control of a domestic or foreign
insurer, an insurance regulator in any jurisdiction may consider such factors as the financial strength of the applicant, the
integrity of the applicant’s board of directors and executive officers, the applicant’s plans for the future operations of the
domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.
Issuing additional shares may dilute the value or affect the price of our common stock.
Our board of directors has the authority, without action or vote of the shareholders, to issue any or all authorized but
unissued shares of our common stock, including securities convertible into, or exchangeable for, our common stock and
authorized but unissued shares under our equity compensation plans. In the future, we may issue such additional securities,
through public or private offerings, in order to raise additional capital. Any such issuance will dilute the percentage ownership
of shareholders and may dilute the per share projected earnings or book value of our common stock. In addition, option holders
may exercise their options at any time when we would otherwise be able to obtain additional equity capital on more favorable
terms.
The occurrence of various events may adversely affect the ability of RGA and its subsidiaries to fully utilize any net
operating losses (“NOLs”) and other tax attributes.
RGA and its subsidiaries may, from time to time, have a substantial amount of NOLs and other tax attributes, for
U.S. federal income tax purposes, to offset taxable income and gains. If a corporation experiences an ownership change, it is
generally subject to an annual limitation, which limits its ability to use its NOLs and other tax attributes. Events outside of our
control may cause RGA (and, consequently, its subsidiaries) to experience an “ownership change” under Sections 382 and 383
of the Internal Revenue Code and the related Treasury regulations, and limit the ability of RGA and its subsidiaries to utilize
fully such NOLs and other tax attributes. If we were to experience an ownership change, we could potentially have higher
U.S. federal income tax liabilities than we would otherwise have had, which would negatively impact our financial condition
and results of operations.
Item 1B. UNRESOLVED STAFF COMMENTS
The Company has no unresolved staff comments from the Securities and Exchange Commission.
Item 2. PROPERTIES
The Company’s corporate headquarters is located at an owned site in Chesterfield, Missouri. In addition, the
Company leases office space in 49 locations throughout the world. Most of the Company’s leases have terms of three to five
years; while some leases have longer terms, none exceed 15 years.
The Company believes that its existing facilities, including both owned and leased, are in good operating condition and
suitable for the conduct of its business.
Item 3. LEGAL PROCEEDINGS
The Company is subject to litigation in the normal course of its business. The Company currently has no material
litigation. A legal reserve is established when the Company is notified of an arbitration demand or litigation or is notified that
an arbitration demand or litigation is imminent, it is probable that the Company will incur a loss as a result and the amount of
the probable loss is reasonably capable of being estimated.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
36
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Insurance companies are subject to statutory regulations that restrict the payment of dividends. See Item 1 under the
caption Regulation – “Restrictions on Dividends and Distributions.” See Item 8, Note 17 – “Equity” in the Notes to
Consolidated Financial Statements for information regarding board-approved stock repurchase plans. See Item 12 for
information about the Company’s compensation plans.
Reinsurance Group of America, Incorporated common stock is traded on the New York Stock Exchange (NYSE)
under the symbol “RGA”. On January 31, 2022, there were 22,278 stockholders of record of RGA’s common stock and 67
million shares outstanding.
Issuer Purchases of Equity Securities
The following table summarizes RGA’s repurchase activity of its common stock during the quarter ended
December 31, 2021:
October 1, 2021 –
October 31, 2021
November 1, 2021 –
November 30, 2021
December 1, 2021 –
December 31, 2021
Total Number of
Shares
Purchased (1)
Average Price
Paid per
Share
Total Number of
Shares
Purchased as Part of
Publicly
Announced Plans
or Programs
Maximum Number (or
Approximate Dollar
Value) of Shares that
May
Yet Be Purchased
Under
the Plan or Program
94 $
447,059 $
8,460 $
118.99
112.01
106.67
— $
121,573,425
446,393 $
71,573,495
— $
71,573,495
(1) RGA repurchased 0, 446,393, and 0 shares of common stock under its share repurchase program in October, November and December 2021, respectively
The Company net settled – issuing 422, 2,937 and 23,162 shares from treasury and repurchased from recipients 94, 666 and 8,460 shares in October,
November and December 2021, respectively, in settlement of income tax withholding requirements incurred by the recipients of equity incentive awards.
On January 24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400 million of
RGA’s outstanding common stock. During the three months ended December 31, 2021, the Company repurchased 446,393
shares of common stock under this program for $50 million, and as of December 31, 2021, approximately $72 million of
RGA’s common stock may still be purchased under the 2019 share repurchase program.
On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of
RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In
connection with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. The pace of
repurchase activity depends on various factors such as the level of available cash, the impact of the ongoing COVID-19
pandemic, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in
force reinsurance transactions, and RGA’s stock price.
37
Comparison of 5-Year Cumulative Total Return
The graph below shows the performance of the Company’s common stock for the period beginning December 31,
2016, and ending December 31, 2021, assuming $100 was invested on December 31, 2016. The graph compares the cumulative
total return on the Company’s common stock, based on the market price of the common stock and assuming reinvestment of
dividends, with the cumulative total return of companies in the Standard & Poor’s (“S&P”) 500 Stock Index and the S&P’s
Insurance (Life/Health) Index. The indices are included for comparative purposes only. They do not necessarily reflect
management’s opinion that such indices are an appropriate measure of the relative performance of the Company’s common
stock and are not intended to forecast or be indicative of future performance of the common stock.
Base Period
12/16
12/17
12/18
12/19
12/20
12/21
Cumulative Total Return
Reinsurance Group of America, Incorporated
S&P 500
$
S&P Life & Health Insurance
100.00 $
100.00
100.00
125.58 $
121.83
116.43
114.63 $
116.49
92.24
135.60 $
153.17
113.63
98.90 $
181.35
102.86
95.71
233.41
140.59
Item 6. (RESERVED)
38
Comparison of 5-Year Cumulative Total ReturnReinsurance Group of America, IncorporatedS&P 500S&P Life & Health Insurance12/1612/1712/1812/1912/2012/21$80$100$120$140$160$180$200$220$240$260
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Overview
Industry Trends
Critical Accounting Policies
Consolidated Results of Operations
Results of Operations by Segment
U.S. and Latin America Operations
Canada Operations
Europe, Middle East and Africa Operations
Asia Pacific Operations
Corporate and Other
Liquidity and Capital Resources
Page
40
41
43
44
48
52
52
56
58
60
63
64
39
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995 including, among others, statements relating to projections of the future operations, strategies, earnings, revenues, income
or loss, ratios, financial performance and growth potential of the Company. Forward-looking statements often contain words
and phrases such as “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe” and other similar
expressions. Forward-looking statements are based on management’s current expectations and beliefs concerning future
developments and their potential effects on the Company. Forward-looking statements are not a guarantee of future
performance and are 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.
The effects of the COVID-19 pandemic and the response thereto on economic conditions, the financial markets and
insurance risks, and the resulting effects on the Company’s financial results, liquidity, capital resources, financial metrics,
investment portfolio and stock price, could cause actual results and events to differ materially from those expressed or implied
by forward-looking statements. Additionally, numerous other important factors (whether related to, resulting from or
exacerbated by the COVID-19 pandemic or otherwise) could also cause results and events to differ materially from those
expressed or implied by forward-looking statements, including, without limitation: (1) adverse changes in mortality, morbidity,
lapsation or claims experience, (2) inadequate risk analysis and underwriting, (3) adverse capital and credit market conditions
and their impact on the Company’s liquidity, access to capital and cost of capital, (4) changes in the Company’s financial
strength and credit ratings and the effect of such changes on the Company’s future results of operations and financial condition,
(5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) requirements to post collateral or
make payments due to declines in market value of assets subject to the Company’s collateral arrangements, (7) action by
regulators who have authority over the Company’s reinsurance operations in the jurisdictions in which it operates, (8) the effect
of the Company parent’s status as an insurance holding company and regulatory restrictions on its ability to pay principal of and
interest on its debt obligations, (9) general economic conditions or a prolonged economic downturn affecting the demand for
insurance and reinsurance in the Company’s current and planned markets, (10) the impairment of other financial institutions
and its effect on the Company’s business, (11) fluctuations in U.S. or foreign currency exchange rates, interest rates, or
securities and real estate markets, (12) market or economic conditions that adversely affect the value of the Company’s
investment securities or result in the impairment of all or a portion of the value of certain of the Company’s investment
securities, that in turn could affect regulatory capital, (13) market or economic conditions that adversely affect the Company’s
ability to make timely sales of investment securities, (14) risks inherent in the Company’s risk management and investment
strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (15) the fact that the
determination of allowances and impairments taken on the Company’s investments is highly subjective, (16) the stability of and
actions by governments and economies in the markets in which the Company operates, including ongoing uncertainties
regarding the amount of U.S. sovereign debt and the credit ratings thereof, (17) the Company’s dependence on third parties,
including those insurance companies and reinsurers to which the Company cedes some reinsurance, third-party investment
managers and others, (18) financial performance of the Company’s clients, (19) the threat of natural disasters, catastrophes,
terrorist attacks, epidemics or pandemics anywhere in the world where the Company or its clients do business, (20) competitive
factors and competitors’ responses to the Company’s initiatives, (21) development and introduction of new products and
distribution opportunities, (22) execution of the Company’s entry into new markets, (23) integration of acquired blocks of
business and entities, (24) interruption or failure of the Company’s telecommunication, information technology or other
operational systems, or the Company’s failure to maintain adequate security to protect the confidentiality or privacy of personal
or sensitive data and intellectual property stored on such systems, (25) adverse litigation or arbitration results, (26) the adequacy
of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of
business, (27) changes in laws, regulations, and accounting standards applicable to the Company or its business, and (28) other
risks and uncertainties described in this document and in the Company’s other filings with the Securities and Exchange
Commission (“SEC”).
Forward-looking statements should be evaluated together with the many risks and uncertainties that affect the
Company’s business, including those mentioned in this document and described in the periodic reports the Company files with
the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not
undertake any obligation to update these forward-looking statements, even though the Company’s situation may change in the
future. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained
in the forward-looking statements, you are advised to see Item 1A – “Risk Factors”.
40
Overview
The Company is among the leading global providers of life reinsurance and financial solutions, with $3.5 trillion of
life reinsurance in force and assets of $92.2 billion as of December 31, 2021. Traditional reinsurance includes individual and
group life and health, disability, and critical illness reinsurance. Financial solutions includes longevity reinsurance, asset-
intensive reinsurance, capital solutions, including financial reinsurance and stable value products. The Company derives
revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new
reinsurance treaties, fee income from financial solutions business and income earned on invested assets.
The Company’s underwriting expertise and industry knowledge allowed it to expand into international markets around
the world including locations in Canada, the Asia Pacific region, Europe, the Middle East, Africa and Latin America. Based on
the compilation of information from competitors’ annual reports, the Company believes it is the second-largest global life and
health reinsurer in the world based on 2020 life and health reinsurance revenues. The Company conducts business with the
majority of the largest U.S. and international life insurance companies. The Company has also developed its capacity and
expertise in the reinsurance of longevity risks, asset-intensive products (primarily annuities and corporate-owned life insurance)
and financial reinsurance. More recently, the Company has increased its investment and expenditures in client service and
technology-oriented initiatives to both support its clients and generate new future revenue streams.
The Company’s traditional life reinsurance business, involves reinsuring life insurance policies that are often in force
for the remaining lifetime of the underlying individuals insured, with premiums earned typically over a period of 10 to 30 years
or longer. To a lesser extent, the Company also reinsures certain health business typically reinsured for a shorter duration. Each
year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or voluntary
surrenders of underlying policies, deaths of the insured, and the exercise of recapture options by ceding companies. The
Company’s financial solutions business, including significant asset-intensive and longevity risk transactions, allow its clients to
take advantage of growth opportunities and manage their capital, longevity and investment risk.
The Company’s long-term profitability largely depends on the volume and amount of death- and health-related claims
incurred and the ability to adequately price the risks it assumes. While death claims are reasonably predictable over a period of
many years, claims become less predictable over shorter periods and are subject to significant fluctuation from quarter to
quarter and year to year. For longevity business, the Company’s profitability depends on the lifespan of the underlying contract
holders and the investment performance for certain contracts. Additionally, the Company generates profits on investment
spreads associated with the reinsurance of investment type contracts and generates fees from financial reinsurance transactions,
which are typically shorter duration than its traditional life reinsurance business. The Company believes its sources of liquidity
are sufficient to cover potential claims payments on both a short-term and long-term basis.
Segment Presentation
The Company has geographic-based and business-based operational segments. Geographic-based operations are
further segmented into traditional and financial solutions businesses. See “Business – Segments” in Item 1 for more
information.
The Company allocates capital to its segments based on an internally developed economic capital model, the purpose
of which is to measure the risk in the business and to provide a consistent basis upon which capital is deployed. The economic
capital model considers the unique and specific nature of the risks inherent in RGA’s businesses. As a result of the economic
capital allocation process, a portion of investment income is credited to the segments based on the level of allocated capital. In
addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is
included in policy acquisition costs and other insurance expenses. Segment investment performance varies with the composition
of investments and the relative allocation of capital to the operating segments.
Segment revenue levels can be significantly influenced by currency fluctuations, large transactions, mix of business
and reporting practices of ceding companies, and therefore may fluctuate from period to period.
41
The following table sets forth the Company’s premiums attributable to each of its segments for the periods indicated
on both a gross assumed basis and net of premiums ceded to third parties:
Gross and Net Premiums by Segment
(in millions)
2021
Gross
Net
Year Ended December 31,
2020
Gross
Net
2019
Gross
Net
$
6,716 $
55
6,771
6,244 $
55
6,299
6,423 $
53
6,476
5,838 $
53
5,891
6,320 $
39
6,359
1,244
90
1,334
1,770
552
2,322
2,736
218
2,954
1,194
90
1,284
1,738
350
2,088
2,624
218
2,842
1,106
83
1,189
1,579
430
2,009
2,787
180
2,967
1,052
83
1,135
1,555
252
1,807
2,681
180
2,861
1,332
89
1,421
1,494
366
1,860
2,652
146
2,798
5,729
39
5,768
1,066
89
1,155
1,442
218
1,660
2,568
146
2,714
—
13,381 $
—
12,513 $
—
12,641 $
—
11,694 $
—
12,438 $
—
11,297
$
U.S. and Latin America:
Traditional
Financial Solutions
Total U.S. and Latin America
Canada:
Traditional
Financial Solutions
Total Canada
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total Europe, Middle East and Africa
Asia Pacific:
Traditional
Financial Solutions
Total Asia Pacific
Corporate and Other
Total
The following table sets forth selected information concerning assumed life reinsurance business in force and assumed
new business volume by segment for the periods indicated. The terms “in force” and “new business” refer to insurance policy
face amounts or net amounts at risk.
Reinsurance Business In Force and New Business by Segment
(in billions)
2021
As of December 31,
2020
2019
In Force
New Business
In Force
New Business
In Force
New Business
U.S. and Latin America:
Traditional
Financial Solutions
Total U.S. and Latin America
Canada:
Traditional
Financial Solutions
Total Canada
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total Europe, Middle East and Africa
Asia Pacific:
Traditional
Financial Solutions
Total Asia Pacific
Total
$
1,628.4 $
5.3
1,633.7
130.5 $
—
130.5
1,611.6 $
5.3
1,616.9
114.9 $
—
114.9
1,619.6 $
5.1
1,624.7
472.6
—
472.6
861.6
—
861.6
48.8
—
48.8
198.4
—
198.4
445.2
—
445.2
864.4
—
864.4
40.8
—
40.8
184.3
—
184.3
417.1
—
417.1
776.4
—
776.4
497.4
1.7
499.1
3,467.0 $
$
34.2
0.2
34.4
412.1 $
553.7
0.5
554.2
3,480.7 $
49.6
—
49.6
389.6 $
662.0
—
662.0
3,480.2 $
115.8
3.2
119.0
40.4
—
40.4
147.4
—
147.4
69.7
—
69.7
376.5
42
Reinsurance business in force reflects the addition or acquisition of new life reinsurance business, offset by
terminations (e.g., life and group contract terminations, lapses of underlying policies, deaths of insureds, and recapture),
changes in foreign currency exchange and any other changes in the amount of insurance in force. As a result of terminations,
fluctuations in foreign exchange rates and other changes, assumed in force amounts at risk decreased by $425.8 billion, $389.1
billion and $225.5 billion in 2021, 2020 and 2019, respectively.
See “Results of Operations by Segment” below for further information about the Company’s segments.
Industry Trends
The Company believes life and health insurance companies will continue to partner with reinsurance companies to
manage risk, achieve new growth, assist with capital efficiency, develop solutions across the value chain and to help navigate
through changes in regulatory and accounting standards. The COVID-19 pandemic has highlighted the importance of insurance
products in general and the value of reinsurance as a risk management tool. In addition, the Company believes reinsurers will
continue to be an integral part of the life and health insurance market due to their ability to efficiently aggregate a significant
volume of life insurance in force, creating economies of scale and greater diversification of risk. As a result of having larger
amounts of mortality and morbidity experience data at their disposal compared to primary life insurance companies, reinsurers
tend to have more comprehensive insights into mortality and morbidity trends, creating more efficient pricing for mortality and
morbidity risk. The Company also believes the following trends in the life and health insurance industry will continue to create
demand for both traditional reinsurance and financial solutions.
Cession Rates. The percentage of new life and health business being reinsured in North America has recently begun to
increase following a period of decline, due to strong recurring production coupled with in-force opportunities and an aging
population, which increases the need for living benefit morbidity products. Cession rates in the Company’s international
markets are expected to continue increasing as middle-class growth and wealth creation drive additional insurance growth. The
COVID-19 pandemic highlighted the insurance protection gap, and the strategic benefits of reinsurance, and thus may lead to
increased cession rates as insurance companies address the gap.
Insured Populations. The aging population in North America and elsewhere, and the growth in the middle class in the
Company’s international markets, are increasing demand for insurance products and 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 continuing demand for annuity products and life insurance policies, larger face amounts of life
insurance policies and higher mortality and longevity risk taken by life insurers, all of which should fuel the need for insurers to
seek reinsurance coverage. Additionally, in many countries, companies are increasingly interested in reducing their exposure to
longevity risk related to employee retirement plans, resulting in a growing demand for pension risk transfer solutions.
Economic, Regulatory and Accounting Changes. The continued low interest rate environment puts pressure on new
business opportunities for asset-intensive blocks; however, the Company believes that the demand for reinsuring these blocks of
business will continue. In addition, regulatory, accounting, and economic changes across the globe are creating opportunities
for reinsurance and innovative capital solutions to:
• manage risk-based capital by shifting mortality and other risks to reinsurers, thereby reducing amounts of reserves and
capital the life and health insurance companies need to maintain;
release capital to pursue new business initiatives;
unlock the capital supporting, and value embedded in, non-core product lines; and
exit certain lines of business.
•
•
•
Consolidation and Reorganization within the Life Reinsurance and Life Insurance Industry. There are fewer
competitors in the traditional life reinsurance industry as a result of consolidations in the industry. As a consequence, the
Company believes there will be business opportunities for the remaining life reinsurers, particularly those with a significant
market presence and strong ratings. However, competition from new entrants for large in-force blocks, particularly for asset-
intensive blocks, has increased in recent years. Additionally, merger and acquisition and other restructuring transactions within
the life insurance industry will likely continue to occur, which the Company believes will increase the demand for reinsurance
products to facilitate these transactions and manage risk.
The Company’s strategy is to continue to capitalize on industry trends by ensuring it is well positioned to meet its
clients’ needs through the following initiatives:
Leading with Expertise and Innovation
•
•
Combine product development, innovation, and new reinsurance structures to open or expand markets.
Leverage underwriting, data, analytics, and digital expertise to grow markets.
43
•
Deliver unique insights to gain competitive advantage and leverage thought leadership to drive growth.
Succeeding Together
•
•
•
Broaden and deepen global, regional, and local client relationships to be the preferred reinsurance partner.
Foster third-party partnerships to accelerate innovation, capabilities, and access to efficient capital.
Strengthen leadership in industry organizations to actively promote and advance industry purpose.
Prioritizing Agility, Impact and Scale
•
•
•
Prioritize high-growth, capability-driven opportunities that best fit risk appetites.
Prioritize opportunities that recognize competitive differentiators and value proposition.
Capitalize on operating model to increase local markets responsiveness and agility.
Building for Future Generations
•
•
•
Pursue a balanced approach to in-force management, portfolio optimization, and new business generation.
Foster an engaging and inclusive culture to attract and retain diverse, world-class talent.
Behave as a responsible global citizen by taking action to address social and environmental issues.
Critical Accounting Policies
The Company’s accounting policies are described in Note 2 – “Significant Accounting Policies and Pronouncements”
in the Notes to Consolidated Financial Statements. The Company believes its most critical accounting policies include the
establishment of premiums receivable; amortization of deferred acquisition costs (“DAC”); the establishment of liabilities for
future policy benefits and incurred but not reported claims; the valuation of investments and investment allowance for credit
losses and impairments; the valuation of embedded derivatives; and accounting for income taxes. The balances of these
accounts require extensive use of assumptions and estimates, particularly related to the future performance of the underlying
business.
Differences in experience compared with the assumptions and estimates utilized in establishing premiums receivable,
the justification of the recoverability of DAC, in establishing reserves for future policy benefits and claim liabilities, or in the
determination of impairments to investment securities can have a material effect on the Company’s results of operations and
financial condition.
Premiums Receivable
Premiums are accrued when due and in accordance with information received from the ceding company. When the
Company enters into a new reinsurance agreement, it records accruals based on the terms of the reinsurance treaty. Similarly,
when a ceding company fails to report information on a timely basis, the Company records accruals based on the terms of the
reinsurance treaty as well as historical experience. Other management estimates include adjustments for increased insurance in
force on existing treaties, lapsed premiums given historical experience, the financial health of specific ceding companies,
collateral value and the legal right of offset on related amounts (i.e., allowances and claims) owed to the ceding company.
Under the legal right of offset provisions in its reinsurance treaties, the Company can withhold payments for allowances and
claims from unpaid premiums.
Deferred Acquisition Costs
Costs of acquiring new business, which vary with and are directly related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Such costs include
commissions and allowances as well as certain costs of policy issuance and underwriting. Non-commission costs related to the
acquisition of new and renewal insurance contracts may be deferred only if they meet the following criteria:
•
•
•
Incremental direct costs of a successful contract acquisition.
Portions of employees’ salaries and benefits directly related to time spent performing specified acquisition activities
for a contract that has been acquired or renewed.
Other costs directly related to the specified acquisition or renewal activities that would not have been incurred had that
acquisition contract transaction not occurred.
The Company tests the recoverability for each year of business at issue before establishing additional DAC. The
Company also performs annual tests to establish that DAC remain recoverable at all times, and if financial performance
44
significantly deteriorates to the point where a deficiency exists, a cumulative charge to current operations will be recorded. No
such adjustments related to DAC recoverability were made in 2021, 2020 and 2019.
DAC related to traditional life insurance contracts are amortized with interest over the premium-paying period of the
related policies in proportion to the ratio of individual period premium revenues to total anticipated premium revenues over the
life of the policy. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities
for future policy benefits.
DAC related to interest-sensitive life and investment-type contracts is amortized over the lives of the contracts, in
relation to the present value of estimated gross profits (“EGP”) from mortality, investment income, and expense margins. The
EGP for asset-intensive products include the following components: (1) estimates of fees charged to policyholders to cover
mortality, surrenders and maintenance costs, less amount of risk upon death; (2) expected interest rate spreads between income
earned and amounts credited to policyholder accounts; and (3) estimated costs of administration. EGP is also reduced by the
Company’s estimate of future losses due to defaults in fixed maturity securities as well as the change in reserves for embedded
derivatives. DAC is sensitive to changes in assumptions regarding these EGP components, and any change in such assumptions
could have an effect on the Company’s profitability.
The Company periodically reviews the EGP valuation model and assumptions so that the assumptions reflect best
estimates of future experience. Two assumptions are considered to be most significant: (1) estimated interest spread, and
(2) estimated future policy lapses. As of December 31, 2021, the Company had $264 million of DAC related to asset-intensive
products, within the U.S. and Latin America and Asia Pacific Financial Solutions segments. The following table reflects the
possible change, as a percentage of current DAC related to asset-intensive products, that would occur in a given year if
assumptions are changed as illustrated:
Quantitative Change in Significant Assumptions
One-Time Increase in
DAC
One-Time Decrease in
DAC
Estimated interest spread increasing (decreasing) 25 basis points from the current spread
Estimated future policy lapse rates decreasing (increasing) 20% on a permanent basis
(including surrender charges)
6.96%
3.17%
(8.94)%
(2.94)%
In general, a change in assumption that improves the Company’s expectations regarding EGP is going to have the
effect of deferring the amortization of DAC into the future, thus increasing earnings and the current DAC balance. DAC can be
no greater than the initial DAC balance plus interest and would be subject to recoverability testing, which is ignored for
purposes of this analysis. Conversely, a change in assumption that decreases EGP will have the effect of speeding up the
amortization of DAC, thus reducing earnings and lowering the DAC balance. The Company also adjusts DAC to reflect
changes in the unrealized gains and losses on available-for-sale fixed maturity securities since these changes affect EGP. This
adjustment to DAC is reflected in accumulated other comprehensive income.
The DAC associated with the Company’s non-asset-intensive business is less sensitive to changes in estimates for
investment yields, mortality and lapses. In accordance with generally accepted accounting principles, the estimates include
provisions for the risk of adverse deviation and are not adjusted unless experience significantly deteriorates to the point where a
premium deficiency exists.
The following table summarizes the DAC balances for the Traditional and Financial Solutions segments as of
December 31, 2021:
(dollars in millions)
Traditional
Financial Solutions
Other
Total
U.S. and Latin America
Canada
Europe, Middle East and Africa
Asia Pacific
Corporate
Total
$
1,926 $
190 $
— $
192
253
1,052
—
—
—
74
—
—
—
—
3
$
3,423 $
264 $
3 $
2,116
192
253
1,126
3
3,690
As of December 31, 2021, the Company estimates that all of its DAC balance is collateralized by surrender fees due to
the Company and the reduction of policy liabilities, in excess of termination values, upon surrender or lapse of a policy.
Liabilities for Future Policy Benefits and Incurred but not Reported Claims
Liabilities for future policy benefits under long-duration life insurance policies (policy reserves) are computed based
upon expected investment yields, mortality and withdrawal (lapse) rates, and other assumptions, including a provision for
45
adverse deviation from expected claim levels. Liabilities for use policy claims and benefits for short-duration contracts are
accounted for based on actuarial estimates of the amount of loss inherent in that period’s claims, including losses incurred for
which claims have not been reported. Short-duration contract loss estimates rely on actuarial observations of ultimate loss
experience for similar historical events. The Company primarily relies on its own valuation and administration systems to
establish policy reserves. The policy reserves the Company establishes may differ from those established by the ceding
companies due to the use of different mortality and other assumptions. However, the Company relies upon its ceding company
clients to provide accurate data, including policy-level information, premiums and claims, which is the primary information
used to establish reserves. The Company’s administration departments work directly with clients to help ensure information is
submitted in accordance with the reinsurance contracts. Additionally, the Company performs periodic audits of the information
provided by clients. The Company establishes reserves for processing backlogs with a goal of clearing all backlogs within a
ninety-day period. The backlogs are usually due to data errors the Company discovers or computer file compatibility issues,
since much of the data reported to the Company is in electronic format and is uploaded to its computer systems.
The Company periodically reviews actual historical experience and relative anticipated experience compared to the
assumptions used to establish aggregate policy reserves. Further, the Company establishes premium deficiency reserves if
actual and anticipated experience indicates that existing aggregate policy reserves, together with the present value of future
gross premiums, are not sufficient to cover the present value of future benefits, settlement and maintenance costs and to recover
unamortized acquisition costs. The premium deficiency reserve is established through a charge to income, as well as a reduction
to unamortized acquisition costs and, to the extent there are no unamortized acquisition costs, an increase to future policy
benefits. Because of the many assumptions and estimates used in establishing reserves and the long-term nature of the
Company’s reinsurance contracts, the reserving process, while based on actuarial science, is inherently uncertain. If the
Company’s assumptions, particularly on mortality, are inaccurate, its reserves may be inadequate to pay claims and there could
be a material adverse effect on its results of operations and financial condition.
Claims payable for incurred but not reported losses for long-duration life policies are determined using case-basis
estimates and lag studies of past experience. The time lag from the date of the claim or death to the date when the ceding
company reports the claim to the Company can be several months and can vary significantly by ceding company, business
segment and product type. Incurred but not reported claims are estimates on an undiscounted basis, using actuarial estimates of
historical claims expense, adjusted for current trends and conditions. These estimates are continually reviewed and the ultimate
liability may vary significantly from the amount recognized, which are reflected in net income in the period in which they are
determined.
Claims payable for incurred but not reported losses for disability, medical and other short-duration contracts are
determined using actuarial methods based on historical claim patterns as well as estimated changes in cost trends. The Company
also reviews and evaluates how prior periods’ estimates are developed when estimating the accrual for the current period. To
the extent appropriate, changes in such development are recorded as a change to the current period expense. Historically, the
amount of the claim development adjustment made in subsequent reporting periods for prior period estimates has been in a
reasonable range given the Company’s normal claim fluctuations.
Valuation of Investments, Allowance for Credit Losses and Impairments
The Company primarily invests in fixed maturity securities, mortgage loans, short-term investments, and other
invested assets. For investments reported at fair value, the Company utilizes, when available, fair values based on quoted prices
in active markets that are regularly and readily obtainable. Generally, these are very liquid investments and the valuation does
not require management judgment. When quoted prices in active markets are not available, fair value is based on market
valuation techniques, market comparable pricing and the income approach. The Company may utilize information from third
parties, such as pricing services and brokers, to assist in determining the fair value for certain investments; however,
management is ultimately responsible for all fair values presented in the Company’s consolidated financial statements. This
includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices and pricing of
assets and liabilities, and approving changes to valuation methodologies and pricing sources. The selection of the valuation
technique(s) to apply considers the definition of an exit price and the nature of the investment being valued and significant
expertise and judgment is required.
In addition, investments are subject to impairment reviews to identify when a decline in value necessitates the
recording of an allowance for credit losses or an impairment for non-credit factors. Impairment losses for non-credit factors are
recognized in AOCI whereas allowances for credit losses are recognized in investment related gains (losses), net. See
“Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” in the
Notes to Consolidated Financial Statements for a discussion of the policies regarding allowance for credit losses and
impairments.
Fixed maturity securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses
on fixed maturity securities classified as available-for-sale, less applicable deferred income taxes as well as related adjustments
46
to deferred acquisition costs, if applicable, are reflected as a direct charge or credit to accumulated other comprehensive income
(“AOCI”) in stockholders’ equity on the consolidated balance sheets.
See “Investments” in Note 2 – “Significant Accounting Policies and Pronouncements” and Note 6 – “Fair Value of
Assets and Liabilities” in the Notes to Consolidated Financial Statements for additional information regarding the valuation of
the Company’s investments.
Mortgage loans on real estate are carried at unpaid principal balances, net of any unamortized premium or discount and
valuation allowances. For a discussion regarding the valuation allowance for mortgage loans see “Allowance for Credit Losses
and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial
Statements.
Valuation of Embedded Derivatives
The Company reinsures certain annuity products that contain terms that are deemed to be embedded derivatives,
primarily equity-indexed annuities and variable annuities with guaranteed minimum benefits. The Company assesses each
identified embedded derivative to determine whether it is required to be bifurcated under the general accounting principles for
Derivatives and Hedging. If the instrument would not be reported in its entirety at fair value and it is determined that the terms
of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a
separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from
the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated
balance sheets at fair value with the host contract.
Additionally, reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general
accounting principles for Derivatives and Hedging related to embedded derivatives. The majority of the Company’s funds
withheld at interest balances are associated with its reinsurance of annuity contracts, the majority of which are subject to the
general accounting principles for Derivatives and Hedging related to embedded derivatives. Management believes the
embedded derivative feature in each of these reinsurance treaties is similar to a total return swap on the assets held by the
ceding companies.
The valuation of the various embedded derivatives requires complex calculations based on actuarial and capital
markets inputs and assumptions related to estimates of future cash flows and interpretations of the primary accounting guidance
continue to evolve in practice. The valuation of embedded derivatives is sensitive to the investment credit spread environment.
Changes in investment credit spreads are also affected by the application of a credit valuation adjustment (“CVA”). The fair
value calculation of an embedded derivative in an asset position utilizes a CVA based on the ceding company’s credit risk.
Conversely, the fair value calculation of an embedded derivative in a liability position utilizes a CVA based on the Company’s
credit risk. Generally, an increase in investment credit spreads, ignoring changes in the CVA, will have a negative impact on the
fair value of the embedded derivative (decrease in income). See “Derivative Instruments” in Note 2 – “Significant Accounting
Policies and Pronouncements” and Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial
Statements for additional information regarding the valuation of the Company’s embedded derivatives.
Income Taxes
The U.S. consolidated tax return includes the operations of RGA and all eligible subsidiaries. The Company’s foreign
subsidiaries are taxed under applicable local statutes.
The Company provides for federal, state and foreign income taxes currently payable, as well as those deferred due to
temporary differences between the tax basis of assets and liabilities and the reported amounts, and are recognized in net income
or in certain cases in other comprehensive income. The Company’s accounting for income taxes represents management’s best
estimate of various events and transactions considering the laws enacted as of the reporting date.
Deferred tax assets and liabilities are measured by applying the relevant jurisdictions’ enacted tax rate for the period in
which the temporary differences are expected to reverse to the temporary difference change for that period. The Company will
establish a valuation allowance if management determines, based on available information, that it is more likely than not that
deferred income tax assets will not be realized. The Company has deferred tax assets including those related to foreign tax
credits, net operating and capital losses. The Company has projected its ability to utilize its deferred tax assets and established a
valuation allowance on the portion of the deferred tax assets the Company believes more likely than not will not be realized.
Significant judgment is required in determining whether valuation allowances should be established as well as the
amount of such allowances. When making such a determination, consideration is given to, among other things, the following:
(i)
taxable income in prior carryback years
(ii) future reversals of existing taxable temporary differences;
(iii) future taxable income exclusive of reversing temporary differences and carryforwards; and
47
(iv) tax planning strategies.
Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year
these changes occur.
The Company made a policy election to account for global intangible low-taxed income (“GILTI”) as a period cost.
The Company reports uncertain tax positions in accordance with generally accepted accounting principles. In order to
recognize the benefit of an uncertain tax position, the position must meet the more likely than not criteria of being sustained.
Unrecognized tax benefits due to tax uncertainties that do not meet the more likely than not criteria are included within
liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest related to
tax uncertainties as interest expense whereas penalties related to tax uncertainties are classified as a component of income tax.
See Note 9 – “Income Tax” for further discussion.
Consolidated Results of Operations
Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic continues to cause increases in the Company’s claims costs, primarily relating to its
mortality business. However, the Company cannot reliably predict the future impact of the pandemic on its business, results of
operations and financial condition as the impact will largely depend on, among other factors, the impact of new variants of the
virus, vaccination effectiveness and take-up rates, development and deployment of new antiviral therapeutics, country-specific
circumstances, measures by public and private institutions, and COVID-19’s indirect impact on mortality and morbidity.
The ultimate amount and timing of claims the Company will experience as a result of the COVID-19 pandemic will
depend on many variables and uncertainties. These variables and uncertainties include those discussed above, in addition to age,
gender, comorbidities, other insured versus general population characteristics, geography-specific institutional and individual
mitigating actions, medical capacity, and other factors. To date, general population COVID-19 deaths have been heavily
concentrated in individuals aged 70 and older and with pre-existing comorbidities; however, more recently, many populations
have seen an increase in younger age deaths, particularly in areas where healthcare facilities were unable to provide adequate
care. The Company’s insured population has lower exposure to older ages than the general population and covers a generally
healthier population due to underwriting and socioeconomic factors of those purchasing insurance. In addition, the Company’s
longevity business may act as a modest offset to excess life insurance claims at older ages.
The Company’s COVID-19 projection and financial impact models continue to be updated and refined based on
updated external data and the Company’s claim experience to date and are subject to the many variables and uncertainties noted
above. The U.S. is the key driver of mortality claim costs followed by India, South Africa, the UK and Canada. For the year
ended December 31, 2021, the Company estimates it has incurred approximately $1.4 billion of COVID-19 related life and
health claim costs, including amounts incurred but not reported, with approximately $850 million of that amount being
associated with the U.S. and Latin America Traditional segment. The Company has maintained the range of COVID-19
mortality claim cost estimates relative to the level of general population deaths for the U.S., the UK and Canada although short-
term experience may be at the higher end of those ranges, reflecting mortality that is still driven in part by the Delta variant. The
Company estimates that every additional 10,000 population deaths in the U.S., UK, or Canada as a result of COVID-19 would
result in the following corresponding excess mortality claims of approximately
•
•
•
$10 million to $20 million in the U.S.;
$4 million to $8 million in the UK; and
$10 million to $20 million in Canada.
The global financial markets have stabilized since the beginning of the pandemic; however, they continue to be in a
state of uncertainty due to COVID-19, including supply chain issues and the impact of historically large and rapid central bank
actions and fiscal policies meant to offset the economic impact of the pandemic. The economic uncertainty caused by these
events may also adversely affect the Company’s financial performance. All investments held by the Company, directly or in a
funds withheld at interest reinsurance arrangement are monitored for conformance with the Company’s stated investment policy
limits as well as any limits prescribed by the applicable jurisdiction’s insurance laws and regulations. The current market
environment may result in certain investments being downgraded which can affect conformance with these limits. The level of
potential impairments will depend on broad economic conditions and the pace at which global economies recover from the
effects of COVID-19 and the response thereto. See “Investments” for more information.
The safety and well-being of the Company’s employees and clients continues to be a priority. The Company’s business
continuity plans remain activated and the actions taken during 2020 to protect both employees and clients, such as working
from home, restricting travel, conducting meetings remotely, and reinforcing the importance of face coverings, good hygiene
and social distancing, also largely continue. The Company’s offices worldwide are at a minimum adhering to local government
48
mandates and guidelines regarding occupancy levels; however, in certain situations the Company’s guidelines are more
restrictive than those of local governments.
The Company has not experienced any significant disruptions to its daily operations, despite most of its workforce
working remotely. However, COVID-19 heightened operational risks and related impacts, which may include impacts to the
Company’s workforce productivity due to travel restrictions, temporary office closures and increased remote working
situations, and potential client delays in paying premiums and reporting claims. Similar to other reinsurers, the Company is
heavily reliant on timely reporting from its clients and other third parties. The Company continues to emphasize awareness and
training regarding operational risks, including privacy and cybersecurity risks, as such risks are heightened during remote
working situations. In addition, the Company continues to monitor its programs, processes and procedures designed to manage
these risks.
RGA’s operating subsidiaries continue to be well capitalized, and the Company continues to monitor its solvency
position under multiple capital regimes on a regular basis while considering both its developing experience and economic
conditions. In addition, the Company utilizes its internal capital model to assess its ability to meet its long-term obligations
under a range of stress scenarios on a consolidated basis. This internal capital model is also used as the capital basis for the
Company’s consolidated Own Risk and Solvency Assessment.
Results of Operations – 2021 compared to 2020
A discussion regarding our financial condition and results of operations for the year ended December 31, 2021,
compared to the year ended December 31, 2020, is presented below. A discussion regarding our financial condition and results
of operations for year ended December 31, 2020, compared to the year ended December 31, 2019, can be found under Item 7 in
our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021, which is
available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at www.rgare.com.
Information provided on such websites does not constitute part of this Annual Report on Form 10-K.
The following table summarizes net income for the periods presented.
Revenues
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Interest expense
Collateral finance and securitization expense
Total benefits and expenses
Income before income taxes
Provision for income taxes
Net income
Earnings per share
Basic earnings per share
Diluted earnings per share
For the years ended December 31,
2021
2020
2021 vs 2020
(Dollars in millions, except per share data)
$
12,513 $
11,694 $
3,138
560
447
16,658
12,776
700
1,416
936
127
12
15,967
691
74
2,575
(33)
360
14,596
11,075
704
1,261
816
170
17
14,043
553
138
$
$
617 $
415 $
9.10 $
9.04
6.35
6.31
819
563
593
87
2,062
1,701
(4)
155
120
(43)
(5)
1,924
138
(64)
202
The increase in income in 2021 was primarily the result of the following:
•
•
$234 million, pre-tax, of capital gains included in other investment related gains (losses), net associated with portfolio
repositioning.
A one-time adjustment of $162 million, pre-tax, associated with prior periods that includes $92 million, pre-tax, to
correct the accounting for equity method limited partnerships to reflect unrealized gains in investment income, net of
related expenses that were previously included in accumulated other comprehensive income, and a $70 million, pre-
tax, correction reflected in other investment related gains (losses), net to adjust the carrying value of certain limited
partnerships from cost less impairments to a fair value approach, using the net asset value (“NAV”) per share or its
equivalent.
49
•
•
Changes in fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment
related gains by $107 million in 2021, compared to a decrease of $62 million in 2020.
As discussed in “Impacts of the COVID-19 Pandemic” above, the Company estimates it has incurred approximately
$1.4 billion of COVID-19 related life and health claim costs, including amounts incurred but not reported, with
approximately $850 million of the current year amount being associated with the U.S. and Latin America Traditional
segment.
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency exchange
fluctuation increased income before taxes by $13 million due to the strengthening of the Great British Pound, Canadian Dollar
and South Africa Rand compared to the U.S. Dollar. Unless otherwise stated, all amounts discussed below are net of foreign
currency fluctuations.
Premiums and business growth
The increase in premiums is primarily due to an increase in new business production, measured by the face amount of
insurance in force, of $412.1 billion during 2021 compared to $389.6 billion during 2020. Consolidated assumed life insurance
in force decreased to $3,467.0 billion as of December 31, 2021, from $3,480.7 billion as of December 31, 2020, due to lapses
and mortality claims in the current year of $391.7 billion, primarily attributable to the COVID-19 pandemic and changes in
foreign exchange, which decreased assumed life insurance in force by $34.1 billion.
Investment income, net of related expenses and investment related gains and losses
The increase in investment income, net of related expenses is primarily attributable to an increase in the average
invested asset base, and increase in investment yield and an increase in variable investment income associated with joint
venture and limited partnership investments:
•
•
•
The average invested assets at amortized cost, excluding spread related business, totaled $33.0 billion and $30.8 billion
in 2021 and 2020, respectively.
The average yield earned on investments, excluding spread related business, was 4.99% and 4.00% in 2021 and 2020,
respectively.
Excluding the previously mentioned correction recorded in the first quarter of 2021 of $92 million, variable investment
income associated with joint venture and limited partnership investments was $341 million and $63 million in 2021
and 2020, respectively.
The average yield will vary from year to year depending on several variables, including the prevailing risk-fee interest
rate and credit spread environment, prepayment fees and make-whole premiums, changes in the mix of the underlying
investments and cash and cash equivalents balances. Variable investment income from joint ventures and limited partnerships
will also vary from year to year and is highly dependent on the timing of dividends and distributions on certain investments.
Investment income is allocated to the operating segments based upon average assets and related capital levels deemed
appropriate to support segment operations.
The increase in investment related gains (losses), net is attributable to the following:
•
•
•
•
•
During 2021, the Company repositioned select portfolios generating net realized gains of $234 million compared to
$32 million of net realized gains in 2020.
Changes in the fair value of embedded derivatives associated with modco/funds withheld treaties, increased and
(decreased) investment related gains (losses) by $107 million and $(62) million in 2021 and 2020, respectively.
During 2021, the Company recognized a gain of $17 million related to changes in allowance for credit losses and
impairments on fixed maturity securities, mortgage loans, and limited partnerships compared to a loss of $77 million
during 2020.
Unrealized gains of $194 million, including the previously mentioned correction recorded in the first quarter of 2021
of $70 million, due to the change in fair value of certain cost method limited partnerships were recognized during 2021
compared to $24 million in 2020.
See the Investment section within Management Discussion and Analysis, Note 4 – “Investments” and Note 5 –
“Derivative Instruments” in the Notes to Consolidated Financial Statements for additional information on the changes
in allowance for credit losses, impairment losses and derivatives.
The effective tax rate on a consolidated basis was 10.6% and 24.9% for 2021 and 2020, respectively. The effective tax
rate for 2021 was lower than the U.S. Statutory rate of 21.0% as result of the release of uncertain tax positions in the amount of
$124 million due to the expiration of statute of limitations, partially offset by income earned in jurisdictions with tax rates
50
higher than the U.S. See Note 9 – “Income Tax” in the Notes to Consolidated Financial Statements for additional information
on the Company’s consolidated effective tax rate.
Impact of certain derivatives
The Company recognizes in consolidated income, any changes in the fair value of embedded derivatives on modco or
funds withheld treaties, EIAs and variable annuities with guaranteed minimum benefit riders. The Company utilizes
freestanding derivatives to minimize the income statement volatility due to changes in the fair value of embedded derivatives
associated with guaranteed minimum benefit riders. The following table presents the effect of embedded derivatives and related
freestanding derivatives on income before income taxes for the periods indicated (dollars in millions):
Twelve months ended December 31,
2021
2020
2021 vs 2020
Modco/Funds withheld:
Unrealized gains (losses)
Deferred acquisition costs/retrocession
Net effect
EIAs:
Unrealized gains (losses)
Deferred acquisition costs/retrocession
Net effect
Guaranteed minimum benefit riders:
Unrealized gains (losses)
Related freestanding derivatives, net of deferred acquisition costs/retrocession
Net effect
$
107 $
(62) $
(36)
71
45
(23)
22
(7)
(47)
(54)
22
(40)
(20)
8
(12)
9
1
10
Net effect after related freestanding derivatives
$
39 $
(42) $
169
(58)
111
65
(31)
34
(16)
(48)
(64)
81
51
Results of Operations by Segment
U.S. and Latin America Operations
The U.S. and Latin America operations consist of two major segments: Traditional and Financial Solutions. The
Traditional segment primarily specializes in the reinsurance of individual mortality-risk, health and long-term care and to a
lesser extent, group reinsurance. The Financial Solutions segment consists of Asset-Intensive and Capital Solutions. Asset-
Intensive within the Financial Solutions segment includes coinsurance of annuities and corporate-owned life insurance policies
and to a lesser extent, fee-based synthetic guaranteed investment contracts, which include investment-only, stable value
contracts. Capital Solutions within the Financial Solutions segment primarily involves assisting ceding companies in meeting
applicable regulatory requirements by enhancing the ceding companies’ financial strength and regulatory surplus position
through relatively low risk reinsurance and other transactions. Typically, capital solution transactions do not qualify as
reinsurance under GAAP, due to the low-risk nature of the transactions, therefore only the related net fees are reflected in other
revenues on the consolidated statements of income.
The following table summarizes income before income taxes for the Company’s U.S. and Latin America operations
for the periods presented:
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Loss before income taxes
2021
2020
2021 vs 2020
$
6,299 $
5,891 $
2,019
78
294
8,690
6,886
635
988
206
8,715
1,713
(50)
226
7,780
6,107
636
871
169
7,783
$
(25) $
(3) $
408
306
128
68
910
779
(1)
117
37
932
(22)
The increase in loss before income taxes in 2021 was the result of an increase in claims in the U.S. Traditional segment
primarily attributable to COVID-19 related factors, partially offset by an increase in variable investment income and improved
results in the Financial Solutions segment primarily due to increased investment related gains (losses), net in coinsurance
portfolios, transaction fees and the net increase in fair value of the embedded derivatives.
52
Traditional Reinsurance
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Loss before income taxes
Key metrics:
2021
2020
2021 vs 2020
$
$
6,244
930
6
18
7,198
6,720
70
792
156
7,738
(540)
$
$
5,838
714
(11)
19
6,560
5,906
73
748
131
6,858
(298)
$
$
406
216
17
(1)
638
814
(3)
44
25
880
(242)
Life insurance in force
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)
Policy acquisition costs and other insurance expenses as a percentage of net premiums
Other operating expenses as a percentage of net premiums
$1,628.4 billion
107.6 %
12.7 %
2.5 %
$1,611.6 billion
101.2 %
12.8 %
2.2 %
The increase in loss before income taxes for the U.S. and Latin America Traditional segment was primarily due to
unfavorable claims experience within the individual mortality line of business primarily attributable to COVID-19, which was
partially offset by higher variable investment income.
Revenues
•
•
The increase in net premiums was primarily due to organic growth as well as new sales. The segment added new life
business production, measured by face amount of insurance in force, of $130.5 billion, and $114.9 billion during 2021
and 2020, respectively.
The increase in net investment income was due to an increase in variable investment income associated with
investments in real estate joint ventures and an increase in realized and unrealized gains associated with investments in
limited partnerships and private equity funds.
Benefits and expenses
•
The increase in the loss ratio for 2021 was primarily due to unfavorable claims experience in the individual mortality
line of business, attributed primarily to the COVID-19 pandemic. While the cause of death is not yet available for all
claims, the Company estimates that approximately $850 million of claims for the year ended December 31, 2021, were
attributable to COVID-19 related factors.
