0000898174srt:AMBestAPlusRatingMemberrga:ReinsurerEMember2020-12-31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
(Mark One)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
¨
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                        Missouri43-1627032
(State or other jurisdiction                  (IRS employer
of incorporation or organization)  identification number)
16600 Swingley Ridge Road
Chesterfield, Missouri 63017
(Address of principal executive offices)
(636) 736-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes x☒  No o
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”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x     Accelerated filer o     Non-accelerated filer o
Smaller reporting company o☐     Emerging growth company o☐
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. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒
Yes o  No xSecurities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01RGANew York Stock Exchange
6.20% Fixed-To-Floating Rate Subordinated Debentures due 2042RZANew York Stock Exchange
5.75% Fixed-To-Floating Rate Subordinated Debentures due 2056RZBNew York Stock Exchange
As of October 31, 2017, 64,404,061April 30, 2021, 67,985,243 shares of the registrant’s common stock were outstanding.


Table of Contents



REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
 
Item     Page
  PART I – FINANCIAL INFORMATION  
1    
    
3
    
4
    
5
6
    
7
    
8
8
8
     3. Equity
9
     4. Investments
11
21
25
30
32
     9. Income Tax
33
33
     11. Reinsurance
34
34
35
2    
37
3    
64
4    
64
  PART II – OTHER INFORMATION  
1    
65
1A    
65
2    
65
6    
65
    
66
    
68
Item     Page
   
   PART I – FINANCIAL INFORMATION   
   
1  
Financial Statements
   
   
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2017 and December 31, 2016
  
3
   
Condensed Consolidated Statements of Income (Unaudited)
Three and nine months ended September 30, 2017 and 2016
  
4
   
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three and nine months ended September 30, 2017 and 2016
  
5
   
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30, 2017 and 2016
  
6
   
Notes to Condensed Consolidated Financial Statements (Unaudited):
  
7
  
     1. Business and Basis of Presentation
 
7
  
     2. Earnings Per Share
 
7
  
     3. Equity
 
8
  
     4. Investments
 
10
  
     5. Derivative Instruments
 
20
  
     6. Fair Value of Assets and Liabilities
 
28
  
     7. Segment Information
 
43
  
     8. Commitments, Contingencies and Guarantees
 
44
  
     9. Income Tax
 
45
  
     10. Employee Benefit Plans
 
46
  
     11. Reinsurance
 
46
  
     12. New Accounting Standards
 
47
2  
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
  
49
3  
Quantitative and Qualitative Disclosures About Market Risk
  
81
4  
Controls and Procedures
  
82
   
   PART II – OTHER INFORMATION   
   
1  
Legal Proceedings
  
83
1A  
Risk Factors
  
83
2  
Unregistered Sales of Equity Securities and Use of Proceeds
  
83
6  
Exhibits
  
83
   
Signatures
  
85
   
Index to Exhibits
  
84


2
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements


REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
(Unaudited)
 September 30,
2017		 December 31,
2016
 (Dollars in thousands, except share data)March 31,
2021		December 31,
2020
Assets
    
Assets
Fixed maturity securities:    
Available-for-sale at fair value (amortized cost of $33,889,968 and $30,211,787) $36,381,742
 $32,093,625
Mortgage loans on real estate (net of allowances of $9,137 and $7,685) 4,322,329
 3,775,522
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,229 and $49,548; allowance for credit losses of $22 and $20)Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,229 and $49,548; allowance for credit losses of $22 and $20)$56,426 $56,735 
Equity securities, at fair valueEquity securities, at fair value135 132 
Mortgage loans on real estate (net of allowances of $47 and $64)Mortgage loans on real estate (net of allowances of $47 and $64)6,001 5,787 
Policy loans 1,340,146
 1,427,602
Policy loans1,253 1,258 
Funds withheld at interest 6,020,336
 5,875,919
Funds withheld at interest5,459 5,432 
Short-term investments 80,582
 76,710
Short-term investments157 227 
Other invested assets 1,532,523
 1,591,940
Other invested assets2,983 2,829 
Total investments 49,677,658
 44,841,318
Total investments72,414 72,400 
Cash and cash equivalents 1,204,590
 1,200,718
Cash and cash equivalents3,122 3,408 
Accrued investment income 420,111
 347,173
Accrued investment income546 511 
Premiums receivable and other reinsurance balances 2,411,777
 1,930,755
Premiums receivable and other reinsurance balances2,907 2,842 
Reinsurance ceded receivables 779,118
 683,972
Reinsurance ceded receivables1,089 983 
Deferred policy acquisition costs 3,315,237
 3,338,605
Deferred policy acquisition costs3,617 3,616 
Other assets 885,540
 755,338
Other assets1,115 896 
Total assets $58,694,031
 $53,097,879
Total assets$84,810 $84,656 
Liabilities and Stockholders’ Equity    Liabilities and Stockholders’ Equity
Future policy benefits $21,084,562
 $19,581,573
Future policy benefits$33,675 $31,453 
Interest-sensitive contract liabilities 16,370,090
 14,029,354
Interest-sensitive contract liabilities23,142 23,276 
Other policy claims and benefits 4,899,367
 4,263,026
Other policy claims and benefits7,077 6,413 
Other reinsurance balances 415,692
 388,989
Other reinsurance balances560 598 
Deferred income taxes 3,180,545
 2,770,640
Deferred income taxes2,417 3,263 
Other liabilities 1,061,352
 1,041,880
Other liabilities1,930 1,340 
Long-term debt 2,788,480
 3,088,635
Long-term debt3,573 3,573 
Collateral finance and securitization notes 796,825
 840,700
Collateral finance and securitization notes346 388 
Total liabilities 50,596,913
 46,004,797
Total liabilities72,720 70,304 
Commitments and contingent liabilities (See Note 8) 

 

Commitments and contingent liabilities (See Note 8)00
Stockholders’ Equity:    Stockholders’ Equity:
Preferred stock - par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding —
 —
Common stock - par value $.01 per share, 140,000,000 shares authorized, 79,137,758 shares issued at September 30, 2017 and December 31, 2016 791
 791
Additional paid-in capital 1,865,699
 1,848,611
Preferred stock – par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstandingPreferred stock – par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding0 0 
Common stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at March 31, 2021 and December 31, 2020Common stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at March 31, 2021 and December 31, 20201 1 
Additional paid-in-capitalAdditional paid-in-capital2,411 2,406 
Retained earnings 5,712,590
 5,199,130
Retained earnings8,235 8,148 
Treasury stock, at cost - 14,769,487 and 14,835,256 shares (1,107,719) (1,094,779)
Treasury stock, at cost – 17,325,355 and 17,353,697 sharesTreasury stock, at cost – 17,325,355 and 17,353,697 shares(1,559)(1,562)
Accumulated other comprehensive income 1,625,757
 1,139,329
Accumulated other comprehensive income3,002 5,359 
Total stockholders’ equity 8,097,118
 7,093,082
Total stockholders’ equity12,090 14,352 
Total liabilities and stockholders’ equity $58,694,031
 $53,097,879
Total liabilities and stockholders’ equity$84,810 $84,656 
See accompanying notes to condensed consolidated financial statements (unaudited).

3
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(Unaudited)
 
 Three months ended September 30, Nine months ended September 30, Three months ended March 31,
 2017 2016 2017 2016 20212020
Revenues: (Dollars in thousands, except per share data)Revenues:
Net premiums $2,489,797
 $2,251,758
 $7,335,944
 $6,755,708
Net premiums$2,914 $2,819 
Investment income, net of related expenses 556,918
 489,727
 1,589,820
 1,414,659
Investment income, net of related expenses812 594 
Investment related gains (losses), net:        Investment related gains (losses), net:
Other-than-temporary impairments on fixed maturity securities (390) —
 (20,980) (34,663)
Impairments and change in allowance for credit losses on fixed maturity securitiesImpairments and change in allowance for credit losses on fixed maturity securities(2)(34)
Other investment related gains (losses), net 23,043
 86,624
 160,451
 118,665
Other investment related gains (losses), net304 (251)
Total investment related gains (losses), net 22,653
 86,624
 139,471
 84,002
Total investment related gains (losses), net302 (285)
Other revenues 75,942
 72,468
 218,091
 197,844
Other revenues91 76 
Total revenues 3,145,310
 2,900,577
 9,283,326
 8,452,213
Total revenues4,119 3,204 
Benefits and Expenses:        Benefits and Expenses:
Claims and other policy benefits 2,100,680
 1,993,064
 6,371,188
 5,877,330
Claims and other policy benefits3,192 2,664 
Interest credited 126,099
 116,848
 349,068
 300,602
Interest credited146 146 
Policy acquisition costs and other insurance expenses 365,424
 300,962
 1,064,645
 940,406
Policy acquisition costs and other insurance expenses333 248 
Other operating expenses 168,417
 152,556
 481,279
 469,875
Other operating expenses214 195 
Interest expense 36,836
 43,063
 108,590
 96,201
Interest expense45 41 
Collateral finance and securitization expense 7,692
 6,484
 21,235
 19,396
Collateral finance and securitization expense3 6 
Total benefits and expenses 2,805,148
 2,612,977
 8,396,005
 7,703,810
Total benefits and expenses3,933 3,300 
Income before income taxes
 340,162
 287,600
 887,321
 748,403
Income (loss) before income taxes
Income (loss) before income taxes
186 (96)
Provision for income taxes 112,571
 88,881
 282,028
 237,109
Provision for income taxes47 (8)
Net income $227,591
 $198,719
 $605,293
 $511,294
Net income (loss)Net income (loss)$139 $(88)
Earnings per share:        Earnings per share:
Basic earnings per share $3.53
 $3.10
 $9.39
 $7.95
Basic earnings per share$2.04 $(1.41)
Diluted earnings per share $3.47
 $3.07
 $9.23
 $7.87
Diluted earnings per share$2.03 $(1.41)
Dividends declared per share $0.50
 $0.41
 $1.32
 $1.15
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
 
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Comprehensive income (Dollars in thousands)
Net income $227,591
 $198,719
 $605,293
 $511,294
Other comprehensive income, net of tax:        
Foreign currency translation adjustments 46,733
 (28,233) 68,085
 59,442
Net unrealized investment gains (93,574) 254,658
 415,870
 1,445,776
Defined benefit pension and postretirement plan adjustments 700
 527
 2,473
 (1,176)
Total other comprehensive income, net of tax (46,141) 226,952
 486,428
 1,504,042
Total comprehensive income $181,450
 $425,671
 $1,091,721
 $2,015,336
 Three months ended March 31,
 20212020
Comprehensive income (loss)
Net income (loss)$139 $(88)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments30 (131)
Net unrealized investment gains (losses)(2,387)(1,873)
Defined benefit pension and postretirement plan adjustments0 (3)
Total other comprehensive income (loss), net of tax(2,357)(2,007)
Total comprehensive income (loss)$(2,218)$(2,095)
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions except per share amounts)
(Unaudited)

Common
Stock		Additional Paid In CapitalRetained
Earnings		Treasury
Stock		Accumulated Other Comprehensive IncomeTotal
Balance, December 31, 2020$1 $2,406 $8,148 $(1,562)$5,359 $14,352 
Adoption of new accounting standards0 
Net income139 139 
Total other comprehensive income (loss)(2,357)(2,357)
Dividends to stockholders, $0.70 per share(48)(48)
Purchase of treasury stock(1)(1)
Reissuance of treasury stock5 (4)4 5 
Balance, March 31, 2021$1 $2,411 $8,235 $(1,559)$3,002 $12,090 

Common
Stock		Additional Paid In CapitalRetained
Earnings		Treasury
Stock		Accumulated Other Comprehensive IncomeTotal
Balance, December 31, 2019$1 $1,937 $7,952 $(1,426)$3,137 $11,601 
Adoption of new accounting standards(12)(12)
Net income(88)(88)
Total other comprehensive income (loss)(2,007)(2,007)
Dividends to stockholders, $0.70 per share(44)(44)
Purchase of treasury stock(156)(156)
Reissuance of treasury stock5 (6)8 7 
Balance, March 31, 2020$1 $1,942 $7,802 $(1,574)$1,130 $9,301 

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


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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
  Nine months ended September 30,
  2017 2016
  
 (Dollars in thousands)
Cash Flows from Operating Activities:    
Net income $605,293
 $511,294
Adjustments to reconcile net income to net cash provided by operating activities:    
Change in operating assets and liabilities:    
Accrued investment income (63,321) (58,863)
Premiums receivable and other reinsurance balances (421,027) (3,619)
Deferred policy acquisition costs 67,471
 (15,059)
Reinsurance ceded receivable balances (120,013) (77,741)
Future policy benefits, other policy claims and benefits, and other reinsurance balances 982,164
 479,606
Deferred income taxes 236,185
 165,988
Other assets and other liabilities, net 78,848
 29,343
Amortization of net investment premiums, discounts and other (95,227) (55,967)
Depreciation and amortization expense 21,384
 19,489
Investment related (gains) losses, net (139,471) (84,002)
Other, net (47,787) 109,403
Net cash provided by operating activities 1,104,499
 1,019,872
Cash Flows from Investing Activities:    
Sales of fixed maturity securities available-for-sale 6,364,236
 3,649,187
Maturities of fixed maturity securities available-for-sale 385,993
 349,836
Sales of equity securities 192,821
 331,978
Principal payments on mortgage loans on real estate 208,052
 377,671
Principal payments on policy loans 93,286
 59,518
Purchases of fixed maturity securities available-for-sale (7,450,749) (5,938,302)
Purchases of equity securities (60,790) (523,499)
Cash invested in mortgage loans on real estate (751,702) (857,445)
Cash invested in policy loans (5,830) (5,685)
Cash invested in funds withheld at interest (12,597) (31,222)
Purchases of property and equipment (33,242) —
Change in short-term investments 65,664
 418,625
Change in other invested assets (51,476) (78,068)
Net cash used in investing activities (1,056,334) (2,247,406)
Cash Flows from Financing Activities:    
Dividends to stockholders (85,086) (74,034)
Repayment of collateral finance and securitization notes (56,637) (60,971)
Proceeds from long-term debt issuance —
 799,984
Debt issuance costs —
 (9,026)
Principal payments of long-term debt (301,927) (1,850)
Purchases of treasury stock (41,360) (121,896)
Exercise of stock options, net 4,450
 11,752
Change in cash collateral for derivative positions and other arrangements (46,206) 24,749
Deposits on universal life and other investment type policies and contracts 1,007,563
 874,708
Withdrawals on universal life and other investment type policies and contracts (568,789) (386,900)
Net cash provided by financing activities (87,992) 1,056,516
Effect of exchange rate changes on cash 43,699
 25,436
Change in cash and cash equivalents 3,872
 (145,582)
Cash and cash equivalents, beginning of period 1,200,718
 1,525,275
Cash and cash equivalents, end of period $1,204,590
 $1,379,693
Supplemental disclosures of cash flow information:    
Interest paid $129,136
 $114,043
Income taxes paid, net of refunds $27,385
 $47,312
Non-cash transactions:    
Transfer of invested assets $2,247,136
 $3,621
(Unaudited)
 Three months ended March 31,
20212020
 