•
The increase in other operating expenses was primarily due to an increase in incentive-based compensation expense.
53
Financial Solutions
For the year ended December 31,
2021
2020
2021 vs 2020
Asset-
Intensive
Capital
Solutions
Total
Asset-
Intensive
Capital
Solutions
Total
Asset-
Intensive
Capital
Solutions
Total
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related
expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other
insurance expenses
Other operating expenses
$
55 $ — $
55
$
53
$ — $
53
$
2 $ — $
2
1,087
72
168
1,382
166
565
192
37
2
—
108
110
—
—
4
13
1,089
72
276
1,492
166
565
196
50
977
515
994
(39)
103
1,111
201
563
118
28
910
201
$
5
—
104
109
—
—
5
10
15
94 $
$
999
(39)
207
1,220
201
563
123
38
925
295
93
111
65
271
(35)
2
74
9
(3)
—
4
1
—
—
(1)
3
50
221 $
$
2
(1) $
90
111
69
272
(35)
2
73
12
52
220
Total benefits and expenses
Income before income taxes
960
422 $
$
17
93 $
Asset-intensive
The increase in income before income taxes for the U.S. and Latin America Financial Solutions’ Asset-intensive
segment was primarily due to higher investment related gains (losses), net primarily due to an increase in the fair value of
embedded derivatives reflected in investment related gains (losses), net.
The invested asset base supporting this segment increased to $24.1 billion as of December 31, 2021, from $23.5 billion
as of December 31, 2020.
•
•
The increase in the asset base was primarily due to an increase in fixed annuity account values due to new transactions.
As of December 31, 2021 and 2020, $4.7 billion and $3.2 billion, respectively, of the invested assets were funds
withheld at interest, of which greater than 90% is associated with two clients.
Impact of certain derivatives
Income from the asset-intensive business tends to be volatile due to changes in the fair value of certain derivatives,
including embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld basis, as well as
embedded derivatives associated with the Company’s reinsurance of EIAs and variable annuities with guaranteed minimum
benefit riders. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to,
interest rate movements (including risk-free rates and credit spreads), implied volatility, the Company’s own credit risk and
equity market performance, all of which are factors in the calculations of fair value. Therefore, management believes it is
helpful to distinguish between the effects of changes in these derivatives, net of related hedging activity, and the primary factors
that drive profitability of the underlying treaties, namely investment income, fee income (included in other revenues), and
interest credited. These fluctuations are considered unrealized by management and do not affect current cash flows, crediting
rates or spread performance on the underlying treaties.
The following table summarizes the asset-intensive results and quantifies the impact of these embedded derivatives for
the periods presented. Revenues before certain derivatives, benefits and expenses before certain derivatives, and income before
income taxes and certain derivatives, should not be viewed as substitutes for GAAP revenues, GAAP benefits and expenses,
and GAAP income before income taxes.
54
For the year ended December 31,
(dollars in millions)
Revenues:
Total revenues
Less:
Embedded derivatives – modco/funds withheld treaties
Guaranteed minimum benefit riders and related free standing derivatives
Revenues before certain derivatives
Benefits and expenses:
Total benefits and expenses
Less:
Embedded derivatives – modco/funds withheld treaties
Guaranteed minimum benefit riders and related free standing derivatives
Equity-indexed annuities
Benefits and expenses before certain derivatives
Income (loss) before income taxes:
Income before income taxes
Less:
Embedded derivatives – modco/funds withheld treaties
Guaranteed minimum benefit riders and related free standing derivatives
Equity-indexed annuities
2021
2020
2021 vs 2020
$
1,382 $
1,111 $
101
(78)
1,359
960
36
(24)
(22)
970
422
65
(54)
22
(51)
47
1,115
910
(22)
37
12
883
201
(29)
10
(12)
232 $
271
152
(125)
244
50
58
(61)
(34)
87
221
94
(64)
34
157
Income before income taxes and certain derivatives
$
389 $
Embedded Derivatives – Modco/Funds Withheld Treaties – Represents the change in the fair value of embedded
derivatives on funds withheld at interest associated with treaties written on a modco or funds withheld basis. The fair value
changes of embedded derivatives are reflected in revenues, while the related impact on deferred acquisition expenses is
reflected in benefits and expenses. The Company’s utilization of a credit valuation adjustment did not have a material effect on
the change in fair value of these embedded derivatives for the years ended December 31, 2021 and 2020.
The change in fair value of the embedded derivatives – modco/funds withheld treaties increased income before income
taxes by $65 million in 2021. The increase in 2021 was primarily the result of tightening credit spreads.
Guaranteed Minimum Benefit Riders – Represents the impact related to guaranteed minimum benefits associated with
the Company’s reinsurance of variable annuities. The fair value changes of the guaranteed minimum benefits along with the
changes in fair value of the free standing derivatives (interest rate swaps, financial futures and equity options), purchased by the
Company to substantially hedge the liability are reflected in revenues, while the related impact on deferred acquisition expenses
is reflected in benefits and expenses. Changes in fair values of the embedded derivatives on guaranteed minimum benefits are
net of an increase (decrease) in investment related gains (losses), net of $(41) million and $77 million for 2021 and 2020,
respectively, associated with the Company’s utilization of a credit valuation adjustment.
The change in fair value of the guaranteed minimum benefits, after allowing for changes in the associated free standing
derivatives, decreased income before income taxes by $54 million in 2021. The decrease in income for 2021 is primarily due to
a decrease in the credit valuation adjustment, which has the impact of increasing the fair value of the guaranteed minimum
benefit liability, net of related impact on deferred acquisition expenses and the annual update of best estimate actuarial
assumptions for future mortality improvement.
Equity-Indexed Annuities – Represents changes in the liability for equity-indexed annuities in excess of changes in
account value, after adjustments for related deferred acquisition expenses. The change in fair value of embedded derivative
liabilities associated with equity-indexed annuities increased income before income taxes by $22 million in 2021, primarily due
to an increase in risk free interest rates which has the impact of lowering the fair value of the liability.
The changes in derivatives discussed above are considered unrealized by management and do not affect current cash
flows, crediting rates or spread performance on the underlying treaties. Fluctuations occur period to period primarily due to
changing investment conditions including, but not limited to, interest rate movements (including benchmark rates and credit
spreads), credit valuation adjustments, implied volatility and equity market performance, all of which are factors in the
calculation of fair value. Therefore, management believes it is helpful to distinguish between the effects of changes in these
derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income
(included in other revenues) and interest credited.
55
Discussion and analysis before certain derivatives
•
•
•
Income before income taxes and certain derivatives increased by $157 million in 2021, which was primarily due to
contributions from new transactions, favorable policyholder experience and higher investment related gains (losses),
net in coinsurance and funds withheld portfolios.
Revenue before certain derivatives increased by $244 million in 2021, primarily due to the revenue associated with
transactions executed during the year, increases in fair value of equity options associated with the reinsurance of EIAs
and higher investment related gains (losses), net in coinsurance portfolios. The effect on investment income related to
equity options is substantially offset by a corresponding change in interest credited.
Benefits and expenses before certain derivatives increased by $87 million in 2021, primarily resulting from an increase
in interest credited associated with the reinsurance of EIAs due to equity market performance and benefits associated
with transactions executed during the year, partially offset by the expected run-off from closed block transactions. The
effect on interest credited related to equity options is substantially offset by a corresponding increase in investment
income.
Capital Solutions
Income before income taxes for the U.S. and Latin America Capital Solutions’ business decreased $1 million for the
year ended December 31, 2021. The decrease was primarily due to the termination of certain transactions, partially offset by
growth from new transactions and organic growth on existing transactions. Fees earned from this business can vary
significantly depending on the size of the transactions and the timing of their completion and, therefore can fluctuate from
period to period.
•
At December 31, 2021 and 2020, the amount of business assumed from client companies, as measured by pre-tax
statutory surplus, risk based capital and other financial reinsurance structures, was $22.7 billion and $19.9 billion,
respectively.
Canada Operations
The Canada operations are primarily engaged in Traditional reinsurance, which consists mainly of traditional
individual life reinsurance, and to a lesser extent creditor, group life and health, critical illness and disability reinsurance.
Creditor insurance covers the outstanding balance on personal, mortgage or commercial loans in the event of death, disability or
critical illness and is generally shorter in duration than traditional individual life insurance. The Canada Financial Solutions
segment consists of longevity and capital solutions.
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
1,284 $
1,135 $
248
3
14
1,549
1,175
—
190
41
1,406
$
143 $
208
—
9
1,352
977
—
181
39
1,197
155 $
149
40
3
5
197
198
—
9
2
209
(12)
•
The decrease in income before income taxes in 2021 is primarily due to unfavorable individual life mortality
experience compared to 2020 attributed primarily to the COVID-19 pandemic, partially offset by increased investment
income.
• While foreign currency fluctuations can result in variances in the financial statement line items, fluctuation in the
Canadian dollar did not result in a material change in income before income taxes in 2021. Unless otherwise stated, all
amounts discussed below are net of foreign currency fluctuations.
56
Traditional Reinsurance
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
Key metrics:
2021
2020
2021 vs 2020
$
$
1,194
248
3
3
1,448
1,096
—
187
37
1,320
128
$
$
1,052
207
—
1
1,260
909
—
180
37
1,126
134
$
$
142
41
3
2
188
187
—
7
—
194
(6)
Life insurance in force
Loss ratios
Policy acquisition costs and other insurance expenses as a percentage of net premiums
Other operating expenses as a percentage of net premiums
$472.6 billion
91.8 %
15.7 %
3.1 %
$445.3 billion
86.4 %
17.1 %
3.5 %
The decrease in income before income taxes in 2021 is primarily due to unfavorable individual life mortality
experience compared to 2020 and the impact of COVID-19 related claims.
Revenues
•
•
•
The increase in net premiums was primarily due to a new transaction completed in the second half of the year for
group business and an increase in business volume under existing treaties.
The segment added new life business production, measured by face amount of insurance in force, of $48.8 billion and
$40.8 billion during 2021 and 2020, respectively.
The increase in net investment income was primarily due to increased variable investment income and an increase in
the invested asset base due to growth in the underlying business volume partially offset by a decline in interest rates.
Benefits and expenses
•
The increase in the loss ratio for 2021 was primarily due to unfavorable claims experience in the individual mortality
line of business, attributed primarily to the COVID-19 pandemic. In addition, while the cause of death is not yet
available for all claims, the Company estimates that approximately $60 million of claims for the year ended December
31, 2021, were attributable to COVID-19 related factors.
57
Financial Solutions
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
90 $
83 $
—
—
11
101
79
—
3
4
86
1
—
8
92
68
—
1
2
71
$
15 $
21 $
7
(1)
—
3
9
11
—
2
2
15
(6)
The decrease in income before income taxes in 2021 was primarily a result of less favorable mortality experience on
longevity business in 2021 as compared to 2020.
Europe, Middle East and Africa Operations
The Europe, Middle East and Africa (“EMEA”) operations consists of two major segments: Traditional and Financial
Solutions. The Traditional segment primarily provides reinsurance through yearly renewable term and coinsurance agreements
on a variety of life, health and critical illness products. Reinsurance agreements may be facultative or automatic agreements
covering primarily individual risks and, in some markets, group risks. The Financial Solutions segment consists of reinsurance
and other transactions associated with longevity closed blocks, payout annuities, capital management solutions and financial
reinsurance.
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
2,088 $
293
49
13
2,443
2,083
4
135
157
2,379
1,807 $
265
15
17
2,104
1,541
11
123
144
1,819
$
64 $
285 $
281
28
34
(4)
339
542
(7)
12
13
560
(221)
•
•
The decrease in income before income taxes in 2021 was primarily due to unfavorable mortality experience attributed
primarily to COVID-19. The unfavorable mortality experience was partially offset by increases in net premiums,
investment income and investment related gains.
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency
fluctuations resulted in a $2 million decrease in income before income taxes in 2021. Unless otherwise stated, all
amounts discussed below are net of foreign currency fluctuations.
58
Traditional Reinsurance
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income (loss) before income taxes
Key metrics:
2021
2020
2021 vs 2020
$
$
1,738
88
—
1
1,827
1,829
—
125
112
2,066
(239)
$
$
1,555
72
—
6
1,633
1,389
—
119
98
1,606
27
$
$
183
16
—
(5)
194
440
—
6
14
460
(266)
Life insurance in force
Loss ratios
Policy acquisition costs and other insurance expenses as a percentage of net premiums
Other operating expenses as a percentage of net premiums
$861.6 billion
105.2 %
7.2 %
6.4 %
$864.3 billion
89.3 %
7.7 %
6.3 %
The decrease in income before income taxes in 2021 is primarily due to less favorable individual life mortality
experience, as well as poor morbidity experience, driven in part by COVID-19 related claims. The decrease in income was
partially offset by an increase in net premiums.
Revenues
•
•
The increase in net premiums was primarily due to an increase in business volume from new and existing treaties.
The segment added new life business production, measured by face amount of insurance in force, of $198.4 billion and
$184.3 billion during 2021 and 2020, respectively.
Benefits and expenses
•
The increase in the loss ratio was due to unfavorable mortality experience, primarily attributable to COVID-19. While
the cause of death is not available for all claims, the Company estimates that approximately $265 million of claims,
were attributable to COVID-19 related factors, of which approximately $150 million were incurred in South Africa
and $105 million were incurred in the UK.
•
The increase in other operating expenses was primarily due to an increase in incentive compensation expenses.
Financial Solutions
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
$
350 $
205
49
12
616
254
4
10
45
313
303 $
252 $
193
15
11
471
152
11
4
46
213
258 $
98
12
34
1
145
102
(7)
6
(1)
100
45
The increase in income before income taxes is primarily due to an increase in new business activity and an increase in
investment related gains on investments supporting annuity business.
59
Revenues
•
•
The increase in net premiums was primarily due to an increase in new business volumes of closed longevity business.
The increase in investment related gains (losses), net was primarily due to fluctuations in the fair market value of CPI
swap derivatives due to changes in future inflation expectations and higher investment related gains on fixed-income
securities, respectively.
Benefits and expenses
•
The increase in claims and other policy benefits was the result of increased volumes of closed longevity block
business.
Asia Pacific Operations
The Asia Pacific operations include business generated by its offices throughout Asia and Australia. The Traditional
segment’s principal types of reinsurance include individual and group life and health, critical illness, disability and
superannuation. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks, and
in some markets, group risks. Superannuation is the Australian government mandated compulsory retirement savings program.
Superannuation funds accumulate retirement funds for employees, and, in addition, typically offer life and disability insurance
coverage. The Financial Solutions segment includes financial reinsurance, asset-intensive and certain disability and life blocks.
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
2,842 $
2,861 $
274
18
61
3,195
2,632
57
215
203
3,107
192
13
49
3,115
2,450
49
198
185
2,882
$
88 $
233 $
(19)
82
5
12
80
182
8
17
18
225
(145)
•
•
The decrease in income before income taxes as compared to the same period in 2020 was due to unfavorable claims
experience in Asia compared to the prior period, partially offset by continued growth of Financial Solutions
Reinsurance in Asia and increases in investment income, net and investment related gains.
Foreign currency fluctuations can result in variances in the financial statement line items, foreign currency fluctuations
resulted in a $3 million decrease in income before income taxes in 2021. Unless otherwise stated, all amounts
discussed below are net of foreign currency fluctuations.
60
Traditional Reinsurance
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
Key metrics:
Life insurance in force
Loss ratios
Policy acquisition costs and other insurance expenses as a percentage of net premiums
Other operating expenses as a percentage of net premiums
2021
2020
2021 vs 2020
(57)
29
(4)
4
(28)
152
—
(8)
12
156
(184)
$
2,624
$
2,681
$
136
(1)
19
2,778
2,445
—
159
184
2,788
107
3
15
2,806
2,293
—
167
172
2,632
$
(10)
$
174
$
$497.4 billion
$553.7 billion
93.2 %
6.1 %
7.0 %
85.5 %
6.2 %
6.4 %
The decrease in income before income taxes is primarily the result of net unfavorable claims experience across the
segment, primarily attributable to COVID-19 related claims in India, and a decrease in net premiums in Australia.
Revenues
•
•
The decrease in net premiums was primarily due to new business growth in Asia, partially offset by premium
reductions in Australia group business as a result of the non-renewal of two large group treaties effective June 30,
2020.
The segment added new life business production, measured by face amount of insurance in force, of $34.2 billion and
$49.6 billion during 2021 and 2020, respectively, due to new business production and in force transactions.
Benefits and expenses
•
The increase in the loss ratio for 2021 was primarily due to unfavorable claims experience in Asia, primarily in India.
While the cause of death is not yet available for all claims, the Company estimates that approximately $240 million of
claims, of which $220 million were incurred in India, for the year ended December 31, 2021, were attributable to
COVID-19 related factors.
61
Financial Solutions
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Total benefits and expenses
Income before income taxes
2021
2020
2021 vs 2020
$
218 $
180 $
138
19
42
417
187
57
56
19
319
85
10
34
309
157
49
31
13
250
$
98 $
59 $
38
53
9
8
108
30
8
25
6
69
39
The increase in income before income taxes is primarily due to the contributions from asset-intensive transactions
executed during 2021, in addition to organic growth, in Asia. The invested asset base supporting asset-intensive transactions
increased to $8.6 billion as of December 31, 2021, from $4.4 billion as of December 31, 2020, primarily as a result of asset-
intensive transactions executed during the year.
Revenues
•
•
The increase in net premiums is primarily due to contributions from new single premium asset-intensive transactions.
The increase in net investment income is due to the growth in the invested asset base supporting asset-intensive
transactions in Asia.
Benefits and expenses
•
The increase in claims and other policy benefits and policy acquisition costs is the result of increased production from
single premium asset-intensive transactions.
62
Corporate and Other
Corporate and Other revenues primarily include investment income from unallocated invested assets, investment
related gains and losses and service fees. Corporate and Other expenses consist of the offset to capital charges allocated to the
operating segments within the policy acquisition costs and other insurance income line item, unallocated overhead and
executive costs, interest expense related to debt, and the investment income and expense associated with the Company’s
collateral finance and securitization transactions and service business expenses. Additionally, Corporate and Other includes
results from certain wholly-owned subsidiaries, such as RGAX, and joint ventures that, among other activities, develop and
market technology, and provide consulting and outsourcing solutions for the insurance and reinsurance industries. The
Company has increased its investment and expenditures in this area in an effort to both support its clients and accelerate the
development of new solutions and services to increase consumer engagement within the life insurance industry and hence
generate new future revenue streams.
For the year ended December 31,
(dollars in millions)
Revenues:
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses:
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance income
Other operating expenses
Interest expense
Collateral finance and securitization expense
Total benefits and expenses
Income/(loss) before income taxes
2021
2020
2021 vs 2020
$
— $
— $
304
412
65
781
—
4
(112)
329
127
12
360
197
(11)
59
245
—
8
(112)
279
170
17
362
$
421 $
(117) $
—
107
423
6
536
—
(4)
—
50
(43)
(5)
(2)
538
The increase in income before income taxes in 2021 is primarily due to an increase in total revenues and a decrease in
interest expense, offset by increases in other operating expenses.
•
•
•
•
The increase in net investment income is primarily due to higher variable investment income associated with
investments in limited partnerships generated from unrealized gains in the underlying investments. The increase
includes a reclassification recorded in the first quarter of approximately $92 million of pre-tax unrealized gains on
certain limited partnerships, for which the Company uses the equity method of accounting, from AOCI to net
investment income that should have been recognized in net investment income in the same prior periods they were
reported as earnings by the investees.
The increase in investment related gains (losses), net includes changes in the carrying value of investments in limited
partnerships considered to be investment companies of $169 million of which $70 million relates to a prior period
adjustment recorded in the first quarter of 2021 to adjust the carrying value from cost less impairments to fair value,
using NAV per share or its equivalent. The remaining increase is attributable to an increase of $197 million of gains on
sales of fixed maturity securities, a decrease in the allowance for credit losses on mortgage loans as a result of
assumption updates due to the improving view of the impact of the COVID-19 pandemic, and changes in the fair value
of derivatives.
The increase in other operating expenses is primarily due to higher incentive-based compensation expense.
The decrease in interest expense is due to the reversal of approximately $32 million of accrued interest associated with
the recognition of uncertain tax positions due to the expiration of the statute of limitations.
63
Liquidity and Capital Resources
Overview
The Company believes that cash flows from the source of funds available to it will provide sufficient cash flows for
the next twelve months to satisfy the current liquidity requirements of the Company under various scenarios that include the
potential risk of early recapture of reinsurance treaties, market events and higher than expected claims associated with
COVID-19. The Company is currently holding higher cash and cash equivalents levels in response to COVID-19. The
Company performs periodic liquidity stress testing to ensure its asset portfolio includes sufficient high quality liquid assets that
could be utilized to bolster its liquidity position under stress scenarios. These assets could be utilized as collateral for secured
borrowing transactions with various third parties or by selling the securities in the open market if needed. The Company’s
liquidity requirements have been and will continue to be funded through net cash flows from operations. However, in the event
of significant unanticipated cash requirements beyond normal liquidity needs, the Company has multiple liquidity alternatives
available based on market conditions and the amount and timing of the liquidity need. These alternatives include the sale of
invested assets subject to market conditions, borrowings under committed credit facilities, secured borrowings, and if necessary
issuing long-term debt, preferred securities or common equity.
Current Market Environment
The Company’s average investment yield, excluding spread related business, for 2021 was at 4.99%, 99 basis points
above the comparable 2020 rate due to higher variable investment income. However, the current interest rate environment
continues to put downward pressure on the Company’s investment yield. The Company’s insurance liabilities, in particular its
annuity products, are sensitive to changing market factors. Due to increases in risk free interest rates, gross unrealized gains on
fixed maturity securities available-for-sale decreased from $7.4 billion at December 31, 2020, to $5.3 billion at December 31,
2021. Gross unrealized losses increased from $197 million at December 31, 2020 to $349 million at December 31, 2021.
The Company continues to be in a position to hold any investment security showing an unrealized loss until recovery,
provided it remains comfortable with the credit of the issuer. As indicated above, gross unrealized gains on investment
securities of $5.3 billion remain well in excess of gross unrealized losses of $349 million as of December 31, 2021. The
Company does not rely on short-term funding or commercial paper and to date it has experienced no liquidity pressure, nor
does it anticipate such pressure in the foreseeable future.
The Company projects its reserves to be sufficient and it would not expect to write down deferred acquisition costs or
be required to take any actions to augment capital, even if interest rates remain at current levels for the next five years,
assuming all other factors remain constant. While the Company has felt the pressures of sustained low interest rates and volatile
equity markets and may continue to do so, its business and results of operations are not overly sensitive to these risks.
Mortality and morbidity risks continue to be the most significant risk for the Company. Although management believes the
Company’s current capital base is adequate to support its business at current operating levels, it continues to monitor new
business opportunities and any associated new capital needs that could arise from the changing financial landscape.
The Holding Company
RGA is an insurance holding company whose primary uses of liquidity include, but are not limited to, the immediate
capital needs of its operating companies, dividends paid to its shareholders, repurchase of common stock and interest payments
on its indebtedness. The primary sources of RGA’s liquidity include proceeds from its capital-raising efforts, interest income
on undeployed corporate investments, interest income received on surplus notes with RGA Reinsurance, RCM and Rockwood
Re and dividends from operating subsidiaries. As the Company continues its growth efforts, RGA will continue to be dependent
upon these sources of liquidity. See “Part IV – Item 15(a)(2) Financial Statement Schedules – Schedule II – Condensed
Financial Information of Registrant” for more information regarding RGA’s financial information.
RGA, through wholly-owned subsidiaries, has committed to provide statutory reserve support to third parties, in
exchange for a fee, by funding loans if certain defined events occur. Such statutory reserves are required under the U.S.
Valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX for term life insurance policies and
Regulation A-XXX for universal life secondary guarantees). The third-parties have recourse to RGA should the subsidiary fail
to provide the required funding, however, as of December 31, 2021, the Company does not believe that it will be required to
provide any funding under these commitments as the occurrence of the defined events is considered remote. See Note 12 –
“Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for a table that presents these
commitments by period and maximum obligation.
RGA established an intercompany revolving credit facility where certain subsidiaries can lend to or borrow from each
other and from RGA in order to manage capital and liquidity more efficiently. The intercompany revolving credit facility,
which is a series of demand loans among RGA and its affiliates, is permitted under applicable insurance laws. This facility
reduces overall borrowing costs by allowing RGA and its operating companies to access internal cash resources instead of
64
incurring third-party transaction costs. The statutory borrowing and lending limit for RGA’s Missouri-domiciled insurance
subsidiaries is currently 3% of the insurance company’s admitted assets as of its most recent year-end. There were borrowings
of $192 million and $153 million outstanding under the intercompany revolving credit facility as of December 31, 2021 and
2020, respectively. In addition to loans associated with the intercompany revolving credit facility, RGA and its subsidiaries,
RGA Americas and RGA International Division Sydney Office Pty Limited, provided loans to RGA Australian Holdings Pty
Limited with a total outstanding balance of $44 million and $46 million as of December 31, 2021 and 2020, respectively.
During 2020, RGA established an intercompany derivative cash collateral pool where RGA and certain subsidiaries
pool derivative cash collateral into a single concentration account. This derivative cash collateral pool allows RGA and its
affiliates to lend or borrow cash from the concentration account in order to more efficiently meet its collateral obligations under
their respective derivative transactions. Cash surplus in RGA or its affiliates accounts is transferred to the concentration
account and any deficit is funded by the concentration account, thereby creating a loan balance. RGA and its subsidiaries
participating in the pool are paid or charged an arm’s length interest rate based on its net loan balance with the concentration
account.
Undistributed earnings of the Company’s foreign subsidiaries are generally targeted for reinvestment outside of the
U.S. As of December 31, 2021, the amount of cash and cash equivalents and short-term investments held by the Company’s
subsidiaries that are taxed in a foreign jurisdiction was $1,032 million. The Global Intangible Low-Taxed Income (“GILTI”)
and Subpart F provisions of U.S. Tax Reform generally eliminate U.S. federal income tax deferral on earnings of foreign
subsidiaries, while the dividend received deduction generally allows for tax-free repatriation of any untaxed earnings.
Therefore, the Company does not expect to incur any material incremental U.S. federal income tax on repatriation of these
earnings. Incremental foreign withholding taxes are not expected to be material.
RGA endeavors to maintain a capital structure that provides financial and operational flexibility to its subsidiaries,
credit ratings that support its competitive position in the financial services marketplace, and shareholder returns. As part of the
Company’s capital deployment strategy, it has in recent years repurchased shares of RGA common stock and paid dividends to
RGA shareholders, as authorized by the board of directors. On January 24, 2019, RGA’s board of directors authorized a share
repurchase program for up to $400 million of RGA’s outstanding common stock. As of December 31, 2021, approximately $72
million of RGA’s common stock may still be purchased under the 2019 share repurchase program.
On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of
RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In
connection with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. The pace of
repurchase activity depends on various factors such as the level of available cash, the impact of the ongoing COVID-19
pandemic, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in
force reinsurance transactions, and RGA’s stock price. Details underlying dividend and share repurchase program activity were
as follows (in millions, except share data):
Dividends to shareholders
Purchase of common stock (1)
Total amount paid to shareholders
Number of common shares purchased (1)
Average price per share
2021
2020
2019
$
$
$
194 $
96
290 $
182 $
153
335 $
852,037
112.67 $
1,074,413
142.05 $
163
80
243
546,614
146.00
(1) Excludes shares utilized to execute and settle certain stock incentive awards.
RGA declared dividends totaling $2.86 per share in 2021. All future payments of dividends are at the discretion of
RGA’s board of directors and will depend on the Company’s earnings, capital requirements, insurance regulatory conditions,
operating conditions, and other such factors as the board of directors may deem relevant. The amount of dividends that RGA
can pay will depend in part on the operations of its reinsurance subsidiaries.
See Note 13 – “Debt” and Note 17 – “Equity” in the Notes to Consolidated Financial Statements for additional
information regarding the Company’s securities transactions.
Statutory Dividend Limitations
RCM, RGA Reinsurance and Chesterfield Re are subject to Missouri statutory provisions that restrict the payment of
dividends. They may not pay dividends in any 12-month period in excess of the greater of the prior year’s statutory net gain
from operations or 10% of statutory capital and surplus at the preceding year-end, without regulatory approval. Aurora National
is subject to California statutory provisions that are identical to those imposed by Missouri regarding the ability of Aurora
National to pay dividends to RGA Reinsurance. The applicable statutory provisions only permit an insurer to pay a shareholder
65
dividend from unassigned surplus. Any dividends paid by RGA Reinsurance would be paid to RCM, its parent company, which
in turn has restrictions related to its ability to pay dividends to RGA. Chesterfield Re would pay dividends to its immediate
parent Chesterfield Financial, which would in turn pay dividends to RCM. The MDCI allows RCM to pay a dividend to RGA
to the extent RCM received the dividend from its subsidiaries, without limitation related to the level of unassigned surplus.
Dividend payments from other subsidiaries are subject to regulations in the jurisdiction of domicile, which are generally based
on their earnings and/or capital level.
The dividend limitations for RCM, RGA Reinsurance and Chesterfield Re are based on statutory financial results.
Statutory accounting practices differ in certain respects from accounting principles used in financial statements prepared in
conformity with GAAP. Significant differences include the treatment of deferred acquisition costs, deferred income taxes,
required investment reserves, reserve calculation assumptions and surplus notes.
Dividend payments from non-U.S. operations are subject to similar restrictions established by local regulators. The
non-U.S. regulatory regimes also commonly limit the dividend payments to the parent to a portion of the prior year’s statutory
income, as determined by the local accounting principles. The regulators of the Company’s non-U.S. operations may also limit
or prohibit profit repatriations or other transfers of funds to the U.S. if such transfers are deemed to be detrimental to the
solvency or financial strength of the non-U.S. operations, or for other reasons. Most of the non-U.S. operating subsidiaries are
second tier subsidiaries that are owned by various non-U.S. holding companies. The capital and rating considerations applicable
to the first tier subsidiaries may also impact the dividends paid to RGA.
Debt
Certain of the Company’s debt agreements contain financial covenant restrictions related to, among others, liens, the
issuance and disposition of stock of restricted subsidiaries, minimum requirements of consolidated net worth, maximum ratios
of debt to capitalization and change of control provisions. The Company is required to maintain a minimum consolidated net
worth, as defined in the debt agreements, of $5.3 billion, calculated as of the last day of each fiscal quarter. Also, consolidated
indebtedness, calculated as of the last day of each fiscal quarter, cannot exceed 35% of the sum of the Company’s consolidated
indebtedness plus adjusted consolidated stockholders’ equity. A material ongoing covenant default could require immediate
payment of the amount due, including principal, under the various agreements. Additionally, the Company’s debt agreements
contain cross-acceleration covenants, which would make outstanding borrowings immediately payable in the event of a material
uncured covenant default under any of the agreements, including, but not limited to, non-payment of indebtedness when due for
an amount in excess of the amounts set forth in those agreements, bankruptcy proceedings, or any other event that results in the
acceleration of the maturity of indebtedness.
As of December 31, 2021 and 2020, the Company had $3.7 billion and $3.6 billion, respectively, in outstanding
borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of December 31,
2021 and 2020, the average interest rate on long-term debt outstanding was 4.42% and 4.54%, respectively. The ability of the
Company to make debt principal and interest payments depends on the earnings and surplus of its subsidiaries, investment
earnings on undeployed capital proceeds, available liquidity at the holding company, and the Company’s ability to raise
additional funds.
On December 13, 2021, RGA Reinsurance issued 4.00% Surplus Notes due in 2051, with a face amount of $500
million. The net proceeds were approximately $494 million and will be used for general corporate purposes.
On June 9, 2020, the Company issued 3.15% Senior Notes due June 15, 2030, with a face amount of $600 million.
This security has been registered with the Securities and Exchange Commission. The net proceeds were approximately $593
million and were used in part to repay the Company’s $400 million 5.00% Senior Notes due in 2021, and the remainder was
used for general corporate purposes. Capitalized issue costs were approximately $5 million.
The Company enters into derivative agreements with counterparties that reference either the Company’s debt rating or
its financial strength rating. If either rating is downgraded in the future, it could trigger certain terms in the Company’s
derivative agreements, which could negatively affect overall liquidity. For the majority of the Company’s derivative
agreements, there is a termination event, should the long-term senior debt ratings drop below either BBB+ (S&P) or Baa1
(Moody’s) or the financial strength ratings drop below either A- (S&P) or A3 (Moody’s).
The Company may borrow up to $850 million in cash and obtain letters of credit in multiple currencies on its
syndicated revolving credit facility that matures in August 2023. As of December 31, 2021, the Company had no cash
borrowings outstanding and $21 million in issued, but undrawn, letters of credit under this facility.
Based on the historic cash flows and the current financial results of the Company, management believes RGA’s cash
flows will be sufficient to enable RGA to meet its obligations for at least the next twelve months.
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Letters of Credit
The Company has obtained bank letters of credit in favor of various affiliated and unaffiliated insurance companies
from which the Company assumes business. These letters of credit represent guarantees of performance under the reinsurance
agreements and allow ceding companies to take statutory reserve credits. Certain of these letters of credit contain financial
covenant restrictions similar to those described in the “Debt” discussion above. At December 31, 2021, there were
approximately $53 million of outstanding bank letters of credit in favor of third parties. Additionally, in accordance with
applicable regulations, the Company utilizes letters of credit to secure statutory reserve credits when it retrocedes business to its
affiliated subsidiaries. The Company cedes business to its affiliates to help reduce the amount of regulatory capital required in
certain jurisdictions, such as the U.S. and the UK. The Company believes the capital required to support the business in the
affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often
considered to be quite conservative. As of December 31, 2021, $1.4 billion in letters of credit from various banks were
outstanding, but undrawn, backing reinsurance between the various subsidiaries of the Company. See Note 13 – “Debt” in the
Notes to Consolidated Financial Statements for information regarding the Company’s letter of credit facilities.
Collateral Finance and Securitization Notes and Statutory Reserve Funding
The Company uses various internal and third-party reinsurance arrangements and funding sources to manage statutory
reserve strain, including reserves associated with the U.S. Valuation of Life Policies Model Regulation (commonly referred to
as Regulation XXX) and principles-based reserves (commonly referred to PBR), and the associated collateral requirements.
Assets in trust and letters of credit are often used as collateral in these arrangements.
Regulation XXX, implemented in the U.S. for various types of life insurance business beginning January 1, 2000,
significantly increased the level of reserves that U.S. life insurance and life reinsurance companies must hold on their statutory
financial statements for various types of life insurance business, primarily certain level premium term life products. The reserve
levels required under Regulation XXX increase over time and are normally in excess of reserves required under GAAP. In
situations where primary insurers have reinsured business to reinsurers that are unlicensed and unaccredited in the U.S., the
reinsurer must provide collateral equal to its reinsurance reserves in order for the ceding company to receive statutory financial
statement credit. In order to manage the effect of Regulation XXX on its statutory financial statements, RGA Reinsurance has
retroceded a majority of Regulation XXX reserves to unaffiliated and affiliated reinsurers, both licensed and unlicensed.
Effective in 2017, PBR is permitted in the U.S. During 2016, the NAIC amended the standard valuation law to adopt
life PBR that was effective January 1, 2017, allowing a three-year adoption period. The Company adopted PBR in 2020. Under
PBR, reserves are determined based on terms of the reinsurance agreement which may differ from those of the direct policies.
RGA Reinsurance’s statutory capital may be significantly reduced if the unlicensed unaffiliated or affiliated reinsurer
is unable to provide the required collateral to support RGA Reinsurance’s statutory reserve credits and RGA Reinsurance
cannot find an alternative source for collateral.
The Company has issued both collateral finance and securitization notes. The consolidated balance sheets include
outstanding notes of $180 million and $388 million as of December 31, 2021 and 2020, respectively. During 2021, the
Company called and fully redeemed the notes issued by the Company’s subsidiary, Chesterfield Financial Holdings, LLC. See
Note 14 – “Collateral Finance and Securitization Notes” in the Notes to Consolidated Financial Statements for additional
information regarding the Company’s collateral finance and securitization notes.
The demand for financing of the ceded reserve credits associated with the Company’s assumed term life business has
grown at a slower rate in recent years. The Company has been able to utilize its certified reinsurer, RGA Americas, as a means
of reducing the burden of financing PBR, Regulation XXX and other types of reserves. The Company’s PBR and Regulation
XXX statutory reserve requirements associated with term life business and other statutory reserve requirements continues to
require the Company to obtain additional letters of credit, put additional assets in trust, or utilize other funding mechanisms to
support reserve credits. If the Company is unable to support the reserve credits, the regulatory capital levels of several of its
subsidiaries may be significantly reduced, while the regulatory capital requirements for these subsidiaries would not change.
The reduction in regulatory capital would not directly affect the Company’s consolidated shareholders’ equity under GAAP;
however, it could affect the Company’s ability to write new business and retain existing business.
Affiliated captives are commonly used in the insurance industry to help manage statutory reserve and collateral
requirements. The NAIC analyzed the insurance industry’s use of affiliated captive reinsurers to satisfy certain reserve
requirements and in 2014 adopted measures to promote uniformity in both the approval and supervision of such captives
reinsuring business subject to Regulation XXX, allowing current captives to continue in accordance with their currently
approved plans. Reinsuring business subject to the additional provisions of Actuarial Guideline 48 increases costs and adds
complexity.
67
In the U.S., the introduction of the certified reinsurer has provided an alternative way to manage collateral
requirements. In 2014, RGA Americas was designated as a certified reinsurer by the MDCI. This designation allows the
Company to retrocede business to RGA Americas in lieu of using captives for collateral requirements. Therefore, the Company
has chosen not to establish captives subject to Actuarial Guideline 48.
It is also possible that the NAIC could place limits on the recognition of the Company’s capital held in related party
captives when adopting its group capital calculation. Doing so would adversely impact the amount of capital that the group
would otherwise be able to recognize and report as capital resident in the group, potentially requiring the Company to
restructure or change the financing of its captives.
Assets in Trust
The Company enters into reinsurance treaties in the ordinary course of business. In some cases, if the credit rating
and/or defined statutory measures of the Company declines to certain levels, the reinsurance treaty would require the Company
to post collateral or additional collateral to secure the Company’s obligations under such reinsurance treaty, obtain guarantees,
permit the ceding company to recapture such reinsurance treaty, or some other negotiated remedy. As of December 31, 2021,
neither the Company nor its subsidiaries have been required to post additional collateral or have had a reinsurance treaty
recaptured as a result of a credit downgrade or a defined statutory measure decline.
In addition, certain reinsurance treaties require the Company to place assets in trust at the time of closing to
collateralize its obligations to the ceding company. Assets placed in trust continue to be owned by the Company, but their
beneficial ownership and use are restricted based on the terms of the trust agreement. Securities with an amortized cost of $3.8
billion were held in trust for the benefit of the Company’s subsidiaries to satisfy collateral requirements for reinsurance
business at December 31, 2021. Additionally, securities with an amortized cost of $28.7 billion as of December 31, 2021, were
held in trust to satisfy collateral requirements under certain third-party reinsurance treaties. Under certain conditions, the
Company may be obligated to move reinsurance from one subsidiary to another subsidiary, post additional collateral or make
payments under a given reinsurance treaty. These conditions include change in control or ratings of the subsidiary, insolvency,
nonperformance under a reinsurance treaty, or loss of license or other regulatory authorization of such subsidiary. If the
Company was ever required to move reinsurance from one subsidiary to another subsidiary, the risk to the Company on a
consolidated basis under the reinsurance treaties would not change; however, additional collateral may need to be posted or
additional capital may be required due to the change in jurisdiction of the subsidiary reinsuring the business, which could lead
to a strain on liquidity.
Proceeds from the notes issued by Timberlake Financial and RGA’s direct investment in Timberlake Financial were
deposited into a series of trust accounts as collateral and are not available to satisfy the general obligations of the Company. As
of December 31, 2021, the Company held deposits in trust and in custody of $426 million for this purpose, which is not
included in the figures in the paragraph above. A reserve account has been established to cover interest payments on notes
issued by Timberlake Financial that are not available to satisfy the general obligations of the Company. At December 31, 2021,
the Company held deposits in trust of $39 million for this purpose, which is not included in the figures in the paragraph above.
See “Collateral Finance and Securitization Notes and Statutory Reserve Funding” above for additional information on the
Timberlake Financial notes.
Reinsurance Operations
Reinsurance treaties, whether facultative or automatic, generally provide recapture provisions. Most U.S.-based
reinsurance treaties include a recapture right for ceding companies, generally after 10 years. Outside of the U.S., treaties
primarily include a mutually agreed-upon recapture provision. Recapture rights permit the ceding company to reassume all or a
portion of the risk formerly ceded to the reinsurer. In some situations, the Company has the right to place assets in trust for the
benefit of the ceding company in lieu of recapture. Additionally, certain treaties may grant recapture rights to ceding companies
in the event of a significant decrease in RGA Reinsurance’s NAIC risk based capital ratio or financial strength rating. The RBC
ratio trigger varies by treaty, with the majority between 125% and 225% of the NAIC’s company action level. Financial
strength rating triggers vary by reinsurance treaty with the majority of the triggers reached if the Company’s financial strength
rating falls five notches from its current rating of “AA-” to the “BBB” level on the S&P scale. Recapture of business previously
ceded does not affect premiums ceded prior to the recapture of such business, but would reduce premiums in subsequent
periods. Upon recapture, the Company would reflect a net gain or loss on the settlement of the assets and liabilities associated
with the reinsurance treaty. In some cases, the ceding company is required to pay the Company a recapture fee.
Guarantees
The Company has issued guarantees to third parties on behalf of its subsidiaries for the payment of amounts due under
certain reinsurance treaties, securities borrowing arrangements, financing arrangements and office lease obligations, whereby if
a subsidiary fails to meet an obligation, the Company or one of its other subsidiaries will make a payment to fulfill the
obligation. In limited circumstances, treaty guarantees are granted to ceding companies in order to provide additional security,
68
particularly in cases where the Company’s subsidiary is relatively new, unrated, or not of significant size, relative to the ceding
company. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results.
Guarantees related to borrowed securities provide additional security to third parties should a subsidiary fail to return the
borrowed securities when due. The Company has issued payment guarantees on behalf of two of its subsidiaries in the event
the subsidiaries fail to make payment under their office lease obligations. See Note 12 – “Commitments, Contingencies and
Guarantees” in the Notes to Consolidated Financial Statements for a table that presents the amounts for guarantees, by type,
issued by the Company.
In addition, the Company indemnifies its directors and officers pursuant to its charters and by-laws. Since this
indemnity generally is not subject to limitation with respect to duration or amount, the Company does not believe that it is
possible to determine the maximum potential amount due under this indemnity in the future.
Off-Balance Sheet Arrangements
The Company has commitments to fund investments in limited partnerships, joint ventures, commercial mortgage
loans, lifetime mortgages, private placement investments and bank loans, including revolving credit agreements. See Note 12 –
“Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for additional information on
the Company’s commitments to fund investments and other off-balance sheet arrangements.
The Company has not engaged in trading activities involving non-exchange-traded contracts reported at fair value, nor
has it engaged in relationships or transactions with persons or entities that derive benefits from their non-independent
relationship with the Company.
Cash Flows
The Company’s principal cash inflows from its reinsurance operations include premiums and deposit funds received
from ceding companies. The primary liquidity concerns with respect to these cash flows are early recapture of the reinsurance
contract by the ceding company and lapses of annuity products reinsured by the Company. The Company’s principal cash
inflows from its invested assets result from investment income and the maturity and sales of invested assets. The primary
liquidity concerns with respect to these cash inflows relates to the risk of default by debtors and interest rate volatility. The
Company manages these risks very closely. See “Investments” and “Interest Rate Risk” below.
Additional sources of liquidity to meet unexpected cash outflows in excess of operating cash inflows and current cash
and equivalents on hand also includes drawing funds under a syndicated revolving credit facility, under which the Company
had availability of $829 million as of December 31, 2021. The Company also has $755 million of funds available through
collateralized borrowings from the Federal Home Loan Bank of Des Moines (“FHLB”) as of December 31, 2021. As of
December 31, 2021, the Company could have borrowed these additional amounts without violating any of its existing debt
covenants.
The Company’s principal cash outflows relate to the payment of claims liabilities, interest credited, operating
expenses, income taxes, dividends to shareholders, purchases of treasury stock, and principal and interest under debt and other
financing obligations. The Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits
paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts (See
Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements). The
Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance. The
Company has never experienced a material default in connection with retrocession arrangements, nor has it experienced any
difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future
performance of such retrocessionaires nor to the recoverability of future claims. The Company’s management believes its cash
and cash equivalents along with its current sources of liquidity are adequate to meet its cash requirements for the next twelve
months, despite the uncertainty associated with the pandemic.
69
Summary of Primary Sources and Uses of Liquidity and Capital
The Company’s primary sources and uses of liquidity and capital are summarized as follows (dollars in millions):
Sources:
Net cash provided by operating activities
Proceeds from offering of common stock, net
Proceeds from long-term debt issuance
Exercise of stock options, net
Change in cash collateral for derivative positions and other arrangements
Change in deposit asset on reinsurance
Net deposits from investment-type policies and contracts
Effect of exchange rate changes on cash
Total sources
Uses:
Net cash used in investing activities
Dividends to stockholders
Repayment of collateral finance and securitization notes
Debt issuance costs
Principal payments of long-term debt
Purchases of treasury stock
Change in cash collateral for derivative positions and other arrangements
Effect of exchange rate changes on cash
Total uses
Net change in cash and cash equivalents
For the years ended December 31,
2021
2020
2019
$
4,182
$
3,322
$
2,307
—
500
—
31
91
308
—
481
598
1
—
—
773
63
—
599
6
—
—
200
11
5,112
5,238
3,123
4,628
194
208
6
403
99
—
34
5,572
$
(460)
$
2,680
182
214
5
3
163
32
—
3,279
1,959
$
2,638
163
91
5
403
101
163
—
3,564
(441)
Cash Flows from Operations – The principal cash inflows from the Company’s reinsurance activities come from
premiums, investment and fee income, annuity considerations and deposit funds. The principal cash outflows relate to the
liabilities associated with various life and health insurance, annuity and disability products, operating expenses, income tax and
interest on outstanding debt obligations. The primary liquidity concern with respect to these cash flows is the risk of shortfalls
in premiums and investment income, particularly in periods with abnormally high claims levels.
Cash Flows from Investments – The principal cash inflows from the Company’s investment activities come from
repayments of principal on invested assets, proceeds from sales and maturities of invested assets, and settlements of
freestanding derivatives. The principal cash outflows relate to purchases of investments, issuances of policy loans and
settlements of freestanding derivatives. The Company typically has a net cash outflow from investing activities because cash
inflows from insurance operations are reinvested in accordance with its asset/liability management discipline to fund insurance
liabilities. The Company closely monitors and manages these risks through its credit risk management process. The primary
liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption, which could make it
difficult for the Company to sell investments.
Financing Cash Flows – The principal cash inflows from the Company’s financing activities come from issuances of
debt and equity securities, and deposit funds associated with universal life and other investment type policies and contracts. The
principal financing cash outflows are the repayments of debt and securitization notes, payments of dividends to stockholders,
purchases of treasury stock, and withdrawals associated with universal life and other investment type policies and contracts. A
primary liquidity concern with respect to these cash flows is the risk of early contractholder and policyholder withdrawal.
70
Contractual Obligations
The following table summarizes the Company’s contractual obligations, including obligations arising from its
reinsurance business (in millions):
Future policy benefits
(1)
Interest-sensitive contract liabilities
Long-term debt, including interest
(2)
Collateral finance and securitization notes, including interest
Other policy claims and benefits
Operating leases
Limited partnership interests and joint ventures
Payables for collateral received under derivative transactions
Other investment related commitments
Total
Total
Less than 1 Year
1-3 Years
4-5 Years
After 5 Years
Payment Due by Period
$
19,079 $
(89) $
(1,209) $
(1,069) $
43,388
7,052
185
6,993
92
1,031
149
961
3,453
173
52
6,993
14
1,031
149
961
5,953
727
5,202
708
61
—
28
—
—
—
8
—
21
—
—
—
21,446
28,780
5,444
64
—
29
—
—
—
$
78,930 $
12,737 $
5,560 $
4,870 $
55,763
(1) Future policy benefits are primarily related to the Company’s reinsurance of life and health insurance products. The amounts presented in the table above
represent the estimated benefit obligations as they become due, and also include estimated future premiums on policies in force, allowances and other
amounts due to or from the ceding companies as the result of the Company’s assumptions of mortality, morbidity, policy lapse and surrender risk as
appropriate to the respective product. All estimated cash payments presented in the table above are undiscounted as to interest and gross of any
reinsurance recoverable. The discounted liability amount of $35.8 billion included on the consolidated balance sheets exceeds the sum of the undiscounted
estimated cash flows of $19.1 billion shown above. The difference is substantially due to net obligations including estimated future premiums exceeding
estimated policy benefit payments and allowances due to the nature of certain reinsurance treaties, which generally have increasing premium rates that
exceed the increasing benefit payments. In addition, differences will arise due to changes in the projection of future benefit payments compared with those
developed when the reserve was established. Total payments may vary materially from prior years due to the assumption of new reinsurance treaties or as
a result of changes in projections of future experience.
(2)
Interest-sensitive contract liabilities include amounts related to the Company’s reinsurance of asset-intensive products, primarily deferred annuities and
corporate-owned life insurance. The amounts in the table above represent the estimated obligations as they become due both to and from ceding
companies relating to activity of the underlying policyholders. All amounts presented above are undiscounted as to interest, and include assumptions
related to surrenders, withdrawals, premium persistency, partial withdrawals, surrender charges, annuitizations, mortality, future interest credited rates and
policy loan utilization. The sum of the obligations shown for all years in the table of $43.4 billion exceeds the liability amount of $26.4 billion included
on the consolidated balance sheets, and the difference is primarily related to the lack of discounting and to liabilities related to accounting conventions,
which are not contractually due and are therefore excluded.
Excluded from the table above are net deferred income tax liabilities, unrecognized tax benefits, and accrued interest
related to unrecognized tax benefits of $2.8 billion, for which the Company cannot reliably determine the timing of payment.
The net funded status of the Company’s qualified and nonqualified pension and other postretirement liabilities
included within other liabilities has been excluded from the amounts presented in the table above. As of December 31, 2021,
the Company had a net unfunded balance of $152 million related to qualified and nonqualified pension and other postretirement
liabilities. See Note 10 – “Employee Benefit Plans” in the Notes to Consolidated Financial Statements for information related to
the Company’s obligations and funding requirements for pension and other postretirement benefits.
Asset / Liability Management
The Company actively manages its cash and invested assets using an approach that is intended to balance quality,
diversification, asset/liability matching, liquidity and investment return. The goals of the investment process are to optimize
after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a
cash flow and duration basis.
The Company has established target asset portfolios for its operating segments, which represent the investment
strategies intended to profitably fund its liabilities within acceptable risk parameters. These strategies include objectives and
limits for effective duration, yield curve sensitivity and convexity, liquidity, asset sector concentration and credit quality.
The Company’s asset-intensive products are primarily supported by investments in fixed maturity securities reflected
on the Company’s consolidated balance sheets and under funds withheld arrangements with the ceding company. 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 the underlying interest-
sensitive contract liabilities. The Company periodically reviews models projecting different interest rate scenarios and their
effect on profitability. Certain of these asset-intensive agreements, primarily in the U.S. and Latin America Financial Solutions
operating segment, are generally funded by fixed maturity securities that are withheld by the ceding company.
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The Company’s liquidity position (cash and cash equivalents and short-term investments) was $3.0 billion and $3.6
billion at December 31, 2021 and 2020, respectively. Given the uncertainty associated with the COVID-19 pandemic and the
related volatility in the financial markets, the Company increased its liquidity position at the onset of the pandemic. Liquidity
needs are determined from valuation analysis conducted by operational units and are driven by product portfolios. Periodic
evaluations of demand liabilities and short-term liquid assets are designed to adjust specific portfolios, as well as their durations
and maturities, in response to anticipated liquidity needs.
See “Securities Borrowing, Lending and Other” in Note 4 – “Investments” in the Notes to Consolidated Financial
Statements for information related to the Company’s securities borrowing, lending and repurchase/reverse repurchase
programs. In addition to its security agreements with third parties, certain RGA subsidiaries have entered into intercompany
securities lending agreements to more efficiently source securities for lending to third parties and to provide for more efficient
regulatory capital management.
The Company is a member of the FHLB and holds $70 million of FHLB common stock, which is included in other
invested assets on the Company’s consolidated balance sheets. The Company has entered into funding agreements with the
FHLB under guaranteed investment contracts whereby the Company has issued the funding agreements in exchange for cash
and for which the FHLB has been granted a blanket lien on the Company’s commercial and residential mortgage-backed
securities and commercial mortgage loans used to collateralize the Company’s obligations under the funding agreements. The
Company maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion of the
collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral
maintenance level. The funding agreements and the related security agreements represented by this blanket lien provide that
upon any event of default by the Company, the FHLB’s recovery is limited to the amount of the Company’s liability under the
outstanding funding agreements. The amount of the Company’s liability for the funding agreements with the FHLB under
guaranteed investment contracts was $1.4 billion and $1.9 billion at December 31, 2021 and 2020, respectively, which is
included in interest sensitive contract liabilities on the Company’s consolidated balance sheets. The advances on these
agreements are collateralized primarily by commercial and residential mortgage-backed securities, commercial mortgage loans,
and U.S. Treasury and government agency securities. The amount of collateral exceeds the liability and is dependent on the
type of assets collateralizing the guaranteed investment contracts.
Investments
Management of Investments
The Company’s investment and derivative strategies involve matching the characteristics of its reinsurance products
and other obligations. The Company seeks to closely approximate the interest rate sensitivity of the assets with estimated
interest rate sensitivity of the reinsurance liabilities. The Company achieves its income objectives through strategic and tactical
asset allocations applying security and derivative strategies within asset/liability and disciplined risk management frameworks.
Derivative strategies are employed within the Company’s risk management framework to help manage duration, currency, and
other risks in assets and/or liabilities and to replicate the credit characteristics of certain assets. For a discussion of the
Company’s risk management process, see “Market and Credit Risk” in the “Enterprise Risk Management” section below.
The Company’s portfolio management groups work with the Enterprise Risk Management function to develop the
investment policies for the assets of the Company’s domestic and international investment portfolios. All investments held by
the Company, directly or in a funds withheld at interest reinsurance arrangement, are monitored for conformance with the
Company’s stated investment policy limits as well as any limits prescribed by the applicable jurisdiction’s insurance laws and
regulations. See Note 4 – “Investments” in the Notes to Consolidated Financial Statements for additional information regarding
the Company’s investments.
Effects of COVID-19
Credit markets continued to recover during 2021 following the disruption in the global financial markets caused by the
COVID-19 pandemic. The Company has exposure to some of the asset classes and industries most affected by the COVID-19
pandemic such as commercial mortgage loans, emerging market debt, energy, and airlines; however, the Company’s primary
exposure in these asset classes is of high quality assets. The Company continues to monitor and evaluate the impact of the
COVID-19 pandemic on its investment portfolio and is working closely with its borrowers to evaluate any short-term cash flow
issues.
72
Portfolio Composition
The Company had total cash and invested assets of $81.5 billion and $75.8 billion as of December 31, 2021 and 2020,
respectively, as illustrated below (dollars in millions):
Fixed maturity securities, available-for-sale
$
60,749
74.6 % $
56,735
74.8 %
2021
% of Total
2020
% of Total
Equity securities
Mortgage loans on real estate
Policy loans
Funds withheld at interest
Short-term investments
Other invested assets
Cash and cash equivalents
Total cash and invested assets
Investment Yield
151
6,283
1,234
6,954
87
3,070
2,948
0.2
7.7
1.5
8.5
0.1
3.8
3.6
132
5,787
1,258
5,432
227
2,829
3,408
0.2
7.6
1.7
7.2
0.3
3.7
4.5
$
81,476
100.0 % $
75,808
100.0 %
The following table presents consolidated average invested assets, excluding spread related business, at amortized cost,
net investment income, investment yield, variable investment income (“VII”), and investment yield excluding VII, which can
vary significantly from period to period (dollars in millions) for the years ended December 31, 2021, 2020 and 2019. Spread
related business is primarily associated with contracts on which the Company earns an interest rate spread between assets and
liabilities. To varying degrees, fluctuations in the yield on other spread related business is generally subject to corresponding
adjustments to the interest credited on the liabilities.
Average invested assets at amortized cost
Net investment income
Annualized investment yield (ratio of net investment
income to average invested assets at amortized cost)
VII (included in net investment income) 1
Annualized investment yield excluding VII (ratio of net
investment income, excluding VII, to average invested
assets, excluding assets with only VII, at amortized
cost)
$
$
$
2021
2020
2019
2021 vs 2020
2020 vs 2019
33,040
1,648
$
$
30,787
1,231
$
$
28,300
1,291
$
$
4.99 %
433
$
4.00 %
4.56 %
63
$
132
$
2,253 $
417 $
99 bps
370 $
2,487
(60)
(56) bps
(69)
3.81 %
3.93 %
4.23 %
(12) bps
(30) bps
(1) VII for 2021 includes an accounting correction of $92 million related to prior periods recorded in 2021. See “Investment Income and Investment Related
Gains (Losses), Net – Accounting Correction” in Note – 4 “Investments” in the Notes to the Consolidated Financial Statements for additional information
regarding the correction recorded in 2021.
Investment yield increased between 2020 and 2021 primarily due to increased variable income from limited
partnerships and real estate joint ventures, which are included in other invested assets on the consolidated balance sheets,
partially offset by decreased yield from the continued low interest rate environment. Investment yield decreased between 2019
and 2020 primarily due to the low interest rate environment combined with higher cash and cash equivalents balances held by
the Company during the COVID-19 pandemic as well as decreased income from joint ventures and limited partnerships.
Fixed Maturity Securities Available-for-Sale
See “Fixed Maturity Securities Available-for-Sale” in Note 4 – “Investments” in the Notes to Consolidated Financial
Statements for tables that provide the amortized cost, allowance for credit losses, unrealized gains and losses and estimated fair
value of these securities by type as of December 31, 2021 and 2020.
The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate
securities (“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential
mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”),
U.S. government and agencies (“U.S. government”), state and political subdivisions, and other foreign government,
supranational and foreign government-sponsored enterprises (“Other foreign government”). RMBS, ABS and CMBS are
collectively “structured securities.” As of December 31, 2021 and 2020, approximately 94.0% of the Company’s consolidated
investment portfolio of fixed maturity securities were investment grade.
Important factors in the selection of investments include diversification, quality, yield, call protection and total rate of
return potential. The relative importance of these factors is determined by market conditions and the underlying reinsurance
liability and existing portfolio characteristics. The Company owns floating rate securities that represent approximately 5.3% and
5.6% of the total fixed maturity securities as of December 31, 2021 and 2020, respectively. These investments have a higher
degree of income variability than the other fixed income holdings in the portfolio due to fluctuations in interest payments. The
73
Company holds floating rate investments to match specific floating rate liabilities primarily reflected in the consolidated
balance sheets as collateral finance notes, as well as to enhance asset management strategies.
The largest asset class in which fixed maturity securities were invested was corporate securities, which represented
approximately 62.8% and 63.9% of total fixed maturity securities as of December 31, 2021 and 2020, respectively. See
“Corporate Fixed Maturity Securities” in Note 4 – “Investments” in the Notes to Consolidated Financial Statements for tables
showing the major sector types, which comprise the corporate fixed maturity holdings as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, the Company’s investments in Canadian government securities represented 8.1%
and 9.1%, respectively, of the fair value of total fixed maturity securities. These assets are primarily high quality, long duration
provincial strip bonds, the valuation of which is closely linked to the interest rate curve. These assets are longer in duration and
held primarily for asset/liability management to meet Canadian regulatory requirements.
The Company references rating agency designations in some of its investments disclosures. These designations are
based on the ratings from nationally recognized statistical rating organizations, primarily Moody’s, S&P and Fitch. Structured
securities held by the Company’s insurance subsidiaries that maintain the NAIC statutory basis of accounting utilize the NAIC
rating methodology. The NAIC assigns designations to publicly traded as well as privately placed securities. The designations
assigned by the NAIC range from class 1 to class 6, with designations in classes 1 and 2 generally considered investment grade
(BBB or higher rating agency designation). NAIC designations in classes 3 through 6 are generally considered below
investment grade (BB or lower rating agency designation).
The quality of the Company’s available-for-sale fixed maturity securities portfolio, as measured at fair value and by
the percentage of fixed maturity securities invested in various ratings categories, relative to the entire available-for-sale fixed
maturity securities portfolio as of December 31, 2021 and 2020 was as follows (dollars in millions):
NAIC
Designation
1
Rating Agency
Designation
Amortized Cost
AAA/AA/A
$
33,540 $
2
3
4
5
6
BBB
BB
B
CCC and lower
In or near default
18,684
2,620
876
96
57
2021
Estimated
Fair Value
36,725
20,379
2,668
863
79
35
% of Total
Amortized Cost
60.5 % $
29,770 $
33.5
4.4
1.4
0.1
0.1
16,440
2,480
713
131
14
2020
Estimated
Fair Value
% of Total
34,589
18,751
2,588
697
102
8
60.9 %
33.1
4.6
1.2
0.2
—
Total
$
55,873 $
60,749
100.0 % $
49,548 $
56,735
100.0 %
The Company’s fixed maturity portfolio includes structured securities. The following table shows the types of
structured securities the Company held as of December 31, 2021 and 2020 (dollars in millions):
2021
Estimated
Fair Value
Amortized Cost
% of Total
Amortized Cost
2020
Estimated
Fair Value
% of Total
RMBS:
Agency
Non-agency
Total RMBS
ABS:
Collateralized loan obligations (“CLOs”)
ABS, excluding CLOs
Total ABS
CMBS
Total
$
551 $
469
1,020
1,761
2,263
4,024
1,790
$
6,834 $
582
468
1,050
1,752
2,253
4,005
1,849
6,904
8.4 % $
686 $
6.8
15.2
25.4
32.6
58.0
26.8
1,049
1,735
1,707
1,392
3,099
1,790
100.0 % $
6,624 $
744
1,073
1,817
1,689
1,403
3,092
1,868
6,777
11.0 %
15.8
26.8
24.9
20.7
45.6
27.6
100.0 %
The Company’s RMBS portfolio includes agency-issued pass-through securities and collateralized mortgage
obligations. Agency-issued pass-through securities are guaranteed or otherwise supported by the Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, or the Government National Mortgage Association. The principal risks
inherent in holding RMBS are prepayment and extension risks, which will affect the timing of when cash will be received and
are dependent on the level of mortgage interest rates. Prepayment risk is the unexpected increase in principal payments from the
expected, primarily as a result of owner refinancing. Extension risk relates to the unexpected slowdown in principal payments
from the expected. In addition, non-agency RMBS face credit risk should the borrower be unable to pay the contractual interest
or principal on their obligation. The Company monitors its mortgage-backed securities to mitigate exposure to the cash flow
uncertainties associated with these risks.
74
The Company’s ABS portfolio primarily consists of CLOs, aircraft, single-family rentals, lifetime mortgages, and
container leasing. The principal risks in holding ABS are structural, credit, capital market and interest rate risks. Structural risks
include the securities’ cash flow priority in the capital structure and the inherent prepayment sensitivity of the underlying
collateral. Credit risks include the adequacy and ability to realize proceeds from the collateral. Credit risks are mitigated by
credit enhancements that include excess spread, over-collateralization and subordination. Capital market risks include general
level of interest rates and the liquidity for these securities in the marketplace.
The Company’s CMBS portfolio primarily consists of large pool securitizations that are diverse by property type,
borrower and geographic dispersion. The principal risks in holding CMBS are structural and credit risks. Structural risks
include the securities’ cash flow priority in the capital structure and the inherent prepayment sensitivity of the underlying
collateral. Credit risks include the adequacy and ability to realize proceeds from the collateral. The Company focuses on
investment grade rated tranches that provide additional credit support beyond the equity protection in the underlying loans.
These assets are viewed as an attractive alternative to other fixed income asset classes.
As of December 31, 2021 and 2020, the Company had $349 million and $197 million, respectively, of gross unrealized
losses related to its fixed maturity securities. The Company monitors its fixed maturity securities to determine impairments in
value and evaluates factors such as financial condition of the issuer, payment performance, compliance with covenants, general
market and industry sector conditions, current intent and ability to hold securities, and various other subjective factors. Based
on management’s judgment, an allowance for credit losses in the amount that fair value is less than the amortized cost is
recorded for securities determined to have expected credit losses.
Mortgage Loans on Real Estate
The Company’s mortgage loan portfolio consists of U.S., Canada and UK based investments primarily in commercial
offices, light industrial properties and retail locations. The mortgage loan portfolio is diversified by geographic region and
property type as discussed further under “Mortgage Loans on Real Estate” in Note 4 – “Investments” in the Notes to
Consolidated Financial Statements. Most of the mortgage loans in the Company’s portfolio range in size up to $30 million, with
the average mortgage loan investment as of December 31, 2021, totaling approximately $9 million. For the year ended
December 31, 2021, the Company decreased its allowance for credit losses on its commercial mortgage loan portfolio by
approximately $29 million reflecting the impact of the updated outlook from the COVID-19 pandemic on the Company’s
borrowers. The Company continues to monitor and evaluate the impact of the COVID-19 pandemic on its investment portfolio
and is working closely with its borrowers to evaluate any short-term cash flow issues. See Note 4 – "Investments" in the Notes
to Consolidated Financial Statements for information on mortgage loan term modifications resulting from the COVID-19
pandemic.
As of December 31, 2021 and 2020, the Company’s recorded investment in mortgage loans, gross of unamortized
deferred loan origination fees and expenses and allowance for credit losses, were distributed geographically as follows (dollars
in millions):
U.S. Region:
West
South
Midwest
Northeast
Subtotal - U.S.
Canada
United Kingdom
Other
Total
2021
2020
Recorded
Investment
% of Total
Recorded
Investment
% of Total
$
$
2,270
2,135
1,166
419
5,990
193
144
2
6,329
36.0 % $
33.7
18.4
6.6
94.7
3.0
2.3
—
100.0 % $
2,253
2,040
1,027
277
5,597
188
76
—
5,861
38.5 %
34.8
17.5
4.7
95.5
3.2
1.3
—
100.0 %
See “Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and
Pronouncements” and “Mortgage Loans on Real Estate” in Note 4 – “Investments” in the Notes to Consolidated Financial
Statements for information regarding the Company’s policy for allowance for credit losses on mortgage loans.
Allowance for Credit Losses and Impairments
The Company’s determination of whether a decline in value necessitates the recording of an allowance for credit losses
includes an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the
Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall
75
ability of the Company to recover the amortized cost of the investment. See “Allowance for Credit Losses and Impairments” in
Note 2 – “Significant Accounting Policies and Pronouncements” for additional information. The table below summarizes
investment related (gains) losses, net, related to allowances for credit losses and impairments for the years ended December 31,
2021, 2020 and 2019 (dollars in millions):
Change in allowance for credit losses and impairments on fixed maturity securities
Other impairment losses and changes in provision
Change in mortgage loan allowance for credit losses
Total
2021
2020
2019
$
$
12 $
—
(29)
(17) $
21 $
18
38
77 $
31
11
1
43
The change in allowance for credit losses and impairments on fixed maturity securities during 2021 and 2020 was
primarily related to high-yield securities reflecting the continued impact of the COVID-19 pandemic. The impairments on fixed
maturity securities for 2019 was primarily due to emerging market and high-yield debt exposures. The other impairment losses
and changes in provision in 2020 were primarily due to impairments on limited partnerships. The other impairment losses and
changes in provision in 2019 were primarily due to impairments on real estate joint ventures and limited partnerships. The
decrease in mortgage loan allowance for credit losses occurring during 2021, was primarily due to the updated outlook from the
COVID-19 pandemic. The increase in mortgage loan allowance for credit losses in 2020 was primarily due to the estimated
impact from the COVID-19 pandemic.
See “Unrealized Losses for Fixed Maturity Securities Available-for-Sale” in Note 4 – “Investments” in the Notes to
Consolidated Financial Statements for tables that present the estimated fair value and gross unrealized losses for securities that
have estimated fair values below amortized cost by class and grade, as well as the length of time the related estimated fair value
has remained below amortized cost as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, the Company classified approximately 8.5% and 5.9%, respectively, of its fixed
maturity securities in the Level 3 category (refer to Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated
Financial Statements for additional information). These securities primarily consist of private placement corporate and asset-
backed securities.
See “Securities Borrowing, Lending and Repurchase Agreements” in Note 4 – “Investments” in the Notes to
Consolidated Financial Statements for information related to the Company’s securities borrowing, lending and repurchase/
reverse repurchase programs.
Funds Withheld at Interest
For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance
basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company, and are
reflected as funds withheld at interest on the Company’s consolidated balance sheets. In the event of a ceding company’s
insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss
to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances against
amounts owed by the ceding company. Interest accrues to the total funds withheld at interest assets at rates defined by the
treaty terms. The Company is subject to the investment performance on the withheld assets, although it does not directly control
them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the
Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and
monitors compliance. Ceding companies with funds withheld at interest had an average financial strength rating of “A” as of
December 31, 2021 and 2020. Certain ceding companies maintain segregated portfolios for the benefit of the Company.
The majority of the Company’s funds withheld at interest balances are associated with its reinsurance of annuity
contracts. The funds withheld receivable balance for segregated portfolios is subject to the general accounting principles for
Derivatives and Hedging related to embedded derivatives.
Under these principles, the Company’s funds withheld receivable under certain reinsurance arrangements incorporate
credit risk exposures that are unrelated or only partially related to the creditworthiness of the obligor and include an embedded
derivative feature that is not clearly and closely related to the host contract. Therefore, the embedded derivative feature must be
measured at fair value on the consolidated balance sheets and changes in fair value reported in income. See “Embedded
Derivatives” in Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial
Statements for further discussion.
76
Based on data provided by ceding companies as of December 31, 2021 and 2020, funds withheld at interest totaled
(dollars in millions):
Underlying Security Type:
Segregated portfolios
Non-segregated portfolios
Embedded derivatives(1)
Total funds withheld at interest
2021
2020
Carrying Value
Estimated
Fair Value
Carrying Value
Estimated
Fair Value
$
$
4,515 $
4,843 $
3,097 $
2,315
124
2,315
—
2,251
84
6,954 $
7,158 $
5,432 $
3,481
2,251
—
5,732
(1) Represents the fair value of embedded derivatives related to reinsurance written on a modco or funds withheld basis and subject to the general accounting
principles for Derivatives and Hedging related to embedded derivatives for the segregated portfolios. When the segregated portfolios are presented on a
fair value basis in the “Estimated Fair Value” column, the calculation of a separate embedded derivative is not applicable.
Based on data provided by the ceding companies as of December 31, 2021 and 2020, segregated portfolios contained
investments similar to those directly owned by the Company; primarily fixed maturity securities, as well as commercial
mortgage loans and derivative securities. These assets pose risks similar to the investments the Company directly owns.
Derivatives consist primarily of S&P 500 options that are used to hedge liabilities and interest credited for EIAs reinsured by
the Company. The securities held within the segregated portfolios are primarily investment-grade, with an average rating of
“A.” The average maturity for investments held within the segregated portfolios of funds withheld at interest is ten years or
more. Interest accrues to the total funds withheld at interest assets at rates defined by the treaty terms and the Company
estimated the yields were approximately 6.34%, 5.40% and 5.59% for the years ended December 31, 2021, 2020 and 2019,
respectively. Changes in these estimated yields are affected by changes in the fair value of equity options held in the funds
withheld portfolio associated with EIAs. Additionally, under certain treaties the Company is subject to the investment
performance on the withheld assets, although it does not directly control them. To mitigate this risk, the Company helps set the
investment guidelines followed by the ceding companies and monitors compliance.
Other Invested Assets
Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime
mortgages, derivative contracts, fair value option (“FVO”) contractholder-directed unit-linked investments and FHLB common
stock. See “Other Invested Assets” in Note 4 – “Investments” in the Notes to Consolidated Financial Statements for a table that
presents the carrying value of the Company’s other invested assets by type as of December 31, 2021 and 2020.
The Company utilizes derivative financial instruments to protect the Company against possible changes in the fair
value of its investment portfolio as a result of interest rate changes, to hedge against risk of changes in the purchase price of
securities, to hedge liabilities associated with the reinsurance of variable annuities with guaranteed living benefits and to
manage the portfolio’s effective yield, maturity and duration. In addition, the Company utilizes derivative financial instruments
to reduce the risk associated with fluctuations in foreign currency exchange rates. The Company uses exchange-traded,
centrally cleared, and customized over-the-counter derivative financial instruments.
See Note 5 – “Derivative Instruments” in the Notes to Consolidated Financial Statements for a table that presents the
notional amounts and fair value of investment related derivative instruments held as of December 31, 2021 and 2020.
The Company may be exposed to credit-related losses in the event of non-performance by counterparties to derivative
financial instruments. Generally, the credit exposure of the Company’s derivative contracts is limited to the fair value and
accrued interest of non-collateralized derivative contracts in an asset position at the reporting date. As of December 31, 2021,
the Company had credit exposure of $18 million.
The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with
creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a
single net payment to be made by one counterparty to another at each due date and upon termination. As exchange-traded
futures are affected through regulated exchanges, and positions are marked to market on a daily basis, the Company has
minimal exposure to credit-related losses in the event of nonperformance by counterparties. See Note 5 – “Derivative
Instruments” in the Notes to Consolidated Financial Statements for more information regarding the Company’s derivative
instruments.
The Company holds $758 million and $935 million of beneficial interest in lifetime mortgages in the UK, net of
allowance for credit losses, as of December 31, 2021 and 2020, respectively. Investment income includes $52 million, $44
million and $34 million in interest income earned on lifetime mortgages for the years ended December 31, 2021, 2020 and
2019, respectively. Lifetime mortgages represent loans provided to individuals 55 years of age and older secured by the
borrower’s residence. Lifetime mortgages are comparable to a home equity loan by allowing the borrower to utilize the equity
in their home as collateral. The amount of the loan is dependent on the appraised value of the home at the time of origination,
77
the borrower's age and interest rate. Unlike a home equity loan, no payment of principal or interest is required until the death of
the borrower or sale of the home. Lifetime mortgages may also be either fully funded at origination, or the borrower can request
periodic funding similar to a line of credit. Lifetime mortgages are subject to risks, including market, credit, interest rate,
liquidity, operational, reputational and legal risks.
Enterprise Risk Management
RGA maintains a dedicated Enterprise Risk Management (“ERM”) function that is responsible for analyzing and
reporting the Company’s risks on an aggregated basis; facilitating monitoring to ensure the Company’s risks remain within its
appetites and limits; and ensuring, on an ongoing basis, that RGA’s ERM objectives are met. This includes ensuring proper risk
controls are in place; risks are effectively identified, assessed, and managed; and key risks to which the Company is exposed are
disclosed to appropriate stakeholders. The ERM function plays an important role in fostering the Company’s risk management
culture and practices.
Enterprise Risk Management Structure and Governance
The board of directors (“the Board”) oversees enterprise risk through its Risk Committee, which oversees the
management of the Company’s ERM program and policies. The Risk Committee receives regular reports and assessments that
describe the Company’s key risk exposures and include quantitative and qualitative assessments and information about
breaches, exceptions, and waivers.
The Company’s Global Chief Risk Officer (“CRO”) reports to the Chief Executive Officer (“CEO”) and has direct
access to the Board through the Risk Committee with formal reporting occurring quarterly. The CRO leads the dedicated ERM
function and is supported by a dedicated risk management staff as well as a network of Business Unit Chief Risk Officers and
Risk Owners throughout the business unit who are responsible for the analysis and management of risks within their scope. A
Lead Risk Owner is assigned to each risk to take overall responsibility to monitor and assess the risk consistently across all
markets.
In addition to leading the ERM function, the CRO also chairs the Company’s Risk Management Steering Committee
(“RMSC”), which includes senior management executives, including the CEO, the Chief Financial Officer (“CFO”), and the
Chief Investment Officer, among others. The RMSC provides oversight for the Insurance, Market and Credit, Capital, and
Operational risk committees and retains direct risk oversight responsibilities for the following:
•
•
•
•
Company’s global ERM framework, activities, and issues.
Identification, assessments, and management of all established and emerging strategic risk exposures.
Risk appetite statement, including the ongoing alignment of the risk appetite statement with the Company’s
strategy and capital plans.
Review, revise and approve RGA group-level strategic risk limits consistent with the risk appetite statement
The Insurance, Market and Credit, Capital, and Operational risk committees have direct oversight accountability for
their respective risk areas including the identification, assessments, and management of established and emerging risk
exposures and the review and approval of RGA group-level risk limits
To ensure appropriate oversight of enterprise-wide risk management issues without unnecessary duplication, as well as
to foster cross-committee communication and coordination regarding risk issues, chairs of the risk committees attend the
RMSC meetings. In addition to the risk committees, their sub-committees and working groups, some RGA operating entities
have risk management committees that oversee relevant risks related to segment-level risk limits.
Enterprise Risk Management Framework
RGA’s ERM framework provides a platform to assess the risk / return profiles of risks throughout the organization to
enable enhanced decision making by business leaders. The ERM framework also guides the development and implementation
of mitigation strategies to reduce exposures to these risks to acceptable levels.
RGA’s ERM framework includes the following elements:
•
•
Risk Culture: Risk management is an integral part of the Company’s culture and is embedded in RGA’s
business processes in accordance with RGA’s risk philosophy. As the cornerstone of the ERM framework, a
culture of prudent risk management reinforced by senior management plays a preeminent role in the effective
management of risks assumed by RGA.
Risk Appetite Statement: A general and high level overview of the risk profile RGA aims to achieve to meet
its strategic objectives. This statement is then supported by more granular risk limits guiding the businesses to
achieve this Risk Appetite Statement.
78
•
•
•
Risk Limits: Risk Limits establish the maximum amount of defined risk that the Company is willing to
assume to remain within the Company’s overall risk appetite. These risks have been identified by the
management of the Company as relevant to manage the overall risk profile of the Company while allowing
achievement of strategic objectives.
Risk Assessment Process: RGA uses qualitative and quantitative methods to assess key risks through a
portfolio approach, which analyzes established and emerging risks in conjunction with other risks.
Business Specific Limits/Controls: These limits/controls provide additional safeguards against undesired risk
exposures and are embedded in business processes. Examples include maximum retention limits, pricing and
underwriting reviews, per issuer limits, concentration limits, and standard treaty language.
Proactive risk monitoring and reporting enable early detection and mitigation of emerging risks. The RMSC and its
subcommittees monitor adherence to risk limits through the ERM function, which reports regularly to the RMSC and the Risk
Committee. The frequency of monitoring is tailored to the volatility assessment and relative priority of each risk. Risk
escalation channels coupled with open communication lines enhance the mitigations explained above. The Company has
devoted significant resources to developing its ERM program and expects to continue to do so in the future. Nonetheless, the
Company’s policies and procedures to identify, manage, and monitor risks may not be fully effective. Many of the Company’s
methods for managing risk are based on historical information, which may not be a good predictor of future risk exposures,
such as the risk of a pandemic causing a large number of deaths. Management of operational, legal, and regulatory risk relies on
policies and procedures that may not be fully effective under all scenarios.
Risk Categories – The Company groups its risks into the following categories: Insurance risk, Market and Credit risk, Capital
risk, Operational risk and Strategic risk. Specific risk assessments and descriptions can be found below and in Item 1A – “Risk
Factors.”
Insurance Risk
Insurance risk is the risk of lower or negative earnings and potentially a reduction in enterprise value due to a greater
amount of benefits and related expenses paid than expected, or from non-market related adverse policyholder or client behavior.
The Company uses multiple approaches to managing insurance risk: active insurance risk assessment and pricing appropriately
for the risks assumed, transferring undesired risks, and managing the retained exposure prudently. These strategies are
explained below.
The global impact of the COVID-19 pandemic and the response thereto has had a material adverse effect on the
Company’s earnings and continues to develop rapidly. While COVID-19 vaccines have been widely distributed in some
countries, the Company’s future results may continue to be adversely impacted by COVID-19, with the extent influenced by the
speed of vaccination, measures by public and private institutions, and timing and adoption of effective treatments, among other
factors. The Company continues to actively assess the impacts of COVID-19 on its business and update and refine its
COVID-19 projection and financial impact models to manage its insurance risk through the pandemic.
The Company has developed extensive expertise in assessing insurance risks that ultimately forms an integral part of
ensuring that it is compensated commensurately for the risks it assumes and that it does not overpay for the risks it transfers to
third parties. This expertise includes a vast array of market and product knowledge supported by a large information database of
historical experience that is closely monitored. Analysis and experience studies derived from this database help form the basis
for the Company’s pricing assumptions that are used in developing rates for new risks. If actual mortality or morbidity
experience is materially adverse, some reinsurance treaties allow for increases to future premium rates.
Misestimation of any key risk can threaten the long term viability of the enterprise. Further, the pricing process is a
key operational risk and significant effort is applied to ensuring the appropriateness of pricing assumptions. Some of the
safeguards the Company uses to ensure proper pricing are: experience studies, strict underwriting, sensitivity and scenario
testing, pricing guidelines and controls, authority limits and internal and external pricing reviews. In addition, the ERM
function provides pricing oversight that includes periodic pricing audits.
To minimize volatility in financial results and reduce the impact of large losses, the Company transfers some of its
insurance risk to third parties using vehicles such as retrocession and catastrophe coverage.
79
In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover
a portion of claims paid by ceding reinsurance to other insurance enterprises (or retrocessionaires) under excess coverage and
coinsurance contracts. In individual life markets, the Company retains a maximum of $8 million of coverage per individual life.
In certain limited situations the Company has retained more than $8 million per individual life. The Company enters into
agreements with other reinsurers to mitigate the residual risk related to the over-retained policies. Additionally, due to some
lower face amount reinsurance coverages provided by the Company in addition to individual life, such as group life, disability
and health, under certain circumstances, the Company could potentially incur claims totaling more than $8 million per
individual life.
The Company seeks to limit its exposure to loss on its assumed catastrophic excess of loss reinsurance agreements by
ceding a portion of its exposure to multiple retrocessionaires through retrocession line slips or directly to retrocession markets.
The Company’s policy is to retain a maximum of $30 million of catastrophic loss exposure per agreement and to retrocede up
to $40 million additional loss exposures to the retrocession markets. The Company limits its exposure on a country-by-country
(and state-by-state in the U.S.) basis by managing its total exposure to all catastrophic excess of loss agreements bound within a
given country to established maximum aggregate exposures. The maximum exposures are established and managed both on
gross amounts issued prior to including retrocession and for amounts net of exposures retroceded.
The Company accesses the markets each year for annual catastrophic coverages and reviews current coverage and
pricing of current and alternate designs. The coverage may vary from year to year based on the Company’s perceived value of
such protection. The current policy covers events involving 5 or more insured deaths from a single occurrence and covers $100
million of claims in excess of the Company’s $25 million deductible.
The Company retains most of the inbound insurance risk. The Company manages the retained exposure proactively
using various mitigating factors such as diversification and limits. Diversification is the primary mitigating factor of short term
volatility risk, but it also mitigates adverse impacts of changes in long term trends and catastrophic events. The Company’s
insured populations are dispersed globally, diversifying the insurance exposure because factors that cause actual experience to
deviate materially from expectations do not affect all areas uniformly and synchronously or in close sequence. A variety of
limits mitigate retained insurance risk. Examples of these limits include geographic exposure limits, which set the maximum
amount of business that can be written in a given country, and jumbo limits, which prevent excessive coverage on a given
individual.
In the event that mortality or morbidity experience develops in excess of expectations, some reinsurance treaties allow
for increases to future premium rates. Other treaties include experience refund provisions, which may also help reduce RGA’s
mortality risk.
RGA has various methods to manage its insurance risks, including access to the capital and reinsurance markets.
Market and Credit Risk
Market and Credit risk is the risk of lower or negative earnings and potentially a reduction in enterprise value due to
changes in the market prices of asset and liabilities.
Interest Rate Risk. Interest Rate risk is the risk that changes in the level and volatility of nominal interest rates affect
the profitability, value or solvency position of the Company. This includes credit spread changes and inflation but excludes
credit quality deterioration. This risk arises from many of the Company’s primary activities, as the Company invests substantial
funds in interest-sensitive assets, primarily fixed maturity securities, and also has certain interest-sensitive contract liabilities. A
prolonged period where market yields are significantly below the book yields of the Company’s asset portfolio puts downward
pressure on portfolio book yields. The Company has been proactive in its investment strategies, reinsurance structures and
overall asset-liability management practices to reduce the risk of unfavorable consequences in this type of environment.
The Company manages interest rate risk to optimize the return on the Company’s capital and to preserve the value
created by its business operations within certain constraints. For example, certain management and monitoring processes are
designed to minimize the effect of sudden and/or sustained changes in interest rates on fair value, cash flows, and net
investment income. The Company manages its exposure to interest rates principally by managing the relative matching of the
cash flows of its liabilities and assets.
80
The following table presents the account values, the weighted average interest-crediting rates and minimum guaranteed
rate ranges for the contracts containing guaranteed rates by major class of interest-sensitive product as of December 31, 2021
and 2020 (dollars in millions):
Interest Sensitive Contract Liability
Traditional individual fixed annuities
Equity-indexed annuities
Individual variable annuity contracts
Guaranteed investment contracts
Universal life – type policies
Funding agreement backed notes
Account Value
2021
2020
$
15,094 $
3,117
116
1,406
4,303
500
11,493
3,398
120
1,886
4,313
—
Current Weighted-Average
Interest Crediting Rate
2021
3.22%
2.10
2.98
0.76
3.76
2.00
2020
3.16%
2.76
2.99
1.44
3.78
—
Minimum Guaranteed
Rate Ranges
2021
2020
0.01 – 5.50%
0.01 – 5.50%
0.10 – 3.00
1.50 – 3.00
0.31 – 3.32
2.00 – 6.00
2.00 – 2.00
0.10 – 3.00
1.50 – 3.00
0.34 – 3.48
2.00 – 6.00
NA
The following table presents the account values by each minimum guaranteed rate, rounded to the nearest percentage,
by class of interest-sensitive product as of December 31, 2021 and 2020 (dollars in millions):
Account Value as of December 31, 2021
Interest Sensitive Contract Liability
1%
2%
3%
4%
5%
6%
Total
Traditional individual fixed annuities
$
2,109 $
1,057 $
4,384 $
5,106 $
2,419 $
19 $
15,094
Equity-indexed annuities
Individual variable annuity contracts
Guaranteed investment contracts
Universal life – type policies
Funding agreement backed notes
943
—
1,202
—
—
1,614
1
138
736
500
560
115
66
318
—
—
—
—
3,185
—
—
—
—
53
—
—
—
—
11
—
3,117
116
1,406
4,303
500
Account Value as of December 31, 2020
Interest Sensitive Contract Liability
1%
2%
3%
4%
5%
6%
Total
Traditional individual fixed annuities
$
1,424 $
864 $
4,733 $
2,104 $
2,348 $
20 $
11,493
Equity-indexed annuities
Individual variable annuity contracts
Guaranteed investment contracts
Universal life – type policies
946
—
1,541
—
1,807
2
187
724
645
118
158
317
—
—
—
3,204
—
—
—
58
—
—
—
10
3,398
120
1,886
4,313
The spread profits on the Company’s fixed annuity and interest-sensitive whole life, universal life (“UL”) and fixed
portion of variable universal life insurance policies are at risk if interest rates decline and remain relatively low for a period of
time, which has generally been the case in recent years. Should interest rates remain at current levels, which are significantly
lower than those existing prior to the declines of recent years, the average earned rate of return on the Company’s annuity and
UL investment portfolios will continue to decline. Declining portfolio yields may cause the spreads between investment
portfolio yields and the interest rate credited to contract holders to deteriorate as the Company’s ability to manage spreads can
become limited by minimum guaranteed rates on annuity and UL policies. In 2021, minimum guaranteed rates on non-variable
annuity and UL policies generally ranged from 0.01% to 6.00%, with an average guaranteed rate of approximately 3.05%. In
2020, minimum guaranteed rates on non-variable annuity and UL policies generally ranged from 0.01% to 6.00%, with an
average guaranteed rate of approximately 2.94%.
Interest rate spreads are managed for near term income through a combination of crediting rate actions and portfolio
management. Certain annuity products contain crediting rates that reset annually, of which $13 billion of account balances are
not subject to surrender charges as of both December 31, 2021 and 2020, with substantially all of these already at their
minimum guaranteed rates. As such, certain management and monitoring processes are designed to minimize the effect of
sudden and/or sustained changes in interest rates on fair value, cash flows, and net investment income.
The Company’s exposure to interest rate price risk and interest rate cash flow risk is reviewed on a quarterly basis.
Interest rate price risk exposure is measured using interest rate sensitivity analysis to determine the change in fair value of the
Company’s financial instruments in the event of a hypothetical change in interest rates. Interest rate cash flow risk exposure is
measured using interest rate sensitivity analysis to determine the Company’s variability in cash flows in the event of a
hypothetical change in interest rates.
Interest rate sensitivity analysis is used to measure the Company’s interest rate price risk by computing estimated
changes in fair value of fixed rate assets and liabilities in the event of a hypothetical 100 basis point change (increase or
decrease) in market interest rates. The Company does not have fixed rate instruments classified as trading securities. The
81
Company’s projected net decrease in fair value of financial instruments in the event of a 100 basis point increase in market
interest rates at its fiscal years ended December 31, 2021 and 2020 was $1.4 billion and $0.9 billion, respectively.
The calculation of fair value is based on the net present value of estimated discounted cash flows expected over the life
of the market risk sensitive instruments, using market prepayment assumptions and market rates of interest provided by
independent broker quotations and other public sources, with adjustments made to reflect the shift in the treasury yield curve as
appropriate.
The interest rate sensitivity relating to the Company’s fixed maturity securities is assessed using hypothetical scenarios
that assume positive and negative 50 and 100 basis point parallel shifts in the yield curves. This analysis assumes that the U.S.,
Canada and other pertinent countries’ yield curve shifts are of equal direction and magnitude. Change in value of individual
securities is estimated consistently under each scenario using a commercial valuation tool. The Company’s actual experience
may differ from the results noted below particularly due to assumptions utilized or if events differ from those included in the
methodology. The following tables summarize the results of this analysis for fixed maturity securities in the Company’s
investment portfolio as of the dates indicated (dollars in millions):
December 31, 2021:
Total estimated fair value
Interest Rate Analysis of Estimated Fair Value of Fixed Maturity Securities
–
60,749
-100 bps
63,711
66,926
-50 bps
$
$
$
+50 bps
+100 bps
$
58,042
$
55,588
% Change in estimated fair value from base
$ Change in estimated fair value from base
10.2 %
4.9 %
— %
(4.5) %
(8.5) %
$
6,177
$
2,962
$
—
$
(2,707)
$
(5,161)
December 31, 2020:
Total estimated fair value
% Change in estimated fair value from base
$ Change in estimated fair value from base
-100 bps
-50 bps
$
62,286
$
59,404
9.8 %
4.7 %
$
5,551
$
2,669
$
$
–
56,735
+50 bps
+100 bps
$
54,278
$
52,033
— %
(4.3) %
(8.3) %
—
$
(2,457)
$
(4,702)
Interest rate sensitivity analysis is also used to measure the Company’s interest rate cash flow risk by computing
estimated changes in the expected cash flows for floating rate assets and liabilities over a one year period following an
instantaneous, parallel, hypothetical 100 basis point change (increase or decrease) in market interest rates. The Company does
not have variable rate instruments classified as trading securities. The Company’s projected decrease in cash flows associated
with floating rate instruments in the event of an instantaneous 100 basis point decrease in market interest rates for its fiscal
years ended December 31, 2021 and 2020 was $34 million.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, and
should not be relied on as indicative of future results. Further, the computations do not contemplate any actions management
could undertake in response to changes in interest rates. Certain shortcomings are inherent in the method of analysis presented
in the computation of the estimated fair value of fixed maturity securities and the estimated cash flows of floating rate
instruments, which constitute forward-looking statements. Actual values may differ materially from those projections presented
due to a number of factors, including, without limitation, market conditions varying from assumptions used in the calculation of
the fair value.
In order to reduce the exposure to changes in fair values from interest rate fluctuations, the Company has developed
strategies to manage the net interest rate sensitivity of its assets and liabilities. In addition, from time to time, the Company has
utilized the swap market to manage the sensitivity of fair values to interest rate fluctuations.
Inflation can also have direct effects on the Company’s assets and liabilities. The primary direct effect 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 Company reinsures annuities with benefits indexed to the cost of living. Some of these benefits are hedged with a
combination of CPI swaps and indexed bonds when material.
Long-term care products have an inflation component linked to the future cost of such services. If health care costs
increase at a much larger rate than what is prevalent in the nominal interest rates available in the markets, the Company may not
earn enough investment yield to pay future claims on such products.
On July 27, 2017, the Financial Conduct Authority (the “FCA”) announced that it intends to stop persuading or
compelling banks to submit London Interbank Offered Rates (“LIBOR”) after December 31, 2021. Subsequently, on March 5,
2021, the FCA announced that all LIBOR settings will either cease to be provided or no longer be representative, with some
being discontinued after December 31, 2021, and the remaining being discontinued after June 30, 2023. Workstreams have
been established in several markets to reform existing reference rates and provide a fall back rate upon discontinuation of
LIBOR. The Alternative Rates Committee of the Federal Reserve Board proposed the Secured Overnight Financing Rate
82
(“SOFR”) as an alternative rate to replace U.S. Dollar LIBOR, and the European Central Bank recommended the Euro Short-
term Rate (“ESTER”) as the new risk-free rate. Other jurisdictions are conducting similar exercises and have proposed potential
replacement rates, as necessary. The Company is currently assessing the effects of the discontinuation of LIBOR on existing
contracts by analyzing contractual fallback provisions, evaluating alternative rate ramifications, and assessing the effects on
current hedging strategies.
Real Estate Risk. Real estate risk is the risk that changes in the level and volatility of real estate market valuations may
impact the profitability, value or solvency position of the Company. The Company has investments in direct real estate equity
and debt instruments collateralized by real estate (“real estate loans”). Real estate equity risks include significant reduction in
valuations, which could be caused by downturns in the broad economy or in specific geographic regions or sectors. In addition,
real estate loan risks include defaults, borrower or tenant bankruptcy and reduced liquidity. Real estate loan risks are partially
mitigated by the excess of the value of the property over the loan principle, which provides a buffer should the value of the real
estate decrease. The Company manages its real estate loan risk by diversifying by property type and geography and through
exposure limits.
Equity Risk. Equity risk is the risk that changes in the level and volatility of equity market valuations affect the
profitability, value or solvency position of the Company. This risk includes variable annuity and other equity linked exposures
and asset related equity exposure. The Company assumes equity risk from alternative investments, fixed indexed annuities and
variable annuities. The Company uses derivatives to hedge its exposure to movements in equity markets that have a direct
correlation with certain of its reinsurance products.
Alternative investments are investments in non-traditional asset classes that primarily back the Company’s capital and
surplus as well as certain long-term illiquid liability portfolios. Alternative investments generally include: hedge funds,
emerging markets debt, distressed debt, commodities, infrastructure, tax credits, and equities, both public and private. The
Company mitigates its exposure to alternative investments by limiting the size of the alternative investments holding and using
per-issuer investment limits.
The Company reinsures fixed indexed annuities (“FIAs”). Credits to FIA contracts are affected by changes in equity
markets. Thus the fair value of the benefit is primarily a function of index returns and volatility. The Company hedges most of
the underlying FIA equity exposure with derivatives.
The Company reinsures variable annuities including those with guaranteed minimum death benefits (“GMDB”),
guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”) and guaranteed
minimum withdrawal benefits (“GMWB”). Strong equity markets, increases in interest rates and decreases in equity market
volatility will generally decrease the fair value of the liabilities underlying the benefits. Conversely, a decrease in the equity
markets along with a decrease in interest rates and an increase in equity market volatility will generally result in an increase in
the fair value of the liabilities underlying the benefits, which has the effect of increasing reserves and lowering earnings. The
Company maintains a customized dynamic hedging program that is designed to substantially mitigate the risks associated with
income volatility around the change in reserves on guaranteed benefits, ignoring the Company’s own credit risk assessment.
However, the hedge positions may not fully offset the changes in the carrying value of the guarantees due to, among other
things, time lags, high levels of volatility in the equity and derivative markets, extreme changes in interest rates, unexpected
contract holder behavior, and divergence between the performance of the underlying funds and hedging indices. These factors,
individually or collectively, may have a material adverse effect on the Company’s net income, financial condition or liquidity.
The table below provides a summary of variable annuity account values and the fair value of the guaranteed benefits as
December 31, 2021 and 2020.
(dollars in millions)
No guaranteed minimum benefits
GMDB only
GMIB only
GMAB only
GMWB only
GMDB / WB
Other
December 31,
2021
2020
$
844 $
960
25
3
1,130
264
19
Total variable annuity account values
Fair value of liabilities associated with living benefit riders
$
$
3,245 $
162 $
665
872
24
4
1,132
275
18
2,990
155
83
Credit risk, which includes default risk, is risk of loss due to credit quality deterioration of an individual financial
asset, derivative or non-derivative contract or instrument. Credit quality deterioration may or may not be accompanied by a
ratings downgrade. Generally, the credit exposure for an asset is limited to the fair value, net of any collateral received, at the
reporting date.