Cash Flows from Operating Activities:
Net income (loss)$139 $(88)
Adjustments to reconcile net income to net cash provided by operating activities:
Change in operating assets and liabilities:
Accrued investment income(35)(27)
Premiums receivable and other reinsurance balances(93)2 
Deferred policy acquisition costs7 (88)
Reinsurance ceded receivable balances(99)39 
Future policy benefits, other policy claims and benefits, and other reinsurance balances3,064 2,051 
Deferred income taxes(195)(67)
Other assets and other liabilities, net37 (57)
Amortization of net investment premiums, discounts and other(12)(12)
Depreciation and amortization expense11 4 
Investment related (gains) losses, net(302)285 
Other, net(156)165 
Net cash provided by operating activities2,366 2,207 
Cash Flows from Investing Activities:
Sales of fixed maturity securities available-for-sale2,738 2,141 
Maturities of fixed maturity securities available-for-sale216 283 
Sales of equity securities1 177 
Principal payments on mortgage loans on real estate164 189 
Principal payments on policy loans10 4 
Purchases of fixed maturity securities available-for-sale(5,293)(3,157)
Purchases of equity securities0 (15)
Cash invested in mortgage loans on real estate(356)(541)
Cash invested in policy loans(4)0 
Cash invested in funds withheld at interest, net(26)(17)
Purchases of property and equipment(4)(6)
Change in short-term investments64 (58)
Change in other invested assets(2)(96)
Net cash used in investing activities(2,492)(1,096)
Cash Flows from Financing Activities:
Dividends to stockholders(48)(44)
Repayment of collateral finance and securitization notes(42)(19)
Principal payments of long-term debt(1)(1)
Purchases of treasury stock(1)(156)
Exercise of stock options, net0 1 
Change in cash collateral for derivative positions and other arrangements(25)51 
Deposits on universal life and other investment type policies and contracts255 663 
Withdrawals on universal life and other investment type policies and contracts(281)(188)
Net cash (used in) provided by financing activities(143)307 
Effect of exchange rate changes on cash(17)(47)
Change in cash and cash equivalents(286)1,371 
Cash and cash equivalents, beginning of period3,408 1,449 
Cash and cash equivalents, end of period$3,122 $2,820 
Supplemental disclosures of cash flow information:
Interest paid$36 $39 
Income taxes paid (received), net of refunds$61 $(31)
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
1.Business and Basis of Presentation
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 accompanying unaudited condensed consolidated financial statements of RGA and its subsidiaries (collectively, 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.
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.S-X of the Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. statements and should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 26, 2021 (the “2020 Annual Report”).
In the opinion of management, all adjustments, including normal recurring adjustments necessary for a fair presentation have been included. Results for the nine months ended September 30, 2017Interim results are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 2021.
Consolidation
These unaudited condensed consolidated financial statements include the accounts of RGA and its subsidiaries and all intercompany accounts and transactions have been eliminated. These condensedEntities in which the Company has significant influence over the operating and financing decisions but are not required to be consolidated statements should be read in conjunction withare reported under the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017 (the “2016 Annual Report”).equity method of accounting.
2.Earnings Per Share
2.    Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share on net income (in thousands,millions, except per share information):
Three months ended March 31,
 20212020
Earnings:
Net income (loss)$139 $(88)
Shares:
Weighted average outstanding shares68 62 
Equivalent shares from outstanding stock awards0 1 
Denominator for diluted calculation68 63 
Earnings per share:
Basic$2.04 $(1.41)
Diluted$2.03 $(1.41)
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Earnings:        
Net income (numerator for basic and diluted calculations) $227,591
 $198,719
 $605,293
 $511,294
Shares:        
Weighted average outstanding shares (denominator for basic calculation) 64,488
 64,146
 64,430
 64,281
Equivalent shares from outstanding stock options 1,165
 669
 1,174
 663
Denominator for diluted calculation 65,653
 64,815
 65,604
 64,944
Earnings per share:        
Basic $3.53
 $3.10
 $9.39
 $7.95
Diluted $3.47
 $3.07
 $9.23
 $7.87
As a result of the net loss for the three months ended March 31, 2020, the Company is required to use basic weighted average common shares outstanding of 62 million in the calculation of diluted loss per share, since the inclusion of shares for outstanding stock awards of 1 million would have been anti-dilutive to the loss per share calculations. In the absence of the losses, weighted average common shares outstanding and dilutive potential common shares would have totaled 63 million.
The calculation of common equivalent shares does not include the impact of optionsstock appreciation rights having a strike or conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive.anti-dilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares,awards, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. For the three months ended September 30, 2017, 0.1 millionThe following table presents approximate amounts of stock optionsappreciation rights and approximately 0.3 million performance contingent shares wereawards excluded from the calculation. For the three months ended September 30, 2016, no stock options and approximately 0.7 million performance contingent shares were excluded from the calculation. Year-to-date amounts forcalculation of common equivalent shares from outstanding stock options and performance contingent shares are the weighted average of the individual quarterly amounts.

(in thousands):
7
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Three months ended March 31,
20212020
Excluded from common equivalent shares:
Stock appreciation rights1,248 1,060 
Performance contingent awards291 150 
3.Equity
3.    Equity
Common Stockstock
The changes in number of common stock shares issued, held in treasury and outstanding are as follows for the periods indicated:
IssuedHeld In TreasuryOutstanding
Balance, December 31, 202085,310,598 17,353,697 67,956,901 
Stock-based compensation (1)
0 (28,342)28,342 
Balance, March 31, 202185,310,598 17,325,355 67,985,243 
  Issued Held In Treasury Outstanding
Balance, December 31, 2016 79,137,758
 14,835,256
 64,302,502
Common stock acquired —
 208,680
 (208,680)
Stock-based compensation (1)
 —
 (274,449) 274,449
Balance, September 30, 2017 79,137,758
 14,769,487
 64,368,271
IssuedHeld In TreasuryOutstanding
Balance, December 31, 201979,137,758 16,481,656 62,656,102 
Common Stock acquired0 1,074,413 (1,074,413)
Stock-based compensation (1)
0 (64,654)64,654 
Balance, March 31, 202079,137,758 17,491,415 61,646,343 
(1)Represents net shares issued from treasury pursuant to the Company’s equity-based compensation programs.
  Issued Held In Treasury Outstanding
Balance, December 31, 2015 79,137,758
 13,933,232
 65,204,526
Common stock acquired —
 1,356,892
 (1,356,892)
Stock-based compensation (1)
 —
 (358,639) 358,639
Balance, September 30, 2016 79,137,758
 14,931,485
 64,206,273
(1)Represents net shares issued from treasury pursuant to the Company’s equity-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 26, 2017,24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400.0$400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In connection with this new authorization, the board of directors terminated the stock repurchase authority granted in 2016.2017. On May 6, 2020, the Company announced that it has suspended stock repurchases until further notice. The resumption and 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. During the first ninethree months ended March 31, 2021, RGA did not repurchase any shares of 2017,common stock under this program. During the three months ended March 31, 2020, RGA repurchased 0.21 million shares of common stock under this program for $26.9$153 million.
Accumulated Other Comprehensive Income (Loss)
The balance of and changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 are as follows (dollars in thousands)millions):
Accumulated Other Comprehensive Income (Loss), Net of Income Tax
 
Accumulated
Currency
Translation
Adjustments
 
Unrealized
Appreciation
(Depreciation)
of Investments(1)
 
Pension and
Postretirement
Benefits
 Total Accumulated
Currency
Translation
Adjustments
Unrealized
Appreciation
(Depreciation)
of Investments(1)
Pension and
Postretirement
Benefits		Total
Balance, December 31, 2016 $(172,541) $1,355,033
 $(43,163) $1,139,329
Balance, December 31, 2020Balance, December 31, 2020$(69)$5,500 $(72)$5,359 
Other comprehensive income (loss) before reclassifications 23,117
 671,564
 (191) 694,490
Other comprehensive income (loss) before reclassifications35 (2,947)(1)(2,913)
Amounts reclassified to (from) AOCI —
 (51,407) 4,006
 (47,401)Amounts reclassified to (from) AOCI0 (113)1 (112)
Deferred income tax benefit (expense) 44,968
 (204,287) (1,342) (160,661)Deferred income tax benefit (expense)(5)673 0 668 
Balance, September 30, 2017 $(104,456) $1,770,903
 $(40,690) $1,625,757
Balance, March 31, 2021Balance, March 31, 2021$(39)$3,113 $(72)$3,002 
9
  
Accumulated
Currency
Translation
Adjustments
 
Unrealized
Appreciation
(Depreciation)
of Investments(1)
 
Pension and
Postretirement
Benefits
 Total
Balance, December 31, 2015 $(181,151) $935,697
 $(46,262) $708,284
Other comprehensive income (loss) before reclassifications 68,271
 2,191,823
 (6,079) 2,254,015
Amounts reclassified to (from) AOCI —
 (109,145) 4,253
 (104,892)
Deferred income tax benefit (expense) (8,829) (636,902) 650
 (645,081)
Balance, September 30, 2016 $(121,709) $2,381,473
 $(47,438) $2,212,326
(1)Includes cash flow hedges of $347 and $(2,496) as of September 30, 2017 and December 31, 2016, respectively, and $(40,597) and $(29,397) as of September 30, 2016 and December 31, 2015, respectively. See Note 5 - “Derivative Instruments” for additional information on cash flow hedges.

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 Accumulated Other Comprehensive Income (Loss), Net of Income Tax
 Accumulated
Currency
Translation
Adjustments
Unrealized
Appreciation
(Depreciation)
of Investments(1)
Pension and
Postretirement
Benefits		Total
Balance, December 31, 2019$(92)$3,299 $(70)$3,137 
Other comprehensive income (loss) before reclassifications(112)(2,496)(5)(2,613)
Amounts reclassified to (from) AOCI0 141 1 142 
Deferred income tax benefit (expense)(19)482 1 464 
Balance, March 31, 2020$(223)$1,426 $(73)$1,130 
(1)Includes cash flow hedges of $(71) and $(49) as of March 31, 2021 and December 31, 2020, respectively, and $(87) and $(26) as of March 31, 2020 and December 31, 2019, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.
The following table presents the amounts of AOCI reclassifications for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (dollars in thousands)millions):
Amount Reclassified from AOCI
Three months ended March 31,Affected Line Item in 
Statement of Income
Details about AOCI Components20212020
Net unrealized investment gains (losses):
Net unrealized gains (losses) on available-for-sale securities$157 $(39)Investment related gains (losses), net
Cash flow hedges – Interest rate0 0 (1)
Cash flow hedges – Currency/Interest rate(2)0 (1)
Deferred policy acquisition costs attributed to unrealized gains and losses(42)(102)(2)
Total113 (141)
Provision for income taxes(24)27 
Net unrealized gains (losses), net of tax$89 $(114)
Amortization of defined benefit plan items:
Prior service cost (credit)$0 $0 (3)
Actuarial gains (losses)(1)(1)(3)
Total(1)(1)
Provision for income taxes0 0 
Amortization of defined benefit plans, net of tax$(1)$(1)
Total reclassifications for the period$88 $(115)
  Amount Reclassified from AOCI  
  Three months ended September 30, Nine months ended September 30,  
Details about AOCI Components 2017 2016 2017 2016 
Affected Line Item in 
Statements of Income
Net unrealized investment gains (losses):          
Net unrealized gains and losses on available-for-sale securities $10,515
 $72,351
 $39,032
 $84,250
 Investment related gains (losses), net
Cash flow hedges - Currency/Interest rate 230
 200
 560
 454
 (1)
Cash flow hedges - Forward bond purchase commitments 224
 137
 286
 (120) (1)
Deferred policy acquisition costs attributed to unrealized gains and losses 1,116
 12,090
 11,529
 24,561
 (2)
Total 12,085
 84,778
 51,407
 109,145
  
Provision for income taxes (3,991) (27,680) (16,015) (32,676)  
Net unrealized gains (losses), net of tax $8,094
 $57,098
 $35,392
 $76,469
  
Amortization of defined benefit plan items:          
Prior service cost (credit) $590
 $391
 $732
 $238
 (3)
Actuarial gains/(losses) (1,661) (1,177) (4,738) (4,491) (3)
Total (1,071) (786) (4,006) (4,253)  
Provision for income taxes 375
 276
 1,402
 1,489
  
Amortization of defined benefit plans, net of tax $(696) $(510) $(2,604) $(2,764)  
           
Total reclassifications for the period $7,398
 $56,588
 $32,788
 $73,705
  
(1)See Note 5 - “Derivative Instruments” for additional information on cash flow hedges.
(2)This AOCI component is included in the computation of the deferred policy acquisition cost. See Note 8 – “Deferred Policy Acquisition Costs” of the 2016 Annual Report for additional details.
(3)This AOCI component is included in the computation of the net periodic pension cost. See Note 10 – “Employee Benefit Plans” for additional details.

(1)See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.
(2)This AOCI component is included in the computation of the deferred policy acquisition cost. See Note 8 – “Deferred Policy Acquisition Costs” of the 2020 Annual Report for additional details.
(3)This AOCI component is included in the computation of the net periodic pension cost. See Note 10 – “Employee Benefit Plans” for additional details.
Equity Based Compensation
Equity compensation expense was $17.1$5 million for the three months ended March 31, 2021 and $27.1 million in the first nine months of 2017 and 2016, respectively.2020. In the first quarter of 2017,2021, the Company granted 0.2 million200,201 stock appreciation rights at $129.72$129.01 weighted average exercise price per share, and 0.2 million167,862 performance contingent awards and 328,725 restricted stock units to employees. Additionally, non-employee directors were granted a total of 7,696Performance contingent awards include both performance contingent shares of common stock.and performance share units. As of September 30, 2017, 1.6 millionMarch 31, 2021, 1,644,630 share optionsawards at a weighted average strike price per share of $60.77$96.71 were vested and exercisable, with a remaining weighted average exercise period of 4.6 years. As of September 30, 2017,March 31, 2021, the total compensation cost of non-vested awards not yet recognized in the condensed consolidated financial statements was $32.5$73 million. It is estimated that these costs will vest over a weighted average period of 1.2 years.


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4.    Investments
4.Investments
Fixed Maturity and Equity 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 and equity securities by sectortype as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
March 31, 2021:AmortizedAllowance forUnrealizedUnrealizedEstimated Fair% of
 CostCredit LossesGainsLossesValueTotal
Available-for-sale:
Corporate$32,916 $16 $2,683 $288 $35,295 62.5 %
Canadian government3,253 0 1,423 3 4,673 8.3 
RMBS1,536 0 62 7 1,591 2.8 
ABS3,156 0 25 30 3,151 5.6 
CMBS1,774 1 78 11 1,840 3.3 
U.S. government960 0 23 53 930 1.6 
State and political subdivisions1,240 0 109 14 1,335 2.4 
Other foreign government7,394 5 306 84 7,611 13.5 
Total fixed maturity securities$52,229 $22 $4,709 $490 $56,426 100.0 %
September 30, 2017: Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value % of Total Other-than-
temporary impairments in AOCI
Available-for-sale:            
Corporate securities $21,418,741
 $1,209,999
 $92,910
 $22,535,830
 61.9% $—
Canadian and Canadian provincial governments 2,850,982
 1,142,635
 2,432
 3,991,185
 11.0
 —
Residential mortgage-backed securities 1,645,379
 42,202
 8,276
 1,679,305
 4.6
 —
Asset-backed securities 1,680,918
 18,713
 5,063
 1,694,568
 4.7
 275
Commercial mortgage-backed securities 1,293,296
 25,471
 5,445
 1,313,322
 3.6
 —
U.S. government and agencies 1,621,053
 13,614
 30,998
 1,603,669
 4.4
 —
State and political subdivisions 614,099
 52,919
 5,987
 661,031
 1.8
 —
Other foreign government, supranational and foreign government-sponsored enterprises 2,765,500
 145,025
 7,693
 2,902,832
 8.0
 —
Total fixed maturity securities $33,889,968
 $2,650,578
 $158,804
 $36,381,742
 100.0% $275
Non-redeemable preferred stock $41,878
 $312
 $3,289
 $38,901
 34.4%  
Other equity securities 74,514
 633
 1,117
 74,030
 65.6
  
Total equity securities $116,392
 $945
 $4,406
 $112,931
 100.0%  
December 31, 2020:AmortizedAllowance forUnrealizedUnrealizedEstimated Fair% of
 CostCredit LossesGainsLossesValueTotal
Available-for-sale:
Corporate$31,963 17 $4,356 $94 $36,208 63.9 %
Canadian government3,145 0 1,995 0 5,140 9.1 
RMBS1,735 0 84 2 1,817 3.2 
ABS3,099 0 35 42 3,092 5.4 
CMBS1,790 3 102 21 1,868 3.3 
U.S. government1,242 0 196 1 1,437 2.5 
State and political subdivisions1,237 0 157 4 1,390 2.4 
Other foreign government5,337 0 479 33 5,783 10.2 
Total fixed maturity securities$49,548 $20 $7,404 $197 $56,735 100.0 %
December 31, 2016: Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value % of Total Other-than-
temporary impairments in AOCI
Available-for-sale:            
Corporate securities $18,924,711
 $911,618
 $217,245
 $19,619,084
 61.1% $—
Canadian and Canadian provincial governments 2,561,605
 1,085,982
 3,541
 3,644,046
 11.4
 —
Residential mortgage-backed securities 1,258,039
 33,917
 13,380
 1,278,576
 4.0
 (375)
Asset-backed securities 1,443,822
 9,350
 23,828
 1,429,344
 4.5
 275
Commercial mortgage-backed securities 1,342,440
 28,973
 7,759
 1,363,654
 4.2
 —
U.S. government and agencies 1,518,702
 12,644
 63,044
 1,468,302
 4.6
 —
State and political subdivisions 566,761
 37,499
 12,464
 591,796
 1.8
 —
Other foreign government, supranational and foreign government-sponsored enterprises 2,595,707
 123,054
 19,938
 2,698,823
 8.4
 —
Total fixed maturity securities $30,211,787
 $2,243,037
 $361,199
 $32,093,625
 100.0% $(100)
Non-redeemable preferred stock $55,812
 $1,648
 $6,337
 $51,123
 18.6%  
Other equity securities 229,767
 1,792
 7,321
 224,238
 81.4
  
Total equity securities $285,579
 $3,440
 $13,658
 $275,361
 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 condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of September 30, 2017March 31, 2021 and December 31, 2016,2020, 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 September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):