Investment credit risk is credit risk related to invested assets. The Company manages investment credit risk using per-
issuer investment limits. In addition to per-issuer limits, the Company also limits the total amounts of investments per rating
category. An automated compliance system checks for compliance for all investment positions and sends warning messages
when there is a breach. The Company manages its credit risk related to over-the-counter derivatives by entering into
transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements
that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. As
futures are transacted through regulated exchanges, and positions are marked to market on a daily basis, the Company has
minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments.
The Company enters into various collateral arrangements, which require both the posting and accepting of collateral in
connection with its derivative instruments. Collateral agreements contain attachment thresholds that vary depending on the
posting party’s financial strength ratings. Additionally, a decrease in the Company’s financial strength rating to a specified level
results in potential settlement of the derivative positions under the Company’s agreements with its counterparties. A committee
is responsible for setting rules and approving and overseeing all transactions requiring collateral. See “Credit Risk” in Note 5 –
“Derivative Instruments” in the Notes to Consolidated Financial Statements for additional information on credit risk related to
derivatives.
Counterparty risk is the potential for the Company to incur losses due to a client, retrocessionaire, or partner becoming
distressed or insolvent. This includes run-on-the-bank risk and collection risk.
Run-on-the-Bank is the potential risk that a client’s in force block incurs substantial surrenders and/or lapses due to
credit impairment, reputation damage or other market changes affecting the counterparty. Policyholder surrenders and/or lapses
substantially higher than expected could result in inadequate in force business to recover cash paid out for acquisition costs.
For clients and retrocessionaires, collection risk includes their inability to satisfy a reinsurance agreement because the
right of offset is disallowed by the receivership court; the reinsurance contract is rejected by the receiver, resulting in a
premature termination of the contract; and/or the security supporting the transaction becomes unavailable to the Company.
The Company manages counterparty risk by limiting the total exposure to a single counterparty and by only initiating
contracts with creditworthy counterparties. In addition, some of the counterparties have set up trusts and letters of credit,
reducing the Company’s exposure to these counterparties.
Generally, the Company’s insurance subsidiaries retrocede amounts in excess of their retention to the Company’s other
insurance subsidiaries. External retrocessions are arranged through the Company’s retrocession pools for amounts in excess of
its retention. As of December 31, 2021, all retrocession pool members in this excess retention pool rated by the A.M. Best
Company were rated “A-” or better. A rating of “A-” is the fourth highest rating out of sixteen possible ratings. For a majority
of the retrocessionaires that were not rated, letters of credit or trust assets have been received by the Company as additional
security. In addition, the Company performs annual financial and in force reviews of its retrocessionaires to evaluate financial
stability and performance.
The Company has never experienced a material default in connection with retrocession arrangements, nor has it
experienced any material difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given
as to the future performance of such retrocessionaires or as to the recoverability of any such claims.
In addition to investment credit limits and counterparty limits, the Company maintains aggregate counterparty risk
limits that include counterparty exposures from reinsurance, financing and investment activities at an aggregated level to
control total exposure to a single counterparty. Counterparty risk aggregation is important because it enables the Company to
capture risk exposures at a comprehensive level and under more extreme circumstances compared to analyzing the components
individually.
All counterparty exposures are calculated on a quarterly basis, reviewed by management and monitored by the ERM
function.
Capital Risk
Capital risk is the risk of lower/negative earnings, potential reduction in enterprise value, and/or the loss of ability to
conduct business due to insufficient financial capacity, including not having the appropriate amount of group or entity-level
capital to conduct business today or in the future. The Company monitors capital risk exposure using relevant bases of
measurement including but not limited to economic, rating agency, and regulatory methodologies. Additionally, the Company
regularly assesses risk related to collateral, foreign currency, financing, liquidity and tax.
84
Collateral Risk. Collateral risk is the risk that collateral will not be available at expected costs or in the capacity
required to meet current and future needs. The Company monitors risks related to interest rate movement, collateral
requirements and position and capital markets environment. Collateral demands and resources continue to be actively managed
with available collateral sources being more than sufficient to cover stress level collateral demands.
Foreign Currency Risk. Foreign currency risk is the risk of changes in level and volatility of currency exchange rates
affect the profitability, value or solvency position of the Company. The Company manages its exposure to foreign currency risk
principally by currency matching invested assets with the underlying liabilities to the extent practical. The Company has in
place net investment hedges for a portion of its investments in its Canadian operations to reduce excess exposure to that
currency. Translation differences resulting from translating foreign subsidiary balances to U.S. dollars are reflected in
stockholders’ equity on the consolidated balance sheets.
The Company generally does not hedge the foreign currency exposure of its subsidiaries transacting business in
currencies other than their functional currency (transaction exposure). However, the Company has entered into cross currency
swaps to manage exposure to specific currencies. The majority of the Company’s foreign currency transactions are denominated
in Australian dollars, British pounds, Canadian dollars, Euros, Japanese yen, Korean won, and the South African rand. The
maximum amount of assets held in a specific currency (with the exception of the U.S. dollar) is measured relative to risk targets
and is monitored regularly.
The Company does not hedge the income statement risk associated with translating foreign currencies. The foreign
exchange risk sensitivity of the Company’s consolidated pre-tax income is assessed using hypothetical test scenarios. Actual
results may differ from the results noted below particularly due to assumptions utilized or if events occur that were not included
in the methodology. For more information on this risk, see “Item 1A – Risk Factors – Risks Related to Our Business.” In
general, a weaker U.S. dollar relative to foreign currencies has a favorable impact on the Company’s income before income
taxes. The following tables summarize the impact on the Company’s reported income before income taxes of an immediate
favorable or unfavorable change in each of the foreign exchange rates to which the Company has exposure (dollars in millions):
Year Ended December 31, 2021
Income before income taxes
% change of income before income taxes from base
$ change of income before income taxes from base
Year Ended December 31, 2020
Income before income taxes
% change of income before income taxes from base
$ change of income before income taxes from base
Unfavorable
-10%
-5%
645
$
668
(6.6) %
(3.3) %
(45)
$
(23)
$
Unfavorable
-10%
-5%
–
–
Favorable
+5%
+10%
691
— %
—
$
$
713
3.3 %
23
$
$
736
6.6 %
45
Favorable
+5%
+10%
494
$
523
10.7 %
5.4 %
(59)
$
(30)
$
553
— %
—
$
$
583
5.4 %
30
$
$
612
10.7 %
59
$
$
$
$
Financing Risk. Financing risk is the risk that capital will not be available at expected costs or in the capacity required.
The Company continues to monitor financing risks related to regulatory financing, contingency financing, and debt capital and
sees no immediate issues with its current structures, capacity and plans.
Liquidity Risk. Liquidity risk is the risk that the Company is unable to meet payment obligations at expected costs or in
the capacity required. The Company’s traditional liquidity demands include items such as claims, expenses, debt financing and
investment purchases, which are largely known or can be reasonably forecasted. The Company regularly performs liquidity risk
modeling, including both market and Company specific stresses, to assess the sufficiency of available resources.
Tax Risk. Tax risk is the risk that current and future tax positions are different than expected. The Company monitors
tax risks related to the evolving tax and regulatory environment, business transactions, legal entity reorganizations, tax
compliance obligations, and financial reporting.
Operational Risk
Operational risk is the risk of lower/negative earnings and a potential reduction in enterprise value caused by
unexpected losses associated with inadequacy or failure on the part of internal processes, people and systems, or from external
events. The Company regularly monitors and assesses the risks related to business conduct and governance, fraud, privacy, and
cybersecurity, business disruption, and business operations. Various insurance, market and credit, capital, and strategy risk
obligations and concerns often intersect with the Company’s core operational process risk areas. Given the scope of the
Company’s business and the number of countries in which it operates, this set of risks has the potential to affect the business
locally, regionally, or globally. Operational risks are core to managing the Company’s brand and market confidence as well as
maintaining its ability to acquire and retain the appropriate expertise to execute and operate the business.
85
Business Conduct and Governance Risk. Business conduct and governance is the risk related to management oversight,
compliance, market conduct, and legal matters. The Company’s Compliance Risk Management Program facilitates a proactive
evaluation of present and potential compliance risks associated with both local and enterprise-wide regulatory requirements as
well as compliance with Company policies and procedures.
Fraud Risk. Fraud risk is the risk related to the deliberate abuse of and/or taking of Company assets in order to secure
gain for the perpetrator or inflict harm on the Company or other victim. Ongoing monitoring and an annual fraud risk
assessment enables the Company to continually evaluate potential fraud risks within the organization.
Privacy Risk. Privacy risk is the risk of non-compliance with privacy regulations and laws. The Company’s privacy
program, processes, and procedures are designed to protect personal information related to its customers, insured individuals or
its employees. The Company’s privacy program facilitates a proactive evaluation of present and potential privacy risks
associated with both local and enterprise-wide regulatory requirements as well as compliance with Company policies and
procedures.
Cybersecurity Risk. Cybersecurity risk is the risk of theft, loss, unauthorized disclosure, or unauthorized use of
physical or electronic assets resulting in a loss of confidentiality, loss of revenue, poor reputational exposure, or regulatory
fines. The Company’s cybersecurity program, processes, and procedures are designed to prevent unauthorized physical and
electronic theft and the disclosure of confidential and personal data related to its customers, insured individuals or its
employees. The Company employs technology, administrative related processes and procedural controls, security measures
and other preventative actions to reduce the risk of such incidents.
Business Disruption Risk. Business disruption risk is the risk of impairment to operational capabilities due to the
unavailability of people, systems, and/or facilities. The Company’s global business continuity process enables associates to
identify potential impacts that threaten operations by providing the framework, policies and procedures and required recurring
training for how the Company will recover and restore interrupted critical functions, within a predetermined time, after a
disaster or extended disruption, until its normal facilities are restored.
Business Operations Risk. Business operations risk is the risk related to business processes and procedures. Business
operations risk includes risk associated with the processing of transactions, data use and management, monitoring and
reporting, the integrity and accuracy of models, the use of third parties, and the delivery of advisory services.
Human Capital Risk. Human capital risk is related to workforce management, including talent acquisition,
development, retention, and employment relations/regulations. The Company actively monitors human capital risks using
multiple practices that include but are not limited to human resource and compliance policies and procedures, regularly
reviewing key risk indicators, performance evaluations, compensation and benefits benchmarking, succession planning,
employee engagement surveys and associate exit interviews.
Strategic Risk
Strategic risk relates to the planning, implementation, and management of the Company’s business plans and
strategies, including the risks associated with: the global environment in which it operates; future law and regulation changes;
political risks; and relationships with key external parties.
Strategy Risk. Strategy risk is the risk related to the design and execution of the Company’s strategic plan, including
risks associated with merger and acquisition activity. Strategy risks are addressed by a robust multi-year planning process,
regular business unit level assessments of strategy execution and active benchmarking of key performance and risk indicators
across the Company’s portfolios of businesses. The Company’s risk appetites and limits are set to be consistent with strategic
objectives.
External Environment Risk
External environment risk relates to external competition, macro trends, and client needs. Macro characteristics that
drive market opportunities, risk and growth potential, the competitive landscape and client feedback are closely monitored.
Key Relationships Risk. Key relationships risk relates to areas of important interactions with parties external to the
Company. The Company’s reputation is a critical asset in successfully conducting business and therefore relationships with its
primary stakeholders (including but not limited to business partners, shareholders, clients, rating agencies, and regulators) are
all carefully monitored.
Political and Regulatory Risk. Political and regulatory risk relates to future law and regulation changes and the impact
of political changes or instability on the Company’s ability to achieve its objectives. Regulatory and political developments and
related risks that may affect the Company are identified, assessed and monitored as part of regular oversight activities.
86
New Accounting Standards
Changes to the general accounting principles are established by the Financial Accounting Standards Board (“FASB”)
in the form of accounting standards updates to the FASB Accounting Standards CodificationTM.
Financial Services – Insurance
In August 2018, the FASB issued amendments that will significantly change the recognition and measurement of long-
duration insurance contracts and expand disclosure requirements. The guidance is effective for the Company on January 1,
2023. The Company established a team to support the implementation of the updated guidance, which requires significant
changes to policies, reporting and processes. The Company’s achievements as of the balance sheet date include, but are not
limited to, the following:
•
•
•
•
•
•
Established key accounting policies;
Updated chart of accounts to support enhanced financial statement presentation and disclosures;
Implemented a data management system and process for grouping treaties into cohorts;
Established valuation analytics and reporting foundation;
Established an assumption governance process for assumption review, changes and approvals; and
Conducted dry runs and end to end system testing.
The Company continues to make progress on the following items (includes, but not limited to):
•
•
•
•
Evaluating and finalizing key accounting policies;
Evaluating the impact to the consolidated financial statements at transition;
Determining and documenting key risks and appropriate internal controls; and
Conducting parallel valuation runs.
See “New Accounting Pronouncements” in Note 2 – “Significant Accounting Policies and Pronouncements” in the
Notes to Consolidated Financial Statements for additional information on new accounting pronouncements and their impact, if
any, on the Company’s results of operations and financial position.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by Item 7A is contained in Item 7 under the caption “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Market and Credit Risk”.
87
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Index to Consolidated Financial Statements
Annual Financial Statements:
Financial Statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements:
Note 1 Business and Basis of Presentation
Note 2 Significant Accounting Policies and Pronouncements
Note 3 Earnings per Share
Note 4 Investments
Note 5 Derivative Instruments
Note 6 Fair Value of Assets and Liabilities
Note 7 Reinsurance Ceded Receivables and Other
Note 8 Deferred Policy Acquisition Costs
Note 9 Income Tax
Note 10 Employee Benefit Plans
Note 11 Financial Condition and Net Income on a Statutory Basis – Significant Subsidiaries
Note 12 Commitments, Contingencies and Guarantees
Note 13 Debt
Note 14 Collateral Finance and Securitization Notes
Note 15 Segment Information
Note 16 Policy Claims and Benefits
Note 17 Equity
Note 18 Quarterly Results of Operations
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Page
89
90
91
92
93
95
95
108
108
116
122
132
134
134
137
140
142
144
145
146
149
152
156
157
88
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
December 31,
2021
December 31,
2020
$
60,749 $
56,735
151
6,283
1,234
6,954
87
3,070
78,528
2,948
533
2,888
2,580
3,690
1,008
132
5,787
1,258
5,432
227
2,829
72,400
3,408
511
2,842
983
3,616
896
92,175 $
84,656
35,782 $
26,377
6,993
613
2,886
2,663
3,667
180
79,161
—
1
2,461
8,563
(1,653)
3,642
13,014
31,453
23,276
6,413
598
3,263
1,340
3,573
388
70,304
—
1
2,406
8,148
(1,562)
5,359
14,352
84,656
$
92,175 $
$
$
Assets
Fixed maturity securities:
Available-for-sale at fair value (amortized cost of $55,873 and $49,548; allowance for credit losses of $31
and $20)
Equity securities, at fair value
Mortgage loans on real estate (net of allowance for credit losses of $35 and $64)
Policy loans
Funds withheld at interest
Short-term investments
Other invested assets
Total investments
Cash and cash equivalents
Accrued investment income
Premiums receivable and other reinsurance balances
Reinsurance ceded receivables and other
Deferred policy acquisition costs
Other assets
Total assets
Liabilities and Stockholders’ Equity
Future policy benefits
Interest-sensitive contract liabilities
Other policy claims and benefits
Other reinsurance balances
Deferred income taxes
Other liabilities
Long-term debt
Collateral finance and securitization notes
Total liabilities
Commitments and contingent liabilities (See Note 12)
Stockholders’ Equity:
Preferred stock (par value $.01 per share; 10,000,000 shares authorized; no shares issued or outstanding)
Common stock (par value $0.01 per share; 140,000,000 shares authorized;
shares issued: 85,310,598 at both December 31, 2021 and December 31, 2020)
Additional paid-in-capital
Retained earnings
Treasury stock, at cost – 18,139,868 and 17,353,697 shares
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
89
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Revenues
Net premiums
Investment income, net of related expenses
Investment related gains (losses), net
Other revenues
Total revenues
Benefits and expenses
Claims and other policy benefits
Interest credited
Policy acquisition costs and other insurance expenses
Other operating expenses
Interest expense
Collateral finance and securitization expense
Total benefits and expenses
Income before income taxes
Provision for income taxes
Net income
Earnings per share
Basic earnings per share
Diluted earnings per share
For the years ended December 31,
2021
2020
2019
$
12,513 $
11,694 $
3,138
560
447
16,658
12,776
700
1,416
936
127
12
15,967
691
74
2,575
(33)
360
14,596
11,075
704
1,261
816
170
17
14,043
553
138
$
$
617 $
415 $
9.10 $
9.04
6.35 $
6.31
11,297
2,520
91
392
14,300
10,197
697
1,204
868
173
29
13,168
1,132
262
870
13.88
13.62
See accompanying notes to consolidated financial statements.
90
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Comprehensive income (loss)
Net Income
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Net unrealized investment gains (losses)
Defined benefit pension and postretirement plan adjustments
Total other comprehensive income (loss), net of tax
Total comprehensive income (loss)
For the years ended December 31,
2021
2020
2019
$
617 $
415 $
870
60
(1,799)
22
(1,717)
23
2,201
(2)
2,222
$
(1,100) $
2,637 $
77
2,443
(19)
2,501
3,371
See accompanying notes to consolidated financial statements.
91
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions except per share amounts)
Balance, December 31, 2018
Adoption of new accounting standards
Net income
Total other comprehensive income (loss)
Dividends to stockholders, $2.60 per share
Issuance of common stock, net of expenses
Purchase of treasury stock
Reissuance of treasury stock
Balance, December 31, 2019
Adoption of new accounting standards
Net income
Total other comprehensive income (loss)
Dividends to stockholders, $2.80 per share
Issuance of common stock, net of expenses
Purchase of treasury stock
Reissuance of treasury stock
Balance, December 31, 2020
Adoption of new accounting standards
Net income
Total other comprehensive income (loss)
Dividends to stockholders, $2.86 per share
Issuance of common stock, net of expenses
Purchase of treasury stock
Reissuance of treasury stock
Balance, December 31, 2021
Common
Stock
Additional
Paid In Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income
Total
1
1,899
7,285
(1,371)
636 $
8,450
1
1
38
1,937
481
(12)
2,406
870
(163)
(40)
7,952
(12)
415
(182)
(25)
8,148
617
(194)
(101)
46
(1,426)
(163)
27
(1,562)
55
(8)
(99)
8
2,501
—
870
2,501
(163)
—
(101)
44
3,137
11,601
2,222
(12)
415
2,222
(182)
481
(163)
(10)
5,359
14,352
(1,717)
—
617
(1,717)
(194)
—
(99)
55
$
1 $
2,461 $
8,563 $
(1,653) $
3,642 $
13,014
See accompanying notes to consolidated financial statements.
92
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
For the years ended December 31,
2021
2020
2019
$
617 $
415 $
870
Change in operating assets and liabilities:
Accrued investment income
Premiums receivable and other reinsurance balances
Deferred policy acquisition costs
Reinsurance ceded receivable balances
Future policy benefits, other policy claims and benefits and
other reinsurance balances
Deferred income taxes
Other assets and other liabilities, net
Amortization of net investment premiums, discounts and other
Depreciation and amortization expense
Investment related (gains) losses, net
Gain on sale of businesses
Other, net
Net cash provided by operating activities
Cash flows from investing activities
Sales of fixed maturity securities available-for-sale
Maturities of fixed maturity securities available-for-sale
Sales of equity securities
Principal payments on mortgage loans on real estate
Principal payments on policy loans
Purchases of fixed maturity securities available-for-sale
Purchases of equity securities
Cash invested in mortgage loans on real estate
Cash invested in policy loans
Cash invested in funds withheld at interest
Purchase of businesses, net of cash acquired of $53 and $27
Proceeds from sale of businesses, net of cash transferred of $43
Purchases of property and equipment
Change in short-term investments
Change in other invested assets
Net cash used in investing activities
Cash flows from financing activities
Dividends to stockholders
Proceeds from issuance of common stock, net
Repayment of collateral finance and securitization notes
Proceeds from long-term debt issuance
Debt issuance costs
Principal payments of long-term debt
Purchases of treasury stock
Exercise of stock options, net
Change in cash collateral for derivative positions and other arrangements
Change in deposit asset on reinsurance
Deposits on investment-type policies and contracts
Withdrawals on investment-type policies and contracts
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
93
(15)
(100)
(71)
(107)
5,062
(89)
(97)
(54)
43
(560)
(11)
(436)
4,182
12,142
887
30
991
57
(18,071)
(22)
(1,155)
(32)
(67)
(156)
19
(19)
371
397
(11)
162
(95)
(115)
(4)
110
(198)
(178)
2,819
1,537
(16)
225
(46)
49
33
—
(98)
3,322
6,514
973
181
661
102
(9,619)
(22)
(780)
(41)
(131)
—
—
(28)
(155)
(335)
211
113
(55)
49
(91)
—
(57)
2,307
13,214
907
98
490
82
(15,664)
(312)
(1,216)
(42)
(60)
4
—
(34)
199
(304)
(4,628)
(2,680)
(2,638)
(194)
—
(208)
500
(6)
(403)
(99)
—
31
91
1,729
(1,421)
20
(34)
(460)
3,408
(182)
481
(214)
598
(5)
(3)
(163)
1
(32)
—
1,576
(803)
1,254
63
1,959
1,449
$
2,948 $
3,408 $
(163)
—
(91)
599
(5)
(403)
(101)
6
(163)
—
1,309
(1,109)
(121)
11
(441)
1,890
1,449
REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
Supplemental disclosures of cash flow information:
Interest paid
Income taxes paid (received), net of refunds
Non-cash investing activities:
Transfer of invested assets
Right-of-use assets acquired through operating leases
Non-cash financing activities:
Non-cash deposits on reinsurance
Purchase of a business:
Assets acquired, excluding cash acquired
Liabilities assumed
Sale of businesses:
Assets disposed, net of cash transferred
Liabilities disposed
For the years ended December 31,
2021
2020
2019
$
$
$
$
$
$
$
$
$
160 $
368 $
1,798 $
— $
1,581 $
847 $
(691) $
(512) $
504 $
166 $
108 $
93 $
23 $
— $
— $
— $
— $
— $
180
44
6,275
1
—
8
(12)
—
—
See accompanying notes to consolidated financial statements.
94
Reinsurance Group of America, Incorporated
Notes to consolidated financial statements
For the years ended December 31, 2021, 2020 and 2019
Note 1 BUSINESS AND BASIS OF PRESENTATION
Business
Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31,
1992. The consolidated financial statements herein include the assets, liabilities, and results of operations of RGA and its
subsidiaries, all of which are wholly owned (collectively, the “Company”).
The Company is engaged in providing traditional reinsurance, which includes individual and group life and health, disability,
and critical illness reinsurance. The Company also provides financial solutions, which includes longevity reinsurance, asset-
intensive products, primarily annuities, financial reinsurance, capital solutions and stable value products.
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 amount at risk 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 risk;
(ii) enhance the ceding company’s financial strength and surplus position;
(iii) stabilize operating results by leveling fluctuations in the ceding company’s loss experience; and
(iv) assist the ceding company in meeting applicable regulatory requirements.
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets
and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. The most significant estimates include those used in determining deferred policy acquisition costs, premiums receivable,
future policy benefits, incurred but not reported claims, income taxes, valuation of investments and investment impairments,
and valuation of embedded derivatives. Actual results could differ materially from the estimates and assumptions used by
management.
The accompanying consolidated financial statements include the accounts of RGA and its subsidiaries, all of which are wholly
owned, and any variable interest entities where the Company is the primary beneficiary. The Company evaluates variable
interest entities in accordance with the general accounting principles for Consolidation. Entities in which the Company has
significant influence over the operating and financing decisions but are not required to be consolidated are reported under the
equity method of accounting. Intercompany balances and transactions have been eliminated.
There were no subsequent events that would require disclosure or adjustments to the accompanying consolidated financial
statements through the date the consolidated financial statements were issued.
Note 2 SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS
Investments
Fixed Maturity Securities
Fixed maturity securities classified as available-for-sale are reported at fair value and are so classified based upon the
possibility that such securities could be sold prior to maturity if that action enables the Company to execute its investment
philosophy and appropriately match investment results to operating and liquidity needs.
Unrealized gains and losses on fixed maturity securities classified as available-for-sale, less applicable deferred income taxes as
well as related adjustments to deferred acquisition costs, if applicable, are recorded in other comprehensive income (“OCI”).
Investment income is recognized as it accrues or is legally due. Realized gains and losses on sales of investments are included
in investment related gains (losses), net, as are change in allowance for credit losses and impairments. The cost of investments
sold is primarily determined based upon the specific identification method.
95
Equity Securities
Equity securities are carried at fair value and realized and unrealized gains and losses are included in investment related gains
(losses), net.
Mortgage Loans on Real Estate
Mortgage loans on real estate are carried at unpaid principal balances, net of any unamortized premium or discount,
unamortized balance of loan origination fees and expenses, and allowance for credit losses. Interest income is accrued on the
principal amount of the mortgage loan based on its contractual interest rate. Amortization of premiums, discounts, and loan
origination fees are recorded using the effective yield method. The Company accrues interest on loans until it is probable the
Company will not receive interest or the loan is 90 days past due. Interest income, amortization of premiums, accretion of
discounts, amortization of loan origination fees and prepayment fees are reported in investment income, net of related expenses.
Policy Loans
Policy loans are reported at the unpaid principal balance. Interest income on such loans is recorded as earned using the
contractually agreed-upon interest rate. 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.
Funds Withheld at Interest
Funds withheld at interest represent amounts contractually withheld by ceding companies in accordance with reinsurance
agreements. For agreements written on a modified coinsurance (“modco”) basis and agreements written on a coinsurance funds
withheld basis, assets that support the net statutory reserves or as defined in the treaty, are withheld and legally owned by the
ceding company. Interest, recorded in investment income, net of related expenses, accrues to these assets at calculated rates as
defined by the treaty terms. Changes in the value of the equity options held within the funds withheld portfolio associated with
equity-indexed annuity treaties are reflected in investment income, net of related expenses.
Short-term Investments
Short-term investments represent investments with remaining maturities of one year or less, but greater than three months, at
the time of acquisition and are stated at estimated fair value or amortized cost, which approximates estimated fair value. Interest
on short-term investments is recorded in investment income, net of related expenses.
Other Invested Assets
In addition to derivative contracts discussed below, other invested assets include Federal Home Loan Bank of Des Moines
(“FHLB”) common stock, limited partnership interests, joint ventures (other than operating joint ventures), lifetime mortgages
and fair value option (“FVO”) contractholder-directed investments. FHLB common stock is carried at cost.
Joint ventures and limited partnerships, in which the Company has more than a minor influence over the investee’s operations,
are reported using the equity method of accounting. The Company generally recognizes its share of the investee’s earnings in
net investment income on a three-month lag in instances where the investee’s financial information is not sufficiently timely or
when the investee’s reporting period differs from the Company’s reporting period.
Limited partnership interests, in which the Company has a minor ownership interest in or virtually no influence over the
investee’s operations, are primarily carried at estimated fair value. If a readily determinable fair value is not available, the
Company uses the net asset value ("NAV") per share. Changes in estimated fair value are included in investment related gains
(losses), net. Certain other limited partnership interests are carried at cost less impairment.
Lifetime mortgages are carried at unpaid principal balances, net of any unamortized premium or discount, unamortized balance
of loan origination fees and expenses, and allowance for credit losses. Interest income is accrued on the principal amount of the
lifetime mortgage based on its contractual interest rate.
The fair value option (“FVO”) was elected for contractholder-directed investments supporting unit-linked variable annuity type
liabilities that do not qualify for presentation and reporting as separate accounts. Changes in estimated fair value of these
securities are included in investment income, net of related expenses.
Securities Borrowing, Lending and Repurchase Agreements
The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s
consolidated balance sheets, are borrowed from third parties. The borrowed securities are used to provide collateral under
affiliated reinsurance transactions. The Company is generally required to maintain a minimum of 103% to 110% of the fair
value, or par value under certain programs, of the borrowed securities as collateral. The collateral generally consists of rights to
reinsurance treaty cash flows. If cash flows from the reinsurance treaties are insufficient to maintain the minimum collateral
requirement, the Company may substitute cash or securities to meet the requirement.
96
The Company participates in securities lending and repurchase/reverse repurchase programs whereby securities, reflected as
investments on the Company’s consolidated balance sheets, are loaned or pledged to a third party. In return, the Company
receives securities as collateral from the third parties, generally in an amount equal to a minimum of 100% to 105% of the fair
value of the securities lent or pledged. The securities received as collateral are not reflected on the Company’s consolidated
balance sheets.
Allowance for Credit Losses and Impairments
Fixed Maturity Securities
The Company identifies fixed maturity securities that could result in a credit loss by monitoring market events that could impact
issuers’ credit ratings, business climates, management changes, litigation, government actions and other similar factors. The
Company also monitors late payments, pricing levels, rating agency actions, key financial ratios, financial statements, revenue
forecasts and cash flow projections as indicators of credit issues.
The Company reviews all securities to determine whether a decline in fair value below amortized cost has resulted from a credit
loss and whether an allowance for credit loss should be recognized. In making this determination, the Company considers
relevant facts and circumstances including: (1) the reasons for the decline in fair value; (2) the issuer’s financial position and
access to capital; and (3) the Company’s intent to sell a security or whether it is more likely than not it will be required to sell
the security before the recovery of its amortized cost that, in some cases, may extend to maturity.
If the Company intends to sell a security or it is more likely than not that it would be required to sell a security before the
recovery of its amortized cost, less any recorded credit loss, it recognizes an impairment loss in investment related gains
(losses), net for the difference between amortized cost and fair value.
Credit impairments and changes in the allowance for credit losses on fixed maturity securities are reflected in investment
related gains (losses), net, while non-credit impairment losses are recognized in accumulated other comprehensive income
(“AOCI”).
The Company estimates the amount of the credit loss component of a fixed maturity security impairment as the difference
between amortized cost and the present value of the expected cash flows of the security. The Company excludes accrued
interest from the amortized cost and the present value of the expected cash flows of the security. The present value is
determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of
purchase or the current yield to accrete an asset-backed or floating rate security. The techniques and assumptions for
establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities’ cash flow
estimates are based on security-specific facts and circumstances that may include collateral characteristics, expectations of
delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and
guarantees.
The Company writes off uncollectible fixed maturity securities when (1) it has sufficient information to determine that the
issuer of the security is insolvent or (2) it has received notice that the issuer of the security has filed for bankruptcy, and the
collectability of the asset is expected to be adversely impacted by the bankruptcy.
Mortgage Loans on Real Estate
Allowance for credit losses on mortgage loans are computed on an expected loss basis using a model that utilizes probability of
default and loss given default methods over the lifetime of the loan. Within the reasonable and supportable forecast period (i.e.
typically two years), the allowance for credit losses for mortgage loans is established based on several pool-level loan
assumptions, defaults and loss severity, loss expectations for loans with similar risk characteristics and industry statistics.
These evaluations are revised as conditions change and new information becomes available. The evaluation also includes the
impact of expected changes in future macro-economic conditions. The Company reverts to historical loss information for
periods beyond which it believes it is able to develop or obtain reasonable and supportable forecasts of future economic
conditions. When individual loans no longer have similar credit risk characteristics of the commercial mortgage loan pool, they
are removed from the pool and are evaluated individually for an allowance.
Any interest accrued or received on the net carrying amount of the impaired loan is included in investment income, net of
related expenses, or applied to the principal of the loan, depending on the assessment of the collectability of the loan. Mortgage
loans deemed to be uncollectible or that have been foreclosed are charged off against the allowance for credit losses and
subsequent recoveries, if any, are credited to the allowance for credit losses. Changes in allowance for credit losses are reported
in investment related gains (losses), net.
The Company evaluates whether a mortgage loan modification represents a troubled debt restructuring and does not meet the
criteria established in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In a troubled debt
restructuring, the Company grants concessions related to the borrower’s financial difficulties. Generally, the types of
concessions include reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current
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market interest rates and/or a reduction of accrued interest. The Company considers the amount, timing and extent of the
concession granted in determining any changes in allowance for credit losses recorded in connection with the troubled debt
restructuring. Through the continuous monitoring process, the Company may have recorded a specific allowance for credit loss
prior to when the mortgage loan is modified in a troubled debt restructuring. Accordingly, the carrying value (after specific
allowance for credit loss) before and after modification through a troubled debt restructuring may not change significantly or
may increase if the expected recovery is higher than the pre-modification recovery assessment.
Other Invested Assets
The Company considers its limited partnership investments that are carried at cost for impairment when the carrying value of
these investments exceeds the fair value. The Company takes into consideration the severity and duration of this excess when
deciding if the investment is impaired. For equity method investments (including real estate joint ventures), the Company
considers financial and other information provided by the investee, other known information and inherent risks in the
underlying investments, as well as future capital commitments, in determining whether an impairment has occurred.
Derivative Instruments
Overview
The Company utilizes a variety of derivative instruments including swaps, options, forwards and futures, primarily to manage
or hedge interest rate risk, credit risk, inflation risk, foreign currency risk, market volatility and various other market risks
associated with its business. The Company does not invest in derivatives for speculative purposes. It is the Company’s policy to
enter into derivative contracts primarily with highly rated parties. See Note 5 – “Derivative Instruments” for additional detail on
the Company’s derivative positions.
Accounting and Financial Statement Presentation of Derivatives
Derivatives are carried on the Company’s consolidated balance sheets primarily in other invested assets or other liabilities, at
fair value. Certain derivatives are subject to master netting provisions and reported as a net asset or liability. On the date a
derivative contract is executed, the Company designates the derivative as (1) a fair value hedge, (2) a cash flow hedge, (3) a net
investment hedge in a foreign operation or (4) free-standing derivatives held for other risk management purposes, which
primarily involve managing asset or liability risks associated with the Company’s reinsurance treaties that do not qualify for
hedge accounting.
Changes in the fair value of free-standing derivative instruments, which do not receive accounting hedge treatment, are
primarily reflected in investment related gains (losses), net.
Hedge Documentation and Hedge Effectiveness
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk
management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a
fair value hedge; (ii) a cash flow hedge; or (iii) a hedge of a net investment in a foreign operation. In this documentation, the
Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets
forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the
method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being
highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and
periodically throughout the life of the designated hedging relationship.
Under a fair value hedge, changes in the fair value of the hedging derivative, including amounts measured as ineffective, and
changes in the fair value of the hedged item related to the designated risk being hedged, are reported within investment related
gains (losses), net. The fair values of the hedging derivatives are exclusive of any accruals that are separately reported within
investment income or interest expense to match the location of the hedged item.
Under a cash flow hedge, changes in the fair value of the hedging derivative measured as effective are reported within AOCI
and the deferred gains or losses on the derivative are reclassified into the consolidated statements of income when the
Company’s earnings are affected by the variability in cash flows of the hedged item. The fair values of the hedging derivatives
are exclusive of any accruals that are separately reported within investment income or interest expense to match the location of
the hedged item.
In a hedge of a net investment in a foreign operation, changes in the fair value of the hedging derivative that are measured as
effective are reported within AOCI consistent with the translation adjustment for the hedged net investment in the foreign
operation. Changes in the fair value of the hedging instrument measured as ineffective are reported within investment related
gains (losses), net.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly
effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold,
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terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is
de-designated as a hedging instrument.
When hedge accounting is discontinued because it is determined that the derivative is not highly effective, the derivative
continues to be carried in the consolidated balance sheets at fair value, with changes in fair value recognized in investment
related gains (losses), net. The carrying value of the hedged asset or liability under a fair value hedge is no longer adjusted for
changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into
income over the remaining life of the hedged item. Provided the hedged forecasted transaction occurrence is still probable, the
changes in estimated fair value of derivatives recorded in other comprehensive income (loss) (“OCI”) related to discontinued
cash flow hedges are released into the consolidated statements of income when the Company’s earnings are affected by the
variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the
anticipated date or within two months of that date, the derivative continues to be carried in the consolidated balance sheets at its
estimated fair value, with changes in estimated fair value recognized currently in investment related gains (losses), net.
Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted
transaction that is no longer probable are recognized immediately in investment related gains (losses), net.
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value in the
consolidated balance sheets, with changes in its estimated fair value recognized in the current period as investment related gains
(losses), net.
Embedded Derivatives
The Company reinsures certain annuity products that contain terms that are deemed to be embedded derivatives, primarily
equity-indexed annuities and variable annuities with guaranteed minimum benefits. The Company assesses reinsurance contract
terms to identify embedded derivatives, which are required to be bifurcated under the general accounting principles for
Derivatives and Hedging. If the contract is not reported for in its entirety at fair value and it is determined that the terms of the
embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate
instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host
contract and accounted for separately.
Embedded derivatives are carried on the consolidated balance sheets at fair value in the same line item as the host contract.
Changes in the fair value of embedded derivatives associated with equity-indexed annuities are reflected in interest credited on
the consolidated statements of income and changes in the fair value of embedded derivatives associated with variable annuity
guaranteed minimum benefits are reflected in investment related gains (losses), net. See “Interest-Sensitive Contract Liabilities”
below for additional information on embedded derivatives related to equity-indexed and variable annuities. The Company has
implemented an economic hedging strategy to mitigate the volatility associated with its reinsurance of variable annuity
guaranteed minimum benefits. The hedging strategy is designed such that changes in the fair value of the hedge contracts,
primarily futures, swap contracts and options, move in the opposite direction of changes in the fair value of the embedded
derivatives. While the Company actively manages its hedging program, the hedges that are in place may not be totally effective
in offsetting the embedded derivative changes due to the many variables that must be managed and the Company may see a
corresponding increase or decrease in the net liability. The Company has elected not to assess this hedging strategy for hedge
accounting treatment.
Additionally, reinsurance treaties written on a modco or funds withheld basis are subject to the general accounting principles for
Derivatives and Hedging related to embedded derivatives. The Company’s funds withheld at interest balances are primarily
associated with its reinsurance treaties structured on a modco or funds withheld basis, the majority of which were subject to the
general accounting principles for Derivatives and Hedging related to embedded derivatives. Management believes the
embedded derivative feature in each of these reinsurance treaties is similar to a total return swap on the assets held by the
ceding companies. The valuation of embedded derivatives is sensitive to the investment credit spread environment. Changes in
investment credit spreads are also affected by the application of a credit valuation adjustment (“CVA”). The fair value
calculation of an embedded derivative in an asset position utilizes a CVA based on the ceding company’s credit risk.
Conversely, the fair value calculation of an embedded derivative in a liability position utilizes a CVA based on the Company’s
credit risk. Generally, an increase in investment credit spreads, ignoring changes in the CVA, will have a negative impact on the
fair value of the embedded derivative (decrease in income). The fair value of the embedded derivative assets and liabilities are
included in the funds withheld at interest and other liabilities, respectively. The change in the fair value of the embedded
derivatives is recorded in investment related gains (losses), net.
The Company has entered into various financial reinsurance treaties on a funds withheld and modco basis. These treaties do not
transfer significant insurance risk and are recorded on a deposit method of accounting with the Company earning a net fee. As a
result of the experience refund provisions contained in these treaties, the value of the embedded derivatives in these contracts is
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currently considered immaterial. The Company monitors the performance of these treaties on a quarterly basis. Significant
adverse performance or losses on these treaties may result in a loss associated with the embedded derivative.
Fair Value Measurements
General accounting principles for Fair Value Measurements and Disclosures define fair value, establish a framework for
measuring fair value, establish a fair value hierarchy based on the inputs used to measure fair value and enhance disclosure
requirements for fair value measurements. In compliance with these principles, the Company has categorized its assets and
liabilities, based on the priority of the inputs to the valuation technique, into a three level hierarchy or separately for assets
measured using the net asset value (“NAV”). The fair value hierarchy gives the highest priority to quoted prices in active
markets for identical assets or liabilities (Level 1), the second highest priority to quoted prices in markets that are not active or
inputs that are observable either directly or indirectly (Level 2) and the lowest priority to unobservable inputs (Level 3).
If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest
priority level input that is significant to the fair value measurement of the asset or liability.
See Note 6 – “Fair Value of Assets and Liabilities” for further details on the Company’s assets and liabilities recorded at fair
value.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and highly liquid debt instruments purchased with an original maturity of
three months or less.
Premiums Receivable
Premiums are accrued when due and in accordance with information received from the ceding company. When the Company
enters into a new reinsurance agreement, it records accruals based on the terms of the reinsurance treaty. Similarly, when a
ceding company fails to report information on a timely basis, the Company records accruals based on the terms of the
reinsurance treaty as well as historical experience. Other management estimates include adjustments for increased in force on
existing treaties, lapsed premiums given historical experience, the financial health of specific ceding companies, collateral value
and the legal right of offset on related amounts (i.e. allowances and claims) owed to the ceding company. Under the legal right
of offset provisions in its reinsurance treaties, the Company can withhold payments for allowances and claims from unpaid
premiums. Based on its review of these factors and historical experience, the Company did not believe a provision for doubtful
accounts was necessary as of December 31, 2021 or 2020.
Reinsurance Ceded Receivables
The Company generally reports retrocession activity on a gross basis. Amounts paid or deemed to have been paid for
reinsurance are reflected in reinsurance ceded receivables. The cost of reinsurance related to long-duration contracts is
recognized over the terms of the reinsured policies on a basis consistent with the reporting of those policies.
Deferred Policy Acquisition Costs
Costs of acquiring new business, which vary with and are directly related to the production of new business, have been deferred
to the extent that such costs are deemed recoverable from future premiums or gross profits. Such costs include commissions and
allowances as well as certain costs of policy issuance and underwriting. Non-commission costs related to the acquisition of new
and renewal insurance contracts may be deferred only if they meet the following criteria:
•
•
•
Incremental direct costs of a successful contract acquisition
Portions of employees’ salaries and benefits directly related to time spent performing specified acquisition activities
for a contract that has been acquired or renewed
Other costs directly related to the specified acquisition or renewal activities that would not have been incurred had that
acquisition contract transaction not occurred
The Company tests the recoverability for each year of business at issue before establishing additional deferred acquisition costs
(“DAC”). The Company also performs annual tests to establish that DAC are expected to remain recoverable, and if financial
performance significantly deteriorates to the point where a deficiency exists, a cumulative charge to current operations will be
recorded. No such adjustments related to DAC recoverability were made in 2021, 2020 and 2019.
DAC related to traditional life insurance contracts are amortized with interest over the premium-paying period of the related
policies in proportion to the ratio of individual period premium revenues to total anticipated premium revenues over the
expected life of the policy. Such anticipated premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
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DAC related to interest-sensitive life and investment-type policies are amortized over the expected lives of the policies, in
proportion to the gross profits realized from mortality, investment income less interest credited, and expense margins.
Other Reinsurance Balances
The Company assumes and retrocedes financial reinsurance contracts that do not expose it to a reasonable possibility of loss
from insurance risk. These contracts are reported as deposits and are included in other reinsurance assets/liabilities. The amount
of revenue reported in other revenues on these contracts represents fees and the cost of insurance under the terms of the
reinsurance agreement. Assets and liabilities are reported on a net or gross basis, depending on the specific details within each
treaty. Reinsurance agreements reported on a net basis, where a legal right of offset exists, are generally included in other
reinsurance balances on the consolidated balance sheets. Balances resulting from the assumption and/or subsequent transfer of
benefits and obligations resulting from cash flows related to variable annuities have also been classified as other reinsurance
balance assets and/or liabilities. Other reinsurance assets are included in premiums receivable and other reinsurance balances
while other reinsurance liabilities are included in other reinsurance balances.
Acquired Intangibles
Goodwill and Value of Business Acquired
Goodwill, reported in other assets, is not amortized into results of operations, but instead is reviewed at least annually for
impairment and written down only in the periods in which the recorded value of goodwill exceeds its fair value. Goodwill as of
December 31, 2021 and 2020, totaled $7 million. As of December 31, 2021 and 2020, the carrying value of business acquired
was $0 million and $4 million, and is reported in other assets.
Value of Distribution Agreements and Customer Relationships Acquired
Value of distribution agreements (“VODA”) is reported in other assets and represents the present value of future profits
associated with the expected future business derived from the distribution agreements. Value of customer relationships acquired
(“VOCRA”) is also reported in other assets and represents the present value of the expected future profits associated with the
expected future business acquired through existing customers of the acquired company or business. VODA is amortized over a
useful life of 15 years and the VOCRA is also amortized over a 15 year period in proportion to expected revenues generated,
with amortization included in policy acquisition costs and other insurance expenses. Each year the Company reviews VODA
and VOCRA to determine the recoverability of these balances. VODA and VOCRA totaled approximately $19 million and $25
million, including accumulated amortization of $102 million and $96 million, as of December 31, 2021 and 2020, respectively.
VODA and VOCRA amortization expense for the years ended December 31, 2021, 2020 and 2019 was $7 million, $8 million
and $8 million, respectively. Amortization of the VODA and VOCRA is estimated to be $6 million, $6 million and $6 million
during 2022, 2023 and 2024, respectively, with the VODA and VOCRA expected to be fully amortized by the end of 2024.
Other Acquired Intangible Assets
Other acquired intangibles are reported in other assets and primarily represent intangibles and licenses acquired through the
Company’s acquisition of service and technology oriented companies in an effort to both support its clients and generate new
future revenue streams. Other acquired intangible assets are amortized using the straight-line method over the estimated useful
life of 10 to 15 years, with amortization included in other operating expenses. Each year the Company reviews other acquired
intangibles to determine the recoverability of these balances. Other acquired intangibles totaled approximately $22 million and
$30 million, including accumulated amortization of $17 million and $12 million, as of December 31, 2021 and 2020,
respectively. Other acquired intangibles amortization expense for the years ended December 31, 2021, 2020 and 2019, was $4
million, $4 million and $4 million, respectively. During 2021, the Company wrote off $4 million of acquired intangible assets
deemed to be impaired. Amortization of other acquired intangibles is estimated to be $4 million during 2022, 2023, 2024, and
2025 and $3 million during 2026, respectively.
Property, Equipment, Leasehold Improvements and Computer Software
Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated
depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, as
appropriate. The estimated life is generally 40 years for company occupied real estate property, from one to seven years for
leasehold improvements, and from three to seven years for all other property and equipment. The cost basis of property,
equipment and leasehold improvements was $270 million and $260 million at December 31, 2021 and 2020, respectively.
Accumulated depreciation of property, equipment and leasehold improvements was $131 million and $116 million at December
31, 2021 and 2020, respectively. Related depreciation expense was $16 million, $17 million and $18 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs,
as well as certain internal and external costs incurred to develop internal-use computer software during the application
development stage, are capitalized. Amortization of software costs is recorded on a straight-line basis over periods ranging from
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three to ten years. Carrying values are reviewed at least annually for indicators of impairment in value. Unamortized computer
software costs were $145 million and $147 million at December 31, 2021 and 2020, respectively. Amortization expense was
$27 million, $32 million, and $31 million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company
did not impair any capital projects during 2021. The Company recognized impairments of $5 million and $4 million in 2020
and 2019, respectively.
Operating Joint Ventures
The Company has made investments in certain joint ventures that are strategic in nature and made other than for the sole
purpose of generating investment income. These investments are reported under the equity method of accounting and are
included in other assets. The Company’s share of earnings from these joint ventures is reported in other revenues on the
consolidated statements of income. The Company’s investments in operating joint ventures do not have a material effect on the
Company’s results of operations and financial condition, and as a result no additional disclosures have been presented.
Future Policy Benefits
Liabilities for future benefits on life and health policies are established in an amount adequate to meet the estimated future
obligations on policies in force. Liabilities for future policy benefits under long-duration life and health insurance policies have
been computed based upon expected investment yields, mortality and withdrawal (lapse) rates, and other assumptions. These
assumptions include a margin for adverse deviation and vary with the characteristics of the plan of insurance, year of issue, age
of insured, and other appropriate factors. Interest rates range from 3.0% to 6.0%. The mortality and withdrawal assumptions are
based on the Company’s experience as well as industry experience and standards. In establishing reserves for future policy
benefits, the Company assigns policy liability assumptions to particular timeframes (eras) in such a manner as to be consistent
with the underlying assumptions and economic conditions at the time the risks are assumed. The Company maintains a
consistent approach to setting the provision for adverse deviation between eras.
Liabilities for future benefits on longevity business, including annuities in the payout phase, are established in an amount
adequate to meet the estimated future obligations on policies in force. Liabilities for future benefits related to the longevity
business, including annuities in the payout phase have been calculated using expected mortality, investment yields, and other
assumptions. These assumptions include a margin for adverse deviation and vary with the characteristics of the plan of
insurance, year of issue, age of insured, and other appropriate factors. The mortality assumptions are based on the Company’s
experience as well as industry experience and standards. A deferred profit liability is established when the gross premium
exceeds the net premium.