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September 30, 2017 December 31, 2016March 31, 2021December 31, 2020
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Amortized
Cost		Estimated
Fair Value		Amortized
Cost		Estimated
Fair Value
Fixed maturity securities pledged as collateral$68,841
 $72,365
 $207,066
 $210,676
Fixed maturity securities pledged as collateral$131 $139 $148 $162 
Fixed maturity securities received as collateraln/a
 461,237
 n/a
 300,925
Fixed maturity securities received as collateraln/a1,751 n/a1,784 
Assets in trust held to satisfy collateral requirements14,598,404
 15,598,457
 12,135,258
 12,874,370
Assets in trust held to satisfy collateral requirements27,893 29,954 27,675 31,179 
The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining a diversified investment portfolio whichthat 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 the securities disclosed below, as of
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March 31, 2021. 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 September 30, 2017 and December 31, 20162020 (dollars in thousands)millions).
March 31, 2021December 31, 2020
Amortized
Cost		Estimated
Fair Value		Amortized
Cost		Estimated
Fair Value
Fixed maturity securities guaranteed or issued by:
Government of Japan$3,366 $3,352 $1,493 $1,491 
Canadian province of Quebec1,337 2,175 1,303 2,474 
Canadian province of Ontario1,081 1,427 1,054 1,528 
 September 30, 2017 December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Fixed maturity securities guaranteed or issued by:       
Canadian province of Quebec$1,115,505
 $1,766,749
 $1,004,261
 $1,612,957
Canadian province of Ontario932,872
 1,231,201
 832,764
 1,126,433
The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at September 30, 2017as of March 31, 2021, are shown by contractual maturity in the table below (dollars in thousands)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. Asset and mortgage-backedStructured securities are shown separately in the table below, as they are not due at a single maturity date.
 Amortized Cost Estimated Fair ValueAmortized CostEstimated Fair Value
Available-for-sale:    Available-for-sale:
Due in one year or less $910,821
 $915,586
Due in one year or less$1,361 $1,378 
Due after one year through five years 7,339,134
 7,618,692
Due after one year through five years8,345 8,829 
Due after five years through ten years 9,581,912
 10,090,704
Due after five years through ten years10,956 11,763 
Due after ten years 11,438,508
 13,069,565
Due after ten years25,101 27,874 
Asset and mortgage-backed securities 4,619,593
 4,687,195
Structured securitiesStructured securities6,466 6,582 
Total $33,889,968
 $36,381,742
Total$52,229 $56,426 
Corporate Fixed Maturity Securities
The tables below show the major industry typessectors of the Company’s corporate fixed maturity holdings as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
March 31, 2021: Estimated 
 Amortized Cost    Fair Value% of Total           
Finance$12,045 $12,906 36.6 %
Industrial16,819 18,029 51.0 
Utility4,052 4,360 12.4 
Total$32,916 $35,295 100.0 %
December 31, 2020: Estimated 
 Amortized CostFair Value% of Total
Finance$11,785 $13,236 36.6 %
Industrial16,274 18,435 50.9 
Utility3,904 4,537 12.5 
Total$31,963 $36,208 100.0 %
12
September 30, 2017:   Estimated  
  Amortized Cost     Fair Value % of Total           
Finance $7,797,576
 $8,146,891
 36.2%
Industrial 11,323,024
 11,914,845
 52.8
Utility 2,298,141
 2,474,094
 11.0
Total $21,418,741
 $22,535,830
 100.0%
       
December 31, 2016:   Estimated  
  Amortized Cost Fair Value % of Total
Finance $6,725,199
 $6,888,968
 35.2%
Industrial 10,228,813
 10,639,613
 54.2
Utility 1,970,699
 2,090,503
 10.6
Total $18,924,711
 $19,619,084
 100.0%

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Other-Than-TemporaryAllowance for Credit Losses and Impairments - – Fixed Maturity and Equity Securities Available-for-Sale
As discussed in Note 2 – “Summary of Significant“Significant Accounting Policies”Policies and Pronouncements” of the 2016Company’s 2020 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”)allowances for credit losses on fixed maturity securities isare recognized in AOCI.investment related gains (losses), net on the condensed consolidated statements of income. For these securities, the net amount recognized in the condensed consolidated statements of income (“credit loss impairments”) 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 debtfixed maturity security prior to impairment.the allowance for credit losses. Any remaining difference between the fair value and amortized cost is recognized in AOCI.
The following table sets forthpresents the amountrollforward of pre-taxthe allowance for credit loss impairments onlosses in fixed maturity securities held by type for the Company as of the dates indicated, for which a portion of the OTTI loss was recognizedthree months ended March 31, 2021 and 2020 (dollars in AOCI, and the corresponding changes in such amounts (dollars in thousands)millions):
Three months ended March 31, 2021
 CorporateCMBSOther Foreign GovernmentTotal
Balance, beginning of period$17 $3 $0 $20 
Credit losses recognized on securities for which credit losses were not previously recorded0 1 5 6 
Reductions for securities sold during the period(1)(2)0 (3)
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period0 (1)0 (1)
Balance, end of period$16 $1 $5 $22 
Three months ended March 31, 2020
CorporateOther Foreign GovernmentTotal
Balance, beginning of periodBalance, beginning of period$0 $0 $0 
Credit losses recognized on securities for which credit losses were not previously recordedCredit losses recognized on securities for which credit losses were not previously recorded26 7 33 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Balance, beginning of period $3,677
 $6,974
 $6,013
 $7,284
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period —
 —
 (2,336) (310)
Balance, end of period $3,677
 $6,974
 $3,677
 $6,974
Balance, end of period$26 $7 $33 
Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale
The following table presents the total gross unrealized losses for the 1,1651,650 and 1,535877 fixed maturity and equity securities as of September 30, 2017March 31, 2021 and December 31, 2016, respectively,2020, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands)millions):
 September 30, 2017 December 31, 2016 March 31, 2021December 31, 2020
 
Gross
Unrealized
Losses
 % of Total     
Gross
Unrealized
Losses
 % of Total     Gross
Unrealized
Losses		% of Total    Gross
Unrealized
Losses		% of Total    
Less than 20% $140,313
 86.0% $337,831
 90.1%Less than 20%$427 87.2 %$133 67.5 %
20% or more for less than six months 3,407
 2.1
 19,438
 5.2
20% or more for less than six months28 5.7 42 21.3 
20% or more for six months or greater 19,490
 11.9
 17,588
 4.7
20% or more for six months or greater35 7.1 22 11.2 
Total $163,210
 100.0% $374,857
 100.0%Total$490 100.0 %$197 100.0 %
The Company’s determination of whether a decline in value is other-than-temporary includes analysis ofnecessitates the underlying credit and the extent and duration of a decline in value. The Company’s credit analysisrecording of an investmentallowance for credit losses includes determiningan 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. In the Company’s impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features.
The following tables present the estimated fair values and gross unrealized losses including other-than-temporary impairment losses reported in AOCI, for 1,165 and 1,535 fixed maturity and equity securities that have estimated fair values below amortized cost as of September 30, 2017March 31, 2021 and December 31, 2016, respectively2020 (dollars in thousands)millions). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.
 

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 Less than 12 months12 months or greaterTotal
  Gross Gross Gross
March 31, 2021:EstimatedUnrealizedEstimatedUnrealizedEstimatedUnrealized
 Fair ValueLossesFair ValueLossesFair ValueLosses
Investment grade securities:
Corporate$4,794 $211 $219 $10 $5,013 $221 
Canadian government29 3 0 0 29 3 
RMBS323 7 0 0 323 7 
ABS793 6 933 12 1,726 18 
CMBS103 2 68 2 171 4 
U.S. government431 53 0 0 431 53 
State and political subdivisions271 9 29 5 300 14 
Other foreign government2,469 50 498 25 2,967 75 
Total investment grade securities9,213 341 1,747 54 10,960 395 
 
Below investment grade securities:
Corporate258 45 226 22 $484 $67 
ABS0 0 15 12 15 12 
CMBS42 1 44 6 86 7 
Other foreign government86 4 26 5 112 9 
Total below investment grade securities386 50 311 45 697 95 
Total fixed maturity securities$9,599 $391 $2,058 $99 $11,657 $490 
  Less than 12 months 12 months or greater Total
    Gross   Gross   Gross
September 30, 2017: Estimated Unrealized Estimated Unrealized Estimated Unrealized
  Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:            
Corporate securities $2,035,856
 $15,923
 $1,213,026
 $49,422
 $3,248,882
 $65,345
Canadian and Canadian provincial governments 97,100
 1,320
 46,663
 1,112
 143,763
 2,432
Residential mortgage-backed securities 507,372
 5,084
 154,469
 3,189
 661,841
 8,273
Asset-backed securities 516,613
 2,318
 133,848
 2,213
 650,461
 4,531
Commercial mortgage-backed securities 293,834
 3,224
 61,707
 2,221
 355,541
 5,445
U.S. government and agencies 1,302,732
 29,712
 56,595
 1,286
 1,359,327
 30,998
State and political subdivisions 53,977
 743
 62,530
 5,156
 116,507
 5,899
Other foreign government, supranational and foreign government-sponsored enterprises 327,813
 2,529
 104,333
 4,865
 432,146
 7,394
Total investment grade securities 5,135,297
 60,853
 1,833,171
 69,464
 6,968,468
 130,317
 
Below investment grade securities:
            
Corporate securities 170,023
 3,780
 95,089
 23,785
 265,112
 27,565
Residential mortgage-backed securities —
 —
 93
 3
 93
 3
Asset-backed securities —
 —
 5,611
 532
 5,611
 532
State and political subdivisions 919
 88
 —
 —
 919
 88
Other foreign government, supranational and foreign government-sponsored enterprises 11,219
 77
 15,667
 222
 26,886
 299
Total below investment grade securities 182,161
 3,945
 116,460
 24,542
 298,621
 28,487
Total fixed maturity securities $5,317,458
 $64,798
 $1,949,631
 $94,006
 $7,267,089
 $158,804
Non-redeemable preferred stock $6,712
 $345
 $25,983
 $2,944
 $32,695
 $3,289
Other equity securities 6,446
 396
 58,206
 721
 64,652
 1,117
Total equity securities $13,158
 $741
 $84,189
 $3,665
 $97,347
 $4,406
  Less than 12 months 12 months or greater Total
    Gross   Gross   Gross
December 31, 2016: Estimated Unrealized Estimated Unrealized Estimated Unrealized
  Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:            
Corporate securities $4,661,706
 $124,444
 $549,273
 $43,282
 $5,210,979
 $167,726
Canadian and Canadian provincial governments 101,578
 3,541
 —
 —
 101,578
 3,541
Residential mortgage-backed securities 490,473
 9,733
 112,216
 3,635
 602,689
 13,368
Asset-backed securities 563,259
 12,010
 257,166
 9,653
 820,425
 21,663
Commercial mortgage-backed securities 368,465
 6,858
 10,853
 166
 379,318
 7,024
U.S. government and agencies 1,056,101
 63,044
 —
 —
 1,056,101
 63,044
State and political subdivisions 187,194
 9,396
 13,635
 3,068
 200,829
 12,464
Other foreign government, supranational and foreign government-sponsored enterprises 524,236
 13,372
 51,097
 2,981
 575,333
 16,353
Total investment grade securities 7,953,012
 242,398
 994,240
 62,785
 8,947,252
 305,183
Below investment grade securities:            
Corporate securities 330,757
 7,914
 163,152
 41,605
 493,909
 49,519
Residential mortgage-backed securities —
 —
 412
 12
 412
 12
Asset-backed securities 5,904
 700
 12,581
 1,465
 18,485
 2,165
Commercial mortgage-backed securities 5,815
 735
 —
 —
 5,815
 735
Other foreign government, supranational and foreign government-sponsored enterprises 32,355
 1,258
 39,763
 2,327
 72,118
 3,585
Total below investment grade securities 374,831
 10,607
 215,908
 45,409
 590,739
 56,016
Total fixed maturity securities $8,327,843
 $253,005
 $1,210,148

$108,194
 $9,537,991
 $361,199
Non-redeemable preferred stock $10,831
 $831
 $21,879
 $5,506
 $32,710
 $6,337
Other equity securities 202,068
 7,020
 6,751
 301
 208,819
 7,321
Total equity securities $212,899
 $7,851
 $28,630

$5,807
 $241,529
 $13,658

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 Less than 12 months12 months or greaterTotal
  Gross Gross Gross
December 31, 2020:EstimatedUnrealizedEstimatedUnrealizedEstimatedUnrealized
 Fair ValueLossesFair ValueLossesFair ValueLosses
Investment grade securities:
Corporate$930 $29 $70 $5 $1,000 $34 
Canadian government0 0 0 0 0 0 
RMBS294 2 0 0 294 2 
ABS1,096 17 570 11 1,666 28 
CMBS160 6 0 0 160 6 
U.S. government27 1 0 0 27 1 
State and political subdivisions66 1 16 3 82 4 
Other foreign government973 27 0 0 973 27 
Total investment grade securities3,546 83 656 19 4,202 102 
Below investment grade securities:
Corporate375 49 81 11 456 60 
ABS20 13 4 1 24 14 
CMBS91 15 0 0 91 15 
Other foreign government36 3 28 3 64 6 
Total below investment grade securities522 80 113 15 635 95 
Total fixed maturity securities$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 table above, as of the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.
Unrealized losses on below investment grade securities as of September 30, 2017 are primarily related to high-yield corporate securities. Changes in unrealized losses are primarily being driven by changes in credit spreads and interest rates.


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Investment Income and Investment Related Gains (Loss), Net - Accounting Correction
During the three-months ended March 31, 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 thousands)millions):
Three months ended September 30, Nine months ended September 30, Three months ended March 31,
2017 2016 2017 2016 20212020
Fixed maturity securities available-for-sale$359,157
 $325,089
 $1,039,392
 $961,096
Fixed maturity securities available-for-sale$495 $480 
Equity securitiesEquity securities2 2 
Mortgage loans on real estate50,040
 39,802
 138,829
 121,494
Mortgage loans on real estate66 67 
Policy loans15,404
 15,391
 45,870
 47,897
Policy loans14 15 
Funds withheld at interest102,144
 104,609
 327,089
 273,482
Funds withheld at interest84 53 
Short-term investments and cash and cash equivalents1,977
 1,752
 5,266
 6,265
Short-term investments and cash and cash equivalents1 4 
Other invested assets47,595
 21,138
 90,488
 57,896
Other invested assets174 (5)
Investment income576,317
 507,781
 1,646,934
 1,468,130
Investment income836 616 
Investment expense(19,399) (18,054) (57,114) (53,471)Investment expense(24)(22)
Investment income, net of related expenses$556,918
 $489,727
 $1,589,820
 $1,414,659
Investment income, net of related expenses812 $594 
Investment Related Gains (Losses), Net
Investment related gains (losses), net, consist of the following (dollars in thousands)millions):
 Three months ended March 31,
 20212020
Fixed maturity securities available-for-sale:
Impairments and change in allowance for credit losses$(2)$(34)
Gain on investment activity167 27 
Loss on investment activity(13)(8)
Net gains (losses) on equity securities3 (23)
Other impairment losses and change in mortgage loan provision18 (13)
Change in fair value of certain limited partnership investments and other, net111 9 
Net gains (losses) on derivatives18 (243)
Total investment related gains (losses), net$302 $(285)
15
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Fixed maturity and equity securities available for sale:       
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings$(390) $—
 $(20,980) $(34,663)
Impairment losses on equity securities(889) —
 (889) —
Gain on investment activity19,522
 46,346
 91,635
 127,153
Loss on investment activity(7,678) (9,054) (30,712) (43,397)
Other impairment losses and change in mortgage loan provision(2,446) (262) (9,220) (2,111)
Derivatives and other, net14,534
 49,594
 109,637
 37,020
Total investment related gains (losses), net$22,653
 $86,624
 $139,471
 $84,002
The fixed maturity impairments for the three and nine months ended September 30, 2017 and 2016 were largely related to high-yield and emerging market corporate securities. The equity impairments for the three and nine months ended September 30, 2017 were related to an equity position received as part of a debt restructuring. The other impairment losses and change in mortgage loan provision for the three and nine months ended September 30, 2017 and 2016 were primarily due to impairments on limited partnerships. The fluctuations in investment related gains (losses) for derivatives and other for the three and nine months ended September 30, 2017, compared to the same periods in 2016, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.
During the three months ended September 30, 2017 and 2016, the Company sold fixed maturity and equity securities with fair values of $484.7 million and $317.3 million at losses of $7.7 million and $9.1 million, respectively. During the nine months ended September 30, 2017 and 2016, the Company sold fixed maturity and equity securities with fair values of $1,771.4 million and $903.1 million at losses of $30.7 million and $43.4 million, respectively. The Company generally does not buy and sell securities on a short-term basis.