The Company periodically reviews actual and anticipated experience compared to the assumptions used to establish policy
benefits. The Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing
policy liabilities together with the present value of future gross premiums will not be sufficient to cover the present value of
future benefits, settlement and maintenance costs and to recover unamortized acquisition costs. Anticipated investment income
is considered in the calculation of premium deficiency losses for short-duration contracts. The premium deficiency reserve is
established by a charge to income, as well as a reduction in unamortized acquisition costs and, to the extent there are no
unamortized acquisition costs, an increase in future policy benefits.
The reserving process includes normal periodic reviews of assumptions used and adjustments of reserves to incorporate the
refinement of the assumptions. Any such adjustments relate only to policies assumed in recent periods and the adjustments are
reflected by a cumulative charge or credit to current operations.
The Company reinsures disability and long-term care products in various markets. Liabilities for future benefits on disability
and long-term care policies’ active lives are established in an amount adequate to meet the estimated future obligations on
policies in force. These reserves are the amounts that, with the additional premiums to be received and interest thereon
compounded annually at certain assumed rates, are calculated to be sufficient to meet the various policy and contract
obligations as they mature.
The Company establishes future policy benefits for guaranteed minimum death benefits (“GMDB”) relating to the reinsurance
of certain variable annuity contracts by estimating the expected value of death benefits in excess of the projected account
balance and recognizing the excess proportionally over the accumulation period based on total expected assessments. The
Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to claims
and other policy benefits, if actual experience or other evidence suggests that earlier assumptions should be revised. The
assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to
the same variability and risk. The Company’s GMDB liabilities at December 31, 2021 and 2020, were not material.
Interest-Sensitive Contract Liabilities
Liabilities for future benefits on interest-sensitive life and investment-type contract liabilities are carried at the accumulated
contract holder values without reduction for potential surrender or withdrawal charges. The Company reinsures asset-intensive
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products, including annuities and corporate-owned life insurance. The investment portfolios for these products are segregated
for management purposes within the general account of the respective legal entity. The liabilities under asset-intensive
insurance contracts or reinsurance contracts reinsured on a coinsurance basis are included in interest-sensitive contract liabilities
on the consolidated balance sheets. Asset-intensive contracts principally include individual fixed annuities in the accumulation
phase, single premium immediate annuities, equity-indexed annuities, individual variable annuities, corporate-owned life and
interest-sensitive whole life insurance contracts. Interest-sensitive contract liabilities are equal to (i) policy account values,
which consist of an accumulation of gross premium payments; (ii) credited interest less expenses, mortality charges, and
withdrawals; and (iii) fair value adjustments relating to business combinations. Liabilities for immediate annuities are
calculated as the present value of the expected cash flows, with the locked-in discount rate determined such that there is no gain
or loss at inception. Additionally, certain annuity contracts the Company reinsures contain terms, such as guaranteed minimum
benefits and equity participation options, which are deemed to be embedded derivatives and are accounted for based on the
general accounting principles for Derivatives and Hedging.
The Company establishes liabilities for guaranteed minimum living benefits relating to certain variable annuity products as
follows:
•
•
•
Guaranteed minimum income benefits (“GMIB”) provide the contract holder, after a specified period of time
determined at the time of issuance of the variable annuity contract, with a minimum level of income (annuity)
payments. Under the reinsurance treaty, the Company makes a payment to the ceding company equal to the GMIB net
amount-at-risk at the time of annuitization and thus these contracts meet the net settlement criteria of the general
accounting principles for Derivatives and Hedging and the Company assumes no mortality risk. Accordingly, the
GMIB is considered an embedded derivative, which is measured at fair value separately from the host variable annuity
product.
Guaranteed minimum withdrawal benefits (“GMWB”) guarantee the contract holder a return of their purchase
payment via partial withdrawals, even if the account value is reduced to zero, provided that the contract holder’s
cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is
equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable
bonus amounts). The GMWB is also an embedded derivative, which is measured at fair value separately from the host
variable annuity product.
Guaranteed minimum accumulation benefits (“GMAB”) provide the contract holder, after a specified period of time
determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase
payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the
initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts).
The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity
product.
For GMIB, GMWB and GMAB, the initial benefit base is increased by additional purchase payments made within a certain
time period and decreased by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may
also increase as a result of an optional reset as defined in the contract.
The fair values of the GMIB, GMWB and GMAB embedded derivative liabilities are reflected in interest-sensitive contract
liabilities on the consolidated balance sheets and are calculated based on actuarial and capital market assumptions related to the
projected cash flows, including benefits and related contract charges over the lives of the contracts. These projected cash flows
incorporate expectations concerning policyholder behavior, such as lapses, withdrawals and benefit selections, and capital
market assumptions such as interest rates and equity market volatilities. In measuring the fair value of GMIBs, GMWBs and
GMABs, the Company attributes a portion of the fees collected from the policyholder equal to the present value of expected
future guaranteed minimum income, withdrawal and accumulation benefits (at inception). The changes in fair value are
reported in investment related gains (losses), net. Any additional fees represent “excess” fees and are reported in other revenues
on the consolidated statements of income. These variable annuity guaranteed living benefits may be more costly than expected
in volatile or declining equity markets or falling interest rate markets, causing an increase in interest-sensitive contract
liabilities, negatively affecting net income.
The Company reinsures equity-indexed annuity contracts. These contracts allow the contract holder to elect an interest rate
return or an equity market component where interest credited is based on the performance of common stock market indices,
such as the S&P 500 Index®, the Dow Jones Industrial Average, or the NASDAQ. The equity market option is considered an
embedded derivative, similar to a call option, which is reflected at fair value on the consolidated balance sheets in interest-
sensitive contract liabilities. The fair value of embedded derivatives is computed based on a projection of future equity option
costs using a budget methodology, discounted back to the balance sheet date using current market indicators of volatility and
interest rates. Changes in the fair value of the embedded derivatives are included as a component of interest credited on the
consolidated statements of income.
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The Company reviews its estimates of actuarial liabilities for interest-sensitive contract liabilities and compares them with its
actual experience. Differences between actual experience and the assumptions used in pricing these guarantees and benefits and
in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in
such estimated liabilities are included in the results of operations in the period in which the changes occur.
Other Policy Claims and Benefits
Claims payable for incurred but not reported losses are determined using case-basis estimates and lag studies of past experience.
The time lag from the date of the claim or death to when the ceding company reports the claim to the Company can vary
significantly by ceding company, business segment and product type, but generally averages around 3.1 months. Incurred but
not reported claims are estimates on an undiscounted basis, using actuarial estimates of historical claims expense, adjusted for
current trends and conditions. These estimates are continually reviewed and the ultimate liability may vary significantly from
the amount recognized, which are reflected in claims and other policy benefits in the period in which they are determined.
Other Liabilities
Other liabilities primarily include liabilities associated with amounts ceded on a funds withheld basis, investments in transit,
separate accounts, employee benefits, cash collateral received on derivative positions and current federal income taxes payable.
Income Taxes
The U.S. consolidated tax return includes the operations of RGA and all eligible subsidiaries. The Company’s foreign
subsidiaries are taxed under applicable local statutes.
The Company provides for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary
differences between the tax basis of assets and liabilities and the reported amounts, and are recognized in net income or in
certain cases in OCI. The Company’s accounting for income taxes represents management’s best estimate of various events and
transactions considering the laws enacted as of the reporting date.
Deferred tax assets and liabilities are measured by applying the relevant jurisdictions’ enacted tax rate for the period in which
the temporary differences are expected to reverse to the temporary difference change for that period. The Company will
establish a valuation allowance if management determines, based on available information, that it is more likely than not that
deferred income tax assets will not be realized. The Company has deferred tax assets including those related to foreign tax
credits, net operating, and capital losses. The Company has projected its ability to utilize its deferred tax assets and established
a valuation allowance on the portion of the deferred tax assets the Company believes more likely than not will not be realized.
Significant judgment is required in determining whether valuation allowances should be established as well as the amount of
such allowances. When making such a determination, consideration is given to, among other things, the following:
(i)
taxable income in prior carryback years
(ii) future reversals of existing taxable temporary differences;
(iii) future taxable income exclusive of reversing temporary differences and carryforwards; and
(iv) tax planning strategies.
Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these
changes occur.
The Company made a policy election to account for GILTI as a period cost.
The Company reports uncertain tax positions in accordance with generally accepted accounting principles. In order to
recognize the benefit of an uncertain tax position, the position must meet the more likely than not criteria of being sustained.
Unrecognized tax benefits due to tax uncertainties that do not meet the more likely than not criteria are included within income
tax liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest related
to tax uncertainties as interest expense whereas penalties related to tax uncertainties are classified as a component of income
tax.
See Note 9 – “Income Tax” for further discussion.
Collateral Finance and Securitization Notes
Collateral finance and securitization notes represent private placement asset-backed structured financing transactions. Collateral
finance notes are issued on specified insurance policies reinsured by the Company’s regulated subsidiaries. Transaction costs,
primarily interest expense, are reflected in collateral finance and securitization expense. See Note 14 – “Collateral Finance and
Securitization Notes” for additional information.
104
Foreign Currency Translation
Assets, liabilities and results of foreign operations are recorded based on the functional currency of each foreign operation. The
determination of the functional currency is based on economic facts and circumstances pertaining to each foreign operation.
The Company’s material functional currencies are the U.S. dollar, Canadian dollar, British pound, Australian dollar, Japanese
yen, Korean won, Euro and South African rand. The translation of the functional currency into U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts
using weighted-average exchange rates during each year. Gains or losses, net of applicable deferred income taxes, resulting
from such translation are included in accumulated currency translation adjustments, in AOCI until the underlying functional
currency operation is sold or substantially liquidated.
Recognition of Revenues and Related Expenses – Long-Duration Products
Life and health premiums are recognized as revenue when due from the insured, and are reported net of amounts retroceded.
Benefits and expenses are reported net of amounts retroceded and are associated with earned premiums so that profits are
recognized over the life of the related contract. This association is accomplished through the provision for future policy benefits
and the amortization of deferred policy acquisition costs. Other revenue includes items such as treaty recapture fees, fees
associated with financial reinsurance and policy changes on interest-sensitive and investment-type products that the Company
reinsures. Any fees that are collected in advance of the period benefited are deferred and recognized over the period benefited.
For certain reinsurance transactions involving in force blocks of business, the ceding company pays a premium equal to the
initial required reserve (future policy benefit). In such transactions, for income statement presentation, the Company nets the
expense associated with the establishment of the reserve against the premiums from the transaction.
Revenues for interest-sensitive and investment-type products consist of investment income, policy charges for the cost of
insurance, policy administration, and surrenders that have been assessed against policy account balances during the period.
Interest-sensitive contract liabilities for these products represent policy account balances before applicable surrender charges.
Policy benefits and claims that are charged to expenses include claims incurred in the period in excess of related policy account
balances and interest credited to policy account balances. Interest is credited to policyholder account balances according to
terms of the policies or contracts.
For each of its reinsurance contracts, the Company must determine if the contract provides indemnification against loss or
liability relating to insurance risk, in accordance with GAAP. The Company must review all contractual features, particularly
those that may limit the amount of insurance risk to which the Company is subject or features that delay the timely
reimbursement of claims. If the Company determines that a contract does not expose it to a reasonable possibility of a
significant loss from insurance risk, the Company records the contract on a deposit method of accounting with any net amount
receivable reflected as an asset within premiums receivable and other reinsurance balances, and any net amount payable
reflected as a liability within other reinsurance balances. Fees earned on the contracts are reflected as other revenues, rather than
premiums.
Recognition of Revenues and Related Expenses – Short-Duration Products
The Company provides reinsurance of medical, disability, life and other products for a fixed period of short-duration, typically
one to three years. Under the short-duration insurance accounting model:
•
•
Premiums are recognized over the coverage period in proportion to the amount of insurance protection provided.
Claims or benefits are recognized when insured events occur, based on the ultimate cost to settle the claim, and are
adjusted to reflect changes in estimates during the life of the contract. The estimated cost to settle the claim is based on
actuarial assumptions for similar claims. The Company also establishes an incurred but not reported (“IBNR”) liability
based on historical reporting patterns.
•
Eligible deferred acquisition costs are capitalized and amortized in proportion to premium.
105
Equity Based Compensation
The Company expenses the fair value of stock awards included in its incentive compensation plans. The fair value of the
awards is expensed over the performance or service period, which generally corresponds to the vesting period, and is
recognized as an increase to additional paid-in-capital in stockholders’ equity, and stock-based compensation expense is
reflected in other operating expenses.
Earnings Per Share
Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period.
Diluted earnings per share include the dilutive effects assuming the exercise or issuance of stock awards.
New Accounting Pronouncements
Changes to the general accounting principles are established by the Financial Accounting Standards Board (“FASB”) in the
form of accounting standards updates to the FASB Accounting Standards CodificationTM. Accounting standards updates not
listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the
Company’s consolidated financial statements.
Description
Date of Adoption
Effect on the Consolidated Financial Statements
Standards adopted:
Financial Instruments – Credit Losses
This guidance adds to U.S. GAAP an impairment model, known as
the current expected credit loss (“CECL”) model that is based on
expected losses rather than incurred losses. For traditional and other
receivables, held-to-maturity debt securities,
loans and other
instruments entities will be required to use the new forward-looking
“expected loss” model that generally will result in earlier recognition
of allowance for losses. For available-for-sale debt securities with
unrealized losses, entities will measure credit losses similar to what
they do today, except the losses will be recognized through an
allowance for credit losses and adjusted each period for changes in
credit risks. Early adoption is permitted.
January 1, 2020
Fair Value Measurement
This guidance is part of the FASB’s disclosure framework project and
eliminates certain disclosure requirements for fair value measurement,
requires entities to disclose new information and modifies existing
disclosure requirements. Early adoption is permitted.
January 1, 2020
Reference Rate Reform
This guidance eases the potential burden in accounting for, or
recognizing the effects of, reference rate reform on financial reporting,
which includes the transition from the London Interbank Offered Rate
(“LIBOR”) during 2023. The ASU provides optional expedients and
exceptions for applying GAAP modification to contracts and hedge
accounting relationships affected by reference rate reform on financial
reporting. Under the new guidance, a change in the reference rate for a
contract that meets certain criteria will be accounted for as a
continuation of that contract rather than the creation of a new contract.
The new guidance applies to debt, insurance contracts, leases,
derivative contracts and other arrangements.
January 1, 2020
For asset classes within the scope of the CECL model, this
guidance was adopted through a cumulative-effect adjustment
to retained earnings (that is, a modified-retrospective approach).
For available-for-sale debt securities, this guidance was applied
prospectively. The allowance for credit losses increased when
this guidance was adopted to include expected losses over the
lifetime of commercial mortgages and other loans, including
reasonable and supportable forecasts and expected changes in
future economic conditions. The overall impact was an
approximate $15 million pre-tax increase in the allowance for
credit losses. This increase was reflected as a decrease to
opening retained earnings, net of income taxes, as of January 1,
2020.
Certain disclosure changes in the new guidance were applied
prospectively in the year of adoption. The remaining changes in
the new guidance were applied retrospectively to all periods
presented in the year of adoption.
As of December 31, 2019, the Company early adopted the
guidance that removed the requirements relating to transfers
between fair value hierarchy levels and certain disclosures about
valuation processes for Level 3 fair value measurements. The
Company adopted the remainder of the guidance on January 1,
2020. The adoption of the new guidance was not material to the
Company’s financial position.
The reference rate reform is not expected to have material
accounting consequences. The Company has established a team
that is currently assessing the effects of the discontinuation of
LIBOR on existing contracts that extend beyond 2021 (that is,
the date when the Financial Conduct Authority intends to stop
persuading or compelling banks to submit LIBOR) by analyzing
contractual fallback provisions, evaluating alternative rate
ramifications and assessing the effects on current hedging
strategies, systems and operations.
106
Standards not yet adopted:
Description
Financial Services – Insurance
This guidance significantly changes how insurers account for long-
duration insurance contracts. The new guidance also significantly
expands the disclosure requirements of long-duration insurance
contracts. Below are the most significant areas of change:
Cash flow assumptions for measuring liability for future policy
benefits The new guidance requires insurers to review, and if
necessary, update the cash flow assumptions used to measure
liabilities for future policy benefits periodically. The change in the
liability estimate as a result of updating cash flow assumptions will be
recognized in net income.
Discount rate assumption for measuring liability for future policy
benefits The new guidance requires insurers to update the discount
rate assumption used to measure liabilities for future policy benefits at
each reporting period, and the discount rate utilized must be based on
an upper-medium grade fixed income instrument yield. The change in
the liability estimate as a result of updating the discount rate
assumption will be recognized in other comprehensive income.
Market risk benefits The new guidance created a new category of
benefit features called market risk benefits that will be measured at
fair value with changes in fair value attributable to a change in the
instrument-specific credit risk recognized in other comprehensive
income.
Amortization of deferred acquisition costs (“DAC”) and other
balances The new guidance requires DAC and other balances to be
amortized on a constant level basis over the expected term of the
related contracts.
Anticipated Date
of Adoption
Effect on the Consolidated Financial Statements
January 1, 2023
See each significant area of change below for the method of
adoption and expected impact to the Company’s results of
operations and financial position.
Cash flow assumptions for measuring liability for future policy
benefits The Company will likely adopt this guidance on a
modified retrospective basis as of the earliest period presented
in the year of adoption. Upon adoption, there will be an
adjustment to retained earnings as a result of capping the net
premium ratio at 100%. The Company is currently evaluating
this impact but anticipates it will likely result in a material
decrease to retained earnings. The Company is currently
evaluating the impact of the other cash flow assumptions
amendments on its results of operations and financial position
but anticipates they will likely be material.
Discount rate assumption for measuring liability for future
policy benefits The Company will likely adopt this guidance on
a modified retrospective basis as of the earliest period presented
in the year of adoption. Upon adoption, there will be an
adjustment to accumulated other comprehensive income as a
result of remeasuring in force contract liabilities using current
upper-medium grade fixed income instrument yields. The
adjustment will largely reflect the difference between discount
rates locked-in at contract inception versus current discount
rates at transition. The Company is currently evaluating the
impact of this adjustment but anticipates it will likely be
material.
Market risk benefits The Company will adopt this guidance on
a retrospective basis as of the earliest period presented in the
year of adoption. Upon adoption, the Company expects an
impact to (1) accumulated other comprehensive income for the
cumulative effect of changes in the instrument-specific credit
risk between contract issue date and transition date and (2)
retained earnings for the difference between fair value and
carrying value at the transition date, excluding the changes in
the instrument-specific credit risk. The Company is currently
evaluating the impact of these adjustments but anticipates they
will likely be material.
Amortization of deferred acquisition costs (“DAC”) and other
balances The Company will likely adopt this guidance on a
modified retrospective basis as of the earliest period presented
in the year of adoption. Upon adoption, the Company expects
an adjustment to accumulated other comprehensive income for
the removal of cumulative adjustments to DAC associated with
unrealized gains and losses previously recorded in accumulated
other comprehensive income. The Company is currently
evaluating the impact of this adjustment but anticipates it will
likely result in a material increase to accumulated other
comprehensive income. The Company is currently evaluating
the impact of the other amortization of DAC and other balances
amendments on its results of operations and financial position
but anticipates they will likely not be material.
107
Note 3 EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share on net income (in millions, except per
share information):
Earnings:
Net income (numerator for basic and diluted calculations)
$
617 $
415 $
2021
2020
2019
Shares:
Weighted average outstanding shares (denominator for basic calculations)
Equivalent shares from outstanding stock awards
Diluted shares (denominator for diluted calculations)
Earnings per share:
Basic
Diluted
67.8
0.5
68.3
65.4
0.4
65.8
$
9.10 $
9.04
6.35 $
6.31
870
62.7
1.2
63.9
13.88
13.62
The calculation of common equivalent shares does not include the impact of stock awards with a conversion price that exceeds
the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares
also excludes the impact of outstanding performance contingent awards, as the conditions necessary for their issuance have not
been satisfied as of the end of the reporting period. Approximately 0.2 million, 0.4 million, and 0.2 million outstanding stock
awards and approximately 0.3 million, 0.3 million and 0.3 million performance contingent awards were excluded from the
calculation of common equivalent shares during 2021, 2020 and 2019, respectively.
Note 4 INVESTMENTS
Fixed Maturity Securities Available-for-Sale
The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate securities
(“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential mortgage-
backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), U.S.
government and agencies (“U.S. government”), state and political subdivisions, and other foreign government, supranational
and foreign government-sponsored enterprises (“Other foreign government”). RMBS, ABS and CMBS are collectively
“structured securities.”
The following tables provide information relating to investments in fixed maturity securities by type as of December 31, 2021
and 2020 (dollars in millions):
December 31, 2021:
Available-for-sale:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total fixed maturity securities
Amortized
Cost
Allowance for
Credit Losses
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
% of Total
$
35,239 $
26 $
3,084 $
194 $
38,103
62.8 %
3,339
1,020
4,024
1,790
2,082
1,191
7,188
—
—
—
1
—
—
4
1,606
37
22
66
31
137
273
1
7
41
6
8
5
87
4,944
1,050
4,005
1,849
2,105
1,323
7,370
$
55,873 $
31 $
5,256 $
349 $
60,749
8.1
1.7
6.6
3.0
3.5
2.2
12.1
100.0 %
108
December 31, 2020:
Available-for-sale:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total fixed maturity securities
Amortized
Cost
Allowance for
Credit Losses
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
% of Total
$
31,963 $
17 $
4,356 $
94 $
36,208
63.9 %
3,145
1,735
3,099
1,790
1,242
1,237
5,337
—
—
—
3
—
—
—
1,995
84
35
102
196
157
479
—
2
42
21
1
4
33
5,140
1,817
3,092
1,868
1,437
1,390
5,783
$
49,548 $
20 $
7,404 $
197 $
56,735
9.1
3.2
5.4
3.3
2.5
2.4
10.2
100.0 %
The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of
fixed maturity securities as collateral. Pledged fixed maturity securities are included in fixed maturity securities, available-for-
sale in the consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts
and are not recorded on the Company’s consolidated balance sheets. Subject to certain constraints, the Company is permitted by
contract to sell or repledge collateral it receives; however, as of December 31, 2021 and 2020, none of the collateral received
had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under derivative
transactions and certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and
received as collateral and assets in trust held to satisfy collateral requirements under derivative transactions and certain third-
party reinsurance treaties as of December 31, 2021 and 2020 (dollars in millions):
Fixed maturity securities pledged as collateral
Fixed maturity securities received as collateral
Assets in trust held to satisfy collateral requirements
2021
2020
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
$
100 $
103
$
148 $
n/a
28,671
1,922
31,173
n/a
27,675
162
1,784
31,179
The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining
a diversified investment portfolio that limits exposure to any one issuer. The Company’s exposure to concentrations of credit
risk from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and
its agencies, as well as the securities disclosed below, as of December 31, 2021 and 2020 (dollars in millions):
Fixed maturity securities guaranteed or issued by:
Government of Japan
Canadian province of Quebec
Canadian province of Ontario
2021
2020
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
$
3,080 $
1,377
1,092
3,063
2,347
1,451
$
1,493 $
1,303
1,054
1,491
2,474
1,528
The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of December 31,
2021, are shown by contractual maturity in the table below (dollars in millions). Actual maturities can differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Structured securities are shown separately in the table below as they are not due at a single maturity date.
Available-for-sale:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Structured securities
Total
Amortized Cost
Estimated Fair Value
$
$
1,641 $
9,698
10,969
26,731
6,834
55,873 $
1,649
10,115
11,700
30,381
6,904
60,749
109
Corporate Fixed Maturity Securities
The tables below show the major sectors of the Company’s corporate fixed maturity holdings as of December 31, 2021 and
2020 (dollars in millions):
December 31, 2021:
Finance
Industrial
Utility
Total
December 31, 2020:
Finance
Industrial
Utility
Total
Amortized Cost
Estimated
Fair Value
% of Total
$
$
$
$
13,101 $
17,857
4,281
35,239 $
Amortized Cost
Estimated
Fair Value
11,785 $
16,274
3,904
31,963 $
14,045
19,375
4,683
38,103
13,236
18,435
4,537
36,208
36.9 %
50.8
12.3
100.0 %
36.6 %
50.9
12.5
100.0 %
% of Total
Allowance for Credit Losses and Impairments – Fixed Maturity Securities Available-for-Sale
As discussed in Note 2 – “Significant Accounting Policies and Pronouncements,” allowances for credit losses on fixed maturity
securities are recognized in investment related gains (losses), net. The amount recognized represents the difference between the
amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate
implicit in the fixed maturity security prior to the allowance for credit losses. Any remaining difference between the fair value
and amortized cost is recognized in AOCI.
The following tables present the rollforward of the allowance for credit losses in fixed maturity securities by type for the years
ended December 31, 2021 and 2020 (dollars in millions):
For the year ended December 31, 2021:
Balance, beginning of period
Credit losses recognized on securities for which credit losses were not previously recorded
Reductions for securities sold during the period
Additional increases or decreases for credit losses on securities that had an allowance
recorded in a previous period
Balance, end of period
For the year ended December 31, 2020:
Balance, beginning of period
Credit losses recognized on securities for which credit losses were not previously recorded
Reductions for securities sold during the period
Balance, end of period
Unrealized Losses for Fixed Maturity Securities Available-for-Sale
Corporate
CMBS
Other
Foreign
Government
Total
$
17 $
3 $
— $
21
(10)
(2)
26 $
1
(2)
(1)
5
(1)
—
1 $
4 $
Corporate
CMBS
Other
Foreign
Government
Total
— $
— $
— $
36
(19)
3
—
2
(2)
17 $
3 $
— $
$
$
$
20
27
(13)
(3)
31
—
41
(21)
20
The Company’s determination of whether a decline in value necessitates the recording of an allowance for credit losses includes
an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will
be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the
Company to recover the amortized cost of the investment.
110
The following table presents the estimated fair values and gross unrealized losses for the 1,862 fixed maturity securities for
which an allowance for credit loss has not been recorded as of December 31, 2021, and the estimated fair value had declined
and remained below amortized cost (dollars in millions). These investments are presented by class and grade of security, as well
as the length of time the related fair value has continuously remained below amortized cost.
December 31, 2021:
Investment grade securities:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total investment grade securities
Below investment grade securities:
Corporate
ABS
CMBS
Other foreign government
Total below investment grade securities
Less than 12 months
12 months or greater
Total
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
$
4,135 $
86 $
946 $
51 $
5,081 $
137
20
132
1,747
152
1,513
109
2,237
10,045
463
—
—
136
599
1
3
22
2
6
3
33
156
13
—
—
7
20
—
102
589
35
31
28
724
2,455
97
13
—
75
185
—
4
6
2
2
2
37
104
44
13
—
10
67
20
234
2,336
187
1,544
137
2,961
12,500
560
13
—
211
784
1
7
28
4
8
5
70
260
57
13
—
17
87
Total fixed maturity securities
$
10,644 $
176 $
2,640 $
171 $
13,284 $
347
The following table presents the estimated fair values and gross unrealized losses for the 877 fixed maturity securities that have
estimated fair values below amortized cost as of December 31, 2020 (dollars in millions). These investments are presented by
class and grade of security, as well as the length of time the related fair value has continuously remained below amortized cost.
December 31, 2020:
Investment grade securities:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total investment grade securities
Below investment grade securities:
Corporate
ABS
CMBS
Other foreign government
Total below investment grade securities
Total fixed maturity securities
Less than 12 months
12 months or greater
Total
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
$
930 $
29 $
70 $
5 $
1,000 $
—
294
1,096
160
27
66
973
3,546
375
20
91
36
522
—
2
17
6
1
1
27
83
49
13
15
3
80
—
—
570
—
—
16
—
656
81
4
—
28
113
—
—
11
—
—
3
—
19
11
1
—
3
15
—
294
1,666
160
27
82
973
4,202
456
24
91
64
635
34
—
2
28
6
1
4
27
102
60
14
15
6
95
$
4,068 $
163 $
769 $
34 $
4,837 $
197
The Company has no intention to sell, nor does it expect to be required to sell, the securities outlined in the tables above, as of
the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in
the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines. Changes in
unrealized losses are primarily driven by changes in interest rates.
111
Investment Income and Investment Related Gains (Losses), Net – Accounting Correction
During the first quarter of 2021, the Company reclassified approximately $92 million of pre-tax unrealized gains from AOCI to
investment income, net of related expenses associated with investments in limited partnerships and private equity funds for
which it utilizes the equity method of accounting. The unrealized gains should have been recognized directly in investment
income in the same prior periods they were reported by the investees. In addition, the Company recorded approximately
$70 million of pre-tax gains in investment related gains (losses), net, associated with investments in limited partnerships
considered to be investment companies in order to adjust the carrying value from cost less impairments to a fair value approach,
using the net asset value (“NAV”) per share or its equivalent. Had the adjustments been recorded in the years they were
reported by the investees, the Company estimates it would have recognized approximately $102 million, $(2) million,
$1 million and $10 million of pre-tax income (loss) in the years ended December 31, 2020, 2019, 2018 and 2017, respectively.
Investment Income, Net of Related Expenses
Major categories of investment income, net of related expenses, consist of the following (dollars in millions):
Fixed maturity securities available-for-sale
$
2,059 $
1,928 $
1,786
For the years ended December 31,
2021
2020
2019
Equity securities
Mortgage loans on real estate
Policy loans
Funds withheld at interest
Short-term investments and cash and cash equivalents
Other invested assets – limited partnerships and real estate joint ventures
Other invested assets – all other
Investment income
Investment expense
Investment income, net of related expenses
$
5
293
55
351
3
419
61
6
282
56
279
7
50
59
3,246
(108)
3,138 $
2,667
(92)
2,575 $
Investment Related Gains (Losses), Net
Investment related gains (losses), net, consist of the following (dollars in millions):
For the years ended December 31,
2021
2020
2019
$
(12) $
(21) $
Fixed maturity securities available-for-sale:
Change in allowance for credit losses and impairments
Realized gains on investment activity
Realized losses on investment activity
Net gains (losses) on equity securities
Other impairment losses and change in mortgage loan allowance for credit losses
Change in fair value of certain limited partnership investments and other, net
Net gains on derivatives
Total investment related gains (losses), net
$
299
(65)
25
29
194
90
560 $
114
(82)
(15)
(56)
24
3
(33) $
8
255
58
297
28
119
65
2,616
(96)
2,520
(31)
151
(50)
16
(12)
13
4
91
As of December 31, 2021, the Company held non-income producing securities with amortized costs, net of allowances, of
$26 million and estimated fair values of $26 million. As of December 31, 2020, the Company held non-income producing
securities with amortized costs, net of allowances, of $71 million and estimated fair values of $63 million. Generally, securities
are non-income producing when principal or interest is not paid primarily as a result of bankruptcies or credit defaults, but also
include securities where amortization has been discontinued.
112
Securities Borrowing, Lending and Repurchase Agreements
The following table includes the amount of borrowed securities, loaned securities, and securities received as collateral as part of
the securities lending program, and repurchased/reverse repurchased securities pledged, securities received, and cash loaned as
of December 31, 2021 and 2020 (dollars in millions):
Borrowed securities
Securities lending:
Securities loaned
Securities received
Repurchase program/reverse repurchase program:
Securities pledged
Securities received
Cash
2021
2020
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
$
374 $
420
$
118 $
94
n/a
704
n/a
10
102
102
736
728
10
94
n/a
653
n/a
—
161
105
102
711
669
—
No cash or securities have been pledged by the Company for its securities borrowing program as of December 31, 2021 and
2020.
The following tables present information on the Company’s securities lending and repurchase/reverse repurchase transactions
as of December 31, 2021 and 2020, respectively (dollars in millions). Collateral associated with certain borrowed securities is
not included within the tables as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.
Securities lending transactions:
Corporate
State and political subdivisions
Other foreign government
Total
Repurchase/reverse repurchase transactions:
Corporate
Other foreign government
Cash
Total
Total transactions
December 31, 2021
Remaining Contractual Maturity of the Agreements
Overnight and
Continuous
Up to 30 Days
30 – 90 Days
Greater than 90
Days
Total
$
— $
— $
— $
94 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
5
102
366
370
10
746
$
— $
— $
— $
848 $
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table
Amounts related to agreements not included in offsetting disclosure
$
$
December 31, 2020
Remaining Contractual Maturity of the Agreements
Overnight and
Continuous
Up to 30 Days
30 – 90 Days
Greater than 90
Days
Total
Securities lending transactions:
Corporate
Total
Repurchase/reverse repurchase transactions:
Corporate
Other foreign government
Total
Total transactions
$
— $
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
105 $
105
417
294
711
$
— $
— $
— $
816 $
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table
Amounts related to agreements not included in offsetting disclosure
$
$
94
3
5
102
366
370
10
746
848
830
18
105
105
417
294
711
816
771
45
113
The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse
repurchase programs, excluding any cash received or paid. After the effect of offsetting, there was no liability presented on the
consolidated balance sheets as of December 31, 2021 and December 31, 2020. As of December 31, 2021 and December 31,
2020, the Company did not have payables resulting from cash received as collateral associated with a repurchase/reverse
repurchase agreements. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with
the agreements.
Mortgage Loans on Real Estate
As of December 31, 2021, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in
California (13.4%), Texas (12.5%) and Washington (7.8%), in addition to loans secured by properties in Canada (3.0%) and
United Kingdom (2.3%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized
deferred loan origination fees and expenses, and allowance for credit losses.
The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type as of
December 31, 2021 and 2020 (dollars in millions):
Property type:
Office
Retail
Industrial
Apartment
Other commercial
Recorded investment
Unamortized balance of loan origination fees and expenses
Allowance for credit losses
Total mortgage loans on real estate
2021
2020
Carrying Value
Percentage of
Total
Carrying Value
Percentage of
Total
$
$
1,683
2,090
1,249
801
506
6,329
(11)
(35)
6,283
26.6 % $
33.0
19.7
12.7
8.0
100.0 %
$
1,702
1,711
1,210
808
430
5,861
(10)
(64)
5,787
29.0 %
29.3
20.6
13.8
7.3
100.0 %
The following table presents the maturities of the Company’s recorded investment in mortgage loans as of December 31, 2021
and 2020 (dollars in millions):
Due within five years
Due after five years through ten years
Due after ten years
Total
2021
2020
Recorded
Investment
% of Total
Recorded
Investment
% of Total
$
$
2,660
2,593
1,076
6,329
42.0 % $
41.0
17.0
100.0 % $
2,276
2,768
817
5,861
38.8 %
47.3
13.9
100.0 %
The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as
of December 31, 2021 and 2020 (dollars in millions):
Debt Service Ratios
Recorded Investment
>1.20x
1.00x – 1.20x
<1.00x
Construction loans
Total
% of Total
December 31, 2021:
Loan-to-Value Ratio
0% – 59.99%
60% – 69.99%
70% – 79.99%
80% or greater
Total
$
$
3,111 $
238 $
51 $
6 $
1,906
520
148
190
41
—
46
12
60
—
—
—
5,685 $
469 $
169 $
6 $
3,406
2,142
573
208
6,329
53.8 %
33.8
9.1
3.3
100.0 %
114
Investment grade
Average
Watch list
In or near default
Total
Investment grade
Average
Watch list
In or near default
Total
Debt Service Ratios
Recorded Investment
>1.20x
1.00x – 1.20x
<1.00x
Construction loans
Total
% of Total
December 31, 2020:
Loan-to-Value Ratio
0% – 59.99%
60% – 69.99%
70% – 79.99%
80% or greater
Total
$
$
2,774 $
106 $
17 $
12 $
2,013
555
189
62
49
21
33
13
17
—
—
—
5,531 $
238 $
80 $
12 $
2,909
2,108
617
227
5,861
49.6 %
36.0
10.5
3.9
100.0 %
The following table sets forth credit quality grades by year of origination of the Company’s recorded investment in mortgage
loans as of December 31, 2021 and 2020 (dollars in millions):
December 31, 2021:
2021
2020
2019
2018
2017
Prior
Total
Recorded Investment
Year of Origination
Internal credit quality grade:
High investment grade
$
725 $
402 $
645 $
461 $
344 $
1,534 $
367
6
—
—
272
—
—
—
331
27
—
—
301
39
—
—
296
5
—
—
502
32
4
36
$
1,098 $
674 $
1,003 $
801 $
645 $
2,108 $
6,329
Recorded Investment
Year of Origination
December 31, 2020:
2020
2019
2018
2017
2016
Prior
Total
Internal credit quality grade:
High investment grade
$
411 $
616 $
493 $
336 $
574 $
1,008 $
352
—
—
—
496
—
—
—
399
—
—
—
407
19
—
—
249
37
—
—
368
55
4
37
$
763 $
1,112 $
892 $
762 $
860 $
1,472 $
5,861
The following table presents the current and past due composition of the Company’s recorded investment in mortgage loans as
of December 31, 2021 and 2020 (dollars in millions):
Current
31 – 60 days past due
Total
2021
2020
$
$
6,329 $
—
6,329 $
5,846
15
5,861
The following table presents information regarding the Company’s allowance for credit losses for mortgage loans as of
December 31, 2021, 2020 and 2019 (dollars in millions):
Balance, beginning of period
Adoption of new accounting standard
Change in allowance for credit losses
Balance, end of period
2021
2020
2019
$
$
64 $
—
(29)
35 $
12 $
14
38
64 $
11
—
1
12
115
4,111
2,069
109
4
36
3,438
2,271
111
4
37
The Company did not acquire any impaired mortgage loans during the years ended December 31, 2021 and 2020. The
Company had no mortgage loans that were on a nonaccrual status as of December 31, 2021 and 2020. For the years ended
December 31, 2021 and 2020, the Company modified the payment terms of 1 and 52 commercial mortgage loans, with a
carrying value of approximately $10 million and $660 million, respectively, in response to COVID-19. These loans met the
criteria established in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and were not considered a
troubled debt restructuring. In accordance with the CARES Act criteria, these loans were not more than 30 days past due at
December 31, 2019, and the modifications included deferral or delayed payments of principal or interest on the loan. The
Company did not have any significant loans that were modified and met the criteria of a Troubled Debt Restructuring for the
years ended December 31, 2021 and 2020.
Policy Loans
The majority of policy loans are associated with one client. These policy loans present no credit risk as the amount of the loan
cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy.
The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. The Company earns a
spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.
Funds Withheld at Interest
As of December 31, 2021, $4.6 billion of the funds withheld at interest balance is primarily associated with two clients. For
reinsurance agreements written on a modco basis and certain agreements written on a coinsurance funds withheld basis, assets
equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as
funds withheld at interest. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the
assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it
owes the ceding company for claims or allowances against amounts owed to the Company from the ceding company.
Other Invested Assets
Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime
mortgages, derivative contracts and fair value option (“FVO”) contractholder-directed unit-linked investments. Other invested
assets also include FHLB common stock, which is included in Other in the table below. As of December 31, 2021 and 2020, the
allowance for credit losses for lifetime mortgages was not material. The carrying values of other invested assets as of
December 31, 2021 and 2020 are as follows (dollars in millions):
Limited partnership interests and real estate joint ventures
Lifetime mortgages
Derivatives
FVO contractholder-directed unit-linked investments
Other
Total other invested assets
2021
2020
1,996 $
758
175
52
89
3,070 $
1,367
935
140
289
98
2,829
$
$
Note 5 DERIVATIVE INSTRUMENTS
Accounting for Derivative Instruments and Hedging Activities
See Note 2 – “Significant Accounting Policies and Pronouncements” for a detailed discussion of the accounting treatment for
derivative instruments, including embedded derivatives and Note 6 – “Fair Value of Assets and Liabilities” for additional
disclosures related to the fair value hierarchy for derivative instruments, including embedded derivatives.
Types of Derivatives Used by the Company
Credit Derivatives
The Company sells protection under single name credit default swaps and credit default swap index tranches, as well as other
credit derivatives, to diversify its credit risk exposure in certain portfolios and, in combination with purchasing securities, to
replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default
triggers for indexed reference entities and single name reference entities are defined in the contracts. The Company’s maximum
exposure to credit loss equals the notional value for credit default swaps. In the event of default of a referencing entity, the
Company is typically required to pay the protection holder the full notional value less a recovery amount determined at auction.
The Company also purchases credit default swaps to reduce its risk against a drop in bond prices due to credit concerns of
certain bond issuers. If a credit event, as defined by the contract, occurs, the Company is able to put the bond back to the
counterparty at par.
116
Equity Derivatives
Exchange-traded equity futures are used primarily to economically hedge liabilities embedded in certain variable annuity
products. With exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of
contracts, the value of which is determined by the relevant stock indices, and to post variation margin on a daily basis in an
amount equal to the difference between the daily estimated fair values of those contracts. The Company enters into exchange-
traded equity futures with regulated futures commission merchants that are members of the exchange.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity
products. To hedge against adverse changes in equity indices volatility, the Company buys put options. The contracts are net
settled in cash based on differentials in the indices at the time of exercise and the strike price.
Foreign Currency Derivatives
Foreign currency swaps are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates
associated with its assets and liabilities denominated in foreign currencies. With a foreign currency swap transaction, the
Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a
forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is
exchanged at the termination of the currency swap by each party. The Company uses foreign currency swaps in hedges of net
investments in foreign operations and fair value hedges.
Foreign currency forwards are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates
associated with its assets and liabilities denominated in foreign currencies. With a foreign currency forward transaction, the
Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price
is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future
date. The Company uses foreign currency forwards in hedges of net investments in foreign operations and non-qualifying hedge
relationships.
Interest Rate Derivatives
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates, to alter interest rate
exposure arising from mismatches between assets and liabilities (duration mismatches) and to manage the risk of cash flows of
liabilities that are variable based on a benchmark rate. With an interest rate swap, the Company agrees with another party to
exchange, at specified intervals, the difference between two rates, which can be either fixed-rate or floating-rate interest
amounts, tied to an agreed-upon notional principal amount. These transactions are executed pursuant to master agreements that
provide for a single net payment or individual gross payments at each due date. The Company utilizes interest rate swaps in
cash flow and non-qualifying hedging relationships.
Other Derivatives
Consumer price index (“CPI”) swaps are used by the Company primarily to economically hedge liabilities embedded in certain
insurance products where value is directly affected by changes in a designated benchmark consumer price index. With a CPI
swap transaction, the Company agrees with another party to exchange the actual amount of inflation realized over a specified
period of time for a fixed amount of inflation determined at inception. These transactions are executed pursuant to master
agreements that provide for a single net payment or individual gross payments to be made by the counterparty at each due date.
Most of these swaps will require a single payment to be made by one counterparty at the maturity date of the swap.
The Company has entered into longevity swaps in the form of out-of-the-money options, which provide protection against
changes in mortality improvement to retirement plans and insurers of such plans. With a longevity swap transaction, the
Company agrees with another party to exchange a proportion of a notional value. The proportion is determined by the
difference between a predefined benefit, and the realized benefit plus the future expected benefit, calculated by reference to a
population index for a fixed premium.
Mortality swaps have been used by the Company to hedge risk from changes in mortality experience associated with its
reinsurance of life insurance risk. The Company agrees with another party to exchange, at specified intervals, a proportion of a
notional value determined by the difference between a predefined expected and realized claim amount on a designated index of
reinsured lives, for a fixed percentage (premium) each term.
The Company sells fee-based synthetic guaranteed investment contracts (“GICs”) to retirement plans that include investment-
only, stable value contracts. The assets are owned by the trustees of such plans, who invest the assets under the terms of
investment guidelines to which the Company agrees. The contracts contain a guarantee of a minimum rate of return on
participant balances supported by the underlying assets, and a guarantee of liquidity to meet certain participant-initiated plan
cash flow requirements. These contracts are reported as derivatives and recorded at fair value.
117
The Company has certain embedded derivatives that are required to be separated from their host contracts and reported as
derivatives. Host contracts include reinsurance treaties structured on a modco or funds withheld basis. Additionally, the
Company reinsures equity-indexed annuity and variable annuity contracts with benefits that are considered embedded
derivatives, including guaranteed minimum withdrawal benefits, guaranteed minimum accumulation benefits, and guaranteed
minimum income benefits. The changes in fair values of embedded derivatives on equity-indexed annuities described below
relate to changes in the fair value associated with capital market and other related assumptions.
Summary of Derivative Positions
Derivatives, except for embedded derivatives, are included in other invested assets or other liabilities, at fair value. Embedded
derivative assets and liabilities on modco or funds withheld arrangements are included on the consolidated balance sheets with
the host contract in funds withheld at interest or other liabilities, at fair value. Embedded derivative liabilities on indexed
annuity and variable annuity products are included on the consolidated balance sheets with the host contract in interest-sensitive
contract liabilities, at fair value. The following table presents the notional amounts and gross fair value of derivative
instruments prior to taking into account the netting effects of master netting agreements as of December 31, 2021 and 2020
(dollars in millions):
December 31, 2021
December 31, 2020
Primary Underlying
Risk
Notional
Amount
Carrying Value/Fair Value
Assets
Liabilities
Notional
Amount
Carrying Value/Fair Value
Assets
Liabilities
Derivatives not designated as hedging
instruments:
Interest rate swaps
Financial futures
Foreign currency swaps
Foreign currency forwards
CPI swaps
Credit default swaps
Equity options
Synthetic GICs
Embedded derivatives in:
Modco or funds withheld
arrangements
Indexed annuity products
Variable annuity products
Interest rate
Equity
Foreign currency
Foreign currency
CPI
Credit
Equity
Interest rate
Total non-hedging derivatives
Derivatives designated as hedging
instruments:
Interest rate swaps
Foreign currency swaps
Foreign currency forwards
Forward bond purchase commitments
Total hedging derivatives
Total derivatives
Foreign currency/
Interest rate
Foreign currency
Foreign currency
Interest rate
$
1,273 $
66 $
1 $
1,084 $
93 $
240
150
395
563
1,321
472
16,143
—
—
—
20,557
941
153
1,320
545
2,959
—
1
2
34
29
29
—
227
—
—
388
4
1
14
14
33
—
—
4
7
1
—
—
62
693
162
930
33
—
11
1
45
258
150
347
612
1,517
395
16,644
—
—
—
21,007
802
234
1,255
—
2,291
—
—
4
11
13
29
—
58
—
—
208
3
8
10
—
21
1
—
18
2
19
—
—
—
—
752
155
947
24
1
15
—
40
$
23,516 $
421 $
975 $
23,298 $
229 $
987
118
Fair Value Hedges
The Company designates and reports certain foreign currency swaps to hedge the foreign currency fair value exposure of
foreign currency denominated assets as fair value hedges when they meet the requirements of the general accounting principles
for Derivatives and Hedging. The gain or loss on the hedged item attributable to a change in foreign currency and the offsetting
gain or loss on the related foreign currency swaps for the years ended December 31, 2021, 2020 and 2019 were (dollars in
millions):
Type of Fair Value Hedge
Hedged Item
For the Year Ended December 31, 2021:
Foreign currency swaps
Foreign-denominated fixed maturity securities
For the Year Ended December 31, 2020:
Foreign currency swaps
Foreign-denominated fixed maturity securities
For the Year Ended December 31, 2019:
Foreign currency swaps
Foreign-denominated fixed maturity securities
Cash Flow Hedges
Gains (Losses)
Recognized for
Derivatives
Gains (Losses)
Recognized for
Hedged Items
Investment Related Gains (Losses)
$
$
$
(4) $
8 $
(4) $
6
(10)
—
Certain derivative instruments are designated as cash flow hedges when they meet the requirements of the general accounting
principles for Derivatives and Hedging. The Company designates and accounts for the following as cash flow hedges: (i)
certain interest rate swaps, in which the cash flows of assets and liabilities are variable based on a benchmark rate; (ii) certain
interest rate swaps, in which the cash flows of assets are denominated in different currencies, commonly referred to as cross-
currency swaps and (iii) forward bond purchase commitments.
The following table presents the components of AOCI, before income tax, and the consolidated income statement classification
where the gain or loss is recognized related to cash flow hedges for the years ended December 31, 2021, 2020 and 2019 (dollars
in millions):
Amounts Included in AOCI
Balance December 31, 2018
Gains (losses) deferred in other comprehensive income (loss)
Amounts reclassified to investment income
Amounts reclassified to interest expense
Balance December 31, 2019
Gains (losses) deferred in other comprehensive income (loss)
Amounts reclassified to investment income
Amounts reclassified to interest expense
Balance December 31, 2020
Gains (losses) deferred in other comprehensive income (loss)
Amounts reclassified to investment income
Amounts reclassified to interest expense
Balance December 31, 2021
$
$
9
(34)
—
(1)
(26)
(27)
—
4
(49)
20
—
7
(22)
As of December 31, 2021, approximately $5 million of before-tax deferred net losses on derivative instruments recorded in
AOCI are expected to be reclassified to interest expense during the next twelve months. For the same time period, no material
amounts of before-tax deferred net gains recorded in AOCI are expected to be reclassified to investment income during the next
twelve months.