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Securities Borrowing, Lending and OtherRepurchase Agreements
The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from third parties. The borrowed securities are used to provide collateral under affiliated reinsurance transactions. The Company is required to maintain a minimum of 100% of the fair value, or par value, under certain programs, of the borrowed securities as collateral. The collateral 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. No cash or securities have been pledged by the Company for this purpose.
The Company also participates in a securities lending program whereby securities, reflected as investments on the Company’s condensed consolidated balance sheets, are loaned to a third party. The Company receives securities as collateral, in an amount equal to a minimum of 105% of the fair value of the securities lent. The securities received as collateral are not reflected on the Company’s condensed consolidated balance sheets.
The Company also participates in repurchase/reverse repurchase programs in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to third parties. In return, the Company receives securities from the third parties with an estimated fair value equal to a minimum of 100% of the securities pledged. The securities received are not reflected on the Company’s condensed consolidated balance sheets.
The Company also participates in a repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to a third party. In return, the Company receives cash from the third party, which is reflected as a payable to the third party and included in other liabilities on the condensed consolidated balance sheets. The Company is required to maintain a minimum collateral balance with a fair value of 102% of the cash received.
The following table includes the amount of borrowed securities, loaned securities, lent and securities received as collateral received as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions).
September 30, 2017 December 31, 2016March 31, 2021December 31, 2020
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Amortized
Cost		Estimated
Fair Value		Amortized
Cost		Estimated
Fair Value
Borrowed securities$360,475
 $379,101
 $263,820
 $279,186
Borrowed securities$233 $257 $118 $161 
Securities lending:       Securities lending:
Securities loaned117,219
 121,958
 74,389
 73,625
Securities loaned94 102 94 105 
Securities receivedn/a
 120,000
 n/a
 80,000
Securities receivedn/a104 n/a102 
Repurchase program/reverse repurchase program:       Repurchase program/reverse repurchase program:
Securities pledged491,824
 512,613
 476,531
 499,891
Securities pledged647 685 653 711 
Securities receivedn/a
 522,354
 n/a
 515,200
Securities receivedn/a657 n/a669 
The Company also held cash collateral for securities lending and the repurchase program/repurchase/reverse repurchase programs of $38.5$5 million as of March 31, 2021. There was no cash collateral held for repurchase/reverse repurchase programs as of December 31, 2020. No cash or securities have been pledged by the Company for its securities borrowing and $28.8 million at September 30, 2017lending programs as of March 31, 2021 and December 31, 2016, respectively.

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2020.
The following table presentstables present information on the Company’s securities lending and repurchase/reverse repurchase transactions as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions). Collateral associated with certain borrowed securities is not included within the table,tables, as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.
March 31, 2021
Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 Days30 – 90 DaysGreater than 90 DaysTotal
Securities lending transactions:
Corporate$0 $0 $0 $102 $102 
Total0 0 0 102 102 
Repurchase/reverse repurchase transactions:
Corporate0 0 0 407 407 
Other foreign government0 0 0 278 278 
Total0 0 0 685 685 
Total transactions$0 $0 $0 $787 $787 
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table$766 
Amounts related to agreements not included in offsetting disclosure$21 
 September 30, 2017
 Remaining Contractual Maturity of the Agreements
 Overnight and Continuous Up to 30 Days 30-90 Days Greater than 90 Days Total
Securities lending transactions:         
Corporate securities$—
 $—
 $—
 $121,958
 $121,958
Total—
 —
 —
 121,958
 121,958
Repurchase transactions:         
Corporate securities—
 1,472
 5,402
 175,258
 182,132
Residential mortgage-backed securities—
 —
 —
 87,418
 87,418
U.S. government and agencies—
 —
 23,206
 196,040
 219,246
Foreign government—
 —
 —
 21,370
 21,370
Other2,447
 —
 —
 —
 2,447
Total2,447
 1,472
 28,608
 480,086
 512,613
Total transactions$2,447
 $1,472
 $28,608
 $602,044
 $634,571
          
Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table $680,850
Amounts related to agreements not included in offsetting disclosure $46,279
 December 31, 2016
 Remaining Contractual Maturity of the Agreements
 Overnight and Continuous Up to 30 Days 30-90 Days Greater than 90 Days Total
Securities lending transactions:         
Corporate securities$—
 $—
 $4,017
 $69,608
 $73,625
Total$—
 $—
 $4,017
 $69,608
 $73,625
Repurchase transactions:         
Corporate securities$—
 $—
 $3,220
 $166,979
 $170,199
Residential mortgage-backed securities—
 —
 —
 92,546
 92,546
U.S. government and agencies—
 —
 —
 216,000
 216,000
Foreign government—
 —
 —
 19,900
 19,900
Other1,246
 —
 —
 —
 1,246
Total1,246
 —
 3,220
 495,425
 499,891
Total borrowings$1,246
 $—
 $7,237
 $565,033
 $573,516
          
Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table $624,032
Amounts related to agreements not included in offsetting disclosure $50,516
December 31, 2020
Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 Days30 – 90 DaysGreater than 90 DaysTotal
Securities lending transactions:
Corporate$0 $0 $0 $105 $105 
Total0 0 0 105 105 
Repurchase/reverse repurchase transactions:
Corporate0 0 0 417 417 
Other foreign government0 0 0 294 294 
Total0 0 0 711 711 
Total transactions$0 $0 $0 $816 $816 
Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table$771 
Amounts related to agreements not included in offsetting disclosure$45 
The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the condensed consolidated balance sheetssheet was a liability of $7.9$5 million and $5.5 millionas of September 30, 2017 andMarch 31, 2021. After the effect of offsetting, there was no liability presented on the consolidated
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balance sheet as of December 31, 2016, respectively.2020. As of September 30, 2017 and DecemberMarch 31, 2016,2021, the Company recognized payables resulting from cash received as collateral associated with a repurchase/reverse repurchase agreement, as discussed above. As of 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.

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Mortgage Loans on Real Estate
Mortgage loans represented approximately 8.7% and 8.4%As of the Company’s total investments as of September 30, 2017 and DecemberMarch 31, 2016. The Company makes2021, mortgage loans on income producing properties that arewere geographically diversifieddispersed throughout the U.S. with the largest concentration beingconcentrations in the state of California which represented 21.2%(13.9%), Texas (13.6%) and 22.1% of mortgageWashington (8.8%), in addition to loans on real estate as of September 30, 2017secured by properties in Canada (3.2%) and December 31, 2016, respectively.United Kingdom (1.8%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses and valuation allowances.
The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type is as follows as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
 March 31, 2021December 31, 2020
 Property type:Carrying Value% of TotalCarrying Value% of Total
Office$1,724 28.5 %$1,702 29.0 %
Retail1,753 28.9 1,711 29.3 
Industrial1,297 21.4 1,210 20.6 
Apartment856 14.1 808 13.8 
Other commercial428 7.1 430 7.3 
Recorded investment$6,058 100.0 %5,861 100.0 %
Unamortized balance of loan origination fees and expenses(10)(10)
Valuation allowances(47)(64)
Total mortgage loans on real estate$6,001 $5,787 
  September 30, 2017 December 31, 2016
 Property type: Carrying Value % of Total Carrying Value % of Total
Office building $1,426,673
 32.9% $1,270,113
 33.6%
Retail 1,316,463
 30.4
 1,179,936
 31.2
Industrial 891,051
 20.6
 713,461
 18.8
Apartment 508,367
 11.7
 447,088
 11.8
Other commercial 191,443
 4.4
 172,609
 4.6
Recorded investment 4,333,997
 100.0% $3,783,207
 100.0%
Unamortized balance of loan origination fees and expenses (2,531)   —
  
Valuation allowances (9,137)   (7,685)  
Total mortgage loans on real estate $4,322,329
   $3,775,522
  
The following table presents the maturities of the Company’s recorded investment in mortgage loans as of September 30, 2017March 31, 2021 and December 31, 2016 are as follows2020 (dollars in thousands)millions):
 September 30, 2017 December 31, 2016March 31, 2021December 31, 2020
 
Recorded
Investment
 % of Total 
Recorded
Investment
 % of TotalRecorded
Investment		% of TotalRecorded
Investment		% of Total
Due within five years $1,086,700
 25.1% $822,073
 21.7%Due within five years$2,478 40.9 %$2,276 38.8 %
Due after five years through ten years 2,334,113
 53.8
 2,099,559
 55.5
Due after five years through ten years2,674 44.1 2,768 47.3 
Due after ten years 913,184
 21.1
 861,575
 22.8
Due after ten years906 15.0 817 13.9 
Total $4,333,997
 100.0% $3,783,207
 100.0%Total$6,058 100.0 %$5,861 100.0 %
The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
Recorded Investment
Debt Service RatiosConstruction loans
>1.20x1.00x – 1.20x<1.00xTotal% of Total
March 31, 2021:
Loan-to-Value Ratio
0% – 59.99%$2,877 $131 $83 $26 $3,117 51.4 %
60% – 69.99%2,020 64 3 0 2,087 34.5 
70% – 79.99%494 71 43 0 608 10.0 
80% or greater208 21 17 0 246 4.1 
Total$5,599 $287 $146 $26 $6,058 100.0 %
 Recorded Investment
 Debt Service Ratios    
 >1.20x 1.00x - 1.20x <1.00x Total % of Total
September 30, 2017:         
Loan-to-Value Ratio         
0% - 59.99%$2,060,277
 $51,162
 $4,698
 $2,116,137
 48.8%
60% - 69.99%1,515,469
 86,613
 44,358
 1,646,440
 38.0
70% - 79.99%424,195
 32,664
 19,850
 476,709
 11.0
Greater than 80%51,348
 19,951
 23,412
 94,711
 2.2
Total$4,051,289
 $190,390
 $92,318
 $4,333,997
 100.0%

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Recorded Investment
Debt Service RatiosConstruction loans
>1.20x1.00x – 1.20x<1.00xTotal% of Total
December 31, 2020:
Loan-to-Value Ratio
0% – 59.99%$2,774 $106 $17 $12 $2,909 49.6 %
60% – 69.99%2,013 62 33 0 2,108 36.0 
70% – 79.99%555 49 13 0 617 10.5 
80% or greater189 21 17 0 227 3.9 
Total$5,531 $238 $80 $12 $5,861 100.0 %
 Recorded Investment
 Debt Service Ratios    
 >1.20x 1.00x - 1.20x <1.00x Total % of Total
December 31, 2016:         
Loan-to-Value Ratio         
0% - 59.99%$1,859,640
 $64,749
 $1,366
 $1,925,755
 50.8%
60% - 69.99%1,257,788
 34,678
 —
 1,292,466
 34.2
70% - 79.99%370,092
 20,869
 24,369
 415,330
 11.0
Greater than 80%114,297
 —
 35,359
 149,656
 4.0
Total$3,601,817
 $120,296
 $61,094
 $3,783,207
 100.0%
NoneThe following table sets forth credit quality grades by year of origination of the payments due to the Company on itsCompany’s recorded investment in mortgage loans were delinquent as of September 30, 2017March 31, 2021 and December 31, 2016.2020 (dollars in millions):
Recorded Investment
Year of Origination
20212020201920182017PriorTotal
March 31, 2021:
Internal credit quality grade:
High investment grade$230 $411 $575 $451 $315 $1,494 $3,476 
Investment grade116 360 498 388 397 637 2,396 
Average0 0 0 39 19 88 146 
Watch list0 0 0 0 0 4 4 
In or near default0  00 0 0 36 36 
Total$346 $771 $1,073 $878 $731 $2,259 $6,058 
Recorded Investment
Year of Origination
20202019201820172016PriorTotal
December 31, 2020:
Internal credit quality grade:
High investment grade$411 $616 $493 $336 $574 $1,008 $3,438 
Investment grade352 496 399 407 249 368 2,271 
Average0 0 0 19 37 55 111 
Watch list0 0 0 0 0 4 4 
In or near default0 0 0 0 0 37 37 
Total$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 March 31, 2021 and December 31, 2020.
 March 31, 2021December 31, 2020
Current$6,043 $5,846 
31 – 60 days past due15 15 
Total$6,058 $5,861 
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The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
 March 31, 2021December 31, 2020
Mortgage loans:
Individually measured for impairment$36 $37 
Collectively measured for impairment6,022 5,824 
Recorded investment$6,058 $5,861 
Valuation allowances:
Individually measured for impairment$0 $0 
Collectively measured for impairment47 64 
Total valuation allowances$47 $64 
  September 30, 2017 December 31, 2016
Mortgage loans:    
Individually measured for impairment $5,856
 $2,216
Collectively measured for impairment 4,328,141
 3,780,991
Recorded investment $4,333,997
 $3,783,207
Valuation allowances:    
Individually measured for impairment $—
 $—
Collectively measured for impairment 9,137
 7,685
Total valuation allowances $9,137
 $7,685
InformationThe following table presents information regarding the Company’s loan valuation allowances for mortgage loans for the three and nine months ended September 30, 2017March 31, 2021 and 2016 is as follows2020 (dollars in thousands)millions):
 Three months ended March 31,
 20212020
Balance, beginning of period$64 $12 
Adoption of new accounting standard, see Note 130 14 
Provision (release)(17)13 
Balance, end of period$47 $39 
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Balance, beginning of period $8,156
 $6,499
 $7,685
 $6,813
Provision (release) 977
 247
 1,444
 (67)
Translation adjustment 4
 —
 8
 —
Balance, end of period $9,137
 $6,746
 $9,137
 $6,746

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InformationThe following table presents information regarding the portion of the Company’s mortgage loans that were impaired as of September 30, 2017March 31, 2021 and December 31, 2016 is as follows2020 (dollars in thousands)millions):
Unpaid
Principal
Balance		Recorded
Investment		Related
Allowance		Carrying
Value
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Related
Allowance
 
Carrying
Value
September 30, 2017:        
March 31, 2021:March 31, 2021:
Impaired mortgage loans with no valuation allowance recorded $6,427
 $5,856
 $—
 $5,856
Impaired mortgage loans with no valuation allowance recorded$36 $36 $0 $36 
Impaired mortgage loans with valuation allowance recorded —
 —
 —
 —
Impaired mortgage loans with valuation allowance recorded0 0 0 0 
Total impaired mortgage loans $6,427
 $5,856
 $—
 $5,856
Total impaired mortgage loans$36 $36 $0 $36 
December 31, 2016:        
December 31, 2020:December 31, 2020:
Impaired mortgage loans with no valuation allowance recorded $2,758
 $2,216
 $—
 $2,216
Impaired mortgage loans with no valuation allowance recorded$37 $37 $0 $37 
Impaired mortgage loans with valuation allowance recorded —
 —
 —
 —
Impaired mortgage loans with valuation allowance recorded0 0 0 0 
Total impaired mortgage loans $2,758
 $2,216
 $—
 $2,216
Total impaired mortgage loans$37 $37 $0 $37 
        
The Company’s average investment in impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):
The following table presents the Company’s average investment balance of impaired mortgage loans and the related interest income for the periods indicated (dollars in millions):The following table presents the Company’s average investment balance of impaired mortgage loans and the related interest income for the periods indicated (dollars in millions):
 Three months ended September 30,
 2017 2016
 
Average
Recorded
Investment(1)
 
Interest
Income
 
Average
Recorded
  Investment(1)
 
Interest
Income
Impaired mortgage loans with no valuation allowance recorded $3,967
 $33
 $6,953
 $107
Impaired mortgage loans with valuation allowance recorded
 —
 —
 —
 —
Total impaired mortgage loans $3,967
 $33
 $6,953
 $107
        
 Nine months ended September 30, Three months ended March 31,
 2017 2016 20212020
 
Average
Recorded
Investment(1)
 
Interest
Income
 
Average
Recorded
Investment(1)
 
Interest
Income
Average
Recorded
Investment(1)
Interest
Income
Average
Recorded
Investment(1)
Interest
Income
Impaired mortgage loans with no valuation allowance recorded $3,062
 $100
 $4,687
 $324
Impaired mortgage loans with no valuation allowance recorded$36 $0 $17 $0 
Impaired mortgage loans with valuation allowance recorded
 —
 —
 5,459
 —
Impaired mortgage loans with valuation allowance recorded0 0 0 0 
Total impaired mortgage loans $3,062
 $100
 $10,146
 $324
Total impaired mortgage loans$36 $0 $17 $0 
(1) Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

The Company did not acquire any impaired mortgage loans during the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020. The Company had no mortgage loans that were on a nonaccrual status at September 30, 2017as of March 31, 2021 and December 31, 2016.2020. For the three months ended March 31, 2021, the Company modified the payment terms of one commercial mortgage loan, with a carrying value of approximately $10 million in response to COVID-19. For the year ended December 31, 2020, the Company modified the payment terms of 52 commercial mortgage loans, with a carrying value of approximately $660 million 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.
Policy Loans
Policy loans comprised approximately 2.7% and 3.2%
19
Table of the Company’s total investments as of September 30, 2017 and December 31, 2016, respectively, theContents

The majority of whichpolicy loans are associated with one client. These policy loans present no credit risk becauseas 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
Funds withheld at interest comprised approximately 12.1% and 13.1%As of the Company’s total investments asMarch 31, 2021, $3.2 billion of September 30, 2017 and December 31, 2016, respectively. Of the $6.0 billion funds withheld at interest balance, net of embedded derivatives, as of September 30, 2017, $4.0 billion of the balance is associated with one client. For reinsurance agreements written on a modified coinsurancemodco 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 on the Company’s condensed consolidated balance sheets.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.

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Other Invested Assets
Other invested assets include equity securities, 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 Federal Home Loan Bank of Des Moines (“FHLB”)FHLB common stock, equity release mortgages and structured loans, all of which areis included in otherOther in the table below. The fair value option was electedallowance for contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualifycredit losses for presentation and reporting as separate accounts. Other invested assets represented approximately 3.1% and 3.6% of the Company’s total investmentslifetime mortgages as of September 30, 2017March 31, 2021 and December 31, 2016,2020, was $1 million and $2 million, respectively. Carrying values of these assets as of September 30, 2017March 31, 2021 and December 31, 20162020 are as follows (dollars in thousands)millions):
March 31, 2021December 31, 2020
Limited partnership interests and real estate joint ventures$1,529 $1,367 
Lifetime mortgages958 935 
Derivatives125 140 
FVO contractholder-directed unit-linked investments276 289 
Other95 98 
Total other invested assets$2,983 $2,829 

20
  September 30, 2017 December 31, 2016
Equity securities $112,931
 $275,361
Limited partnership interests and real estate joint ventures 761,739
 687,522
Derivatives 133,405
 229,108
FVO contractholder-directed unit-linked investments 210,660
 190,120
Other 313,788
 209,829
Total other invested assets $1,532,523
 $1,591,940
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5.    Derivative Instruments
Accounting for Derivative Instruments and Hedging Activities
See Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2020 Annual Report for a detailed discussion of the accounting treatment for derivative instruments, including embedded derivatives. See 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
Commonly used derivative instruments include, but are not necessarily limited to: credit default swaps, financial futures, equity options, foreign currency swaps, foreign currency forwards, interest rate swaps, synthetic guaranteed investment contracts (“GICs”), consumer price index (“CPI”) swaps, other derivatives, and embedded derivatives.
For detailed information on these derivative instruments and the related strategies, see Note 5 – “Derivative Instruments” of the Company’s 2020 Annual Report.
Summary of Derivative Positions
Derivatives, except for embedded derivatives, and longevity and mortality swaps, are carried on the Company’s condensed consolidated balance sheetsincluded in other invested assets or other liabilities, at fair value. Longevity and mortality swaps are included on the condensed consolidated balance sheets in other assets or other liabilities, at fair value. Embedded derivative assets and liabilities on modified coinsurancemodco or funds withheld arrangements are included on the condensed consolidated balance sheets with the host contract in funds withheld at interest, at fair value. Embedded derivative liabilities on indexed annuity and variable annuity products are included on the condensed 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 September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
 March 31, 2021December 31, 2020
 Primary Underlying RiskNotionalCarrying Value/Fair ValueNotionalCarrying Value/Fair Value
 AmountAssetsLiabilitiesAmountAssetsLiabilities
Derivatives not designated as hedging instruments:
Interest rate swapsInterest rate$1,107 $67 $3 $1,084 $93 $1 
Financial futuresEquity285 0 0 258 0 0 
Foreign currency swapsForeign currency150 0 9 150 0 18 
Foreign currency forwardsForeign currency475 2 10 347 4 2 
CPI swapsCPI627 19 12 612 11 19 
Credit default swapsCredit1,720 32 3 1,517 13 0 
Equity optionsEquity443 26 0 395 29 0 
Synthetic GICsInterest rate16,423 0 0 16,644 0 0 
Embedded derivatives in:
Modco or funds withheld arrangements0 109 0 0 58 0 
Indexed annuity products0 0 720 0 0 752 
Variable annuity products0 0 136 0 0 155 
Total non-hedging derivatives21,230 255 893 21,007 208 947 
Derivatives designated as hedging instruments:
Interest rate swapsForeign currency/Interest rate878 2 24 802 3 24 
Foreign currency swapsForeign currency214 6 1 234 8 1 
Foreign currency forwardsForeign currency1,141 5 18 1,255 10 15 
Other derivativesInterest rate114 0 7 0 0 0 
Total hedging derivatives2,347 13 50 2,291 21 40 
Total derivatives$23,577 $268 $943 $23,298 $229 $987 
  September 30, 2017 December 31, 2016
  Notional Carrying Value/Fair Value Notional Carrying Value/Fair Value
  Amount Assets Liabilities Amount Assets Liabilities
Derivatives not designated as hedging instruments:            
Interest rate swaps $946,726
 $61,263
 $1,825
 $949,556
 $78,405
 $5,949
Financial futures 448,600
 —
 —
 475,968
 —
 —
Foreign currency forwards 6,000
 (84) —
 25,000
 —
 5,070
Consumer price index swaps 132,081
 589
 420
 20,615
 —
 262
Credit default swaps 948,000
 7,905
 490
 926,000
 12,012
 2,871
Equity options 541,532
 20,006
 —
 525,894
 33,459
 —
Longevity swaps 945,120
 37,827
 —
 841,360
 26,958
 —
Mortality swaps 50,000
 —
 1,683
 50,000
 —
 2,462
Synthetic guaranteed investment contracts 9,119,434
 —
 —
 8,834,700
 —
 —
Embedded derivatives in:            
Modified coinsurance or funds withheld arrangements —
 84,325
 —
 —
 —
 22,529
Indexed annuity products —
 —
 821,821
 —
 —
 805,672
Variable annuity products —
 —
 168,119
 —
 —
 184,636
Total non-hedging derivatives 13,137,493
 211,831
 994,358
 12,649,093
 150,834
 1,029,451
Derivatives designated as hedging instruments:            
Interest rate swaps 435,000
 —
 22,133
 435,000
 27,901
 31,223
Foreign currency swaps 796,489
 71,032
 13,876
 928,505
 104,359
 734
Foreign currency forwards 331,135
 1,418
 10,203
 —
 —
 —
Total hedging derivatives 1,562,624
 72,450
 46,212
 1,363,505
 132,260
 31,957
Total derivatives $14,700,117
 $284,281
 $1,040,570
 $14,012,598
 $283,094
 $1,061,408
Netting Arrangements
Certain of the Company’s derivatives are subject to enforceable master netting arrangements and reported as a net asset or liability in the condensed consolidated balance sheets. The Company nets all derivatives that are subject to such arrangements.

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The Company has elected to include all derivatives, except embedded derivatives, in the tables 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, repurchase and repurchase/reverse repurchase programs. See “Embedded Derivatives” below for information regarding the Company’s bifurcated embedded derivatives.
The following table provides information relating to the Company’s derivative instruments as of September 30, 2017 and December 31, 2016 (dollars in thousands):
        
Gross Amounts Not
Offset in the Balance Sheet
  
  
Gross Amounts   
Recognized
 
Gross Amounts
Offset in the
Balance Sheet   
 
Net Amounts
Presented in the
Balance Sheet   
 
Financial
Instruments (1)    
 
Cash Collateral   
Pledged/
Received
 Net Amount   
September 30, 2017:            
Derivative assets $199,956
 $(28,724) $171,232
 $(17,782) $(174,120) $(20,670)
Derivative liabilities 50,630
 (28,724) 21,906
 (58,360) (30,771) (67,225)
December 31, 2016:            
Derivative assets $283,094
 $(27,028) $256,066
 $(16,913) $(254,498) $(15,345)
Derivative liabilities 48,571
 (27,028) 21,543
 (95,863) (1,441) (75,761)
(1)Includes initial margin posted to a central clearing partner.
Accounting for Derivative Instruments and Hedging Activities
The Company does not enter into derivative instruments for speculative purposes. As discussed below under “Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging,” the Company uses various derivative instruments for risk management purposes that either do not qualify or have not been qualified for hedge accounting treatment. As of September 30, 2017 and December 31, 2016, the Company held interest rate swaps that were designated and qualified as cash flow hedges of interest rate risk, for variable rate liabilities and foreign currency assets, foreign currency swaps and foreign currency forwards that were designated and qualified as hedges of a portion of its net investment in its foreign operations, foreign currency swaps that were designated and qualified as fair value hedges of foreign currency risk, and derivative instruments that were not designated as hedging instruments. See Note 2 – “Summary of Significant Accounting Policies” of the Company’s 2016 Annual Report for a detailed discussion of the accounting treatment for derivative instruments, including embedded derivatives. Derivative instruments are carried at fair value and generally require an insignificant amount of cash at inception of the contracts.
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 as of September 30, 2017March 31, 2021 and 2016,2020 were (dollars in thousands)millions):
Type of Fair Value Hedge Hedged Item Gains (Losses) Recognized for Derivatives Gains (Losses) Recognized for Hedged Items Ineffectiveness Recognized in Investment Related Gains (Losses), net
For the three months ended September 30, 2017:      
Foreign currency swaps Foreign-denominated fixed maturity securities $2,100
 $(2,100) $—
For the three months ended September 30, 2016:      
Foreign currency swaps Foreign-denominated fixed maturity securities $3,205
 $(3,205) $—
For the nine months ended September 30, 2017:      
Foreign currency swaps Foreign-denominated fixed maturity securities $9,541
 $(9,541) $—
For the nine months ended September 30, 2016:      
Foreign currency swaps Foreign-denominated fixed maturity securities $5,317
 $(5,317) $—
A regression analysis was used, both at inception of the hedge and on an ongoing basis, to determine whether each derivative used in a hedged transaction is highly effective in offsetting changes in the hedged item. For the foreign currency swaps, the change in fair value related to changes in the benchmark interest rate and credit spreads are excluded from the hedge effectiveness. For the three and nine months ended September 30, 2017, $0.2 million and $0.8 million, respectively, of the change in the estimated fair value of derivatives, was excluded from hedge effectiveness. For the three and nine months ended September 30, 2016, $1.6 million and $(5.4) million, respectively, of the change in the estimated fair value of derivatives, was excluded from hedge effectiveness.



21
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Type of Fair Value HedgeHedged ItemGains (Losses) Recognized for DerivativesGains (Losses) Recognized for Hedged Items
Investment Related Gains (Losses)
For the three months ended March 31, 2021:
Foreign currency swapsForeign-denominated fixed maturity securities$0 $1 
For the three months ended March 31, 2020:
Foreign currency swapsForeign-denominated fixed maturity securities$(22)$14 
Cash Flow Hedges
Certain derivative instruments are designated as cash flow hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging.Hedging. The Company designates and accounts for the following as cash flows: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 condensed consolidated income statement classification where the gain or loss is recognized related to cash flow hedges for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (dollars in thousands)millions):
  Three months ended September 30,
  2017 2016
Balance beginning of period $7,690
 $(41,192)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges (6,889) 932
Amounts reclassified to investment related (gains) losses, net (183) (116)
Amounts reclassified to investment income (271) (221)
Balance end of period $347
 $(40,597)
     
  Nine months ended September 30,
  2017 2016
Balance beginning of period $(2,496) $(29,397)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges 3,689
 (10,866)
Amounts reclassified to investment related (gains) losses, net (142) 53
Amounts reclassified to investment income (704) (387)
Balance end of period $347
 $(40,597)
 Three months ended March 31,
 20212020
Balance, beginning of period$(49)$(26)
Gains (losses) deferred in other comprehensive income (loss)(24)(61)
Amounts reclassified to investment income0 0 
Amounts reclassified to interest expense2 0 
Balance, end of period$(71)$(87)
As of September 30, 2017, theMarch 31, 2021, approximately $6 million of before-tax deferred net gains (losses)losses on derivative instruments recorded in AOCI that are expected to be reclassified to earningsinterest expense during the next twelve months are approximately $(0.4) million. This expectation is based onmonths. For the anticipated interest payments on hedged investments in fixed maturity securities that will occur oversame time period, there was an immaterial amount of before-tax deferred net gains expected to be reclassified to investment income during the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to investment income over the term of the investment cash flows.months.

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The following table presents the effective portioneffect of derivatives in cash flow hedging relationships on the condensed consolidated statements of income and the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (dollars in thousands)millions):
Derivative TypeGain (Loss) Deferred in OCIGain (Loss) Reclassified into Income from OCI
Investment IncomeInterest Expense
For the three months ended March 31, 2021:
Interest rate$(23)$0 $(2)
Foreign currency/interest rate(1)0 0 
Total$(24)$0 $(2)
For the three months ended March 31, 2020:
Interest rate$(36)$0 $0 
Foreign currency/interest rate(25)0 0 
Total$(61)$0 $0 
  Effective Portion
Derivative Type Gain (Loss) Deferred in OCI Gain (Loss) Reclassified into Income from OCI
    Investment Related Gains (Losses) Investment Income
For the three months ended September 30, 2017:      
Interest rate $(8,421) $—
 $—
Currency/Interest rate 1,544
 —
 230
Forward bond purchase commitments (12) 183
 41
Total $(6,889) $183
 $271
For the three months ended September 30, 2016:      
Interest rate $(3,282) $—
 $—
Currency/Interest rate 4,214
 —
 200
Forward bond purchase commitments —
 116
 21
Total $932
 $116
 $221
       
For the nine months ended September 30, 2017:      
Interest rate $(6,205) $—
 $—
Currency/Interest rate 9,894
 —
 560
Forward bond purchase commitments —
 142
 144
Total $3,689
 $142
 $704
For the nine months ended September 30, 2016:      
Interest rate $(15,617) $—
 $—
Currency/Interest rate 4,751
 —
 454
Forward bond purchase commitments —
 (53) (67)
Total $(10,866) $(53) $387
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For the three and nine months ended September 30, 2017March 31, 2021 and 2016, the ineffective portion of derivatives reported as cash flow hedges was not material to the Company’s results of operations. Also,2020, there were no material amounts reclassified into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging.
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Hedges of Net Investments in Foreign Operations
The Company uses foreign currency swaps and foreign currency forwards to hedge a portion of its net investment in certain foreign operations against adverse movements in exchange rates. The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges and the gains (losses) deferred in AOCI for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (dollars in thousands)millions):
 Derivative Gains (Losses) Deferred in AOCI   
 For the three months ended March 31,
Type of NIFO Hedge20212020
Foreign currency swaps$(1)$15 
Foreign currency forwards(14)80 
Total$(15)$95 
  Derivative Gains (Losses) Deferred in AOCI     
  For the three months ended September 30, For the nine months ended September 30,
Type of NIFO Hedge (1) (2)
 2017 2016 2017 2016
Foreign currency swaps $(35,198) $8,341
 $(60,723) $(23,151)
Foreign currency forwards 4,627
 —
 8,785
 —
Total $(30,571) $8,341
 $(51,938) $(23,151)
(1)There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive income (loss) into investment income during the periods presented.
(2)There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations.

The cumulative foreign currency translation gain recorded in AOCI related to these hedges was $109.7$124 million and $161.6$139 million at September 30, 2017 as of March 31, 2021 and December 31, 2016,2020, respectively. If a hedged foreign operation was sold or substantially liquidated, the amounts in AOCI would be reclassified to the condensed consolidated statements of income. A pro rata portion would be reclassified upon partial sale of a hedged foreign operation.

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net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive income (loss) 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 qualified 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 in the condensed consolidated statements of income, except where otherwise noted.
A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 is as follows (dollars in thousands)millions):
   Gain (Loss) for the three months ended September 30,  Gain (loss) for the three months ended        
March 31,
Type of Non-hedging Derivative Income Statement Location of Gain (Loss) 2017 2016Type of Non-hedging DerivativeIncome Statement Location of Gain (Loss)20212020
Interest rate swaps Investment related gains (losses), net $641
 $4,122
Interest rate swapsInvestment related gains (losses), net$(70)$106 
Financial futures Investment related gains (losses), net (8,890) (11,677)Financial futuresInvestment related gains (losses), net(10)44 
Foreign currency swapsForeign currency swapsInvestment related gains (losses), net9 (13)
Foreign currency forwards Investment related gains (losses), net 24
 507
Foreign currency forwardsInvestment related gains (losses), net(8)(3)
CPI swaps Investment related gains (losses), net 220
 76
CPI swapsInvestment related gains (losses), net18 (40)
Credit default swaps Investment related gains (losses), net 4,137
 6,672
Credit default swapsInvestment related gains (losses), net20 (24)
Equity options Investment related gains (losses), net (8,295) (13,648)Equity optionsInvestment related gains (losses), net(10)53 
Longevity swaps Other revenues 3,334
 8,921
Mortality swaps Other revenues (132) (400)
Subtotal (8,961) (5,427)Subtotal(51)123 
Embedded derivatives in:    Embedded derivatives in:
Modified coinsurance or funds withheld arrangements Investment related gains (losses), net 23,044
 49,078
Modco or funds withheld arrangementsModco or funds withheld arrangementsInvestment related gains (losses), net50 (230)
Indexed annuity products Interest credited (13,133) (20,104)Indexed annuity productsInterest credited14 6 
Variable annuity products Investment related gains (losses), net (6,205) 7,988
Variable annuity productsInvestment related gains (losses), net19 (128)
Total non-hedging derivatives $(5,255) $31,535
Total non-hedging derivatives$32 $(229)
    
   
Gain (Loss) for the nine months ended        
September 30,
Type of Non-hedging Derivative Income Statement Location of Gain (Loss) 2017 2016
Interest rate swaps Investment related gains (losses), net $12,318
 $108,149
Financial futures Investment related gains (losses), net (28,107) (30,285)
Foreign currency forwards Investment related gains (losses), net 577
 6,584
CPI swaps Investment related gains (losses), net 211
 (624)
Credit default swaps Investment related gains (losses), net 15,374
 13,536
Equity options Investment related gains (losses), net (34,757) (19,576)
Longevity swaps Other revenues 7,180
 11,402
Mortality swaps Other revenues (921) 222
Subtotal (28,125) 89,408
Embedded derivatives in:    
Modified coinsurance or funds withheld arrangements Investment related gains (losses), net 106,854
 33,795
Indexed annuity products Interest credited (35,490) (20,730)
Variable annuity products Investment related gains (losses), net 16,518
 (83,089)
Total non-hedging derivatives $59,757
 $19,384
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Types of Derivatives Used by the Company
Interest Rate Swaps
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.
Financial Futures
Exchange-traded futures are used primarily to economically hedge liabilities embedded in certain variable annuity products. With exchange-traded futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the relevant 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 futures with regulated futures commission merchants that are members of the exchange.
Equity Options
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. Equity warrants are also used by the Company to economically hedge the variability in anticipated cash flows for the acquisition of investment securities.
Consumer Price Index Swaps
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.
Foreign Currency Swaps
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 non-qualifying hedge relationships.
Foreign Currency Forwards
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.
Forward Bond Purchase Commitments
Forward bond purchase commitments have been used by the Company to hedge against the variability in the anticipated cash flows required to purchase securities. With forward bond purchase commitments, the forward price is agreed upon at the time of the contract and payment for such contract is made at the future specified settlement date of the securities.