119
The following table presents the effect of derivatives in cash flow hedging relationships on the consolidated statements of
income and the consolidated statements of stockholders’ equity for the years ended December 31, 2021, 2020 and 2019 (dollars
in millions):
Derivative Type
For the year ended December 31, 2021:
Interest rate
Foreign currency/Interest rate
Total
For the year ended December 31, 2020:
Interest rate
Foreign currency/Interest rate
Total
For the year ended December 31, 2019:
Interest rate
Foreign currency/Interest rate
Total
Gains (Losses)
Deferred in OCI
Gains (Losses) Reclassified into Income from AOCI
Investment Related
Gains (Losses)
Investment Income
Interest Expense
$
$
$
$
$
$
28 $
(8)
20 $
(33) $
6
(27) $
(32) $
(2)
(34) $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
(7)
—
(7)
(4)
—
(4)
1
—
1
For the years ended December 31, 2021, 2020 and 2019, there were no material amounts reclassified into earnings relating to
instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by
the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for
derivatives and hedging.
Hedges of Net Investments in Foreign Operations
The Company uses foreign currency swaps and foreign currency forwards to hedge a portion of its net investment in certain
foreign operations against adverse movements in exchange rates. The following table illustrates the Company’s net investments
in foreign operations (“NIFO”) hedges and the gains (losses) deferred in OCI for the years ended December 31, 2021, 2020 and
2019 (dollars in millions):
Type of NIFO Hedge
Foreign currency swaps
Foreign currency forwards
Total
Derivative Gains (Losses) Deferred in OCI
For the years ended December 31,
2021
2020
2019
$
$
(2) $
—
(2) $
1 $
(30)
(29) $
(9)
(24)
(33)
The cumulative foreign currency translation gain recorded in AOCI related to these hedges was $137 million and $139 million
as of December 31, 2021 and 2020, respectively. If a hedged foreign operation was sold or substantially liquidated, the amounts
in AOCI would be reclassified to the consolidated statements of income. A pro rata portion would be reclassified upon partial
sale of a hedged foreign operation. There were no sales or substantial liquidations of net investments in foreign operations that
would have required the reclassification of gains or losses from AOCI into investment income during the periods presented.
Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging
The Company uses various other derivative instruments for risk management purposes that either do not qualify or have not
been elected for hedge accounting treatment. The gain or loss related to the change in fair value for these derivative instruments
is recognized in investment related gains (losses), net, except where otherwise noted.
120
A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s consolidated
statements of income for the years ended December 31, 2021, 2020 and 2019 is as follows (dollars in millions):
Income Statement
Location of Gains (Losses)
2021
2020
2019
Gains (Losses) for the years ended December 31,
Investment related gains (losses), net
$
(34) $
Type of Non-hedging Derivative
Interest rate swaps
Financial futures
Foreign currency swaps
Foreign currency forwards
Consumer price index swaps
Credit default swaps
Equity options
Longevity swaps
Mortality swaps
Subtotal
Embedded derivatives in:
Investment related gains (losses), net
Investment related gains (losses), net
Investment related gains (losses), net
Investment related gains (losses), net
Investment related gains (losses), net
Investment related gains (losses), net
Other revenues
Other revenues
(24)
20
(20)
46
33
(33)
—
—
(12)
107
10
(7)
76 $
(47)
(7)
5
16
16
—
—
—
59
(62)
(30)
8
65
(46)
—
1
(18)
30
(40)
13
(1)
4
11
(57)
5
(37)
Modco or funds withheld arrangements
Investment related gains (losses), net
Indexed annuity products
Variable annuity products
Total non-hedging derivatives
Interest credited
Investment related gains (losses), net
$
98 $
(25) $
Changes in the credit valuation adjustment utilized by the Company to value its embedded derivatives resulted in a (decrease)
and increase in investment related gains (losses), net of approximately $(36) million and $70 million for the years ended
December 31, 2021 and 2020, respectively. Changes in the credit valuation adjustment did not have a material effect on the
change in fair value for the year ended December 31, 2019.
Credit Derivatives
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to
maturity of credit default swaps sold by the Company as of December 31, 2021 and 2020 (dollars in millions):
Rating Agency Designation of
Referenced Credit Obligations
AAA/AA+/AA/AA-/A+/A/A-
(1)
Single name credit default swaps
Subtotal
BBB+/BBB/BBB-
Single name credit default swaps
Credit default swaps referencing indices
Subtotal
BB+/BB/BB-
Single name credit default swaps
Subtotal
Total
2021
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
Estimated Fair
Value of Credit
Default Swaps
Weighted
Average
Years to
Maturity(3)
Estimated Fair
Value of Credit
Default Swaps
2020
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
Weighted
Average
Years to
Maturity(3)
$
28 $
28
1
—
1
(1)
(1)
$
28 $
600
600
141
565
706
15
15
1,321
14.2
14.2
2.4
5.1
4.6
3.5
3.5
9.0
$
11 $
11
2
—
2
—
—
$
13 $
287
287
15.0
15.0
232
988
1,220
10
10
1,517
1.6
3.9
3.5
0.7
0.7
5.6
(1) The rating agency designations are based on ratings from Standard and Poor’s (“S&P”).
(2) Assumes the value of the referenced credit obligations is zero.
(3) The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
Netting Arrangements and Credit Risk
Certain of the Company’s derivatives are subject to enforceable master netting arrangements and reported as a net asset or
liability in the consolidated balance sheets. The Company nets all derivatives that are subject to such arrangements.
121
The Company has elected to include all derivatives, except embedded derivatives, in the table below, irrespective of whether
they are subject to an enforceable master netting arrangement or a similar agreement. See Note 4 – “Investments” for
information regarding the Company’s securities borrowing, lending, and repurchase/reverse repurchase programs. See
“Embedded Derivatives” above for information regarding the Company’s bifurcated embedded derivatives.
The following table provides information relating to the netting of the Company’s derivative instruments as of December 31,
2021 and December 31, 2020 (dollars in millions):
December 31, 2021:
Derivative assets
Derivative liabilities
December 31, 2020:
Derivative assets
Derivative liabilities
Gross Amounts
Recognized
Gross Amounts
Offset in the
Balance Sheet
Net Amounts
Presented in the
Balance Sheet
Financial
Instruments/
Collateral (1)
Net Amount
$
$
194 $
58
171 $
80
(19) $
(19)
(31) $
(31)
175 $
39
140 $
49
(175) $
(39) $
(128) $
(193)
—
—
12
(144)
(1)
Includes initial margin posted to a central clearing partner for financial instruments and excludes the excess of collateral received/pledged from/to the
counterparty.
The Company may be exposed to credit-related losses in the event of non-performance by counterparties to derivative financial
instruments. Generally, the credit exposure of the Company’s derivative contracts is limited to the fair value and accrued
interest of non-collateralized derivative contracts in an asset position at the reporting date. As of December 31, 2021, the
Company had credit exposure of $18 million.
Derivatives may be exchange-traded or they may be privately negotiated contracts, which are referred to as over-the-counter
(“OTC”) derivatives. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties
(“OTC cleared”) and others are bilateral contracts between two counterparties. The Company manages its credit risk related to
OTC derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and
through the use of master netting agreements that provide for a single net payment to be made by one counterparty to another at
each due date and upon termination. The Company is only exposed to the default of the central clearing counterparties for OTC
cleared derivatives, and these transactions require initial and daily variation margin collateral postings. Exchange-traded
derivatives are settled on a daily basis, thereby reducing the credit risk exposure in the event of non-performance by
counterparties to such financial instruments.
Note 6 FAIR VALUE OF ASSETS AND LIABILITIES
Fair Value Measurement
General accounting principles for Fair Value Measurements and Disclosures define fair value as the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. These principles also establish a three-
level fair value hierarchy that requires an entity to maximize the use of observable inputs and to minimize the use of
unobservable inputs when measuring fair value:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Active markets are defined through
various characteristics for the measured asset/liability, such as having many transactions and narrow bid/ask spreads.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or market standard valuation techniques and assumptions that use significant inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
related assets or liabilities and include those whose value is determined using market standard valuation techniques described
above. Prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques
that require management’s judgment or estimation in developing inputs that are consistent with those other market participants
would use when pricing similar assets and liabilities.
122
Assets and Liabilities by Hierarchy Level
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020 are summarized below
(dollars in millions):
December 31, 2021:
Assets:
Fixed maturity securities – available-for-sale:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total fixed maturity securities – available-for-sale
Equity securities
Funds withheld at interest – embedded derivatives
Funds withheld at interest
Cash equivalents
Short-term investments
Other invested assets:
Derivatives
FVO contractholder-directed unit-linked investments
Total other invested assets (1)
Total
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives
Other liabilities:
Funds withheld at interest – embedded derivatives
Derivatives
Total
Total
Level 1
Fair Value Measurements Using:
Level 2
Level 3
$
$
$
$
38,103 $
4,944
1,050
4,005
1,849
2,105
1,323
7,370
60,749
151
104
83
1,138
64
175
52
227
62,516 $
855 $
(61)
39
833 $
— $
—
—
—
—
1,993
—
—
1,993
101
—
—
1,138
—
—
—
—
3,232 $
— $
—
—
— $
34,215 $
4,944
1,049
2,908
1,768
100
1,290
7,337
53,611
—
—
—
—
36
175
52
227
53,874 $
— $
—
39
39 $
3,888
—
1
1,097
81
12
33
33
5,145
50
104
83
—
28
—
—
—
5,410
855
(61)
—
794
(1) Other invested assets included in the fair value hierarchy exclude limited partnership interests that are measured at estimated fair value using the NAV per
share (or its equivalent) as a practical expedient. As of December 31, 2021, the fair value of such investments was $581 million.
123
December 31, 2020:
Assets:
Fixed maturity securities – available-for-sale:
Corporate
Canadian government
RMBS
ABS
CMBS
U.S. government
State and political subdivisions
Other foreign government
Total fixed maturity securities – available-for-sale
Equity securities
Funds withheld at interest – embedded derivatives
Funds withheld at interest
Cash equivalents
Short-term investments
Other invested assets:
Derivatives
FVO contractholder-directed unit-linked investments
Total other invested assets
Total
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives
Other liabilities:
Funds withheld at interest – embedded derivatives
Derivatives
Total
$
$
$
Total
Level 1
Level 2
Level 3
Fair Value Measurements Using:
$
36,208 $
— $
33,179 $
3,029
5,140
1,817
3,092
1,868
1,437
1,390
5,783
56,735
132
58
56
1,478
197
140
289
429
—
—
—
—
1,312
—
—
1,312
79
—
—
1,478
32
—
224
224
5,140
1,814
2,896
1,813
111
1,381
5,766
—
3
196
55
14
9
17
52,100
3,323
—
—
—
—
150
140
65
205
53
58
56
—
15
—
—
—
59,085 $
3,125 $
52,455 $
3,505
907 $
—
49
956 $
— $
—
—
— $
— $
—
49
49 $
907
—
—
907
The Company may utilize information from third parties, such as pricing services and brokers, to assist in determining the fair
value for certain assets and liabilities; however, management is ultimately responsible for all fair values presented in the
Company’s financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and
reliable valuation practices and pricing of assets and liabilities, and approving changes to valuation methodologies and pricing
sources. The selection of the valuation technique(s) to apply considers the definition of an exit price and the nature of the asset
or liability being valued and significant expertise and judgment is required.
The Company performs initial and ongoing analysis and review of the various techniques utilized in determining fair value to
ensure that they are appropriate and consistently applied, and that the various assumptions are reasonable. The Company
analyzes and reviews the information and prices received from third parties to ensure that the prices represent a reasonable
estimate of the fair value and to monitor controls around pricing, which includes quantitative and qualitative analysis and is
overseen by the Company’s investment and accounting personnel. Examples of procedures performed include, but are not
limited to, review of pricing trends, comparison of a sample of executed prices of securities sold to the fair value estimates,
comparison of fair value estimates to management’s knowledge of the current market, and ongoing confirmation that third party
pricing services use, wherever possible, market-based parameters for valuation. In addition, the Company utilizes both internal
and external cash flow models to analyze the reasonableness of fair values utilizing credit spread and other market assumptions,
where appropriate. As a result of the analysis, if the Company determines there is a more appropriate fair value based upon the
available market data, the price received from the third party is adjusted accordingly. The Company also determines if the
inputs used in estimated fair values received from pricing services are observable by assessing whether these inputs can be
corroborated by observable market data.
For assets and liabilities reported at fair value, the Company utilizes, when available, fair values based on quoted prices in
active markets that are regularly and readily obtainable. Generally, these are very liquid investments and the valuation does not
require management judgment. When quoted prices in active markets are not available, fair value is based on market valuation
techniques, market comparable pricing and the income approach. The use of different techniques, assumptions and inputs may
have a material effect on the estimated fair values of the Company’s securities holdings. For the periods presented, the
application of market standard valuation techniques applied to similar assets and liabilities has been consistent.
The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a
recurring basis are summarized below.
124
Fixed Maturity Securities – The fair values of the Company’s publicly-traded fixed maturity securities are generally based on
prices obtained from independent pricing services. Prices from pricing services are sourced from multiple vendors, and a
vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company
generally receives prices from multiple pricing services for each security, but ultimately uses the price from the vendor that is
highest in the hierarchy for the respective asset type. To validate reasonableness, prices are periodically reviewed as explained
above. Consistent with the fair value hierarchy described above, securities with quotes from pricing services are generally
reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable
inputs. If the pricing information received from third party pricing services is not reflective of market activity or other inputs
observable in the market, the Company may challenge the price through a formal process with the pricing service.
If the Company ultimately concludes that pricing information received from the independent pricing service is not reflective of
fair value, non-binding broker quotes are used, if available. If the Company concludes that the values from both pricing services
and brokers are not reflective of fair value, an internally developed valuation may be prepared; however, this occurs
infrequently. Internally developed valuations or non-binding broker quotes are also used to determine fair value in
circumstances where vendor pricing is not available. These valuations may use significant unobservable inputs, which reflect
the Company’s assumptions about the inputs that market participants would use in pricing the asset. Observable market data
may not be available in certain circumstances such as market illiquidity and credit events related to the security. Pricing service
overrides, internally developed valuations and non-binding broker quotes are generally based on significant unobservable inputs
and are reflected as Level 3 in the valuation hierarchy.
The inputs used in the valuation of corporate and government securities include, but are not limited to standard market
observable inputs that are derived from, or corroborated by, market observable data including market yield curve, duration, call
provisions, observable prices and spreads for similar publicly traded or privately placed issues that incorporate the credit quality
and industry sector of the issuer. For internal pricing of private placements and structured securities, valuation is based
primarily on matrix pricing or other similar techniques using standard market inputs including spreads for actively traded
securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, rating,
weighted average coupon, weighted average maturity, average delinquency rates, geographic region, debt service coverage
ratios and issuance-specific information including, but not limited to: collateral type, payment terms of the underlying assets,
payment priority within the tranche, structure of the security, deal performance and vintage of loans.
When observable inputs are not available, the market standard valuation techniques for determining the estimated fair value of
certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are
significant to the estimated fair value that are not observable in the market or cannot be derived principally from or
corroborated by observable market data, such as market illiquidity. Other significant unobservable inputs used in the fair value
measurement of the Company’s private debt investments include a multiple of earnings before interest, taxes, depreciation and
amortization (“EBITDA”). These unobservable inputs can be based in large part on management judgment or estimation, and
cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed
appropriate given the circumstances and are believed to be consistent with what other market participants would use when
pricing such securities.
Equity Securities – Equity securities consist principally of common and preferred stock of publicly and privately traded
companies. The fair values of publicly traded equity securities are primarily based on quoted market prices in active markets
and are classified within Level 1 in the fair value hierarchy. Non-binding broker quotes and internally developed evaluations for
equity securities are generally based on significant unobservable inputs and are reflected as Level 3 in the fair value hierarchy.
Embedded Derivatives – The fair value of embedded derivative liabilities, including those calculated by third parties, are
monitored through the use of attribution reports to quantify the effect of underlying sources of fair value change, including
capital market inputs based on policyholder account values, interest rates and short-term and long-term implied volatilities,
from period to period. Actuarial assumptions are based on experience studies performed internally in combination with
available industry information and are reviewed on a periodic basis, at least annually.
For embedded derivative liabilities associated with the underlying products in reinsurance treaties, primarily equity-indexed and
variable annuity treaties, the Company utilizes a discounted cash flow model, which includes an estimate of future equity option
purchases and an adjustment for a CVA. The variable annuity embedded derivative calculations are performed by third parties
based on methodology and input assumptions provided by the Company. To validate the reasonableness of the resulting fair
value, the Company’s internal actuaries perform reviews and analytical procedures on the results. The capital market inputs to
the model, such as equity indexes, short-term equity volatility and interest rates, are generally observable. The valuation also
requires certain significant inputs, which are generally not observable and accordingly, the valuation is considered Level 3 in
the fair value hierarchy,
The fair value of embedded derivatives associated with funds withheld reinsurance treaties is determined based upon a total
return swap technique with reference to the fair value of the investments held by the ceding company that support the
125
Company’s funds withheld at interest asset with an adjustment for a CVA. The fair value of the underlying assets is generally
based on a variety of sources and pricing methodologies chosen by the ceding company, which are not transparent to the
Company and may include significant unobservable inputs. Additionally, some of the valuations also require certain significant
inputs, which are generally not observable. Therefore, the valuation of the embedded derivative assets and liabilities associated
with these funds withheld reinsurance treaties are considered Level 3 in the fair value hierarchy. Where those funds withheld
reinsurance agreements are ceded by the Company, the same approach is taken to valuing the embedded derivatives associated
with the funds withheld at interest liability.
Credit Valuation Adjustment – The Company uses a structural default risk model to estimate a CVA. The input assumptions are
a combination of externally derived and published values (default threshold and uncertainty), market inputs (interest rate, equity
price per share, debt per share, equity price volatility) and insurance industry data (Loss Given Default), adjusted for market
recoverability.
Funds Withheld at Interest – Funds withheld at interest, elected at fair value on a limited basis, include assets where inputs are
not observable in the market and are considered Level 3 in the fair value hierarchy.
Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market
instruments and other highly liquid debt instruments. Money market instruments are generally valued using unadjusted quoted
prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The fair value of certain
other cash equivalents and short-term investments, such as bonds with original maturities twelve months or less, are based upon
other market observable data and are typically classified as Level 2. However, certain short-term investments may incorporate
significant unobservable inputs resulting in a Level 3 classification. Various time deposits, certificates of deposit and sweeps
carried as cash equivalents or short-term investments are not measured at estimated fair value and therefore are excluded from
the tables presented.
FVO Contractholder-Directed Unit-Linked Investments – FVO contractholder-directed investments supporting unit-linked
variable annuity type liabilities consist of fixed maturity securities, exchange-traded funds and to a lesser extent cash and cash
equivalents. The fair values of the exchange-traded securities are primarily based on quoted market prices in active markets
and are classified within Level 1 of the hierarchy. The fair value of the fixed maturity contractholder-directed securities is
determined on a basis consistent with the methodologies described above for fixed maturity securities and are classified within
Level 2 of the hierarchy.
Derivative Assets and Derivative Liabilities – All of the derivative instruments utilized by the Company are classified within
Level 2 on the fair value hierarchy. These derivatives are principally valued using an income approach. Valuations of interest
rate contracts are based on present value techniques, which utilize significant inputs that may include the swap yield curve,
London Interbank Offered Rate (“LIBOR”) basis curves, Overnight Index Swaps curves, and repurchase rates. Valuations of
foreign currency contracts are based on present value techniques, which utilize significant inputs that may include the swap
yield curve, LIBOR basis curves, currency spot rates, and cross currency basis curves. Valuations of credit contracts, are based
on present value techniques, which utilize significant inputs that may include the swap yield curve, credit curves, and recovery
rates. Valuations of equity market contracts, are based on present value techniques, which utilize significant inputs that may
include the swap yield curve, spot equity index levels, and dividend yield curves. Valuations of equity market contracts, option-
based, are based on option pricing models, which utilize significant inputs that may include the swap yield curve, spot equity
index levels, dividend yield curves, and equity volatility.
126
Quantitative Information Regarding Internally-Priced Assets and Liabilities
The following table presents quantitative information about significant unobservable inputs used in Level 3 fair value
measurements that are developed internally by the Company as of December 31, 2021 and 2020 (dollars in millions):
Assets:
Corporate
ABS
U.S. government
Equity securities
Estimated Fair Value
2021
2020
Valuation
Technique
Unobservable
Range (Weighted Average)
Input
2021
2020
$
49 $
37
Market comparable
securities
205
12
5
Market comparable
securities
Market comparable
securities
Market comparable
securities
87
14
10
Liquidity premium
0-1% (1%)
0-1% (1%)
EBITDA Multiple
5.2x-7.0x (6.4x)
5.2x-11.2x (7.1x)
Liquidity premium
2-18% (4%)
1-18% (1%)
Liquidity premium
0-1% (1%)
0-1% (1%)
EBITDA Multiple
6.9x-10.6x (8.0x)
6.9x-10.6x (7.9x)
Funds withheld at interest –
embedded derivatives
182
58 Total return swap
Mortality
Lapse
Withdrawal
CVA
Crediting rate
0-100% (3%)
0-100% (3%)
0-35% (18%)
0-35% (13%)
0-5% (4%)
0-5% (0%)
1-4% (2%)
0-5% (3%)
0-5% (1%)
2-4% (2%)
Liabilities:
Interest-sensitive contract
liabilities – embedded
derivatives – indexed annuities
693
752 Discounted cash flow
Mortality
Lapse
Withdrawal
Option budget
projection
Interest-sensitive contract
liabilities – embedded
derivatives – variable annuities
162
155 Discounted cash flow
Mortality
Lapse
Withdrawal
CVA
0-100% (2%)
0-35% (16%)
0-5% (3%)
0-100% (3%)
0-35% (13%)
0-5% (3%)
1-4% (2%)
2-4% (2%)
0-100% (2%)
0-100% (2%)
0-25% (4%)
0-25% (4%)
0-7% (5%)
0-5% (1%)
0-7% (5%)
0-5% (1%)
Long-term volatility
0-27% (14%)
0-27% (13%)
127
Changes in Level 3 Assets and Liabilities
Assets and liabilities transferred into Level 3 are due to a lack of observable market transactions and price information.
Transfers out of Level 3 are primarily the result of the Company obtaining observable pricing information or a third party
pricing quotation that appropriately reflects the fair value of those assets and liabilities.
The reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs
(Level 3) are as follows (dollars in millions):
For the year ended
December 31, 2021:
Fixed maturity securities – available-for-sale
Corporate
Foreign
govt
Structured
securities
U.S. and
local govt
Equity
securities
Short-term
investments
Funds
withheld at
interest –
embedded
derivatives,
net(1)
Funds
withheld
at interest
Interest-
sensitive
contract
liabilities –
embedded
derivatives
Fair value, beginning of period
$
3,029 $
17 $
254 $
23 $
53 $
15 $
58 $
56 $
(907)
Total gains/losses (realized/
unrealized)
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Interest credited
Included in other
comprehensive income
Other revenues
Purchases(2)
Sales(2)
Settlements(2)
Transfers into Level 3
Transfers out of Level 3
Fair value, end of period
5
—
(5)
—
—
—
(28)
(4)
—
—
1,506
25
(53)
—
(587)
(5)
29
—
(8)
—
1
—
—
(6)
—
1,038
(6)
(186)
84
—
—
—
—
—
—
—
—
(3)
25
—
—
13
—
—
—
9
(25)
—
—
—
—
—
—
—
—
31
(3)
(10)
—
(5)
—
107
—
—
—
—
—
—
—
—
(4)
—
—
(1)
—
36
—
(4)
—
—
—
(7)
10
—
—
(34)
—
83
—
—
$
3,888 $
33 $
1,179 $
45 $
50 $
28 $
165 $
83 $
(855)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Other revenues
Interest credited
Included in other comprehensive
income
$
4 $ — $
1 $
— $
— $
— $
— $
(4) $
—
(7)
—
—
—
—
—
(24)
(4)
—
—
—
(6)
—
—
—
—
7
—
—
—
—
—
—
—
107
—
—
—
—
—
—
(1)
(15)
—
(72)
—
(1) Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(2) The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and
settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward.
The Company had no issuances during the period.
128
For the year ended
December 31, 2020:
Fixed maturity securities – available-for-sale
Funds
withheld at
interest –
embedded
derivatives
Funds
withheld
at interest
Interest-
sensitive
contract
liabilities –
embedded
derivatives
Foreign
govt
Structured
securities
U.S. and
local govt
Equity
securities
Short-term
investments
Corporate
$
2,186 $ 720 $
Fair value, beginning of period
Total gains/losses (realized/
unrealized)
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Interest credited
Included in other
comprehensive income
Other revenues
Purchases(1)
Sales(1)
Settlements(1)
Transfers into Level 3
Transfers out of Level 3
Fair value, end of period
$
2
—
(22)
—
—
—
1
—
—
—
—
—
(704)
28
—
1,193
(182)
(229)
57
(4)
3,029 $
17 $
208 $
25 $
77 $
2 $
121 $
— $
(930)
—
—
—
(7)
—
149
(5)
(59)
38
(70)
254 $
—
—
—
1
—
—
—
(3)
—
—
23 $
—
(13)
—
—
—
3
—
—
—
(14)
53 $
—
—
—
—
—
17
—
(3)
—
(1)
15 $
—
(63)
—
—
—
—
—
—
—
—
58 $
(4)
—
—
—
—
60
—
—
—
—
56 $
—
8
(30)
—
—
(32)
—
77
—
—
(907)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Other revenues
Interest credited
Included in other comprehensive
income
$
— $ — $
— $
— $
— $
— $
— $
(4) $
—
(23)
—
—
—
—
—
(34)
1
—
—
—
(8)
—
—
—
1
(13)
—
—
—
—
—
—
—
(63)
—
—
—
—
—
—
—
(2)
—
(107)
—
(1) The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and
settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward.
The Company had no issuances during the period.
129
For the year ended
December 31, 2019:
Fixed maturity securities – available-for-sale
Corporate
Foreign
govt
Structured
securities
U.S. and
local govt
Equity
securities
Short-term
investments
Funds
withheld at
interest –
embedded
derivatives
Other
assets –
longevity
and
mortality
swaps
Interest-
sensitive
contract
liabilities –
embedded
derivatives
Fair value, beginning of period
$
1,331 $ 533 $
103 $
28 $
33 $
2 $
110 $
48 $
(945)
Total gains/losses (realized/
unrealized)
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Interest credited
Included in other
comprehensive income
Other revenues
Purchases(1)
Sales(1)
Settlements(1)
Transfers into Level 3
Transfers out of Level 3
Fair value, end of period
1
15
(11)
—
—
—
48
—
162
—
1,050
10
(81)
—
(194)
—
43
—
(1)
—
$
2,186 $ 720 $
—
—
—
4
—
85
(1)
(63)
86
—
—
—
1
—
—
—
(4)
—
—
12
—
—
—
33
(1)
—
—
(6)
208 $
—
25 $
—
77 $
—
—
—
(1)
—
30
(1)
(1)
—
(27)
2 $
—
11
—
—
—
—
—
—
—
—
—
—
(2)
12
—
—
(58)
—
—
5
(57)
—
—
(17)
—
84
—
—
121 $
—
— $
—
(930)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of
related expenses
Investment related gains
(losses), net
Other revenues
Interest credited
$
2 $
15 $
— $
— $
— $
— $
— $
— $
(11)
—
—
—
—
—
—
—
—
—
—
—
12
—
—
—
—
—
11
—
—
—
—
—
—
(3)
—
(140)
(1) The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and
settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward.
The Company had no issuances during the period.
Nonrecurring Fair Value Measurements
The Company has certain assets subject to measurement at fair value on a nonrecurring basis, in periods subsequent to their
initial recognition if they are determined to be impaired. For the year ended December 31, 2021, the Company did not have any
material assets that were measured at fair value due to impairment. The following table presents information for assets
measured at an estimated fair value on a nonrecurring basis as of December 31, 2020, and still held at the reporting date (for
example, when there is evidence of impairment). The estimated fair values for these assets were determined using significant
unobservable inputs (Level 3).
(dollars in millions)
Limited partnership interests(1)
Carrying Value After Measurement
At December 31,
Net Investment Gains (Losses)
Years ended December 31,
2020
2020
$
20
$
(17)
(1)
Impairments on these investments were recognized at estimated fair value determined using the net asset values of the Company’s ownership interest as
provided in the financial statements of the investees. The market for these investments has limited activity and price transparency.
130
Fair Value of Financial Instruments
The following table presents the carrying values and estimated fair values of the Company’s financial instruments, which were
not measured at fair value on a recurring basis, as of December 31, 2021 and 2020 (dollars in millions). This table excludes any
payables or receivables for collateral under repurchase or reverse repurchase agreements and other transactions. The estimated
fair value of the excluded amount approximates carrying value as they equal the amount of cash collateral received/paid.
December 31, 2021:
Assets:
Estimated Fair
Fair Value Measurement Using:
Carrying Value (1)
Value
Level 1
Level 2
Level 3
NAV
Mortgage loans on real estate
$
6,283 $
6,580 $
— $
— $
6,580 $
Policy loans
Funds withheld at interest
Cash and cash equivalents
Short-term investments
Other invested assets
Accrued investment income
Liabilities:
1,234
6,747
1,810
23
910
533
1,234
7,075
1,810
23
907
533
—
—
1,810
23
6
—
1,234
—
—
—
70
533
—
7,075
—
—
831
—
Interest-sensitive contract liabilities
Other liabilities – funds withheld at interest
Long-term debt
Collateral finance and securitization notes
$
18,625 $
19,540 $
— $
— $
19,540 $
1,658
3,667
180
1,657
3,886
153
—
—
—
—
1,657
3,886
153
December 31, 2020:
Assets:
Mortgage loans on real estate
$
5,787 $
6,167 $
— $
— $
6,167 $
Policy loans
Funds withheld at interest
Cash and cash equivalents
Short-term investments
Other invested assets
Accrued investment income
Liabilities:
1,258
5,292
1,930
30
1,482
511
1,258
5,676
1,930
30
1,601
511
—
—
1,930
30
5
—
1,258
—
—
—
89
511
—
5,676
—
—
1,018
—
Interest-sensitive contract liabilities
Long-term debt
Collateral finance and securitization notes
$
18,106 $
19,683 $
— $
— $
19,683 $
3,573
388
3,901
351
—
—
—
—
3,901
351
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
489
—
—
—
—
(1) Carrying values presented herein may differ from those in the Company’s consolidated balance sheets because certain items within the respective
financial statement captions may be measured at fair value on a recurring basis.
Mortgage Loans on Real Estate – The fair value of mortgage loans on real estate is estimated by discounting cash flows, both
principal and interest, using current interest rates for mortgage loans with similar credit ratings and similar remaining
maturities. As such, inputs include current treasury yields and spreads, which are based on the credit rating and average life of
the loan, corresponding to the market spreads. The valuation of mortgage loans on real estate is considered Level 3 in the fair
value hierarchy.
Policy Loans – Policy loans typically carry an interest rate that is adjusted annually based on an observable market index and
therefore carrying value approximates fair value. The valuation of policy loans is considered Level 2 in the fair value hierarchy.
Funds Withheld at Interest – The carrying value of funds withheld at interest approximates fair value except where the funds
withheld are specifically identified in the agreement. When funds withheld are specifically identified in the agreement, the fair
value is based on the fair value of the underlying assets that are held by the ceding company. A variety of sources and pricing
methodologies, which are not transparent to the Company and may include significant unobservable inputs, are used to value
the securities that are held in distinct portfolios, therefore the valuation of these funds withheld assets and liabilities are
considered Level 3 in the fair value hierarchy.
Cash and Cash Equivalents and Short-term Investments – The carrying values of cash and cash equivalents and short-term
investments approximate fair values due to the short-term maturities of these instruments and are considered Level 1 in the fair
value hierarchy.
131
Other Invested Assets – This primarily includes lifetime mortgages, FHLB common stock, limited partnership interests
accounted for using the cost method and cash collateral. The fair value of the Company’s lifetime mortgage loan portfolio,
considered Level 3 in the fair value hierarchy, is estimated by discounting cash flows, both principal and interest, using a risk-
free rate plus an illiquidity premium. The cash flow analysis considers future expenses, changes in property prices, and actuarial
analysis of borrower behavior, mortality and morbidity. The fair value of the Company’s common stock investment in the
FHLB is considered to be the carrying value and it is considered Level 2 in the fair value hierarchy. The fair value of limited
partnership interests accounted for using the cost method, considered Level 3 in the fair value hierarchy, is estimated by
internally developed valuation techniques. The fair value of the Company’s cash collateral is considered to be the carrying
value and considered to be Level 1 in the fair value hierarchy.
Accrued Investment Income – The carrying value for accrued investment income approximates fair value as there are no
adjustments made to the carrying value. This is considered Level 2 in the fair value hierarchy.
Interest-Sensitive Contract Liabilities – The carrying and fair values of interest-sensitive contract liabilities reflected in the table
above exclude contracts with significant mortality risk. The fair value of the Company’s interest-sensitive contract liabilities
utilizes a market standard technique with both capital market inputs and policyholder behavior assumptions, as well as cash
values adjusted for recapture fees. The capital market inputs to the model, such as interest rates, are generally observable.
Policyholder behavior assumptions are generally not observable and may require use of significant management judgment. The
valuation of interest-sensitive contract liabilities is considered Level 3 in the fair value hierarchy.
Long-term Debt/Collateral Finance and Securitization Notes – The fair value of the Company’s long-term debt, and collateral
finance and securitization notes is generally estimated by discounting future cash flows using market rates currently available
for debt with similar remaining maturities and reflecting the credit risk of the Company, including inputs when available, from
actively traded debt of the Company or other companies with similar credit quality. The valuation of long-term debt, and
collateral finance and securitization notes is generally obtained from brokers and is considered Level 3 in the fair value
hierarchy.
Note 7 REINSURANCE CEDED RECEIVABLES AND OTHER
In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion
of benefits paid by ceding reinsurance to other insurance or reinsurance companies under excess coverage and coinsurance
contracts. In the individual life markets, the Company retains a maximum of $8 million of coverage per individual life. Claims
in excess of this retention amount are retroceded to retrocessionaires; however, the Company remains fully liable to the ceding
company for the entire amount of risk it assumes. In certain limited situations the Company has retained more than $8 million
per individual policy. The Company enters into agreements with other reinsurers to mitigate the residual risk related to the over-
retained policies. Additionally, due to some lower face amount reinsurance coverage provided by the Company in addition to
individual life, such as group life, disability and health, under certain circumstances, the Company could potentially incur net
claims totaling more than $8 million per individual life.
Retrocession reinsurance treaties do not relieve the Company from its obligations to direct writing companies. Failure of
retrocessionaires to honor their obligations could result in losses to the Company. The Company regularly evaluates the
financial condition of the insurance and reinsurance companies from which it assumes and to which it cedes reinsurance.
Consequently, allowances would be established for amounts deemed uncollectible. At December 31, 2021 and 2020, no
allowances were deemed necessary.
Retrocessions are arranged through the Company’s retrocession pools for amounts in excess of the Company’s retention limit.
As of December 31, 2021, all rated retrocession pool participants followed by the A.M. Best Company were rated “A-
(excellent)” or better. The Company verifies retrocession pool participants’ ratings on a quarterly basis. For a majority of the
retrocessionaires that were not rated, security in the form of letters of credit or trust assets has been posted. In addition, the
Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance. In addition
to its third party retrocessionaires, various RGA reinsurance subsidiaries retrocede amounts in excess of their retention to
affiliated subsidiaries.
132
The following table presents information for the Company’s reinsurance ceded receivables and other, including the respective
amount and A.M. Best rating for each reinsurer representing in excess of five percent of the total as of December 31, 2021 and
2020 (dollars in millions):
Reinsurer
Reinsurer A
Reinsurer B
Reinsurer C
Reinsurer D
Reinsurer E
Reinsurer F
Other reinsurers
Total
A.M. Best Rating
Amount
% of Total
Amount
% of Total
2021
2020
A+
A+
A+
A
A+
A++
$
1,626
63.0 % $
423
212
59
44
42
174
2,580
$
16.4
8.2
2.3
1.7
1.6
6.8
100.0 % $
—
420
216
64
46
55
182
983
— %
42.7
22.0
6.5
4.7
5.6
18.5
100.0 %
Included in the total ceded reinsurance receivables balance were $203 million and $278 million of claims recoverable, of which
$10 million and $10 million were in excess of 90 days past due, as of December 31, 2021 and 2020, respectively. Also included
in the total reinsurance ceded receivable and other is a deposit asset on reinsurance of $1,626 million as of December 31, 2021.
The effect of reinsurance on net premiums is as follows (dollars in millions):
Years ended December 31,
Direct insurance
Reinsurance assumed
Reinsurance ceded
Net premiums
2021
2020
2019
$
$
33 $
58 $
13,348
(868)
12,583
(947)
12,513 $
11,694 $
The effect of reinsurance on claims and other policy benefits as follows (dollars in millions):
Years ended December 31,
Direct insurance
Reinsurance assumed
Reinsurance ceded
Net claims and other policy benefits
2021
2020
2019
$
$
37 $
97 $
13,725
(986)
11,931
(953)
12,776 $
11,075 $
76
12,150
(929)
11,297
113
11,404
(1,320)
10,197
The effect of reinsurance on life insurance in force is shown in the following schedule (dollars in millions):
December 31, 2021
December 31, 2020
December 31, 2019
Direct
Assumed
Ceded
Net
Assumed/Net %
$
1,117 $
3,467,054 $
166,842 $
1,990
1,316
3,480,692
3,480,206
184,625
192,864
3,301,329
3,298,057
3,288,658
105.0 %
105.5
105.8
At December 31, 2021 and 2020, respectively, the Company provided approximately $25.9 billion and $24.3 billion of financial
reinsurance, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures, to other
insurance companies under financial reinsurance or capital solutions transactions to assist ceding companies in meeting
applicable regulatory requirements. Generally, such financial reinsurance is provided by the Company committing cash or
assuming insurance liabilities, which are collateralized by future profits on the reinsured business. The Company earns a fee
based on the amount of net outstanding financial reinsurance.
Reinsurance treaties, 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, or in some cases due to changes in the financial condition or ratings of the
reinsurer. Recapture of business previously ceded does not affect premiums ceded prior to the recapture of such business but
would reduce premiums in subsequent periods. Additionally, some reinsurance treaties give the ceding company the right to
require the Company to place assets in trust for their benefit to support the ceding company’s statutory reserve credits, in the
event of a downgrade of the Company’s credit ratings and or other statutory measure to specified levels, generally non-
investment grade levels, or if minimum levels of financial condition are not maintained. As of December 31, 2021, neither the
Company nor its subsidiaries have been required to post additional collateral or have had a reinsurance treaty recaptured as a
result of credit downgrade or defined statutory measure decline.
Certain reinsurance treaties require the reinsurer to place assets in trust to collateralize the reinsurer’s obligation to the ceding
company. Assets placed in trust continue to be owned by the Company, but their use is restricted based on the terms of the trust
133
agreement. Securities with an amortized cost of $4.1 billion and $3.7 billion were held in trust for the benefit of the Company’s
subsidiaries to satisfy collateral requirements for reinsurance business at December 31, 2021 and 2020, respectively.
Additionally, securities with an amortized cost of $28.7 billion and $27.7 billion as of December 31, 2021 and 2020,
respectively, were held in trust to satisfy collateral requirements under certain third-party reinsurance treaties. Under certain
conditions, the Company may be obligated to move reinsurance from one subsidiary to another subsidiary, post additional
collateral or make payments under a given reinsurance treaty. These conditions include change in control or ratings of the
subsidiary, insolvency, nonperformance under a reinsurance treaty, or loss of license or other regulatory authorization of such
subsidiary. If the Company was ever required to move reinsurance from one subsidiary to another subsidiary, the risk to the
Company on a consolidated basis under the reinsurance treaties would not change; however, additional collateral may need to
be posted or additional capital may be required due to the change in jurisdiction of the subsidiary reinsuring the business, which
could lead to a strain on liquidity.
Note 8 DEFERRED POLICY ACQUISITION COSTS
The following reflects the amounts of policy acquisition costs deferred and amortized (dollars in millions):
Years ended December 31,
Balance, beginning of year
Capitalization
Amortization (including interest)
Change in value of embedded derivatives
Attributed to unrealized investment gains (losses)
Foreign currency translation
Balance, end of year
2021
2020
2019
$
3,616 $
3,512 $
541
(496)
(36)
33
32
478
(405)
22
(26)
35
$
3,690 $
3,616 $
3,398
526
(315)
(15)
(97)
15
3,512
Some reinsurance agreements involve reimbursing the ceding company for allowances and commissions in excess of first-year
premiums. These amounts represent acquisition costs and are capitalized to the extent deemed recoverable from the future
premiums and amortized against future profits of the business. This type of agreement presents a risk to the extent that the
business lapses faster than originally anticipated, resulting in future profits being insufficient to recover the Company’s
investment.
Note 9 INCOME TAX
The effective tax rate for 2021 was lower than the U.S. Statutory rate of 21.0% primarily as a result of the release of uncertain
tax positions due to the expiration of the statute of limitations, and the release of valuation allowances primarily due to income
earned in RGA Australia. This benefit was partially offset by income earned in jurisdictions with tax rates higher than the U.S.
and GILTI, both emerging from income in Canada and Australia. Furthermore, the UK enacted an increase to the statutory tax
rate resulting in a tax expense from the remeasurement of the deferred tax liabilities. The effective tax rate for 2020 was higher
than the U.S. Statutory rate of 21.0% primarily as a result of income earned in jurisdictions with tax rates higher than the U.S.,
GILTI tax primarily due to RGA Canada's income, and a change in the corporate tax rate in the UK. These increases were
partially offset by foreign tax credit utilization and bases differences in Australia.
Pre-tax income for the years ended December 31, 2021, 2020 and 2019 consists of the following (dollars in millions):
Pre-tax income – U.S.
Pre-tax income – foreign
Total pre-tax income
2021
2020
2019
$
$
327 $
364
691 $
79 $
474
553 $
871
261
1,132
134
The provision for income tax expense for the years ended December 31, 2021, 2020 and 2019 consists of the following (dollars
in millions):
Current income tax expense (benefit):
U.S.
Foreign
Total current
Deferred income tax expense (benefit):
U.S.
Foreign
Total deferred
2021
2020
2019
$
91 $
75 $
72
163
(127)
38
(89)
79
154
(60)
44
(16)
Total provision for income taxes
$
74 $
138 $
(9)
60
51
182
29
211
262
The Company’s effective tax rate differed from the U.S. federal income tax statutory rate of 21% as a result of the following for
the years ended December 31, 2021, 2020 and 2019 (dollars in millions):
Tax provision at U.S. statutory rate
Increase (decrease) in income taxes resulting from:
Tax rate differences on income in other jurisdictions
Differences in tax basis in foreign jurisdictions
Deferred tax valuation allowance
Amounts related to uncertain tax positions
Equity based compensation
Corporate rate changes
GILTI, net of credits
Subpart F for non-full inclusion companies
Foreign tax credits
Return to provision adjustments
Other, net
Total provision for income taxes
Effective tax rate (1)
2021
2020
2019
$
145
$
116
$
238
51
(4)
(18)
(119)
(1)
29
11
2
(10)
(17)
5
74
10.6 %
$
21
(32)
10
10
(1)
13
13
—
(7)
(4)
(1)
138
24.9 %
$
2
(23)
56
8
(8)
(1)
—
1
(6)
(6)
1
262
23.1 %
$
(1) The Company rounds amounts in the financial statements to millions and calculates the effective tax rate from the underlying whole-dollar amounts. Thus
certain amounts may not recalculate based on the numbers due to rounding.
Total income taxes for the years ended December 31, 2021, 2020 and 2019 were as follows (dollars in millions):
Provision for income taxes
Income tax from OCI and additional paid-in-capital:
Net unrealized holding gain (loss) on debt and equity securities recognized for
financial reporting purposes
Foreign currency translation
Unrealized pension and post retirement
Total income taxes provided
$
$
2021
2020
2019
74 $
138 $
262
(520)
23
7
(416) $
611
(9)
(1)
739 $
681
3
(5)
941
135
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at
December 31, 2021 and 2020, are presented in the following tables (dollars in millions):
2021
2020
Deferred income tax assets:
Nondeductible accruals
Net operating loss carryforward
Tax Credit Carryforward
Other
Subtotal
Valuation allowance
Total deferred income tax assets
Deferred income tax liabilities:
Deferred acquisition costs
Policy reserves and other reinsurance liabilities
Invested assets
Outside basis difference foreign subsidiaries
Foreign currency translation
Anticipated future tax credit reduction
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
Balance sheet presentation of net deferred income tax liabilities:
Included in other assets
Included in deferred income taxes
Net deferred income tax liabilities
$
$
$
$
85 $
251
50
3
389
(218)
171
754
1,085
793
260
66
58
—
3,016
2,845 $
41 $
2,886
2,845 $
92
254
—
—
346
(251)
95
775
1,105
1,043
354
40
20
2
3,339
3,244
19
3,263
3,244
As of December 31, 2021, the valuation allowance against deferred tax assets was $218 million. During 2021, there were
decreases to the valuation allowance due to pre-tax earnings in certain subsidiaries with valuation allowances. These decreases
were partially offset by increases in the valuation allowance due to losses in subsidiaries that do not have a history of income.
The valuation allowance was further impacted by changes in foreign currency translation during the year.
As of December 31, 2020, the valuation allowance against deferred tax assets was $251 million. During 2020, there was a $20
million increase to the valuation allowance related to the tax losses of RGA Reinsurance Company of Australia Limited ("RGA
Australia"). RGA Australia's tax loss primarily relates to income on internal retrocession that is not taxable in RGA Australia.
The RGA Australia deferred tax asset has been reduced to the amount more likely than not to be realized considering the
projected future earnings. The valuation allowance increased further due to losses in jurisdictions that do not have a history of
income and changes in foreign currency translation during the year. These increases were partially offset by a valuation
allowance release related to U.S. Foreign Tax Credit utilization and income in jurisdictions with valuation allowances.
The earnings of substantially all of the Company's foreign subsidiaries have been permanently reinvested in foreign operations.
The Company has provided for future tax on the full inclusion companies where the Company cannot assert permanent
reinvestment. At December 31, 2021 and 2020, the financial reporting basis in excess of the tax basis for which no deferred
taxes have been recognized was approximately $1.8 billion and $2.7 billion, respectively. As U.S. Tax Reform generally
eliminates U.S. federal income taxes on dividends from foreign subsidiaries, the Company does not expect to incur material
income taxes if these funds were repatriated.
During 2021, 2020, and 2019, the Company received federal and foreign income tax refunds of approximately $20 million,
$59 million, and $22 million, respectively. The Company made cash income tax payments of approximately $388 million,
$167 million, and $66 million, in 2021, 2020, and 2019, respectively.
The following table presents consolidated net operating losses (“NOL”) as of December 31, 2021 (dollars in millions):
NOL with no expiration and with no valuation allowance
NOL with a full valuation allowance
NOL with no expiration and a partial valuation allowance
NOL with expiration dates between 2025 and 2041 with no valuation allowance
Total net operating loss carryforwards
2021
100
187
631
2
920
$
$
These net operating losses, other than the net operating losses for which there is a valuation allowance, are expected to be
utilized in the normal course of business during the period allowed for carryforwards and in any event, are not expected to be
lost, due to the application of tax planning strategies that management would utilize.
136
As of December 31, 2021, the Company had foreign tax credit carryforwards of $50 million related to the U.S. and Ireland. The
Ireland foreign tax credit of $26 million has a full valuation allowance.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company
is under continuous examination by the Internal Revenue Service and is subject to audit by taxing authorities in other foreign
jurisdictions in which the Company has significant business operations. The income tax years under examination vary by
jurisdiction. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to
2018, Canadian tax authorities for years prior to 2017 and with a few exceptions, the Company is no longer subject to state and
foreign income tax examinations by tax authorities for years prior to 2016.
As of December 31, 2021, the Company’s total amount of unrecognized tax benefits is $34 million all of which would affect
the effective tax rate, if recognized. Management believes it is reasonably possible that the unrecognized tax benefit could
decrease by up to $5 million over the next 12 months if statutes expire.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021, 2020
and 2019, is as follows (dollars in millions):
Beginning balance, January 1
Additions for tax positions of prior years
Reductions for tax positions of prior years
Additions for tax positions of current year
Ending balance, December 31
Total Unrecognized Tax Benefits
2021
2020
2019
342 $
333 $
2
(312)
2
281
(278)
6
34 $
342 $
325
264
(262)
6
333
$
$
The Company recognized interest expense (benefit) associated with uncertain tax positions in 2021, 2020 and 2019 of $(31)
million, $11 million, and $12 million, respectively. As of December 31, 2021 and 2020, the Company had $3 million and $34
million, respectively, of accrued interest related to unrecognized tax benefits. There are no penalties accrued as of December
31, 2021 and 2020.
Note 10 EMPLOYEE BENEFIT PLANS
Certain subsidiaries of the Company are sponsors or administrators of both qualified and non-qualified defined benefit pension
plans (“Pension Plans”). The largest of these plans is a non-contributory qualified defined benefit pension plan sponsored by
RGA Reinsurance Company (“RGA Reinsurance”) that covers U.S. employees. The benefits under the Pension Plans are
generally based on years of service and compensation levels. Effective January 1, 2020, the qualified defined benefit pension
plan and some of the non-qualified defined benefit pension plans were closed to new employees.
The Company also provides select health care and life insurance benefits for certain retired employees. The health care benefits
are provided through a self-insured welfare benefit plan. Employees become eligible for these benefits if they meet minimum
age and service requirements. The retiree’s cost for health care benefits varies depending upon the credited years of service.
Effective January 1, 2017, employees hired in the U.S. are not eligible for retiree health care benefits. The effect of the
amendment was recorded in 2016 in AOCI and is being amortized through prior service cost. Virtually all retirees, or their
beneficiaries, contribute a portion of the total cost of postretirement health benefits. Overfunded and underfunded plans are
recognized in other assets and other liabilities, respectively.
A December 31 measurement date is used for all of the defined benefit and postretirement plans. The status of these plans as of
December 31, 2021 and 2020 is summarized below (dollars in millions):
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Participant contributions
Amendments
Actuarial (gains) losses
Benefits paid
Foreign exchange translations and other adjustments
December 31,
Pension Benefits
Other Benefits
2021
2020
2021
2020
$
254 $
220 $
81 $
18
4
—
—
(8)
(12)
—
14
6
—
—
25
(12)
1
3
2
—
(3)
(6)
(2)
—
Benefit obligation at end of year
$
256 $
254 $
75 $
87
3
2
—
—
(9)
(2)
—
81
137
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Participant contributions
Benefits paid and expenses
Fair value of plan assets at end of year
Funded status at end of year
December 31,
Pension Benefits
Other Benefits
2021
2020
2021
2020
$
$
$
157 $
133 $
— $
15
19
—
(12)
179 $
(77) $
18
18
—
(12)
157 $
(97) $
—
2
—
(2)
— $
(75) $
Aggregate fair value of plan assets
Aggregate projected benefit
obligations
Over (under) funded
$
$
Qualified Plans
2021
2020
December 31,
Non-Qualified Plans(1)
2020
2021
Total
2021
2020
179 $
157 $
— $
— $
179 $
166
13 $
160
(3) $
90
(90) $
94
(94) $
256
(77) $
(1) For non-qualified plans, there are no required funding levels.
—
—
2
—
(2)
—
(81)
157
254
(97)
December 31,
Pension Benefits
Other Benefits
2021
2020
2021
2020
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss
Net prior service cost (credit)
Total
$
$
52 $
—
52 $
71 $
—
71 $
20 $
(9)
11 $
29
(8)
21
The following table presents information for qualified and non-qualified pension plans with a projected benefit obligation in
excess of plan assets as of December 31, 2021 and 2020 (dollars in millions):
Projected benefit obligation
Fair value of plan assets
2021
2020
$
256 $
179
254
157
The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of
December 31, 2021 and 2020 (dollars in millions):
Accumulated benefit obligation
Fair value of plan assets
2021
2020
$
248 $
179
243
157
The components of net periodic benefit cost, included in other operating expenses on the consolidated statements of income,
and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows (dollars in
millions):
138
Net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial losses
Amortization of prior service cost (credit)
Settlements
Net periodic benefit cost
Other changes in plan assets and benefit
obligations recognized in other
comprehensive income:
Net actuarial (gains) losses
Amortization of net actuarial (losses)
Amortization of prior service (cost) credit
Settlements
Prior service cost (credit)
Foreign exchange translations and other
adjustments
Total recognized in other comprehensive
income
Total recognized in net periodic benefit
cost and other comprehensive income
Pension Benefits
Other Benefits
2021
2020
2019
2021
2020
2019
$
18 $
14 $
13 $
3 $
3 $
4
(10)
6
—
—
18
(13)
(6)
—
—
—
—
(19)
6
(9)
5
—
—
16
17
(5)
—
—
—
—
12
7
(7)
4
—
—
17
14
(4)
—
—
—
—
10
2
—
2
(1)
—
6
(6)
(2)
1
—
(3)
—
(10)
2
—
2
(1)
—
6
(8)
(2)
1
—
—
—
(9)
$
(1) $
28 $
27 $
(4) $
(3) $
3
3
—
1
(1)
—
6
14
(1)
1
—
—
—
14
20
During 2022, the Company expects to contribute $22 million and $2 million to the pension plans and other benefit plans,
respectively.
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (dollars in
millions):
2022
2023
2024
2025
2026
2027 – 2031
Assumptions
Pension Benefits
Other Benefits
$
12 $
15
16
18
17
97
2
2
2
2
3
17
The weighted average assumptions used to determine the benefit obligation and net periodic benefit cost were as follows:
Benefit obligation
Discount rate
Rate of compensation increase
Net periodic benefit cost
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
Pension Benefits
Other Benefits
2021
2020
2019
2021
2020
2019
2.64 %
4.74 %
2.21 %
6.50 %
4.71 %
2.22 %
4.69 %
3.03 %
7.00 %
4.60 %
3.05 %
4.61 %
4.03 %
7.00 %
4.16 %
2.76 %
n/a
2.41 %
n/a
3.17 %
n/a
2.41 %
3.17 %
4.17 %
n/a
n/a
n/a
n/a
n/a
n/a
The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan
invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of
the plan assets by sector, adjusted for the long-term expectations on the performance of the markets. While the precise expected
return derived using this approach may fluctuate from year to year, the policy is to hold this long-term assumption constant as
long as it remains within reasonable tolerance from the derived rate. This process is consistent for all plan assets as all the assets
are invested in mutual funds.
139
The assumed health care cost trend rates used in measuring the accumulated non-pension post-retirement benefit obligation
were as follows:
Health care cost trend rates assumed for next year
Ultimate cost trend rate
Year ultimate trend is reached
Plan Assets
As of December 31,
2021
2020
6.50 %
4.50 %
2026
7.00 %
4.50 %
2026
Target allocations of U.S. qualified pension plan assets are determined with the objective of maximizing returns and minimizing
volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target
allocations based on the Company’s assessment of the effect of economic factors and market conditions. The target allocations
for plan assets are 60% equity securities and 40% debt securities as of December 31, 2021 and 2020. The Company’s plan
assets are invested in mutual funds. The mutual funds include holdings of S&P 500 securities, large-cap securities, mid-cap
securities, small-cap securities, international securities, corporate debt securities, U.S. and other government securities,
mortgage-related securities and cash.
Equity and debt securities are exposed to various risks, such as interest rate risk, credit risk and overall market volatility. Due to
the level of risk associated with certain investment securities, changes in the values of investment securities will occur and any
change would affect the amounts reported in the financial statements.
The fair values of the Company’s qualified pension plan assets as of December 31, 2021 and 2020 are summarized below
(dollars in millions):
Mutual Funds(1)
Cash
Total
December 31, 2021
Fair Value Measurement Using:
Total
Level 1
Level 2
Level 3
$
$
179 $
—
179 $
179 $
—
179 $
— $
—
— $
(1) Mutual funds were invested 27% in U.S. equity funds, 38% in U.S. fixed income funds, 18% in non-U.S. equity funds and 17% in other.
Mutual Funds(2)
Cash
Total
December 31, 2020
Fair Value Measurement Using:
Total
Level 1
Level 2
Level 3
$
$
157 $
—
157 $
157 $
—
157 $
— $
—
— $
—
—
—
—
—
—
(2) Mutual funds were invested 27% in U.S. equity funds, 39% in U.S. fixed income funds, 18% in non-U.S. equity funds and 16% in other.
As of December 31, 2021 and 2020, the Company classified all of its qualified pension plan assets in the Level 1 category as
quoted prices in active markets are available for these assets. See Note 6 – “Fair Value of Asset and Liabilities” for additional
detail on the fair value hierarchy.
Savings and Investment Plans
Certain subsidiaries of RGA also sponsor savings and investment plans under which a portion of employee contributions are
matched. Subsidiary contributions to these plans were $21 million, $19 million and $16 million in 2021, 2020 and 2019,
respectively.
Note 11 FINANCIAL CONDITION AND NET INCOME ON A STATUTORY BASIS – SIGNIFICANT SUBSIDIARIES
The domestic and foreign insurance subsidiaries of RGA prepare their statutory financial statements in conformity with
statutory accounting practices prescribed or permitted by the applicable state insurance department or local regulatory authority,
which may vary materially from statements prepared in accordance with GAAP. Prescribed statutory accounting practices in the
U.S. include publications of the National Association of Insurance Commissioners (“NAIC”), as well as state laws, local
regulations and general administrative rules. The differences between statutory financial statements and financial statements
prepared in accordance with GAAP vary between jurisdictions. The principal differences between GAAP and NAIC are that
statutory financial statements do not reflect deferred policy acquisition costs and limit deferred tax assets, life benefit reserves
140
predominately use interest rate and mortality assumptions prescribed by the NAIC and local regulatory agencies, bonds are
generally carried at amortized cost and reinsurance assets and liabilities are presented net of reinsurance.
Statutory net income and capital and surplus of the Company’s primary operating insurance subsidiaries, determined in
accordance with statutory accounting practices prescribed by the applicable state insurance department or local regulatory
authority are as follows (dollars in millions):
Statutory Capital and Surplus
Statutory Net Income (Loss)
2021
2020
2021
2020
2019
RGA Americas Reinsurance Company, Ltd.
$
6,812 $
8,249 $
(241) $
RGA Reinsurance Company
Reinsurance Company of Missouri, Incorporated
RGA Reinsurance Company (Barbados) Ltd.
RGA Atlantic Reinsurance Company Ltd.
RGA International Reinsurance Company dac
RGA Life Reinsurance Company of Canada
RGA Worldwide Reinsurance Company, Ltd.
RGA Global Reinsurance Company, Ltd.
RGA Reinsurance Company of Australia Limited
Other
2,368
2,362
1,781
1,137
1,121
903
702
565
485
1,015
2,131
2,136
1,835
1,441
1,460
886
703
495
535
1,298
(98)
(13)
52
(226)
43
25
10
93
(22)
(152)
879 $
(133)
4
268
175
52
152
104
59
42
194
1,049
280
75
234
243
37
(225)
106
71
15
114
Each U.S. domestic insurance subsidiary’s state of domicile imposes minimum risk-based capital (“RBC”) requirements that
were developed by the NAIC. The formulas for determining the amount of RBC specify various weighting factors that are
applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is
determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the
NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified
corrective action. Each of RGA’s U.S. domestic insurance subsidiaries exceeded the minimum RBC requirements for all
periods presented herein. These requirements do not represent a significant constraint for the payment of dividends by RGA’s
U.S. domestic insurance companies.
The licensing orders of the Company’s special purpose companies stipulate a minimum amount of capital required based on the
purpose of the entity and the underlying business. These companies are subject to enhanced oversight by the regulator which
includes filing detailed plans of operations before commencing operations or making material changes to existing agreements or
entering into new agreements. Each of the Company’s Special Purpose Life Reinsurance Captives (“SPLRC”) exceeded the
minimum capital requirements for all periods presented herein.
The Company’s foreign insurance subsidiaries prepare financial statements in accordance with local regulatory requirements.
The regulatory authorities in these foreign jurisdictions establish some form of minimum regulatory capital and surplus
requirements. All of the Company’s foreign insurance subsidiaries have regulatory capital and surplus that exceed the local
minimum requirements. These requirements do not represent a significant constraint for the payment of dividends by the
Company’s foreign insurance companies.
The state of domicile of certain of the Company’s SPLRCs follow prescribed accounting practices differing from NAIC
statutory accounting practices (“NAIC SAP”) applicable to their statutory financial statements. Specifically, these prescribed
practices require that surplus note interest accrued but not approved for payment be reported as a direct reduction of surplus and
an addition to the surplus note balance. Under NAIC SAP, surplus note interest is not to be reported until approved for payment
and is reported as a reduction of net investment income in the Summary of Operations. In addition, these prescribed practices
allow the SPLRC to reflect letters of credit issued for its benefit as an admitted asset and a direct credit to unassigned surplus.
Under NAIC SAP, letters of credit issued on behalf of the reporting company are not reported on the balance sheet.
A reconciliation of the surplus between NAIC SAP and practices prescribed by the state of domicile is shown below (dollars in
millions):
Prescribed practice – surplus
Prescribed practice – letters of credit
Surplus (deficit) – NAIC SAP
December 31,
2021
2020
$
$
403 $
(461)
(58) $
577
(461)
116
Reinsurance Company of Missouri (“RCM”), RGA Reinsurance and Chesterfield Reinsurance Company (“Chesterfield Re”)
are subject to Missouri statutory provisions that restrict the payment of dividends. They may not pay dividends in any 12-month
period in excess of the greater of the prior year’s statutory net gain from operations or 10% of statutory capital and surplus at
141
the preceding year-end, without regulatory approval. Aurora National Life Assurance Company (“Aurora National”) is subject
to California statutory provisions that are identical to those imposed by Missouri regarding the ability of Aurora National to pay
dividends to RGA Reinsurance. The applicable statutory provisions only permit an insurer to pay a shareholder dividend from
unassigned surplus. As of January 1, 2022, RGA Reinsurance could pay maximum dividends, without prior approval, of
approximately $237 million. Any dividends paid by RGA Reinsurance would be paid to RCM, its parent company, which in
turn has restrictions related to its ability to pay dividends to RGA.
Chesterfield Re would pay dividends to its immediate parent Chesterfield Financial Holdings LLC, (“Chesterfield Financial”),
which would in turn pay dividends to RCM, subject to the terms of the indenture for the embedded value securitization
transaction, in which Chesterfield Financial cannot declare or pay any dividends so long as any private placement notes are
outstanding. The Missouri Department of Commerce and Insurance allows RCM to pay a dividend to RGA to the extent RCM
received the dividend from its subsidiaries, without limitation related to the level of unassigned surplus. Dividend payments
from other subsidiaries are subject to regulations in the jurisdiction of domicile, which are generally based on their earnings
and/or capital level.
Dividend payments from non-U.S. operations are subject to similar restrictions established by local regulators. The non-U.S.
regulatory regimes also commonly limit the dividend payments to the parent to a portion of the prior year’s statutory income, as
determined by the local accounting principles. The regulators of the Company’s non-U.S. operations may also limit or prohibit
profit repatriations or other transfers of funds to the U.S. if such transfers are deemed to be detrimental to the solvency or
financial strength of the non-U.S. operations, or for other reasons. Most of the non-U.S. operating subsidiaries are second tier
subsidiaries that are owned by various non-U.S. holding companies. The capital and rating considerations applicable to the first
tier subsidiaries may also impact the dividends paid to RGA.
There are no regulatory restrictions that limit the payment of dividends by RGA, except those generally applicable to Missouri
corporations. Dividends are payable by Missouri corporations only under the circumstances specified in The General and
Business Corporation Law of Missouri. RGA would not be permitted to pay common stock dividends if there is any accrued
and unpaid interest on its subordinated debentures and its junior subordinated debentures. Furthermore, the ability of RGA to
pay dividends is dependent on business conditions, income, cash requirements of the Company, receipt of dividends from its
subsidiaries, financial covenant provisions and other relevant factors.
Note 12 COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
Funding of Investments
The Company’s commitments to fund investments as of December 31, 2021 and 2020 are presented in the following table
(dollars in millions):
Limited partnership interests and joint ventures
Mortgage loans on real estate
Bank loans and private placements
Lifetime mortgages
2021
2020
$
1,031 $
152
768
41
678
199
194
43
The Company anticipates that the majority of its current commitments will be invested over the next five years; however, these
commitments could become due any time at the request of the counterparties. Bank loans and private placements are included
in fixed maturity securities available-for-sale.
The Company has a liability for expected credit losses associated with unfunded commitments of approximately $1 million and
$2 million as of December 31, 2021 and 2020, respectively, which is included in other liabilities on the Company’s
consolidated balance sheets.
Off-Balance Sheet Arrangements
In 2013, the Company executed a series of incentive agreements with the County of St. Louis, Missouri (the “County”). Under
these agreements, the Company transferred ownership in its newly constructed world headquarters to the County in exchange
for taxable industrial revenue bonds (the “bonds”), in a series of bond issuances during 2013 and 2014, with a maximum
amount of $150 million. As a result, the Company was able to reduce the cost of constructing and operating its world
headquarters by reducing certain state and local tax expenditures. The Company simultaneously leased the world headquarters
from the County and has an option to purchase the world headquarters for a nominal fee upon tendering the bonds back to the
County. The payments due to the Company under the terms of the bonds and the amounts owed by the Company under the
terms of the lease agreement qualify for the right of offset under GAAP. As such, neither the bonds nor the lease obligation is
142
recorded on the consolidated balance sheets as an asset or liability, respectively. The world headquarters is recorded as an asset
of the Company in “Other assets” on the consolidated balance sheets.
Funding Agreements
Federal Home Loan Bank of Des Moines
The Company is a member of the FHLB and, through membership, has issued funding agreements to the FHLB in exchange for
cash advances. As of December 31, 2021 and 2020, the Company had $1.4 billion and $1.9 billion, respectively, of FHLB
funding agreements outstanding. The Company is required to provide collateral in excess of the funding agreement amounts
outstanding, considering any discounts to the securities posted and prepayment penalties.
Funding Agreement Backed Notes
During 2021, the Company executed an offering under its Funding Agreement Backed Notes (“FABN”) program, which allows
RGA Global Funding, a special-purpose, unaffiliated statutory trust, to offer its senior secured medium-term notes to investors.
RGA Global Funding uses the net proceeds from each sale to purchase one or more funding agreements from the Company. As
of December 31, 2021, the Company had $500 million of FABN agreements outstanding and are included within interest-
sensitive contract liabilities. On January 18, 2022, the Company issued additional FABN agreements totaling $400 million.
Contingencies
Litigation
The Company is subject to litigation in the normal course of its business; however, the Company currently has no material
litigation. A legal reserve is established when the Company is notified of an arbitration demand or litigation or is notified that
an arbitration demand or litigation is imminent, it is probable that the Company will incur a loss as a result and the amount of
the probable loss is reasonably capable of being estimated.
Other Contingencies
The Company indemnifies its directors and officers as provided in its charters and by-laws. Since this indemnity generally is
not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the
maximum potential amount due under this indemnity in the future.
Guarantees
Statutory Reserve and Solvency Support
The Company has committed to provide statutory reserve support to third-parties, in exchange for a fee, by funding loans if
certain defined events occur. Such statutory reserves are required under the U.S. Valuation of Life Policies Model Regulation
(commonly referred to as Regulation XXX for term life insurance policies and Regulation A-XXX for universal life secondary
guarantees). In addition, the Company has also committed to provide capital support to a third-party, in exchange for a fee, by
agreeing to assume real estate leases in the event of a severe and prolonged decline in the commercial lease market. Upon
assumption of a lease, the Company would recognize a right to use asset and lease obligation. As of December 31, 2021, the
Company does not believe that it will be required to provide any funding under these commitments as the occurrence of the
defined events is considered remote. The following table presents the maximum potential obligation for these commitments as
of December 31, 2021 (dollars in millions):
Commitment Period
2034
2035
2036
2037
2038
2039
2046
Other Guarantees
$
Maximum Potential
Obligation
1,243
2,671
3,599
6,850
2,300
7,351
3,000
The Company has issued guarantees to third parties on behalf of its subsidiaries for the payment of amounts due under certain
reinsurance treaties, securities borrowing and repurchase arrangements, financing arrangements and office lease obligations,
whereby if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the
obligation. In limited circumstances, treaty guarantees are granted to ceding companies in order to provide them additional
security, particularly in cases where RGA’s subsidiary is relatively new, unrated, or not of a significant size, relative to the
ceding company. Liabilities supported by the treaty guarantees, before consideration for any legally offsetting amounts due
143
from the guaranteed party are reflected on the Company’s consolidated balance sheets in a policy related liability. Potential
guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related
to securities borrowing and repurchase arrangements provide additional security to third parties should a subsidiary fail to
provide securities when due. RGA’s guarantees issued as of December 31, 2021 and 2020 are reflected in the following table
(dollars in millions):
Treaty guarantees
Treaty guarantees, net of assets in trust
Securities borrowing and repurchase arrangements
Note 13 DEBT
Long-Term Debt
$
2021
2020
2,208 $
1,281
134
1,934
961
133
The Company’s long-term debt consists of the following as of December 31, 2021 and 2020 (dollars in millions):
$400 million 5.00% Senior Notes due 2021
$400 million 4.70% Senior Notes due 2023
$400 million 3.95% Senior Notes due 2026
$600 million 3.90% Senior Notes due 2029
$600 million 3.15% Senior Notes due 2030
$100 million 4.09% Promissory Note due 2039
$400 million 6.20% Subordinated Debentures due 2042
$500 million 4.00% Surplus Notes due 2051
$400 million 5.75% Subordinated Debentures due 2056
$400 million Variable Rate Junior Subordinated Debentures due 2065
Sub-total
Unamortized issuance costs
Long-term Debt
2021
2020
$
— $
400
400
599
597
80
400
500
400
319
3,695
(28)
3,667 $
$
400
399
400
599
597
83
400
—
400
319
3,597
(24)
3,573
RGA has entered into an interest rate swap on its Variable Rate Junior Subordinated Debentures that effectively fixes the
interest rate on these securities at 4.82% until December 2037.
On December 13, 2021, RGA Reinsurance, a subsidiary of Reinsurance Group of America, Incorporated, entered into a
subscription agreement with unaffiliated financial institutions as purchasers (the “Purchasers”), pursuant to which RGA
Reinsurance has issued to the Purchasers 4.00% Surplus Notes due 2051 (the “Surplus Notes”). The proceeds of the Surplus
Notes issued pursuant to the subscription agreement was $500 million. RGA Reinsurance will use the proceeds of the Surplus
Notes for general corporate purposes. Capitalized issue costs were approximately $6 million.
On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face amount of $600 million. This security has
been registered with the Securities and Exchange Commission. The net proceeds were approximately $593 million and were
used in part to repay the Company’s $400 million 5.00% Senior Notes that matured in June 2021, and the remainder was used
for general corporate purposes. Capitalized issue costs were approximately $5 million.
Certain of the Company’s debt agreements contain financial covenant restrictions related to, among others, liens, the issuance
and disposition of stock of restricted subsidiaries, minimum requirements of consolidated net worth, maximum ratios of debt to
capitalization and change of control provisions. A material ongoing covenant default could require immediate payment of the
amount due, including principal, under the various agreements. Additionally, the Company’s debt agreements contain cross-
default covenants, which would make outstanding borrowings immediately payable in the event of a material uncured covenant
default under any of the agreements, including, but not limited to, non-payment of indebtedness when due for an amount in
excess of the amounts set forth in those agreements, bankruptcy proceedings, or any other event that results in the acceleration
of the maturity of indebtedness. As of December 31, 2021 and 2020, the Company had $3,695 million and $3,597 million,
respectively, in outstanding borrowings under its debt agreements and was in compliance with all covenants under those
agreements. As of December 31, 2021 and 2020, the average interest rate on long-term debt outstanding was 4.42% and 4.54%,
respectively.
144
The ability of the Company to make debt principal and interest payments depends on the earnings and surplus of subsidiaries,
investment earnings on undeployed capital proceeds, and the Company’s ability to raise additional funds. Future principal
payments due on long-term debt, excluding discounts, as of December 31, 2021, were as follows (dollars in millions):
2022
2023
2024
2025
2026
Thereafter
Calendar Year
Long-term debt
$
3 $
403 $
3 $
4 $
404 $
2,883
Credit and Committed Facilities
The Company has obtained bank letters of credit in favor of various affiliated and unaffiliated insurance companies from which
the Company assumes business. These letters of credit represent guarantees of performance under the reinsurance agreements
and allow ceding companies to take statutory reserve credits. Certain of these letters of credit contain financial covenant
restrictions. At December 31, 2021 and 2020, there were approximately $53 million and $23 million, respectively, of undrawn
outstanding bank letters of credit in favor of third parties. Additionally, the Company utilizes letters of credit primarily to secure
reserve credits when it retrocedes business to its affiliated subsidiaries. The Company cedes business to its affiliates to help
reduce the amount of regulatory capital required in certain jurisdictions such as the U.S. and the UK. As of December 31, 2021
and 2020, $1,440 million and $1,508 million, respectively, in undrawn letters of credit from various banks were outstanding,
primarily backing reinsurance between the various subsidiaries of the Company. The banks providing letters of credit to the
Company are included on the NAIC list of approved banks.
The Company maintains seven committed credit facilities, a syndicated revolving credit facility and six letter of credit facilities.
The committed credit facilities have a combined capacity of $988 million while the syndicated revolving credit facility is for
$850 million and the remaining credit facilities have a capacity of $1,025 million. The Company may borrow cash and obtain
letters of credit in multiple currencies under its syndicated revolving credit facility. The following table provides additional
information on the Company’s existing committed credit facilities as of December 31, 2021 and 2020 (dollars in millions):
Amount Utilized(1)
December 31,
Current Capacity
Maturity Date
2021
2020
Basis of Fees
$
108
500
100
850
80 (2)
100
100
March 2022
$
May 2022
May 2023
August 2023
December 2023
February 2024
August 2024
108 $
376
107 Fixed
210 Debt rating and utilization %
70
21
80
51
40
75 Fixed
21 Senior unsecured long-term debt rating
100 Fixed
51 Fixed
100 Fixed
(1) Represents issued but undrawn letters of credit. There was no cash borrowed for the periods presented.
(2) Foreign currency denominated facility, amounts presented are in U.S. dollars.
Fees associated with the Company’s other letters of credit are not fixed for periods in excess of one year and are based on the
Company’s ratings and the general availability of these instruments in the marketplace. Total fees expensed associated with the
Company’s letters of credit were $11 million, $10 million and $8 million for the years ended December 31, 2021, 2020 and
2019, respectively, and are included in policy acquisition costs and other insurance expenses.
Note 14 COLLATERAL FINANCE AND SECURITIZATION NOTES
Collateral Finance Notes
In 2006, RGA’s subsidiary, Timberlake Financial L.L.C. (“Timberlake Financial”), issued $850 million of Series A Floating
Rate Insured Notes, due June 2036, in a private placement. The notes were issued to fund the collateral requirements for
statutory reserves required by Regulation XXX on specified term life insurance policies reinsured by RGA Reinsurance and
retroceded to Timberlake Re. Proceeds from the notes, along with a $113 million direct investment by RGA, were deposited
into a series of accounts that collateralize the notes and are not available to satisfy the general obligations of the Company. As
of December 31, 2021 and 2020, respectively, the Company held assets in trust and in custody of $465 million and $572
million, of which $39 million and $40 million were held in a Debt Service Coverage account to cover interest payments on the
notes. Interest on the notes accrues at an annual rate of 1-month LIBOR plus a base rate margin, payable monthly, and totaled
$1 million, $3 million and $9 million in 2021, 2020 and 2019, respectively.
In 2015, RGA’s subsidiary, RGA Reinsurance Company (Barbados) Ltd. (“RGA Barbados”) obtained CAD$200.0 million of
collateral financing from a third party that matured in May 2020, enabling RGA Barbados to support collateral requirements for
Canadian reinsurance transactions. The obligation is reflected on the consolidated balance sheets in collateral finance and
145
securitization notes. Interest on the collateral financing is payable quarterly and accrues at 3-month Canadian Dealer Offered
Rate plus a margin and totaled $0 million, $2 million and $5 million in 2021, 2020 and 2019, respectively.
Securitization Notes
In 2014, RGA’s subsidiary, Chesterfield Financial Holdings LLC, (“Chesterfield Financial”), issued $300 million of asset-
backed notes due December 2024 in a private placement. The notes were called and fully redeemed on December 15, 2021.
As of December 31, 2021 and 2020, the Company held deposits in trust of $0 million and $10 million, respectively, to cover
interest payments on the notes, which are not available to satisfy the general obligations of the Company. Interest on the notes
accrues at an annual rate of 4.50%, payable quarterly, and totaled $6 million, $7 million and $8 million in 2021, 2020 and 2019,
respectively.
The Company’s collateral finance and securitization notes consist of the following as of December 31, 2021 and 2020 (dollars
in millions):
Timberlake Financial
Chesterfield Financial
Unamortized issuance costs
Total
Note 15 SEGMENT INFORMATION
2021
2020
181 $
—
(1)
180 $
247
143
(2)
388
$
$
The Company has geographic-based and business-based operational segments. Geographic-based operations are further
segmented into traditional and financial solutions businesses.
The U.S. and Latin America Traditional segment provides individual and group life and health reinsurance to domestic clients
for a variety of products through yearly renewable term agreements, coinsurance, and modified coinsurance. The U.S. and Latin
America Financial Solutions segment includes asset-intensive products that concentrate on the investment risk within
underlying annuities and corporate-owned life insurance policies, financial reinsurance, and capital solutions that assists ceding
companies in meeting applicable regulatory requirements while enhancing their financial strength and regulatory surplus
position.
The Canada Traditional segment is primarily engaged in individual life reinsurance, and to a lesser extent creditor, group life
and health, critical illness and disability reinsurance, through yearly renewable term and coinsurance agreements. The Canada
Financial Solutions segment concentrates on assisting clients with longevity risk transfer structures within underlying annuities
and pension benefit obligations, and provides capital solutions to assist clients in meeting applicable regulatory requirements
while enhancing their financial strength and regulatory surplus position through financial reinsurance and other capital solutions
structures.
The Europe, Middle East and Africa Traditional segment provides individual and group life and health products through yearly
renewable term and coinsurance agreements, reinsurance of critical illness coverage that provides a benefit in the event of the
diagnosis of a pre-defined critical illness and underwritten annuities. The Europe, Middle East and Africa Financial Solutions
segment provides longevity, asset-intensive and financial reinsurance. Longevity reinsurance takes the form of closed block
annuity reinsurance and longevity swap structures.
The Asia Pacific Traditional segment provides individual and group life and health reinsurance, critical illness coverage,
disability and superannuation through yearly renewable term and coinsurance agreements. The Asia Pacific Financial Solutions
segment provides financial reinsurance, asset-intensive and certain disability and life blocks.
Corporate and Other revenues primarily include investment income from unallocated invested assets, investment related gains
and losses and service fees. Corporate and Other expenses consist of the offset to capital charges allocated to the operating
segments within the policy acquisition costs and other insurance income line item, unallocated overhead and executive costs,
interest expense related to debt, and the investment income and expense associated with the Company’s collateral finance and
securitization transactions and service business expenses. Additionally, Corporate and Other includes results from certain
wholly-owned subsidiaries, such as RGAX, and joint ventures that, among other activities, develop and market technology, and
provide consulting and outsourcing solutions for the insurance and reinsurance industries. The Company has increased its
investment and expenditures in this area in an effort to both support its clients and accelerate the development of new solutions
and services to increase consumer engagement within the life industry.
The accounting policies of the segments are the same as those described in Note 2 – “Significant Accounting Policies and
Pronouncements.” The Company measures segment performance primarily based on profit or loss from operations before
income taxes. There are no intersegment reinsurance transactions and the Company does not have any material long-lived
assets.
146
The Company allocates capital to its segments based on an internally developed economic capital model, the purpose of which
is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model
considers the unique and specific nature of the risks inherent in the Company’s businesses. As a result of the economic capital
allocation process, a portion of investment income is attributed to the segments based on the level of allocated capital. In
addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is
included in policy acquisition costs and other insurance expenses.
Information related to revenues, income (loss) before income taxes, interest expense, depreciation and amortization, and assets
of the Company’s operations are summarized below (dollars in millions):
For the years ended December 31,
Revenues:
U.S. and Latin America:
Traditional
Financial Solutions
Total
Canada:
Traditional
Financial Solutions
Total
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total
Asia Pacific:
Traditional
Financial Solutions
Total
Corporate and Other
Total
For the years ended December 31,
Income (loss) before income taxes:
U.S. and Latin America:
Traditional
Financial Solutions
Total
Canada:
Traditional
Financial Solutions
Total
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total
Asia Pacific:
Traditional
Financial Solutions
Total
Corporate and Other
Total
For the years ended December 31,
Interest expense:
Corporate and Other
Total
2021
2020
2019
$
7,198 $
6,560 $
1,492
8,690
1,448
101
1,549
1,827
616
2,443
2,778
417
3,195
781
1,220
7,780
1,260
92
1,352
1,633
471
2,104
2,806
309
3,115
245
16,658 $
14,596 $
2021
2020
2019
(540) $
515
(25)
128
15
143
(239)
303
64
(10)
98
88
421
691 $
(298) $
295
(3)
134
21
155
27
258
285
174
59
233
(117)
553 $
(145)
1,132
2021
2020
2019
127 $
127 $
170 $
170 $
173
173
6,500
1,279
7,779
1,286
99
1,385
1,520
450
1,970
2,681
228
2,909
257
14,300
265
398
663
168
15
183
80
223
303
105
23
128
$
$
$
$
$
147
For the years ended December 31,
Depreciation and amortization:
U.S. and Latin America:
Traditional
Financial Solutions
Total
Canada:
Traditional
Financial Solutions
Total
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total
Asia Pacific:
Traditional
Financial Solutions
Total
Corporate and Other
Total
2021
2020
2019
$
360 $
80
440
291 $
90
381
21
—
21
66
1
67
87
43
130
22
24
—
24
46
1
47
94
20
114
23
291
143
434
20
—
20
56
1
57
60
16
76
22
$
680 $
589 $
609
The table above includes amortization of DAC, including the effect from investment related gains and losses.
For the years ended December 31,
Assets:
U.S. and Latin America:
Traditional
Financial Solutions
Total
Canada:
Traditional
Financial Solutions
Total
Europe, Middle East and Africa:
Traditional
Financial Solutions
Total
Asia Pacific:
Traditional
Financial Solutions
Total
Corporate and Other
Total
2021
2020
$
20,572 $
29,028
49,600
5,091
18
5,109
4,670
7,165
11,835
10,048
7,678
17,726
$
7,905
92,175 $
20,071
25,433
45,504
4,682
13
4,695
4,763
7,292
12,055
8,197
4,299
12,496
9,906
84,656
Companies in which the Company has significant influence over the operating and financing decisions but are not required to
be consolidated, are reported on the equity basis of accounting. The equity in the net income of such investments is not material
to the results of operations or financial position of individual segments or the Company taken as a whole. Capital expenditures
of each reporting segment were immaterial in the periods noted.
No individual client generated 10% or more of the Company’s total gross premiums and other revenues on a consolidated basis
in 2021, 2020 and 2019. For the purpose of this disclosure, companies that are within the same insurance holding company
structure are combined.
148
Note 16 POLICY CLAIMS AND BENEFITS
Liabilities for Unpaid Claims and Claim Expense
The Company uses several actuarial methods to compute incurred-but-not reported liabilities. These methods use historical
claim reporting patterns to develop a triangle of reported claim amounts. The claim triangle is then used to develop the ultimate
claims amount and the incurred-but-not reported liabilities. Expected claim methods use exposure data such as premiums to
develop the ultimate claim amount. The final method blends the estimates from the development and the expected claim
methods. There were no significant changes in methodologies during 2021.
The following tables provide information on incurred and paid claims development, net of retrocession, for short-duration
reinsurance contracts for the Company’s U.S. and Latin America and Asia Pacific Traditional segments, which primarily relate
to group life and health (including disability) business. The short-duration business for the Company’s other segments is
immaterial. Liabilities for claims and claims adjustment expenses, net of reinsurance equals total incurred claims less
cumulative paid claims plus outstanding liabilities prior to 2012.
The Company provides reinsurance on large quota share transactions. It is common industry practice for cedants to provide loss
information on a bulk basis without comprehensive claim details. Additionally, a claim under aggregate stop loss coverage may
be the result of thousands of claims, but the Company only pays the excess amount. Therefore, it is impractical to provide
meaningful claim count detail by accident year in the tables shown below.
U.S. and Latin America
(dollars in millions)
As of
December 31, 2021
Total of Incurred-but-Not-
Reported Liabilities Plus
Expected Development on
Reported Claims
Accident
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Accident
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Incurred Claims and Allocated Claim Adjustments, Net of Reinsurance (1)
For the Years Ended December 31,
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
—
—
—
—
—
—
1
4
25
211
$
323 $
309 $
297 $
298 $
299 $
298 $
297 $
297 $
296 $
297 $
349
333
408
339
411
460
337
396
461
501
336
397
465
500
485
336
396
462
501
514
538
337
399
462
497
509
538
491
335
399
463
497
504
524
473
469
336
401
463
498
503
517
456
426
509
Total
$ 4,406
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance (1)
For the Years Ended December 31,
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$
109 $
222 $
244 $
252 $
258 $
264 $
268 $
272 $
275 $
114
249
129
277
305
146
286
337
361
185
292
349
407
393
190
297
356
422
437
403
183
302
364
431
451
448
415
180
305
368
437
460
462
465
372
159
279
309
374
441
467
468
479
418
356
177
Liabilities for claims and claim adjustment expense, net of reinsurance
All outstanding claims prior to 2012, net of reinsurance
$
110
748
Total $ 3,768
(1)
2012 – 2020 unaudited.
149
Asia Pacific
(dollars in millions)
As of
December 31, 2021
Total of Incurred-but-Not-
Reported Liabilities Plus
Expected Development on
Reported Claims
Accident
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Accident
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Incurred Claims and Allocated Claim Adjustments, Net of Reinsurance (1)
For the Years Ended December 31,
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
3
4
5
8
7
7
22
44
40
37
$
214 $
287 $
292 $
295 $
303 $
313 $
319 $
323 $
325 $
328 $
302
323
285
313
309
287
310
273
265
235
324
279
258
212
219
338
293
275
219
221
261
340
295
275
227
221
279
261
339
295
276
226
224
273
270
154
340
294
275
223
211
261
277
151
72
Total $ 2,432
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance (1)
For the Years Ended December 31,
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$
51 $
139 $
191 $
230 $
251 $
268 $
283 $
293 $
301 $
51
149
36
216
140
50
243
183
122
39
269
212
172
101
37
292
236
208
137
90
33
304
250
229
157
119
110
39
313
260
241
172
141
151
105
23
307
320
267
251
183
157
182
145
56
8
All outstanding claims prior to 2012, net of reinsurance
75
Liabilities for claims and claim adjustment expense, net of reinsurance
$
631
Total $ 1,876
(1)
2012 – 2020 unaudited.
The following is unaudited supplementary information about average historical claims duration as of December 31, 2021:
Average Annual Payout of Incurred Claims by Age, Net of Reinsurance
Years
U.S. and Latin America
Asia Pacific
1
35.6 %
15.0 %
2
42.8 %
27.2 %
3
9.0 %
16.1 %
4
2.8 %
10.6 %
5
1.8 %
7.3 %
6
1.6 %
5.2 %
7
1.2 %
3.9 %
8
1.3 %
2.6 %
9
1.1 %
2.2 %
10
1.1 %
2.0 %
150
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claims
Adjustment Expenses
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment
expense in the consolidated balance sheet as of December 31, 2021, is as follows (dollars in millions):
Liabilities for claims and claim adjustment expense, net of reinsurance:
U.S. and Latin America
Asia Pacific
Liabilities for claims and claim adjustment expense, net of reinsurance
Adjustments to reconcile to total policy claims and future policy benefits:
Reinsurance recoverable
Effect of discounting
Unallocated claims adjustment expense
Total adjustments
Other short-duration contracts:
Canada
Europe, Middle East and Africa
Other
2021
$
Liability for unpaid claims and claim adjustment expense – short-duration
Liability for unpaid claims and claim adjustment expense – long-duration
Total liability for unpaid claims and claim adjustment expense (included in future policy benefits and other policy-related
balances)
$
748
631
1,379
13
(105)
7
(85)
276
636
272
2,478
5,575
8,053
Rollforward of Claims and Claim Adjustment Expenses
The liability for unpaid claims is reported in future policy benefits and other policy-related balances within the Company’s
consolidated balance sheets. Activity associated with unpaid claims is summarized below (dollars in millions):
Balance, beginning of period
Less: reinsurance recoverable
Net balance, beginning of period
Incurred:
Current year
Prior years
Total incurred
Payments:
Current year
Prior years
Total payments
Other changes:
Interest accretion
Foreign exchange adjustments
Total other changes
Net balance, end of period
Plus: reinsurance recoverable
Balance, end of period
2021
2020
2019
$
7,556 $
(641)
6,915
6,786 $
(564)
6,222
13,181
(377)
12,804
(6,284)
(5,810)
(12,094)
31
(159)
(128)
7,497
556
11,195
123
11,318
(5,617)
(5,204)
(10,821)
36
160
196
6,915
641
$
8,053 $
7,556 $
6,585
(433)
6,152
10,307
154
10,461
(5,140)
(5,305)
(10,445)
33
21
54
6,222
564
6,786
Incurred claims associated with prior periods are primarily due to events, related to long-duration business, which were incurred
in prior periods but were reported in the current period, and to a lesser extent, the development of short-duration business
claims for prior years being different than were anticipated when the liabilities for unpaid claims were originally estimated.
These trends have been considered in establishing the current year liability for unpaid claims.
151
Note 17 EQUITY
On June 5, 2020, the Company completed a public offering of 6,172,840 shares of common stock, $0.01 par value per share, at
a public offering price of $81.00 per share. The Company received net proceeds of approximately $481 million. The Company
granted the underwriters an option to purchase from the Company, within 30 days after the Underwriting Agreement dated June
2, 2020, up to an additional 925,926 shares of common stock at the offering price of $81.00 per share. The underwriters’ option
was not exercised and expired on July 2, 2020. The Company used the net proceeds of the offering for general corporate
purposes.
Common Stock
The changes in number of common stock shares, issued, held in treasury and outstanding are as follows for the periods
indicated:
Balance, December 31, 2018
Common Stock acquired
Stock-based compensation (1)
Balance, December 31, 2019
Equity offering
Common Stock acquired
Stock-based compensation (1)
Balance, December 31, 2020
Common Stock acquired
Stock-based compensation (1)
Balance, December 31, 2021
Issued
Held In Treasury
Outstanding
79,137,758
—
—
79,137,758
6,172,840
—
—
85,310,598
—
—
85,310,598
16,323,390
546,614
(388,348)
16,481,656
—
1,074,413
(202,372)
17,353,697
852,037
(65,866)
18,139,868
62,814,368
(546,614)
388,348
62,656,102
6,172,840
(1,074,413)
202,372
67,956,901
(852,037)
65,866
67,170,730
(1) Represents net shares issued from treasury pursuant to the Company’s stock-based compensation programs.
Common Stock Held in Treasury
Common stock held in treasury is accounted for at average cost. Gains resulting from the reissuance of “Common stock held in
treasury” are credited to “Additional paid-in capital.” Losses resulting from the reissuance of “Common stock held in treasury”
are charged first to “Additional paid-in capital” to the extent the Company has previously recorded gains on treasury share
transactions, then to “Retained earnings.”
On January 24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s
outstanding common stock. As of December 31, 2021, $72 million of RGA’s common stock may still be purchased under the
2019 share repurchase program.
On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s
outstanding common stock. The authorization was effective immediately and does not have an expiration date. In connection
with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. The pace of repurchase
activity depends on various factors such as the level of available cash, the impact of the ongoing COVID-19 pandemic, an
evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force
reinsurance transactions, and RGA’s stock price.
The following table summarizes the Company’s current share repurchase program activity under the 2019 share repurchase
program for the years ended December 31, 2021 and 2020 (dollar amounts in millions, except for the number of shares and per
share amounts):
Year of Repurchase
2021
2020
Shares Repurchased
Amount Paid
Average Per Share
852,037 $
1,074,413 $
96 $
153 $
112.64
142.05
152
Other Comprehensive Income (Loss)
The following table presents the components of the Company’s other comprehensive income (loss) for the years ended
December 31, 2021, 2020 and 2019 (dollars in millions):
$
$
$
$
$
For the year ended December 31, 2021:
Foreign currency translation adjustments:
Change arising during year
Foreign currency swap
Net foreign currency translation adjustments
Unrealized gains on investments:(1)
Unrealized net holding losses arising during the year
Less: Reclassification adjustment for net gains realized in net income
Net unrealized gains
Change in impairments on fixed maturity securities
Unrealized pension and postretirement benefits:
Net prior service cost arising during the year
Net gain (loss) arising during the period
Unrealized pension and postretirement benefits, net
Other comprehensive income (loss)
For the year ended December 31, 2020:
Foreign currency translation adjustments:
Change arising during year
Foreign currency swap
Net foreign currency translation adjustments
Unrealized gains on investments:(1)
Unrealized net holding gains arising during the year
Less: Reclassification adjustment for net gains realized in net income
Net unrealized gains
Change in impairments on fixed maturity securities
Unrealized pension and postretirement benefits:
Net prior service cost arising during the year
Net gain (loss) arising during the period
Unrealized pension and postretirement benefits, net
Other comprehensive income (loss)
For the year ended December 31, 2019:
Foreign currency translation adjustments:
Change arising during year
Foreign currency swap
Net foreign currency translation adjustments
Unrealized gains on investments:(1)
Unrealized net holding gains arising during the year
Less: Reclassification adjustment for net gains realized in net income
Net unrealized gains
Change in impairments on fixed maturity securities
Unrealized pension and postretirement benefits:
Net prior service cost arising during the year
Net gain arising during the period
Unrealized pension and postretirement benefits, net
Before-Tax Amount
Tax (Expense) Benefit
After-Tax Amount
85 $
(2)
83
(2,093)
226
(2,319)
—
2
27
29
(2,207) $
(24) $
1
(23)
471
(49)
520
—
—
(7)
(7)
490 $
61
(1)
60
(1,622)
177
(1,799)
—
2
20
22
(1,717)
Before-Tax Amount
Tax (Expense) Benefit
After-Tax Amount
43 $
(29)
14
2,812
(8)
2,820
(8)
(1)
(2)
(3)
3 $
6
9
(614)
(1)
(613)
2
—
1
1
46
(23)
23
2,198
(9)
2,207
(6)
(1)
(1)
(2)
2,823 $
(601) $
2,222
Before-Tax Amount
Tax (Expense) Benefit
After-Tax Amount
113 $
(33)
80
3,208
84
3,124
—
(1)
(23)
(24)
(10) $
7
(3)
(698)
(17)
(681)
—
—
5
5
103
(26)
77
2,510
67
2,443
—
(1)
(18)
(19)
2,501
Other comprehensive income (loss)
$
3,180 $
(679) $
(1)
Includes cash flow hedges. See Note 5 for additional information on cash flow hedges.
153
A summary of the components of net unrealized appreciation (depreciation) of balances carried at fair value is as follows
(dollars in millions):
For the years ended December 31,
Change in net unrealized appreciation (depreciation) on:
Fixed maturity securities available-for-sale
Other investments(1)
Effect on unrealized appreciation on:
Deferred policy acquisition costs
Net unrealized appreciation (depreciation)
2021
2020
2019
$
$
(2,299) $
(64)
44
(2,319) $
2,837 $
29
(54)
2,812 $
3,258
(37)
(98)
3,123
(1)
Includes cash flow hedges. See Note 5 for additional information on cash flow hedges.
The balance of and changes in each component of AOCI were as follows (dollars in millions):
Balance, December 31, 2018
OCI before reclassifications
Amounts reclassified from AOCI
Deferred income tax benefit (expense)
Balance, December 31, 2019
OCI before reclassifications
Amounts reclassified from AOCI
Deferred income tax benefit (expense)
Balance, December 31, 2020
OCI before reclassifications
Amounts reclassified from AOCI
Deferred income tax benefit (expense)
Balance, December 31, 2021
Accumulated
Currency
Translation
Adjustments
Unrealized
Appreciation
(Depreciation)
of Investments (1)
Pension and
Postretirement
Benefits
Accumulated
Other
Comprehensive
Income (Loss)
(169)
80
—
(3)
(92)
14
—
9
856
3,306
(182)
(681)
3,299
2,854
(42)
(611)
(51)
(28)
4
5
(70)
(9)
6
1
$
$
(69) $
5,500 $
(72) $
83
—
(23)
(2,144)
(175)
520
22
7
(7)
(9) $
3,701 $
(50) $
636
3,358
(178)
(679)
3,137
2,859
(36)
(601)
5,359
(2,039)
(168)
490
3,642
(1)
Includes cash flow hedges of $(22), $(49) and $(26) as of December 31, 2021, 2020 and 2019, respectively. See Note 5 for additional information on cash
flow hedges.