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Credit Default SwapsDerivatives
The Company sells protection under single name credit default swaps and credit default swap index tranches 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 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 at September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
 March 31, 2021December 31, 2020
Rating Agency Designation of Referenced Credit Obligations(1)
Estimated Fair
Value of Credit 
Default Swaps
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
Weighted
Average
Years to
Maturity(3)
Estimated Fair
Value of Credit 
Default Swaps
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
Weighted
Average
Years to
Maturity(3)  
AAA/AA+/AA/AA-/A+/A/A-
Single name credit default swaps$26 $492 17.8$11 $287 15.0
Subtotal26 492 17.811 287 15.0
BBB+/BBB/BBB-
Single name credit default swaps2 230 1.72 232 1.6
Credit default swaps referencing indices1 988 3.70 988 3.9
Subtotal3 1,218 3.32 1,220 3.5
BB+/BB/BB-
Single name credit default swaps0 10 0.50 10 0.7
Subtotal0 10 0.50 10 0.7
Total$29 $1,720 7.4$13 $1,517 5.6
  September 30, 2017 December 31, 2016
Rating Agency Designation of Referenced Credit Obligations(1)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)  
AAA/AA+/AA/AA-/A+/A/A-            
Single name credit default swaps $2,975
 $155,500
 3.2 $1,726
 $150,500
 3.8
Subtotal 2,975
 155,500
 3.2 1,726
 150,500
 3.8
BBB+/BBB/BBB-            
Single name credit default swaps 4,209
 368,200
 3.2 1,426
 347,200
 3.7
Credit default swaps referencing indices 56
 416,000
 4.2 6,295
 416,000
 5.0
Subtotal 4,265
 784,200
 3.7 7,721
 763,200
 4.4
BB+/BB/BB-            
Single name credit default swaps 21
 5,000
 1.7 (477) 9,000
 3.5
Subtotal 21
 5,000
 1.7 (477) 9,000
 3.5
Total $7,261
 $944,700
 3.6 $8,970
 $922,700
 4.3
(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.
(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)
(3)The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
The Company also purchases 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 reduce its risk againstenforceable master netting arrangements and reported as a dropnet asset or liability 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.
Longevity Swaps
condensed consolidated balance sheets. The Company enters into longevity swaps in the form of out-of-the-money options, which provide protection against changes in mortality improvementnets all derivatives that are subject 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
Mortality swaps are 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.
Synthetic Guaranteed Investment Contracts
The Company sells fee-based synthetic guaranteed investment contracts to retirement plans which 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.
Embedded Derivativesarrangements.
The Company has certainelected to include all derivatives, except embedded derivatives, whichin the tables below, irrespective of whether they are requiredsubject 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.
The following table provides information relating to the netting of the Company’s derivative instruments as of March 31, 2021 and December 31, 2020 (dollars in millions):
    Gross Amounts Not
Offset in the Balance Sheet		 
Gross Amounts  
Recognized		Gross Amounts
Offset in the
Balance Sheet   		Net Amounts
Presented in the
Balance Sheet   
Financial
Instruments (1)    
Cash Collateral  
Pledged/
Received		Net Amount   
March 31, 2021:
Derivative assets$159 $(34)$125 $(33)$(81)$11 
Derivative liabilities87 (34)53 (118)(43)(108)
December 31, 2020:
Derivative assets$171 $(31)$140 $(30)$(98)$12 
Derivative liabilities80 (31)49 (146)(47)(144)
(1)Includes initial margin posted to a central clearing partner.
The Company may be separated from their hostexposed 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 and reported as derivatives. Host contracts include reinsurance treaties structured on a modified coinsurance (“modco”) or funds withheld basis. Additionally, the Company reinsures equity-indexed annuity and variable annuity contracts with benefits that are considered

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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 relateis limited to changes in the fair value associated with capital market and other related assumptions. Theaccrued interest of non-collateralized derivative contracts in an asset position at the reporting date. As of March 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 utilization of a credit valuation adjustmentOTC derivatives are cleared and settled through central clearing counterparties (“CVA”) did not have a material effect on the change in fair value of its embedded derivatives for the three and nine months ended September 30, 2017 and 2016.
The related gains (losses) and the effect on net income after amortization of deferred acquisition costs (“DAC”OTC cleared”) and income taxes for the three and nine months ended September 30, 2017 and 2016others are reflected in the following table (dollars in thousands):
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Embedded derivatives in modco or funds withheld arrangements included in investment related gains$23,044
 $49,078
 $106,854
 $33,795
After the associated amortization of DAC and taxes, the related amounts included in net income7,515
 9,653
 36,300
 1,683
Embedded derivatives in variable annuity contracts included in investment related gains(6,205) 7,988
 16,518
 (83,089)
After the associated amortization of DAC and taxes, the related amounts included in net income(1,074) 2,595
 30,785
 (63,415)
Amounts related to embedded derivatives in equity-indexed annuities included in benefits and expenses(13,133) (20,104) (35,490) (20,730)
After the associated amortization of DAC and taxes, the related amounts included in net income(9,737) (13,397) (38,059) (9,979)
Credit Risk
bilateral contracts between two counterparties. The Company manages its credit risk related to over-the-counter (“OTC”)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 credit exposure of the Company’s OTC derivative transactions is represented by the contracts with a positive fair value (market value) at the reporting date. To reduce credit exposures, the Company seeks to (i) enter into OTC derivative transactions pursuant to master netting agreements that provide for a netting of payments and receipts with a single counterparty, and (ii) enter into agreements that allow the use of credit support annexes, which are bilateral rating-sensitive agreements that require collateral postings at established threshold levels. Certain of the Company’s OTC derivatives are cleared derivatives, which are bilateral transactions between the Company and a counterparty where the transactions are cleared through a clearinghouse, such that each derivative counterparty is only exposed to the default of the clearinghouse. These central clearing counterparties for OTC
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cleared derivatives, and these transactions require initial and daily variation margin collateral postings and include certain interest rate swaps and credit default swaps entered into on or after June 10, 2013, related to guidelines implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Also, the Company enters into exchange-traded futures through regulated exchanges and these transactionspostings. 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.
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 may vary depending on the posting party’s ratings. Additionally, a decline in the Company’s or the counterparty’s credit ratings to specified levels could result in potential settlement of the derivative positions under the Company’s agreements with its counterparties. The Company also has exchange-traded futures, which require the maintenance of a margin account. 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.







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The Company’s credit exposure related to derivative contracts is generally limited to the fair value at the reporting date plus or minus any collateral posted or held by the Company. The Company’s credit exposure to mortality swaps is minimal, as they are fully collateralized by a counterparty. Information regarding the Company’s credit exposure related to its over-the-counter derivative contracts, centrally cleared derivative contracts and margin account for exchange-traded futures, excluding mortality swaps, at September 30, 2017 and December 31, 2016 are reflected in the following table (dollars in thousands):
  September 30, 2017 December 31, 2016
Estimated fair value of derivatives in net asset position $151,009
 $236,985
Cash provided as collateral(1)
 30,771
 1,441
Securities pledged to counterparties as collateral(2)
 58,360
 95,863
Cash pledged from counterparties as collateral(3)
 (174,120) (254,498)
Securities pledged from counterparties as collateral(4)
 (17,782) (16,913)
Initial margin for cleared derivatives(2)
 (58,360) (73,571)
Net amount after application of master netting agreements and collateral $(10,122) $(10,693)
Margin account related to exchange-traded futures(5)
 $7,832
 $9,687
(1)Consists of receivable from counterparty, included in other assets.
(2)Included in available-for-sale securities, primarily consists of U.S. Treasury and government agency securities.
(3)Included in cash and cash equivalents, with obligation to return cash collateral recorded in other liabilities.
(4)Consists of U.S. Treasury and government securities.
(5)Included in other assets.

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 fair value hierarchy whichthat requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and describes three levels of inputs that may be used to measure fair value:
Level 1 -– Unadjusted quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets and liabilities are traded in active exchange markets.
Level 2 -– Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or market standard valuation 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. 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. Additionally, the Company’s embedded derivatives, all of which are associated with reinsurance treaties, and longevity and mortality swaps, are classified in Level 3 since their values include significant unobservable inputs.
When inputs used to measureFor a discussion of the Company’s valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 6 – “Fair Value of an asset or liability fall within different levels ofAssets and Liabilities” in the hierarchy,Notes to Consolidated Financial Statements included in the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety, except for fair value measurements using net asset value. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within Level 3 may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).Company’s 2020 Annual Report.



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Assets and Liabilities by Hierarchy Level
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2017March 31, 2021 and December 31, 20162020 are summarized below (dollars in thousands)millions):
March 31, 2021: Fair Value Measurements Using:
 Total    Level 1        Level 2    Level 3    
Assets:
Fixed maturity securities – available-for-sale:
Corporate$35,295 $0 $32,194 $3,101 
Canadian government4,673 0 4,673 0 
RMBS1,591 0 1,588 3 
ABS3,151 0 2,822 329 
CMBS1,840 0 1,784 56 
U.S. government930 809 108 13 
State and political subdivisions1,335 0 1,326 9 
Other foreign government7,611 0 7,595 16 
Total fixed maturity securities – available-for-sale56,426 809 52,090 3,527 
Equity securities135 81 0 54 
Funds withheld at interest – embedded derivatives & other176 0 0 176 
Cash equivalents1,460 1,434 26 0 
Short-term investments123 3 109 11 
Other invested assets:
Derivatives125 0 125 0 
FVO contractholder-directed unit-linked investments276 222 54 0 
Total other invested assets (1)
401 222 179 0 
Total$58,721 $2,549 $52,404 $3,768 
Liabilities:
Interest sensitive contract liabilities – embedded derivatives$856 $0 $0 $856 
Other liabilities:
Derivatives53 0 53 0 
Total$909 $0 $53 $856 
September 30, 2017:   Fair Value Measurements Using:
  Total     Level 1         Level 2     Level 3    
Assets:        
Fixed maturity securities – available-for-sale:        
Corporate securities $22,535,830
 $615,433
 $20,648,377
 $1,272,020
Canadian and Canadian provincial governments 3,991,185
 —
 3,465,820
 525,365
Residential mortgage-backed securities 1,679,305
 —
 1,561,310
 117,995
Asset-backed securities 1,694,568
 —
 1,549,371
 145,197
Commercial mortgage-backed securities 1,313,322
 —
 1,311,375
 1,947
U.S. government and agencies 1,603,669
 1,480,357
 100,061
 23,251
State and political subdivisions 661,031
 —
 619,519
 41,512
Other foreign government supranational and foreign government-sponsored enterprises 2,902,832
 319,147
 2,578,057
 5,628
Total fixed maturity securities – available-for-sale 36,381,742
 2,414,937
 31,833,890
 2,132,915
Funds withheld at interest – embedded derivatives 84,325
 —
 —
 84,325
Cash equivalents 332,186
 332,186
 —
 —
Short-term investments 56,454
 —
 53,095
 3,359
Other invested assets:        
Non-redeemable preferred stock 38,901
 38,901
 —
 —
Other equity securities 74,030
 74,030
 —
 —
Derivatives:        
Interest rate swaps 46,258
 —
 46,258
 —
Foreign currency forwards 1,418
 —
 1,418
 —
CPI swaps 230
 —
 230
 —
Credit default swaps 6,903
 —
 6,903
 —
Equity options 9,700
 —
 9,700
 —
Foreign currency swaps 68,896
 —
 68,896
 —
FVO contractholder-directed unit-linked investments 210,660
 209,136
 1,524
 —
Total other invested assets 456,996
 322,067
 134,929
 —
Other assets - longevity swaps 37,827
 —
 —
 37,827
Total $37,349,530
 $3,069,190
 $32,021,914
 $2,258,426
Liabilities:        
Interest sensitive contract liabilities – embedded derivatives $989,940
 $—
 $—
 $989,940
Other liabilities:        
Derivatives:        
Interest rate swaps 8,953
 —
 8,953
 —
Foreign currency forwards 10,287
 —
 10,287
 —
CPI swaps 61
 —
 61
 —
Credit default swaps (512) —
 (512) —
Equity options (10,306) —
 (10,306) —
Foreign currency swaps 11,740
 —
 11,740
 —
Mortality swaps 1,683
 —
 —
 1,683
Total $1,011,846
 $—
 $20,223
 $991,623

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December 31, 2016:   Fair Value Measurements Using:
  Total Level 1 Level 2 Level 3
Assets:        
Fixed maturity securities – available-for-sale:        
Corporate securities $19,619,084
 $310,995
 $18,035,836
 $1,272,253
Canadian and Canadian provincial governments 3,644,046
 —
 3,168,081
 475,965
Residential mortgage-backed securities 1,278,576
 —
 1,118,285
 160,291
Asset-backed securities 1,429,344
 —
 1,210,064
 219,280
Commercial mortgage-backed securities 1,363,654
 —
 1,342,509
 21,145
U.S. government and agencies 1,468,302
 1,345,755
 98,059
 24,488
State and political subdivisions 591,796
 —
 550,130
 41,666
Other foreign government, supranational and foreign government-sponsored enterprises 2,698,823
 276,729
 2,409,225
 12,869
Total fixed maturity securities – available-for-sale 32,093,625
 1,933,479
 27,932,189
 2,227,957
Funds withheld at interest – embedded derivatives (22,529) —
 —
 (22,529)
Cash equivalents 338,601
 338,601
 —
 —
Short-term investments 44,241
 8,276
 32,619
 3,346
Other invested assets:        
Non-redeemable preferred stock 51,123
 38,317
 12,806
 —
Other equity securities 224,238
 224,238
 —
 —
Derivatives:        
Interest rate swaps 93,508
 —
 93,508
 —
Credit default swaps 9,136
 —
 9,136
 —
Equity options 26,070
 —
 26,070
 —
Foreign currency swaps 100,394
 —
 100,394
 —
FVO contractholder-directed unit-linked investments 190,120
 188,891
 1,229
 —
Other 11,036
 11,036
 —
 —
Total other invested assets 705,625
 462,482
 243,143
 —
Other assets - longevity swaps 26,958
 —
 —
 26,958
Total $33,186,521
 $2,742,838
 $28,207,951
 $2,235,732
Liabilities:        
Interest sensitive contract liabilities – embedded derivatives $990,308
 $—
 $—
 $990,308
Other liabilities:        
Derivatives:        
Interest rate swaps 24,374
 —
 24,374
 —
Foreign currency forwards 5,070
 —
 5,070
 —
CPI swaps 262
 —
 262
 —
Credit default swaps (5) —
 (5) —
Equity options (7,389) —
 (7,389) —
Foreign currency swaps (3,231) —
 (3,231) —
Mortality swaps 2,462
 —
 —
 2,462
Total $1,011,851
 $—
 $19,081
 $992,770
The Company may utilize information from third parties, such as pricing services and brokers, to assist in determining the fair value for certain(1)Other invested assets and liabilities; however, management is ultimately responsible for all fair values presented in the Company’s condensed 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 asset or liability being valued and significant expertise and judgment is required.

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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.
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 which 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 traded issues that incorporate the credit quality and industry sector of the issuer. For 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. 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.