The following table presents the amounts of AOCI reclassifications for the years ended December 31, 2021 and 2020 (dollars in
millions):
Details about AOCI Components
Net unrealized investment gains (losses):
Net unrealized gains and losses on available-for-sale securities
Cash flow hedges – Interest rate
Cash flow hedges – Currency/Interest rate
Cash flow hedges – Forward bond purchase commitments
Deferred policy acquisition costs attributed to unrealized gains and
losses
Total
Provision for income taxes
Net unrealized gains (losses), net of tax
Amortization of defined benefit plan items:
Prior service cost (credit)
Actuarial gains (losses)
Total
Provision for income taxes
Amortization of defined benefit plans, net of tax
Total reclassifications for the period
(1) See Note 5 for information on cash flow hedges.
(2) See Note 8 for information on deferred policy acquisition costs.
(3) See Note 10 for information on employee benefit plans.
Amount Reclassified from AOCI
2021
2020
Affected Line Item in
Statement of Income
226 $
(7)
—
—
(44)
175
(38)
137 $
1 $
(8)
(7)
1
(6) $
131 $
(8) Investment related gains (losses), net
(4)
—
—
(1)
(1)
(1)
(2)
(3)
(3)
54
42
(12)
30
1
(7)
(6)
1
(5)
25
$
$
$
$
$
154
Equity Based Compensation
The Company adopted the RGA Flexible Stock Plan (the “Plan”) in February 1993, as amended, and the Flexible Stock Plan for
Directors (the “Directors Plan”) in January 1997, as amended, (collectively, the “Stock Plans”). The Stock Plans provide for the
award of benefits (collectively “Benefits”) of various types, including stock options, stock appreciation rights (“SARs”),
restricted stock, performance shares, cash awards, and other stock-based awards, to key employees, officers, directors and
others performing significant services for the benefit of the Company or its subsidiaries. As of December 31, 2021, shares
authorized for the granting of Benefits under the Plan and the Directors Plan totaled 16,460,077 and 462,500 respectively. The
Company uses treasury shares or shares made available from authorized but unissued shares to support the future exercise of
options or settlement of awards granted under its stock plans.
Equity-based compensation expense of $55 million, $(12) million, and $39 million related to grants or awards under the Stock
Plans was recognized in 2021, 2020 and 2019, respectively. The equity compensation credit for the year ended December 31,
2020, is attributable to the reduction in the estimated financial performance measures associated with performance-based stock
awards, primarily due to the adverse impact of COVID-19 on the Company’s financial results. Equity-based compensation
expense is principally related to the issuance of performance contingent restricted units, stock appreciation rights and restricted
stock.
In general, stock awards granted under the Plan become exercisable over vesting periods ranging from one to four years. SARs
are generally granted with a conversion price equal to the stock’s fair value at the date of grant and expire 10 years after the
date of grant. There are no stock options outstanding under the Directors Plan during the periods presented. Information with
respect to grants under the Stock Plans are as follows.
Stock Options and Stock Appreciation Rights
The following table presents a summary of options and SARs activity:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Awards exercisable
Number of Options
and SARs
Weighted-Average
Exercise/Conversion
Price
Aggregate Intrinsic
Value (in millions)
2,168,395 $
200,239 $
(144,042) $
(1,878) $
2,222,714 $
1,800,569 $
102.30
129.01
60.47
129.01
107.39 $
103.30 $
28.7
28.7
The intrinsic value of awards exercised was $8 million, $15 million, and $31 million for 2021, 2020 and 2019, respectively.
Range of Exercise Prices
$50.00 – $89.99
$90.00 – $99.99
$100.00 – $139.99
$140.00 +
Totals
Number
Outstanding as
of 12/31/2021
Awards Outstanding
Weighted-Average
Remaining
Contractual Life (years)
Awards Exercisable
Weighted-
Average Exercise
Price
Number
Exercisable as of
12/31/2021
Weighted-Average
Exercise Price
368,754
703,305
805,743
344,912
2,222,714
1.3
3.8
7.8
6.7
5.3
$
$
$
$
$
64.03
92.55
122.90
147.80
107.39
368,754 $
703,305 $
430,718 $
297,792 $
1,800,569 $
64.03
92.55
123.44
148.20
103.30
The following table presents the weighted average assumptions used to determine the fair value of SARs issued:
For the years ended December 31,
2021
2020
2019
Dividend yield
Risk-free rate of return
Expected volatility
Expected life (years)
2.17 %
1.04 %
34.5 %
6.3
2.37 %
0.69 %
18.8 %
7.0
Weighted average exercise price of stock options granted
Weighted average fair value of stock options granted
$
$
129.01
34.93
$
$
117.85
15.14
$
$
1.65 %
2.67 %
18.2 %
6.0
145.25
26.59
The Black-Scholes model was used to determine the fair value recognized in the financial statements of SARs that have been
granted. The Company used daily historical volatility when calculating a SAR’s value. The benchmark rate is based on
observed interest rates for instruments with maturities similar to the expected term of the stock options. Dividend yield is
determined based on historical dividend distributions compared to the price of the underlying common stock as of the valuation
155
date and held constant over the life of the stock options. The Company estimated expected life using the historical average years
to exercise or cancellation.
Performance Contingent Awards
Performance contingent awards include both Performance Contingent Shares (“PCS”) and Performance Share Units (“PSU”).
•
•
Performance Contingent Shares, are units that, if they vest, are multiplied by a performance factor to produce a number
of final units that are paid in the Company’s common stock. Each PCS represents the right to receive up to two shares
of Company’s common stock, depending on the results of certain performance measures.
Performance Share Units, are units that, if they vest, are paid in the Company’s common stock. Each PSU represents
the right to receive one share of Company common stock, depending on the results of certain performance measures.
The compensation expense related to each type of performance continent award is recognized ratably over the requisite
performance period. Performance contingent awards are accounted for as equity awards, but are not credited with dividend-
equivalents for actual dividends paid on the Company’s common stock during the performance period.
Restricted Stock Units
In general, restricted stock units (“RSUs”) become payable at the end of a two or three-year vesting period. Each RSU, if they
vest, represents the right to receive one share of Company common stock. RSUs awarded under the plan generally have no
strike price and are included in the Company’s shares outstanding.
The following table presents a summary of Performance Share and Restricted Stock Unit activity:
Outstanding at December 31, 2020
Granted
Change in units based on performance factor
Paid
Forfeited
Outstanding at December 31, 2021 (1)
Performance
Contingent Awards
Restricted Stock
Units
291,129
167,862
(117,589)
—
(997)
340,405
76,390
328,491
—
(18,487)
(6,506)
379,888
(1) Amount outstanding at December 31, 2021, includes the amount of shares to be issued under RSUs expected to vest and number of shares to be issued
under performance continent awards at target performance. The amount of shares do not reflect potential increases or decreases that may result from the
performance factor results except for the 2019 – 2021 grants which vested as of December 31, 2021.
During 2021, the Company issued 167,862 performance contingent awards at a weighted average fair value per unit of $129.01.
As of December 31, 2021, the total compensation cost of non-vested awards not yet recognized in the financial statements was
$21.0 million. It is estimated that these costs will vest over a weighted average period of 0.7 years.
The majority of the awards granted each year under the board-approved incentive compensation package and Directors Plan are
made in the first quarter of each year.
Note 18 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Years Ended December 31,
(in millions, except per share data)
2021
Total Revenues
Total benefits and expenses
Income before income taxes
Net Income
Earnings Per Share:
Basic earnings per share
Diluted earnings per share
2020
Total Revenues
Total benefits and expenses
Income before income taxes
Net Income
Earnings Per Share:
Basic earnings per share
Diluted earnings per share
March 31,
June 30,
September 30,
December 31,
Three Months Ended
4,119 $
3,933
186
139
2.04 $
2.03
4,137 $
3,655
482
344
5.06 $
5.02
4,043 $
4,077
(34)
(22)
(0.32) $
(0.32)
4,359
4,302
57
156
2.32
2.30
March 31,
June 30,
September 30,
December 31,
3,204 $
3,300
(96)
(88)
(1.41) $
(1.41)
3,606 $
3,411
195
158
2.49 $
2.48
3,643 $
3,358
285
213
3.13 $
3.12
4,143
3,974
169
132
1.95
1.94
$
$
$
$
156
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Reinsurance Group of America, Incorporated
Chesterfield, Missouri
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Reinsurance Group of America, Incorporated and
subsidiaries (the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of income,
comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2021,
and the related notes, and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company
as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on the criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 25, 2022 expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
Fair Value - Level 3 Fixed Maturity Securities - Refer to Note 6 to the financial statements
Critical Audit Matter Description
The Company has certain fixed maturity securities that are not actively traded and classified as Level 3 assets. Since such
securities trade infrequently and have little or no price transparency, the Company’s market standard valuation techniques for
determining the estimated fair value of such securities rely on inputs that are significant to the estimated fair value that are not
observable in the market or cannot be derived principally from or corroborated by observable market data. The determination of
these unobservable inputs involve significant management judgment and estimation and typically cannot be supported by
reference to market activity.
Auditing of unobservable inputs used by management to estimate the fair value of Level 3 securities required a high degree of
auditor judgement and an increased extent of effort, including the involvement of our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the proprietary models and unobservable inputs used by management to estimate the fair value
of Level 3 securities included the following, among others:
157
• We tested the effectiveness of controls, including those surrounding the valuation of Level 3 securities.
• We obtained an understanding and evaluated the appropriateness of the Company’s pricing sources.
•
For a selection of securities, we compared the accuracy of the Company’s estimated fair value price to a price
independently developed by our fair value specialists.
Actuarial Assumptions - Refer to Notes 1, 6, and 8 to the financial statements
Critical Audit Matter Description
The estimated valuation of future policy benefits, embedded derivatives, and the amortization of deferred acquisition costs are
measured based on actuarial methodologies and underlying economic and future policyholder behavior assumptions.
Significant judgment was involved in the setting of the future policyholder behavior assumptions used to determine the
estimated valuation of future policy benefits, embedded derivatives and the amortization of deferred acquisition costs. These
assumptions include mortality, longevity, and withdrawal (lapse).
Given the significant estimation uncertainty and complexity of the Company’s actuarial assumptions, auditing these estimates
required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial
specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the assumptions used by management to estimate the valuation of future policy benefits and
embedded derivatives and the amortization of deferred policy acquisition costs included the following, among others:
• We tested the effectiveness of controls, including those related to the performance of experience studies and the setting of
best estimate assumptions.
• We tested the accuracy and completeness of the underlying data that served as the basis for the estimated assumptions.
• With the assistance of our actuarial specialists, we assessed the reasonableness of assumptions used in developing the
estimates by comparing conclusions reached by management to the related experience study results and industry
experience, as applicable.
Premiums receivable and other reinsurance balances - Refer to Note 1 to the financial statements
Critical Audit Matter Description
Premiums are accrued when due and in accordance with information received from the ceding company. When the Company
enters into a new reinsurance agreement, the methodology to record estimated premiums receivables is based on the terms of
the reinsurance treaty. Similarly, when a ceding company fails to report information on a timely basis, the methodology used by
the Company to record estimated premiums receivables is based on the terms of the reinsurance treaty and historical experience.
Other management estimates include adjustments to the premiums receivable for increased in force in existing treaties and
lapsed premiums based on historical experience. Given the significant judgment used in determining estimated premium
receivable, auditing the actual methodologies and estimates required a high degree of auditor judgment and an increased extent
of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimation of premiums receivable included the following, among others:
• We tested the effectiveness of controls that address management’s estimation of accrued premiums receivable.
• We tested management’s historical accuracy of estimation by comparing a selection of premiums received during the
•
year to previously-reported premiums receivable.
For a selection of management’s premiums receivable estimates, we compared our independently-developed
expectation to management’s estimate.
• We utilized statistical analysis to identify outliers in the population for further testing.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
February 25, 2022
We have served as the Company’s auditor since 2000.
158
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and
operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that these disclosure controls and procedures were effective.
There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule
13a-15(f) during the quarter ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting. As a result of the COVID-19 pandemic, the majority of the
Company’s workforce began working remotely in March 2020. These changes to the working environment did not have a
material effect on the Company’s internal controls over financial reporting during the most recent quarter. The Company
continues to monitor and assess the COVID-19 situation on its internal controls to minimize the impact on their design and
operating effectiveness.
Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits
and related costs of control procedures. The objectives of internal control include providing management with reasonable, but
not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are
executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America.
Financial management has documented and evaluated the effectiveness of the internal control of the Company as of
December 31, 2021 pertaining to financial reporting in accordance with the criteria established in “Internal Control – Integrated
Framework (2013)” by the Committee of Sponsoring Organizations of the Treadway Commission.
In the opinion of management, the Company maintained effective internal control over financial reporting as of
December 31, 2021.
Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the
effectiveness of the Company’s internal control over financial reporting.
159
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Reinsurance Group of America, Incorporated
Chesterfield, Missouri
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Reinsurance Group of Americas Incorporated and subsidiaries
(the “Company”) as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our
report dated February 25, 2022, expressed an unqualified opinion on those consolidated financial statements and financial
statement schedules.
Basis of Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
February 25, 2022
160
Item 9B. OTHER INFORMATION
None.
Part III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company is found in the Proxy Statement under the captions “Board of
Directors – Item 1 – Election of Directors,” “– Director Qualifications and Nomination,” “Stock Ownership – Delinquent
Section 16(a) Reports,” “Corporate Governance – Overview,” and “– Board Committees” and is incorporated herein by
reference.
Executive Officers
The following is certain additional information concerning each individual who is an executive officer of the Company
or its primary U.S.-based operating subsidiary, RGA Reinsurance Company.
Leslie Barbi, 55, is Executive Vice President, Chief Investment Officer of the Company. She is also a member of the
Company’s Executive Committee. Prior to joining RGA in 2020, Ms. Barbi served as Executive Officer – Senior Vice
President, Head of Public Investments for Northwestern Mutual Life Insurance Company. Prior to that, she was the Senior
Managing Director, Head of Public Fixed Income at The Guardian Life Insurance Company of America. Earlier in her career,
Ms. Barbi held senior positions at Goldman Sachs Asset Management and at Pacific Investment Management Company
(PIMCO).
Gay Burns, 55, is Executive Vice President, Chief Human Resources Officer for the Company. She is also Chairperson
of the RGA Foundation and a member of the Company’s Executive Committee. Prior to joining RGA in 2011, she served as
Managing Director, Talent Development and Managing Director, Global HR Operations for Swiss Re. Prior to that, Ms. Burns
was a human resources executive with Employer’s Reinsurance Corporation, a General Electric subsidiary.
Lawrence S. Carson, 50, is Executive Vice President, Global Financial Solutions (“GFS”) unit, which is responsible
for all of RGA’s financial reinsurance, asset-intensive reinsurance and bulk longevity business worldwide. He is also a member
of the Company’s Executive Committee. Most recently, Mr. Carson was Executive Vice President and Chief Actuary of GFS.
Prior to joining RGA in 1999, he was with the actuarial firm of Milliman and Robertson (now Milliman Inc.), where he worked
on demutualizations, mergers and acquisitions valuations, and market conduct class-action settlements. Previously, he was with
Equitable Life Assurance Society. Mr. Carson is a Fellow of the Society of Actuaries.
Tony Cheng, 48, is Executive Vice President, Head of Asia, Australia and EMEA. He is also a member of RGA’s
Executive Committee. He joined RGA in 1997 as Chief Actuary of Malaysian Life Reinsurance Group Berhad, the Company’s
joint venture with the Life Insurance Association of Malaysia. In 2004, Mr. Cheng was named Chief Executive Officer of the
Hong Kong office, responsible for all business activity in Hong Kong and Southeast Asia, and in 2011, was appointed Senior
Vice President, Asia, an expanded role incorporating overall management of RGA’s Asia operations.
Olav Cuiper, 64, is Executive Vice President, Chief Client Officer. He is also a member of the Executive Committee.
Prior to joining RGA in 2009, he was Managing (statutory) Director Europe for Fortis Insurance International. Before then,
Mr. Cuiper was Managing (statutory) Director of Group Life/Institutional Clients for Delta Lloyd Insurance NV. His work
experience also includes business development positions with Sedgwick/Mercer and with Goudse Verzekeringen in the
Netherlands. Mr. Cuiper also serves as a director and officer of several RGA subsidiaries.
Alka Gautam, 54, is Executive Vice President of the Company and President and Chief Executive Officer of RGA Life
Reinsurance Company of Canada (“RGA Canada”). She is responsible for RGA’s Technology and Operational Effectiveness
divisions and leads all business activities for RGA Canada. She is also a member of the Executive Committee. Prior to joining
RGA Canada in 2000, Ms. Gautam was at KPMG for 10 years. She became RGA Canada’s Chief Financial Officer and Chief
Risk Officer in 2006, was named its Chief Operating Officer in 2014, and in 2015 was named RGA Canada’s President and
Chief Executive Officer.
John W. Hayden, 55, is Executive Vice President, Controller. Mr. Hayden joined the Company in 2000 and held the
position of Vice President, SEC Reporting and Investor Relations prior to his current role. Before coming to RGA, Mr. Hayden
served in a finance position at General American Life Insurance Company and prior to that position, he was a senior manager at
KPMG LLP, in the financial services audit practice, specializing in the insurance industry. Mr. Hayden also serves as a director
and officer of several RGA subsidiaries.
Ron Herrmann, 57, is Executive Vice President, Head of U.S. & Latin American Markets of RGA Reinsurance
Company. He joined the Company in December 2020 and is a member of RGA’s Executive Committee. Prior to joining RGA,
Mr. Herrmann served as Head of both Individual Life and Employee Benefits at Equitable. Prior to that he held senior positions
161
at Prudential and The Hartford, as well as senior sales and sales management roles at Chubb Corporation, John Hancock Life
Insurance Company, and Metropolitan Life. Mr. Herrmann is a Certified Financial Planner and a member of Leadership for
Advanced Life Underwriting. He sits on the American Council of Life Insurers' Life Insurance Committee as well as the Group
Executive Insurance Council.
William L. Hutton, 62, is Executive Vice President, General Counsel and Secretary of the Company. He is responsible
for legal services provided throughout the RGA enterprise. Mr. Hutton joined the Company in 2001 and held several positions
in the legal function before becoming General Counsel in 2011. Prior to joining the Company, he served as counsel at General
American Life Insurance Company and was in private practice with two law firms in St. Louis, Missouri. Mr. Hutton also
serves as an officer of several RGA subsidiaries.
Todd C. Larson, 58, is Senior Executive Vice President, Chief Financial Officer of the Company. He is also a member
of the Company’s Executive Committee. Mr. Larson joined the Company in May 1995 as Controller and held several positions
in the finance function, including the position of Executive Vice President, Corporate Finance and Treasurer, before becoming
Global Chief Risk Officer in July 2014. Mr. Larson assumed the role of Chief Financial Officer in May 2016. Mr. Larson
previously was Assistant Controller at Northwestern Mutual Life Insurance Company from 1994 through 1995 and prior to that
position was an accountant for KPMG LLP from 1985 through 1993.
Anna Manning, 63, is President and Chief Executive Officer of the Company. She is also a member of the Company’s
Executive Committee. Prior to her current role, Ms. Manning held the position of Senior Executive Vice President, Structured
Solutions, which includes the Company’s Global Financial Solutions and Global Acquisitions businesses. Ms. Manning joined
the Company in 2007 as Executive Vice President and Chief Operating Officer for RGA International Corporation, followed by
four years as Executive Vice President of U.S. Markets. Prior to joining the Company, Ms. Manning spent 19 years in actuarial
consulting at Tillinghast Towers Perrin, following an actuarial career in the Canadian marketplace at Manulife Financial from
1981 through 1988. She holds a B.Sc. in Actuarial Science from the University of Toronto, is a Fellow of the Canadian
Institute of Actuaries (“FCIA”), and a Fellow of the Society of Actuaries.
Jonathan Porter, 51, is Executive Vice President and Global Chief Risk Officer. He is also a member of the Company’s
Executive Committee. Mr. Porter is responsible for the Company’s global enterprise risk management and corporate pricing
oversight. Prior to his current role, Mr. Porter previously served in positions of Senior Vice President, Global Analytics and In-
Force Management and Chief Pricing Actuary of International Markets. Before joining the Company in 2008, Mr. Porter
worked for Manulife Financial as Chief Financial Officer, U.S. Life Insurance. Mr. Porter holds FSA and FCIA designations.
Mr. Porter also serves as a director and officer of several RGA subsidiaries.
Corporate Governance
The Company has adopted a Code of Conduct (the “Code”), a Directors’ Code of Business Conduct and Ethics (the
“Directors’ Code”), and a Financial Management Code of Professional Conduct (the “Financial Management Code”). The Code
applies to all employees and officers of the Company and its subsidiaries. The Directors’ Code applies to directors of the
Company and its subsidiaries. The Financial Management Code applies to the Company’s chief executive officer, chief
financial officer, corporate controller, primary financial officers in each business unit, and all professionals in finance and
finance-related departments. The Company intends to satisfy its disclosure obligations under Item 5.05 of Form 8-K by posting
on its website information about amendments to, or waivers from a provision of the Financial Management Code that applies to
the Company’s chief executive officer, chief financial officer, and corporate controller. Each of the three Codes described
above is available on the Company’s website at www.rgare.com.
Also available on the Company’s website are the following other items: Corporate Governance Guidelines, Audit
Committee Charter, Compensation Committee Charter, Investment Committee Charter, Nominating and Governance
Committee Charter and Risk Committee Charter (collectively “Governance Documents”).
The Company will provide without charge upon written or oral request, a copy of any of the Codes of Conduct or
Governance Documents. Requests should be directed to Investor Relations, Reinsurance Group of America, Incorporated,
16600 Swingley Ridge Road, Chesterfield, MO 63017, by electronic mail (investrelations@rgare.com) or by telephone
(636-736-2068).
In accordance with the Securities Exchange Act of 1934, the Company’s board of directors has established a standing
audit committee. The board of directors has determined, in its judgment, that all of the members of the audit committee are
independent within the meaning of SEC regulations and the listing standards of the New York Stock Exchange (“NYSE”). The
board of directors has determined, in its judgment, that all members of the Audit Committee (Ms. Guinn (chair), Mr. Gauthier,
Mr. O’Hearn, Mr. Tulin and Mr. Van Wyk) are qualified as audit committee financial experts within the meaning of SEC
regulations and the board has determined that each of them has accounting and related financial management expertise within
the meaning of the listing standards of the NYSE. The audit committee charter provides that members of the audit committee
may not simultaneously serve on the audit committee of more than two other public companies unless such member
162
demonstrates that he or she has the ability to devote the time and attention that are required to serve on multiple audit
committees.
Item 11. EXECUTIVE COMPENSATION
Information on this subject is found in the Proxy Statement under the captions “Compensation Discussion and
Analysis,” “Compensation Tables and Other Matters,” “Compensation Committee Report,” “Board of Directors – Director
Compensation” and “Corporate Governance – Board Committees” and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
Information on this subject is found in the Proxy Statement under the caption “Stock Ownership – Securities
Ownership of Directors, Management and Certain Beneficial Owners” and is incorporated herein by reference.
The following table summarizes information regarding securities authorized for issuance under equity compensation
plans:
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
2,990,040(1)
—
2,990,040(1)
$107.39(2)(3)
—
$107.39(2)(3)
2,111,066(4)
—
2,111,066(4)
(1)
Includes the number of securities to be issued upon exercises or settlement of stock appreciation rights, restricted units, performance contingent shares,
and performance share units under the following plans: Flexible Stock Plan – 2,943,007; Director Flexible Stock Plan – 2,204; and Phantom Stock Plan
for Directors – 48,829. The number of performance contingent shares represents the number of shares that would be issued based on target performance,
reduced for cancellations and adjustments through December 31, 2021. The actual number of shares issued at the end of each performance period will
range between 0% and 200% of the target number of units granted, based on a measure of the actual performance of the Company relative to stated goals.
(2) Does not include 340,405 performance contingent shares and performance share units outstanding under the Flexible Stock Plan; 2,204 outstanding under
the Flexible Stock Plan for Directors or 48,829 phantom units outstanding under the Phantom Stock Plan for Directors because those securities do not
have an exercise price (i.e. a unit is a hypothetical share of Company common stock with a value equal to the fair market value of the common stock).
(3) Reflects the blended weighted-average exercise price of outstanding options under the Flexible Stock Plan $107.39.
(4)
Includes the number of securities remaining available for future issuance under the following plans: Flexible Stock Plan – 2,017,793; Flexible Stock Plan
for Directors – 52,926; and Phantom Stock Plan for Directors – 40,347.
On January 24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400 million of
RGA’s outstanding common stock. During the twelve months ended December 31, 2021, RGA repurchased 852,037 shares of
common stock under this program for $96 million, and as of December 31, 2021, approximately $72 million of RGA’s common
stock may still be purchased under the 2019 share repurchase program.
On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of
RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In
connection with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. The pace of
repurchase activity depends on various factors such as the level of available cash, an evaluation of the costs and benefits
associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock
price.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information on this subject is found in the Proxy Statement under the captions “Corporate Governance – Certain
Relationships and Related Person Transactions,” and – “Overview” and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information on this subject is found in the Proxy Statement under the caption “Item 5 – Ratification of
Appointment of Independent Auditor” and is incorporated herein by reference.
163
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1. Financial Statements
The following consolidated statements are included within Item 8 under the following captions:
Index
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. Schedules, Reinsurance Group of America, Incorporated and Subsidiaries
Schedule
I
II
III
IV
V
Summary of Investments
Condensed Financial Information of the Registrant
Supplementary Insurance Information
Reinsurance
Valuation and Qualifying Accounts
Page
89
90
91
92
93
95-156
157
Page
165
166-167
168-169
170
171
All other schedules specified in Regulation S-X are omitted for the reason that they are not required, are not
applicable, or that equivalent information has been included in the consolidated financial statements, and notes thereto,
appearing in Item 8.
3. Exhibits
See the Index to Exhibits on page 173.
Item 16. FORM 10-K SUMMARY
None.
164
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE I-SUMMARY OF INVESTMENTS-OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 2021
(in millions)
Type of Investment
Fixed maturity securities:
Amortized Cost
Estimated Fair Value
Amount at Which
Shown in the Balance
Sheets(1)
United States government and government agencies and authorities
$
2,082 $
2,105 $
State and political subdivisions
Foreign governments(2)
Public utilities
Mortgage-backed and asset-backed securities
All other corporate bonds
Total fixed maturity securities
Equity securities
Mortgage loans on real estate
Policy loans
Funds withheld at interest
Short-term investments
Other invested assets
Total investments
1,191
10,527
4,281
6,834
30,958
1,323
12,314
4,683
6,904
33,420
55,873 $
60,749 $
176 $
151 $
6,283
1,234
6,954
87
3,070
73,677
$
$
$
$
(1) Fixed maturity securities are classified as available-for-sale and carried at fair value.
(2)
Includes fixed maturities directly issued by foreign governments, supranational and foreign government-sponsored enterprises.
2,105
1,323
12,314
4,683
6,904
33,420
60,749
151
6,283
1,234
6,954
87
3,070
78,528
165
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
December 31,
(in millions)
2021
2020
2019
CONDENSED BALANCE SHEETS
Assets:
Fixed maturity securities available-for-sale, at fair value
Short-term and other investments
Cash and cash equivalents
Investment in subsidiaries
Loans to subsidiaries
Other assets
Total assets
Liabilities and stockholders’ equity:
Long-term debt – unaffiliated(1)
Long-term debt – affiliated(2)
Other liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
CONDENSED STATEMENTS OF INCOME
Interest / dividend income(3)
Investment related gains (losses), net
Operating expenses
Interest expense
Income (loss) before income tax and undistributed earnings of subsidiaries
Income tax expense (benefit)
Net income (loss) before undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries
Net income
Other comprehensive income (loss)
Total comprehensive income
$
$
$
$
$
523 $
7
92
15,737
1,020
382
17,761 $
3,172 $
600
975
13,014
17,761 $
642
172
494
16,937
1,010
326
19,581
3,569
500
1,160
14,352
19,581
399 $
472 $
5
(66)
(152)
186
(21)
207
410
617
14
14
(59)
(202)
225
(21)
246
169
415
(29)
$
631 $
386 $
308
4
(55)
(206)
51
(33)
84
786
870
(33)
837
The condensed financial information of RGA (the “Parent Company”) should be read in conjunction with the consolidated financial statements of RGA and its
subsidiaries and the notes thereto (the “Consolidated Financial Statements”). These condensed unconsolidated financial statements reflect the results of
operations, financial position and cash flows for RGA. Investments in subsidiaries are accounted for using the equity method of accounting.
(1) Long-term debt – unaffiliated consists of the following:
$400 million 5.00% Senior Notes due 2021
$400 million 4.70% Senior Notes due 2023
$400 million 3.95% Senior Notes due 2026
$600 million 3.90% Senior Notes due 2029
$600 million 3.15% Senior Notes due 2030
$400 million 6.20% Subordinated Debentures due 2042
$400 million 5.75% Subordinated Debentures due 2056
$400 million Variable Rate Junior Subordinated Debentures due 2065
Subtotal
Unamortized debt issuance costs
Total
2021
2020
$
— $
400
400
599
597
400
400
399
3,195
(23)
3,172 $
$
400
399
400
599
598
400
400
398
3,594
(25)
3,569
(2) Long-term debt includes $600 million and $500 million of affiliated subordinated debt in 2021 and 2020, respectively. The affiliated subordinated debt
was issued to various operating subsidiaries.
(3)
Interest/dividend income includes $270 million and $340 million of cash dividends received from consolidated subsidiaries in 2021 and 2020,
respectively.
166
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT (continued)
December 31,
(in millions)
CONDENSED STATEMENTS OF CASH FLOWS
Operating activities:
Net income
Equity in earnings of subsidiaries
Other, net
Net cash provided by (used in) operating activities
Investing activities:
Sales of fixed maturity securities available-for-sale
Purchases of fixed maturity securities available-for-sale
Repayments/issuances of loans to subsidiaries
Change in short-term investments
Change in other invested assets
Capital contributions to subsidiaries
Net cash provided by (used in) investing activities
Financing activities:
Dividends to stockholders
Proceeds from issuance of common stock, net
Purchases of treasury stock
Exercise of stock options, net
Change in cash collateral for derivative positions and other arrangements
Principal payments on debt
Principal payments on affiliated debt
Proceeds from unaffiliated long-term debt issuance
Proceeds from affiliated long-term debt issuance
Debt issuance costs
Net cash provided by (used in) financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplementary information:
Interest paid
Income taxes paid, net of refunds
2021
2020
2019
$
617 $
415 $
(410)
(227)
(20)
268
(150)
(10)
165
(1)
(43)
229
(194)
—
(99)
—
(19)
(399)
(500)
—
600
—
(611)
(402)
494
(169)
(170)
76
358
(400)
—
(165)
(26)
(78)
(311)
(182)
481
(163)
1
(11)
—
—
598
—
(5)
719
484
10
$
$
$
92 $
494 $
173 $
323 $
187 $
23 $
870
(786)
72
156
576
(494)
—
—
—
(96)
(14)
(163)
—
(101)
6
(92)
(397)
—
599
—
(5)
(153)
(11)
21
10
192
9
167
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE III—SUPPLEMENTARY INSURANCE INFORMATION
(in millions)
Deferred Policy
Acquisition Costs
As of December 31,
Future Policy Benefits and
Interest-Sensitive Contract
Liabilities
Other Policy Claims and
Benefits Payable
2021
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Corporate and Other
Total
2020
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Corporate and Other
Total
$
1,926 $
190
192
—
253
—
1,052
74
3
12,757 $
25,107
3,668
16
1,366
5,999
3,792
8,202
1,252
$
$
3,690 $
62,159 $
1,816 $
255
195
—
264
—
1,045
41
—
12,245 $
23,104
3,474
16
1,379
5,881
3,568
4,187
875
$
3,616 $
54,729 $
2,806
24
330
5
1,612
89
2,116
6
5
6,993
2,578
18
292
4
1,389
66
2,059
2
5
6,413
168
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE III—SUPPLEMENTARY INSURANCE INFORMATION (continued)
(in millions)
2021
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Corporate and Other
Total
2020
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Corporate and Other
Total
2019
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Corporate and Other
Total
Premium Income
Net Investment
Income
Year ended December 31,
Policyholder
Benefits and
Interest Credited
Amortization of
DAC (1)
Other Expenses (2)
$
6,244 $
930 $
6,790 $
55
1,089
1,194
90
1,738
350
2,624
218
—
248
—
88
205
136
138
304
731
1,096
79
1,829
258
2,445
244
4
269 $
101
13
—
48
—
60
41
—
679
145
211
7
189
55
283
34
356
$
$
$
$
12,513 $
3,138 $
13,476 $
532 $
1,959
5,838 $
53
714 $
999
1,052
83
1,555
252
2,681
180
—
207
1
72
193
107
85
197
5,979 $
200 $
764
909
68
1,389
163
2,293
206
8
52
16
—
31
—
65
19
—
679
109
201
3
186
50
274
25
354
11,694 $
2,575 $
11,779 $
383 $
1,881
5,729 $
39
769 $
931
1,066
89
1,442
218
2,568
146
—
205
3
73
195
104
46
194
5,339 $
199 $
737
857
80
1,205
175
2,317
162
22
31
12
—
36
—
36
16
—
697
113
249
4
199
52
223
27
380
$
11,297 $
2,520 $
10,894 $
330 $
1,944
(1)
Includes the effect from investment related gains and losses.
(2)
Includes policy acquisition costs and other insurance expenses, excluding amortization of DAC. Also includes other operating expenses, interest expense,
and collateral finance and securitization expense.
169
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE IV—REINSURANCE
(in millions)
2021
Life insurance in force
Premiums
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Total
2020
Life insurance in force
Premiums
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Total
2019
Life insurance in force
Premiums
U.S. and Latin America:
Traditional
Financial Solutions
Canada:
Traditional
Financial Solutions
Europe, Middle East and Africa:
Traditional
Financial Solutions
Asia Pacific:
Traditional
Financial Solutions
Total
$
$
$
$
$
$
$
$
$
As of or for the Year ended December 31,
Gross Amount
Ceded to Other
Companies
Assumed from
Other Companies
Net Amounts
Percentage of
Amount Assumed
to Net
1,117 $
166,842 $
3,467,054 $
3,301,329
105.0 %
26 $
2
472 $
—
6,690 $
53
—
—
5
—
—
50
—
32
202
112
1,244
90
1,765
552
2,736
—
33 $
—
868 $
218
13,348 $
6,244
55
1,194
90
1,738
350
2,624
218
12,513
107.1 %
96.4
104.2
100.0
101.6
157.7
104.3
100.0
106.7
1,990 $
184,625 $
3,480,692 $
3,298,057
105.5 %
23 $
3
585 $
—
6,399 $
50
—
—
32
—
—
—
58 $
54
—
24
178
1,106
83
1,548
430
106
—
947 $
2,787
180
12,583 $
5,837
53
1,052
83
1,556
252
2,681
180
11,694
109.6 %
94.3
105.1
100.0
99.5
170.6
104.0
100.0
107.6
1,316 $
192,864 $
3,480,206 $
3,288,658
105.8 %
29 $
2
591 $
—
6,291
37
1,120
89
1,449
366
54
—
52
148
84
—
929 $
2,652
146
12,150 $
5,729
39
1,066
89
1,442
218
2,568
146
11,297
109.8 %
95.4
105.0
100.0
100.6
167.9
103.2
100.0
107.5
—
—
45
—
—
—
76 $
170
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE V—VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Description
2021
Additions
Balance at
Beginning of
Period
Charged to Costs
and Expenses
Charged to Other
Accounts
Deductions
Balance at End of
Period
Valuation allowance for deferred income taxes
$
251 $
(18) $
(15) $
— $
Allowance for credit losses for mortgage loans
Allowance for credit losses for fixed maturity
securities available-for-sale
2020
Valuation allowance for deferred income taxes
Allowance for credit losses for mortgage loans (1)
Allowance for credit losses for fixed maturity
securities available-for-sale
2019
Valuation allowance for deferred income taxes
$
Allowance for credit losses for mortgage loans
64
20
—
27
—
—
29
16
$
236 $
(4) $
19 $
— $
12
—
181 $
11
38
41
56 $
1
14
—
(1) $
—
—
21
— $
—
218
35
31
251
64
20
236
12
(1) Upon adoption of Financial Instruments – Credits Losses on January 1, 2020, the Company increased the valuation allowance for mortgage loans by $14
million. The increase was reflected as a decrease to opening retained earnings, net of income taxes.
171
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Reinsurance Group of America, Incorporated.
By:
/s/ Anna Manning
Anna Manning
President and Chief Executive Officer
Date: February 25, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons
on behalf of the registrant and in the capacities indicated on February 25, 2022.
Signatures
Title
February 25, 2022*
Chairman of the Board and Director
/s/ J. Cliff Eason
J. Cliff Eason
/s/ Anna Manning
Anna Manning
/s/ Pina Albo
Pina Albo
February 25, 2022
February 25, 2022*
/s/ Christine R. Detrick
February 25, 2022*
Christine R. Detrick
/s/ John J. Gauthier
John J. Gauthier
/s/ Patricia L. Guinn
Patricia L. Guinn
February 25, 2022*
February 25, 2022*
/s/ Hazel M. McNeilage
February 25, 2022*
Hazel M. McNeilage
/s/ Ng Keng Hooi
Ng Keng Hooi
/s/ George Nichols III
George Nichols III
February 25, 2022*
February 25, 2022*
/s/ Stephen T. O’Hearn
February 25, 2022*
Stephen T. O’Hearn
/s/ Shundrawn Thomas
Shundrawn Thomas
/s/ Stanley B. Tulin
Stanley B. Tulin
/s/ Steven C. Van Wyk
Steven C. Van Wyk
/s/ Todd C. Larson
Todd C. Larson
February 25, 2022*
February 25, 2022*
February 25, 2022*
February 25, 2022
*
By: /s/ Todd C. Larson
February 25, 2022
Todd C. Larson Attorney-in-fact
172
President, Chief Executive Officer and
Director
(Principal Executive Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Senior Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Exhibit
Number
3.1(i)
3.1(ii)
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
Index to Exhibits
Description
Amended and Restated Articles of Incorporation, effective as of May 21, 2020, incorporated by
reference to Exhibit 3.1(i) to Current Report on Form 8-K filed on May 22, 2020 (File No. 1-11848)
Certificate of Designation Termination, effective as of May 21, 2020, incorporated by reference to
Exhibit 3.1(ii) to Current Report on Form 8-K filed on May 22, 2020 (File No. 1-11848)
Amended and Restated Bylaws, effective as of May 23, 2018, incorporated by reference to Exhibit 3.2
to Current Report on Form 8-K filed on May 24, 2018 (File No. 1-11848)
Form of stock certificate for RGA’s common stock, incorporated by reference to Exhibit 4 to RGA’s
Registration Statement on Form 8-A filed on November 17, 2008 (File No. 1-11848)
Indenture, dated as of August 21, 2012, between RGA and The Bank of New York Mellon Trust
Company, N.A., as Trustee, incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K
filed on August 21, 2012 (File No. 1-11848)
First Supplemental Indenture, dated as of August 21, 2012, between RGA and The Bank of New York
Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current Report on
Form 8-K filed on August 21, 2012 (File No. 1-11848)
Second Supplemental Indenture, dated as of September 24, 2013, between RGA and The Bank of New
York Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current Report on
Form 8-K filed on September 24, 2013 (File No. 1-11848)
Third Supplemental Indenture, dated as of June 8, 2016, between RGA and The Bank of New York
Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current Report on
Form 8-K filed on June 8, 2016 (File No. 1-11848)
Fourth Supplemental Indenture, dated as of June 8, 2016, between the Company and The Bank of New
York Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.3 to Current
Report on Form 8-K filed on June 8, 2016 (File No. 1-11848)
Fifth Supplemental Indenture, dated as of May 15, 2019, between the Company and The Bank of New
York Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current
Report on Form 8-K filed on May 15, 2019 (File No. 1-11848)
Sixth Supplemental Indenture, dated as of June 9, 2020, between the Company and The Bank of New
York Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current
Report on Form 8-K filed on June 9, 2020 (File No. 1-11848)
Form of Junior Subordinated Indenture between RGA and The Bank of New York, as Trustee,
incorporated by reference to Exhibit 4.3 of the Original S-3 (File No. 333-55304)
Form of Second Supplemental Junior Subordinated Indenture between RGA and The Bank of New
York, as Trustee, incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on
December 9, 2005 (File No. 1-11848)
Description of Securities, incorporated by reference to Exhibit 4.13 to Annual Report on Form 10-K for
the fiscal year ended December 31, 2019, filed on February 27, 2020 (File No. 1-11848)
173
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Credit Agreement, dated as of August 21, 2018, by and among RGA, the lenders named therein, U.S.
Bank National Association, as Administrative Agent, Swing Line Lender and L/C Issuer, Bank of
America, N.A.; JPMorgan Chase Bank, N.A.; and Wells Fargo Bank, National Association as Joint
Syndication Agents and Barclays Bank PLC; HSBC Bank USA, National Association; KeyBank
National Association; Mizuho Bank, Ltd.; MUFG Bank, Ltd.; Royal Bank of Canada; and Sumitomo
Mitsui Banking Corporation as Co-Documentation Agents, incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed on August 22, 2018 (File No. 1-11848)
Letter of Credit Reimbursement Agreement, dated as of May 17, 2017, by and between RGA and Crédit
Agricole Corporate and Investment Bank, incorporated by reference to Exhibit 10.1 of Current Report
on Form 8-K filed May 19, 2017 (File No. 1-11848)
First Amendment to Letter of Credit Reimbursement Agreement, dated as of June 14, 2019, by and
between Reinsurance Group of America, Incorporated and Crédit Agricole Corporate and Investment
Bank, incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 18, 2019
(File No. 1-11848)
RGA Annual Bonus Plan, effective February 20, 2020, incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 7, 2020 (file No.
1-11848)*
RGA Flexible Stock Plan as amended and restated effective July 1, 1998 and as further amended by
Amendment on March 16, 2000, Second Amendment on May 28, 2003, Third Amendment on May 26,
2004, Fourth Amendment on May 23, 2007, Fifth Amendment on May 21, 2008, Sixth Amendment on
May 8, 2011, Seventh Amendment on May 18, 2011, and Eighth Amendment on May 15, 2013,
incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended June
30, 2013, filed on August 5, 2013 (File No. 1-11848)*
Form of RGA Flexible Stock Plan Performance Contingent Share Agreement, incorporated by reference
to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period ended March 31, 2012, filed on May 7,
2012 (File No. 1-11848)*
Form of RGA Flexible Stock Plan Stock Appreciation Right Award Agreement, incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 25, 2011 (File No. 1-11848)*
Form of RGA Flexible Stock Plan Stock Appreciation Right Award Agreement, incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended March 31, 2012, filed
on May 7, 2012 (File No. 1-11848)*
RGA Flexible Stock Plan, as amended and restated effective May 23, 2017, incorporated by reference to
Exhibit 10.9 to Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on
February 27, 2018 (File No. 1-11848)*
Form of Performance Contingent Share Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q for the period ended March 31, 2018, filed on May 4, 2018 (File No. 1-11848)*
Form of Stock Appreciation Right Award Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.2 to Quarterly Report on Form
10-Q for the period ended March 31, 2018, filed on May 4, 2018 (File No. 1-11848)*
Form of Non-Qualified Stock Option Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q for the period ended June 30, 2018, filed on August 3, 2018 (File No. 1-11848)*
Form of Performance Contingent Share Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q for the period ended March 31, 2019, filed on May 3, 2019 (File No. 1-11848)*
174
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
Form of Stock Appreciation Right Award Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.2 to Quarterly Report on Form
10-Q for the period ended March 31, 2019, filed on May 3, 2019 (File No. 1-11848)*
Form of Non-Qualified Stock Option Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.3 to Quarterly Report on Form
10-Q for the period ended March 31, 2019, filed on May 3, 2019 (File No. 1-11848)*
RGA Flexible Stock Plan for Directors, as amended and restated effective May 28, 2003, incorporated
by reference to Proxy Statement on Schedule 14A for the annual meeting of shareholders on May 28,
2003, filed on April 10, 2003 (File No. 1-11848)*
RGA Flexible Stock Plan for Directors, as amended and restated effective May 23, 2017, incorporated
by reference to Exhibit 10.11 to Annual Report on Form 10-K for the fiscal year ended December 31,
2017, filed on February 27, 2018 (File No. 1-11848)*
RGA Phantom Stock Plan for Directors, as amended effective January 1, 2003, incorporated by
reference to Proxy Statement on Schedule 14A for the annual meeting of shareholders on May 28, 2003,
filed on April 10, 2003*
RGA Phantom Stock Plan for Directors, as amended and restated effective January 1, 2016, incorporated
by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended September 30,
2015, filed on November 4, 2015 (File No. 1-11848)*
RGA Phantom Stock Plan for Directors, as amended and restated effective May 23, 2017, incorporated
by reference to Exhibit 10.14 to Annual Report on Form 10-K for the fiscal year ended December 31,
2017, filed on February 27, 2018 (File No. 1-11848)*
Offer Letter, dated October 29, 2015, between RGA and Anna Manning, incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed on November 24, 2015 (File No. 1-11848)*
Letter Agreement, dated as of July 25, 2019, by and between the Company and Anna Manning,
incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended
September 30, 2019, filed on November 1, 2019 (File No. 1-11848)*
RGA Reinsurance Company Augmented Benefit Plan, as amended, incorporated by reference to Exhibit
10.20 to Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February
27, 2018 (File No. 1-11848)*
RGA Reinsurance Company Executive Deferred Savings Plan, as amended, incorporated by reference to
Exhibit 10.21 to Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on
February 27, 2018 (File No. 1-11848)*
Canadian Supplemental Executive Retirement Plan for Executive Employees of RGA Life Reinsurance
Company of Canada, as amended and restated as of August 1, 2015, incorporated by reference to Exhibit
10.22 to Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February
27, 2018 (File No. 1-11848)*
Directors’ Compensation Summary Sheet
Form of Directors’ Indemnification Agreement, incorporated by reference to Exhibit 10.24 to Annual
Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 27, 2018 (File No.
1-11848)*
Form of Performance Share Unit Agreement as amended and restated effective May 23, 2017,
incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 15, 2021 (File
No. 1-11848)*
175
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Form of Restricted Share Unit Agreement as amended and restated effective May 23, 2017, incorporated
by reference to Exhibit 10.2 to Current Report on Form 8-K filed on March 15, 2021 (File No.
1-11848)*
Form of Performance Contingent Share Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017*
Form of Restricted Stock Unit Agreement under RGA Flexible Stock Plan, as amended and restated
effective May 23, 2017, incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for
the period ended March 31, 2021, filed on May 7, 2021 (File No. 1-11848)*
Form of Stock Appreciation Right Award Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.3 to Quarterly Report on Form
10-Q for the period ended March 31, 2021, filed on May 7, 2021 (File No. 1-11848)*
Form of Non-Qualified Stock Option Agreement under RGA Flexible Stock Plan, as amended and
restated effective May 23, 2017, incorporated by reference to Exhibit 10.4 to Quarterly Report on Form
10-Q for the period ended March 31, 2021, filed on May 7, 2021 (File No. 1-11848)*
Amendment to the Reinsurance Group of America, Incorporated Flexible Stock Plan, effective May 19,
2021, incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 20, 2021
(File No. 1-11848)*
Amendment to the Reinsurance Group of America, Incorporated Flexible Stock Plan for Directors,
effective May 19, 2021, incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed
on May 20, 2021 (File No. 1-11848)*
Reinsurance Group of America, Incorporated Phantom Stock Plan for Directors, as amended and
restated effective May 19, 2021, incorporated by reference to Exhibit 10.3 to Current Report on Form 8-
K filed on May 20, 2021 (File No. 1-11848)*
Separation and Release Agreement, dated December 14, 2021, by and among Reinsurance Group of
America, Incorporated, RGA Life Reinsurance Company of Canada and Alain P. Néemeh, incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 17, 2021 (File No.
1-11848)
Subsidiaries of RGA
Consent of Deloitte & Touche LLP
Powers of Attorney for Messrs. Eason, Gauthier, Hooi, Nichols, O’Hearn, Thomas, Tulin and Van Wyk
and Mses. Albo, Detrick, Guinn and McNeilage
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
176
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
101.DEF
104
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101).
* Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form
pursuant to Item 15 of this Report.
177
Shareholder Information
Transfer Agent:
Computershare
P.O. Box 505000
Louisville, KY 40233
T 866-204-0209
http://www.computershare.com/investor
Independent Auditors:
Deloitte and Touche LLP
Annual Report on Form 10-K:
Reinsurance Group of America, Incorporated files with the
Securities and Exchange Commission an Annual Report
(Form 10-K).
Shareholders may obtain a copy of the Form 10-K without
charge by writing to:
Jeff Hopson
Senior Vice President – Investor Relations
Reinsurance Group of America, Incorporated
16600 Swingley Ridge Road
Chesterfield, Missouri 63017-1706
U.S.A.
Shareholders may contact us through our internet site at
http://www.rgare.com or may email us at
investrelations@rgare.com
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16600 Swingley Ridge Road
Chesterfield, Missouri 63017-1706 U.S.A.
www.rgare.com