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The fair values of private placement securities are primarily determined using a discounted cash flow model. In certain cases these models primarily use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 3. For certain private fixed maturities, the discounted cash flow model may also incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the security. To the extent management determines that such unobservable inputs are not significant to the price of a security, a Level 2 classification is made. Otherwise, a Level 3 classification is used.
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 3included in the fair value hierarchy see “Level 3 Measurements and Transfers” below for a description.
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 companyexclude limited partnership interests that support the Company’s funds withheld at interest asset with an adjustment for a CVA. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. 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, see “Level 3 Measurements and Transfers” below for a description.
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.
Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market instruments, commercial paper 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 floating rate notes and bonds with original maturities less than twelve months, 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 carried as cash equivalents or short-term investments are not measured at estimated fair value and therefore are excluded fromusing the tables presented.
Equity Securities – Equity securities consist principallynet asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of exchange-traded funds 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. The fair values of preferred equity securities, for which quoted market prices are not readily available, are based on prices obtained from independent pricing services and these securities are generally classified within Level 2 in the fair value hierarchy. Non-binding broker quotes for equity securities are generally based on significant unobservable inputs and are reflected as Level 3 in the fair value hierarchy.
FVO Contractholder-Directed Unit-Linked Investments – FVO contractholder-directed investments supporting unit-linked variable annuity type liabilities primarily consist of exchange-traded funds and, to a lesser extent, fixed maturity securities and 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.

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Derivative Assets and Derivative Liabilities – All of the derivative instruments utilized by the Company, except for longevity and mortality swaps, 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, 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. The Company does not currently have derivatives, except for longevity and mortality swaps, included in Level 3 measurement.
Longevity and Mortality Swaps – The Company utilizes a discounted cash flow model to estimateMarch 31, 2021, the fair value of longevity and mortality swaps. The fair value of these swaps includes an accrual for premiums payable and receivable. Some inputs to the valuation model are generally observable, such as interest rates and actual population mortality experience. The valuation also requires significant inputs that are generally not observable and, accordingly, the valuation is considered Level 3 in the fair value hierarchy.investments was $465 million.
Level 3 Measurements and Transfers
As of September 30, 2017 and December 31, 2016, the Company classified approximately 5.9% and 6.9%, respectively, of its fixed maturity securities in the Level 3 category. These securities primarily consist of private placement corporate securities and bank loans as well as Canadian provincial strips with inactive trading markets. Additionally, the Company has included asset-backed securities with subprime exposure and mortgage-backed securities with below investment grade ratings in the Level 3 category due to market uncertainty associated with these securities and the Company’s utilization of unobservable information from third parties for the valuation of these securities.

The significant unobservable inputs used in the fair value measurement of the Company’s corporate, sovereign, government-backed, and other political subdivision investments are probability of default, liquidity premium and subordination premium. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumptions used for the liquidity premium and subordination premium. For securities with a fair value derived using the market comparable pricing valuation technique, liquidity premium is the only significant unobservable input.
The significant unobservable inputs used in the fair value measurement of the Company’s asset and mortgage-backed securities are prepayment rates, probability of default, liquidity premium and loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the liquidity premium and loss severity and a directionally opposite change in the assumption used for prepayment rates.
The actuarial assumptions used in the fair value of embedded derivatives which include assumptions related to lapses, withdrawals, and mortality, are based on experience studies performed by the Company in combination with available industry information and are reviewed on a periodic basis, at least annually. The significant unobservable inputs used in the fair value measurement of embedded derivatives are assumptions associated with policyholder experience and selected capital market assumptions for equity-indexed and variable annuities. The selected capital market assumptions, which include long-term implied volatilities, are projections based on short-term historical information. Changes in interest rates, equity indices, equity volatility, CVA, and actuarial assumptions regarding policyholder experience may result in significant fluctuations in the value of embedded derivatives.
Fair value measurements associated with funds withheld reinsurance treaties are generally not materially sensitive to changes in unobservable inputs associated with policyholder experience. The primary drivers of change in these fair values are related to movements of credit spreads, which are generally observable. Increases (decreases) in market credit spreads tend to decrease (increase) the fair value of embedded derivatives. Increases (decreases) in the CVA assumption tend to decrease (increase) the magnitude of the fair value of embedded derivatives.
Fair value measurements associated with variable annuity treaties are sensitive to both capital markets inputs and policyholder experience inputs. Increases (decreases) in lapse rates tend to decrease (increase) the value of the embedded derivatives associated with variable annuity treaties. Increases (decreases) in the long-term volatility assumption tend to increase (decrease) the fair value of embedded derivatives. Increases (decreases) in the CVA assumption tend to decrease (increase) the magnitude of the fair value of embedded derivatives.

December 31, 2020: Fair Value Measurements Using:
 TotalLevel 1Level 2Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate$36,208 $0 $33,179 $3,029 
Canadian government5,140 0 5,140 0 
RMBS1,817 0 1,814 3 
ABS3,092 0 2,896 196 
CMBS1,868 0 1,813 55 
U.S. government1,437 1,312 111 14 
State and political subdivisions1,390 0 1,381 9 
Other foreign government5,783 0 5,766 17 
Total fixed maturity securities – available-for-sale56,735 1,312 52,100 3,323 
Equity securities132 79 0 53 
Funds withheld at interest – embedded derivatives & other114 0 0 114 
Cash equivalents1,478 1,478 0 0 
Short-term investments197 32 150 15 
Other invested assets:
Derivatives140 0 140 0 
FVO contractholder-directed unit-linked investments289 224 65 0 
Total other invested assets429 224 205 0 
Total$59,085 $3,125 $52,455 $3,505 
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives$907 $0 $0 $907 
Other liabilities:
Derivatives49 0 49 0 
Total$956 $0 $49 $907 
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Quantitative Information Regarding Internally Priced Assets and Liabilities
The actuarial assumptions used in the fair value of longevity and mortality swaps include assumptions related to the level and volatility of mortality. The assumptions are based on studies performed by the Company in combination with available industry information and are reviewed on a periodic basis, at least annually.
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 September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
Estimated Fair Value      Valuation TechniqueUnobservable InputsRange (Weighted Average) 
March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Assets:
Corporate$21 $37 Market comparable securitiesLiquidity premiumN/A0-1% (1%)
EBITDA Multiple5.2x-7.6x (6.5x)5.2x-11.2x (7.1x)
ABS79 87 Market comparable securitiesLiquidity premium1-18% (5%)1-18% (1%)
U.S. government13 14 Market comparable securitiesLiquidity premium0-1% (1%)0-1% (1%)
Equity securities12 10 Market comparable securitiesEBITDA Multiple6.9x-10.6x (8.1x)6.9x-10.6x (7.9x)
Funds withheld at interest – embedded derivatives109 58 Total return swapMortality0-100%  (3%)0-100%  (3%)
Lapse0-35%  (14%)0-35%  (13%)
Withdrawal0-5%  (3%)0-5%  (3%)
CVA0-5%  (1%)0-5%  (1%)
Crediting rate2-4%  (2%)2-4%  (2%)
Liabilities:
Interest sensitive contract liabilities – embedded derivatives – indexed annuities720 752 Discounted cash flowMortality0-100%  (3%)0-100% (3%)
Lapse0-35%  (14%)0-35% (13%)
Withdrawal0-5%  (3%)0-5% (3%)
Option budget projection2-4%  (2%)2-4% (2%)
Interest sensitive contract liabilities – embedded derivatives – variable annuities136 155 Discounted cash 
flow		Mortality0-100% (2%)0-100% (2%)
Lapse0-25%(4%)0-25% (4%)
Withdrawal0-7% (5%)0-7% (5%)
CVA0-5% (1%)0-5% (1%)
Long-term volatility0-27% (14%)0-27% (13%)

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 Estimated Fair Value       Valuation Technique Unobservable Inputs Range (Weighted Average) 
September 30, 2017 December 31, 2016   September 30, 2017 December 31, 2016
Assets:           
Corporate securities$150,170
 $167,815
 Market comparable securities Liquidity premium 0-2% (1%)
 0-2%  (1%)
U.S. government and agencies23,251
 24,488
 Market comparable securities Liquidity premium 0-1% (1%)
 0-1%  (1%)
State and political subdivisions4,544
 4,670
 Market comparable securities     Liquidity premium 1% 1%
Funds withheld at interest- embedded derivatives84,325
 (22,529) Total return swap Mortality 0-100%  (3%)
 0-100%  (2%)
       Lapse 0-35%  (10%)
 0-35%  (8%)
       Withdrawal 0-5%  (4%)
 0-5%  (3%)
       CVA 0-5%  (1%)
 0-5%  (1%)
       Crediting rate 2-4%  (3%)
 2-4%  (2%)
Longevity swaps37,827
 26,958
 Discounted cash flow Mortality 0-100%  (2%)
 0-100%  (2%)
       Mortality improvement (10%)-10%  (3%)
 (10%)-10%  (3%)
Liabilities:           
Interest sensitive contract liabilities- embedded derivatives- indexed annuities821,821
 805,672
 Discounted cash flow Mortality 0-100%  (3%)
 0-100% (2%)
       Lapse 0-35%  (10%)
 0-35% (8%)
       Withdrawal 0-5%  (4%)
 0-5% (3%)
       Option budget projection 2-4%  (3%)
 2-4% (2%)
            
Interest sensitive contract liabilities- embedded derivatives- variable annuities168,119
 184,636
 
Discounted cash 
flow
 Mortality 0-100% (1%)
 0-100% (2%)
       Lapse 0-25% (5%)
 0-25% (6%)
       Withdrawal 0-7% (3%)
 0-7% (3%)
       CVA 0-5% (1%)
 0-5% (1%)
       Long-term volatility 0-27% (9%)
 0-27% (14%)
Mortality swaps1,683
 2,462
 Discounted cash flow Mortality 0-100%  (1%)
 0-100%  (1%)
Changes in Level 3 Assets and Liabilities
The Company recognizes transfers of assets and liabilities into and out of levels within the fair value hierarchy at the beginning of the quarter in which the actual event or change in circumstances that caused the transfer occurs. Assets and liabilities transferred into Level 3 are due to a lack of observable market transactions and price information. Assets and liabilities are transferred out of Level 3 when circumstances change such that significant inputs can be corroborated with market observable data. This may be due to a significant increase in market activity for the asset or liability, a specific event, one or more significant input(s) becoming observable. Transfers out of Level 3 wereare primarily the result of the Company obtaining observable pricing information or a third partythird-party pricing quotation that appropriately reflects the fair value of those assets and liabilities. In addition, certain transfers out
For further information on the Company’s valuation processes, see Note 6 – “Fair Value of Level 3 were also dueAssets and Liabilities” in the Notes to ratings upgradesConsolidated Financial Statements included in the Company’s 2020 Annual Report.
The reconciliations for all assets and liabilities measured at fair value on mortgage-backed securities that had previously had below investment-grade ratings.a recurring basis using significant unobservable inputs (Level 3) are as follows (dollars in millions):

For the three months ended March 31, 2021:Fixed maturity securities – available-for-sale
Funds 
withheld at interest –embedded derivatives & other
Interest-sensitive contract 
liabilities embedded derivatives
 CorporateForeign govtStructured securitiesU.S. and local govtEquity securitiesShort-term investments
Fair value, beginning of period$3,029 $17 $254 $23 $53 $15 $114 $(907)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Investment income, net of related expenses1 0 0 0 0 0 (5)0 
Investment related gains (losses), net(1)0 0 0 1 0 50 19 
Interest credited0 0 0 0 0 0 0 13 
Included in other comprehensive income(82)(1)(1)0 0 0 1 0 
Purchases(1)
223 0 166 0 0 0 16 (3)
Sales(1)
(1)0 0 0 0 0 0 0 
Settlements(1)
(72)0 (61)(1)0 0 0 22 
Transfers into Level 34 0 30 0 0 0 0 0 
Transfers out of Level 30 0 0 0 0 (4)0 0 
Fair value, end of period$3,101 $16 $388 $22 $54 $11 $176 $(856)
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$1 $0 $0 $0 $0 $0 $(5)$0 
Investment related gains (losses), net(1)0 0 0 1 0 50 16 
Claims and other policy benefits0 0 0 0 0 0 0 (8)
Included in other comprehensive income(82)(1)(1)0 0 0 0 0 

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For the three months ended March 31, 2020:Fixed maturity securities – available-for-sale
Funds 
withheld at interest –embedded derivatives
Interest-sensitive contract 
liabilities embedded derivatives
 CorporateForeign govtStructured securitiesU.S. and local govtEquity securitiesShort-term investments
Fair value, beginning of period$2,186 $720 $208 $25 $77 $2 $121 $(930)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Investment income, net of related expenses1 0 0 0 0 0 0 0 
Investment related gains (losses), net(11)0 0 0 (7)0 (230)(128)
Interest credited0 0 0 0 0 0 0 6 
Included in other comprehensive income(115)(1)(27)1 0 0 0 0 
Purchases(1)
231 0 9 0 0 0 0 (11)
Sales(1)
(44)0 (1)0 0 0 0 0 
Settlements(1)
(52)0 (13)(1)0 0 0 21 
Transfers into Level 31 0 21 0 0 0 0 0 
Transfers out of Level 30 (704)(53)0 (14)(1)0 0 
Fair value, end of period$2,197 $15 $144 $25 $56 $1 $(109)$(1,042)
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$0 $0 $0 $0 $0 $0 $0 $0 
Investment related gains (losses), net(11)0 0 0 (7)0 (230)(131)
Claims & other policy benefits0 0 0 0 0 0 0 (15)
Included in other comprehensive income(140)(1)(27)1 0 0 0 0 
Transfers from Level 1 to Level 2 are due to(1)The amount reported within purchases, sales and settlements is the lack of observable market data when pricing these securities, while transfers from Level 2 to Level 1 are due to an increasepurchase 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 availability of market observable data in an active market. There weresame period are excluded from the rollforward. The Company had no transfers between Level 1 and Level 2issuances during the three and nine months ended September 30, 2016. The following tables present the transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2017 (dollars in thousands):period.
  2017
  
Transfers from    
Level 1 to
Level 2
 
Transfers from    
Level 2 to
Level 1
Three months ended September 30:    
Fixed maturity securities - available-for-sale:    
Corporate securities $—
 $—
     
Nine months ended September 30:    
Fixed maturity securities - available-for-sale:    
Corporate securities $—
 $88,674
The tables below provide a summary of the changes in fair value of Level 3 assets and liabilities for the three and nine months ended September 30, 2017, as well as the portion of gains or losses included in income for the three and nine months ended September 30, 2017 attributable to unrealized gains or losses related to those assets and liabilities still held at September 30, 2017 (dollars in thousands):
For the three months ended September 30, 2017: Fixed maturity securities - available-for-sale
  
Corporate
securities
 Canadian and Canadian provincial governments 
Residential
mortgage-
backed
securities
 
Asset-backed
securities
Fair value, beginning of period $1,291,054
 $533,270
 $148,685
 $201,589
Total gains/losses (realized/unrealized)        
Included in earnings, net:        
Investment income, net of related expenses (383) 3,460
 (30) 160
Investment related gains (losses), net 396
 —
 44
 —
Included in other comprehensive income (2,700) (11,365) 104
 (101)
Purchases(1)
 107,670
 —
 26,765
 —
Sales(1)
 (26,337) —
 (3,553) —
Settlements(1)
 (88,551) —
 (3,645) (15,243)
Transfers into Level 3 3,844
 —
 15
 36,994
Transfers out of Level 3 (12,973) —
 (50,390) (78,202)
Fair value, end of period $1,272,020
 $525,365
 $117,995
 $145,197
Unrealized gains and losses recorded in earnings 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 $(394) $3,460
 $(27) $156

35
Table of Contents


For the three months ended September 30, 2017 (continued): Fixed maturity securities available-for-sale
  Commercial    
mortgage-
backed
securities		 U.S. government
and agencies		 State
and political
subdivisions		 Other foreign government, supranational  and foreign government-sponsored enterprises
Fair value, beginning of period $1,943
 $23,567
 $34,434
 $11,994
Total gains/losses (realized/unrealized)        
Included in earnings, net:        
Investment income, net of related expenses —
 (116) 26
 (1)
Included in other comprehensive income 5
 6
 (208) (7)
Purchases(1)
 —
 134
 —
 495
Settlements(1)
 (1) (340) (35) —
Transfers into Level 3 —
 —
 7,295
 —
Transfers out of Level 3 —
 —
 —
 (6,853)
Fair value, end of period $1,947
 $23,251
 $41,512
 $5,628
Unrealized gains and losses recorded in earnings 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 $—
 $(116) $26
 $(1)
For the three months ended September 30, 2017 (continued): Short-term Investments 
Funds withheld
at interest-
embedded
derivatives
 Other assets - longevity swaps Interest sensitive contract liabilities embedded derivatives Other liabilities - mortality swaps
Fair value, beginning of period $3,548
 $61,281
 $33,349
 $(974,631) $(1,552)
Total gains/losses (realized/unrealized)          
Included in earnings, net:          
Investment related gains (losses), net —
 23,044
 —
 (10,047) —
Interest credited —
 —
 —
 (8,335) —
Included in other comprehensive income (3) —
 1,144
 —
 1
Other revenues —
 —
 3,334
 —
 (132)
Purchases(1)
 3,164
 —
 —
 (18,736) —
Settlements(1)
 (114) —
 —
 21,809
 —
Transfers out of Level 3 (3,236) —
 

 —
 —
Fair value, end of period $3,359
 $84,325
 $37,827
 $(989,940) $(1,683)
Unrealized gains and losses recorded in earnings 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 related gains (losses), net —
 23,044
 —
 (11,900) —
Other revenues —
 —
 3,334
 —
 (132)
Interest credited —
 —
 —
 (30,145) —

36
Table of Contents


For the nine months ended September 30, 2017: Fixed maturity securities - available-for-sale
  
Corporate
securities
 Canadian and Canadian provincial governments 
Residential
mortgage-
backed
securities
 
Asset-backed
securities
Fair value, beginning of period $1,272,253
 $475,965
 $160,291
 $219,280
Total gains/losses (realized/unrealized)        
Included in earnings, net:        
Investment income, net of related expenses (1,202) 9,731
 (304) 1,689
Investment related gains (losses), net 7,592
 —
 524
 —
Interest credited 

 

 

 

Included in other comprehensive income (2,300) 39,669
 2,716
 6,802
Purchases(1)
 257,671
 —
 72,582
 45,215
Sales(1)
 (49,511) —
 (18,624) —
Settlements(1)
 (234,552) —
 (15,084) (60,966)
Transfers into Level 3 35,042
 —
 5,515
 75,752
Transfers out of Level 3 (12,973) —
 (89,621) (142,575)
Fair value, end of period $1,272,020
 $525,365
 $117,995
 $145,197
Unrealized gains and losses recorded in earnings 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 $(1,213) $9,731
 $(155) $556
Investment related gains (losses), net (2,788) —
 (346) —
For the nine months ended September 30, 2017 (continued): Fixed maturity securities available-for-sale
  Commercial    
mortgage-
backed
securities		 U.S. government
and agencies		 State
and political
subdivisions		 Other foreign government, supranational  and foreign government-sponsored enterprises
Fair value, beginning of period $21,145
 $24,488
 $41,666
 $12,869
Total gains/losses (realized/unrealized)        
Included in earnings, net:        
Investment income, net of related expenses 709
 (348) (68) (1)
Investment related gains (losses), net (595) —
 —
 —
Included in other comprehensive income (57) 269
 (228) (210)
Other revenues —
 —
 —
 —
Purchases(1)
 —
 370
 —
 495
Sales(1)
 (3,720) —
 —
 —
Settlements(1)
 (5,403) (1,528) (309) (672)
Transfers into Level 3 —
 —
 7,295
 —
Transfers out of Level 3 (10,132) —
 (6,844) (6,853)
Fair value, end of period $1,947
 $23,251
 $41,512
 $5,628
Unrealized gains and losses recorded in earnings 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 $—
 $(348) $(68) $(1)


37
Table of Contents


For the nine months ended September 30, 2017 (continued): Short-term Investments 
Funds withheld
at interest-
embedded
derivatives
 Other assets - longevity swaps Interest sensitive contract liabilities embedded derivatives Other liabilities - mortality swaps
Fair value, beginning of period $3,346
 $(22,529) $26,958
 $(990,308) $(2,462)
Total gains/losses (realized/unrealized)          
Included in earnings, net:          
Investment related gains (losses), net —
 106,854
 —
 9,005
 —
Interest credited —
 —
 —
 (20,408) —
Included in other comprehensive income 1
 —
 3,689
 —
 1
Other revenues —
 —
 7,180
 —
 (922)
Purchases(1)
 3,520
 —
 —
 (51,276) —
Settlements(1)
 (272) —
 —
 63,047
 1,700
Transfers out of Level 3 (3,236) —
 —
 —
 —
Fair value, end of period $3,359
 $84,325
 $37,827
 $(989,940) $(1,683)
Unrealized gains and losses recorded in earnings 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 related gains (losses), net —
 106,854
 —
 2,934
 —
Other revenues —
 —
 7,180
 —
 (922)
Interest credited —
 —
 —
 (83,456) —

(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.

The tables below provide a summary of the changes in fair value of Level 3 assets and liabilities for the three and nine months ended September 30, 2016, as well as the portion of gains or losses included in income for the three and nine months ended September 30, 2016 attributable to unrealized gains or losses related to those assets and liabilities still held at September 30, 2016 (dollars in thousands):
For the three months ended September 30, 2016: Fixed maturity securities - available-for-sale
  
Corporate
securities
 Canadian and Canadian provincial governments 
Residential
mortgage-
backed
securities
 
Asset-backed
securities
 
Commercial    
mortgage-
backed
securities
 
U.S. government
and agencies
Fair value, beginning of period $1,297,382
 $554,192
 $165,979
 $298,816
 $37,935
 $26,255
Total gains/losses (realized/unrealized)            
Included in earnings, net:            
Investment income, net of related expenses (567) 3,085
 (40) 173
 304
 (122)
Investment related gains (losses), net 17,917
 —
 —
 —
 —
 —
Included in other comprehensive income (19,635) 16,342
 2,597
 3,410
 (94) (135)
Purchases(1)
 54,492
 —
 27,548
 5,013
 —
 147
Sales(1)
 (26,320) —
 —
 —
 —
 —
Settlements(1)
 (44,110) —
 (6,935) (18,602) (1) (312)
Transfers into Level 3 —
 —
 1,544
 28,285
 —
 —
Transfers out of Level 3 (23,255) —
 —
 (93,444) (637) —
Fair value, end of period $1,255,904
 $573,619
 $190,693
 $223,651
 $37,507
 $25,833
Unrealized gains and losses recorded in earnings 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 $(489) $3,085
 $(40) $173
 $304
 $(122)

38
Table of Contents


For the three months ended September 30, 2016 (continued): 
Fixed maturity securities
available-for-sale
        
  State
and political
subdivisions		 Other foreign government, supranational and foreign government-sponsored enterprises 
Funds withheld
at interest-
embedded
derivatives
 Other assets - longevity swaps Interest sensitive contract liabilities embedded derivatives Other liabilities - mortality swaps
Fair value, beginning of period $35,246
 $13,706
 $(91,981) $17,781
 $(1,125,380) $(1,997)
Total gains/losses (realized/unrealized)            
Included in earnings, net:            
Investment income, net of related expenses 10
 —
 —
 —
 —
 —
Investment related gains (losses), net —
 —
 49,078
 —
 7,988
 —
Interest credited —
 —
 —
 —
 (20,104) —
Included in other comprehensive income 553
 48
 —
 327
 —
 —
Other revenues —
 —
 —
 8,921
 —
 (400)
Purchases(1)
 1,986
 —
 —
 —
 (11,853) —
Sales(1)
 —
 —
 —
 —
 —
 —
Settlements(1)
 (32) (328) —
 —
 19,225
 329
Transfers into Level 3 —
 —
 —
 —
 —
 —
Transfers out of Level 3 —
 —
 —
 —
 —
 —
Fair value, end of period $37,763
 $13,426
 $(42,903) $27,029
 $(1,130,124) $(2,068)
Unrealized gains and losses recorded in earnings 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 $10
 $—
 $—
 $—
 $—
 $—
Investment related gains (losses), net —
 —
 49,078
 —
 3,969
 —
Other revenues —
 —
 —
 8,921
 —
 (400)
Interest credited —
 —
 —
 —
 (39,329) —
For the nine months ended September 30, 2016: Fixed maturity securities - available-for-sale
  
Corporate
securities
 Canadian and Canadian provincial governments 
Residential
mortgage-
backed
securities
 
Asset-backed
securities
 
Commercial    
mortgage-
backed
securities
 
U.S. government
and agencies
Fair value, beginning of period $1,226,970
 $416,076
 $330,649
 $303,836
 $68,563
 $26,265
Total gains/losses (realized/unrealized)            
Included in earnings, net:            
Investment income, net of related expenses (1,986) 9,136
 (411) 599
 1,437
 (367)
Investment related gains (losses), net (3,939) —
 (1,922) 1,101
 (3,289) —
Interest credited —
 —
 —
 —
 —
 —
Included in other comprehensive income 36,438
 148,407
 2,104
 (4,324) (2,453) 922
Other revenues —
 —
 —
 —
 —
 —
Purchases(1)
 195,070
 —
 99,776
 102,063
 1,545
 404
Sales(1)
 (36,803) —
 (167,684) (38,681) (25,976) —
Settlements(1)
 (141,065) —
 (31,839) (26,523) (138) (1,391)
Transfers into Level 3 10,206
 —
 1,544
 53,081
 —
 —
Transfers out of Level 3 (28,987) —
 (41,524) (167,501) (2,182) —
Fair value, end of period $1,255,904
 $573,619
 $190,693
 $223,651
 $37,507
 $25,833
Unrealized gains and losses recorded in earnings 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 $(1,917) $9,136
 $2
 $523
 $1,335
 $(367)

39
Table of Contents


For the nine months ended September 30, 2016 (continued): 
Fixed maturity securities
available-for-sale
        
  State
and political
subdivisions		 Other foreign government, supranational and foreign government-sponsored enterprises 
Funds withheld
at interest-
embedded
derivatives
 Other assets - longevity swaps Interest sensitive contract liabilities embedded derivatives Other liabilities - mortality swaps
Fair value, beginning of period $38,342
 $14,065
 $(76,698) $14,996
 $(1,070,584) $(2,619)
Total gains/losses (realized/unrealized)            
Included in earnings, net:            
Investment income, net of related expenses 205
 —
 —
 —
 —
 —
Investment related gains (losses), net —
 —
 33,795
 —
 (83,089) —
Interest credited —
 —
 —
 —
 (20,730) —
Included in other comprehensive income 1,725
 336
 —
 631
 —
 —
Other revenues —
 —
 —
 11,402
 —
 222
Purchases(1)
 1,986
 —
 —
 —
 (9,817) —
Sales(1)
 —
 —
 —
 —
 —
 —
Settlements(1)
 (290) (975) —
 —
 54,096
 329
Transfers into Level 3 —
 —
 —
 —
 —
 —
Transfers out of Level 3 (4,205) —
 —
 —
 —
 —
Fair value, end of period $37,763
 $13,426
 $(42,903) $27,029
 $(1,130,124) $(2,068)
Unrealized gains and losses recorded in earnings 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 $205
 $—
 $—
 $—
 $—
 $—
Investment related gains (losses), net —
 —
 33,795
 —
 (92,842) —
Other revenues —
 —
 —
 11,402
 —
 222
Interest credited —
 —
 —
 —
 (74,826) —

(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.

40
Table of Contents


Nonrecurring Fair Value Measurements
The following table presents information forCompany has certain assets measuredsubject to measurement at estimated fair value on a nonrecurring basis, duringin periods subsequent to their initial recognition if they are determined to be impaired. During the periods presentedthree months ended March 31, 2021 and still held2020, the Company did not have any material assets that were measured 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).
  Carrying Value After Measurement Net Investment Gains (Losses)  
  At September 30, Three months ended September 30, Nine months ended September 30,
(dollars in thousands) 2017 2016 2017 2016 2017 2016
Mortgage loans(1)
 $—
 $6,913
 $—
 $747
 $—
 $45
Limited partnership interests(2)
 4,656
 4,460
 (896) —
 (7,204) (2,039)
Private equities(3)
 106
 —
 (531) —
 (531) —
(1)Estimated fair values for impaired mortgage loans are based on internal valuation models using unobservable inputs or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, are based on external appraisals of the underlying collateral.
(2)The impaired limited partnership interests presented above were accounted for using the cost method. Impairments on these cost method 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.
(3)The fair value of the Company’s private equity investments is based on external valuation models.

value due to impairment.
Fair Value of Financial Instruments
The Company is required by general accounting principles for Fair Value Measurements and Disclosures to disclose the fair value of certain financial instruments including those that are not carried at fair value. The following table presents the carrying amountsvalues and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis, as of September 30, 2017March 31, 2021 and December 31, 20162020 (dollars in thousands)millions). For additional information regarding the methods and significant assumptions used by the Company to estimate these fair values, see Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s 2020 Annual Report. 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.
29
September 30, 2017: Carrying Value     
Estimated 
Fair Value
 Fair Value Measurement Using:
Level 1 Level 2 Level 3 NAV
Assets:            
Mortgage loans on real estate $4,322,329
 $4,494,964
 $—
 $—
 $4,494,964
 $—
Policy loans 1,340,146
 1,340,146
 —
 1,340,146
 —
 —
Funds withheld at interest(1)
 5,931,416
 6,309,369
 —
 —
 6,309,369
 —
Cash and cash equivalents(2)
 872,404
 872,404
 872,404
 —
 —
 —
Short-term investments(2)
 24,128
 24,128
 24,128
 —
 —
 —
Other invested assets(2)
 601,905
 627,650
 28,267
 68,342
 230,355
 300,686
Accrued investment income 420,111
 420,111
 —
 420,111
 —
 —
Liabilities:            
Interest-sensitive contract liabilities(1)
 $12,616,104
 $12,960,161
 $—
 $—
 $12,960,161
 $—
Long-term debt 2,778,480
 2,997,791
 —
 —
 2,997,791
 —
Collateral finance and securitization notes 796,825
 708,342
 —
 —
 708,342
 —
             
December 31, 2016: Carrying Value 
Estimated
Fair Value
 Fair Value Measurement Using:
Level 1 Level 2 Level 3 NAV
Assets:            
Mortgage loans on real estate $3,775,522
 $3,786,987
 $—
 $—
 $3,786,987
 $—
Policy loans 1,427,602
 1,427,602
 —
 1,427,602
 —
 —
Funds withheld at interest(1)
 5,893,381
 6,193,166
 —
 —
 6,193,166
 —
Cash and cash equivalents(2)
 862,117
 862,117
 862,117
 —
 —
 —
Short-term investments(2)
 32,469
 32,469
 32,469
 —
 —
 —
Other invested assets(2)
 477,132
 510,640
 26,294
 55,669
 131,904
 296,773
Accrued investment income 347,173
 347,173
 —
 347,173
 —
 —
Liabilities:            
Interest-sensitive contract liabilities(1)
 $10,225,099
 $10,234,544
 $—
 $—
 $10,234,544
 $—
Long-term debt 3,088,635
 3,186,173
 —
 —
 3,186,173
 —
Collateral finance and securitization notes 840,700
 745,805
 —
 —
 745,805
 —
(1)Carrying values presented herein differ from those presented in the condensed consolidated balance sheets because certain items within the respective financial statement caption are embedded derivatives and are measured at fair value on a recurring basis.
(2)Carrying values presented herein differ from those presented in the condensed consolidated balance sheets because certain items within the respective financial statement caption are measured at fair value on a recurring basis.

41
Table of Contents



March 31, 2021:
Carrying Value (1)
Estimated 
Fair Value		Fair Value Measurement Using:
Level 1Level 2Level 3NAV
Assets:
Mortgage loans on real estate$6,001 $6,231 $0 $0 $6,231 $0 
Policy loans1,253 1,253 0 1,253 0 0 
Funds withheld at interest5,264 5,618 0 0 5,618 0 
Cash and cash equivalents1,662 1,662 1,662 0 0 0 
Short-term investments34 34 34 0 0 0 
Other invested assets1,139 1,115 6 86 1,023 0 
Accrued investment income546 546 0 546 0 0 
Liabilities:
Interest-sensitive contract liabilities$18,031 $19,470 $0 $0 $19,470 $0 
Long-term debt3,573 3,800 0 0 3,800 0 
Collateral finance and securitization notes346 311 0 0 311 0 
December 31, 2020:
Assets:
Mortgage loans on real estate$5,787 $6,167 $0 $0 $6,167 $0 
Policy loans1,258 1,258 0 1,258 0 0 
Funds withheld at interest5,292 5,676 0 0 5,676 0 
Cash and cash equivalents1,930 1,930 1,930 0 0 0 
Short-term investments30 30 30 0 0 0 
Other invested assets1,482 1,601 5 89 1,018 489 
Accrued investment income511 511 0 511 0 0 
Liabilities:
Interest-sensitive contract liabilities$18,106 $19,683 $0 $0 $19,683 $0 
Long-term debt3,573 3,901 0 0 3,901 0 
Collateral finance and securitization notes388 351 0 0 351 0 
Mortgage Loans on Real Estate – The(1)Carrying values presented herein may differ from those in the Company’s condensed consolidated balance sheets because certain items within the respective financial statement captions may be measured at 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 which are held by the ceding company. Ceding companies use a variety of sources and pricing methodologies, which are not transparent to the Company and may include significant unobservable inputs, to value the securities that are held in distinct portfolios, therefore the valuation of these funds withheld assets 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 approximates fair values due to the short-term maturities of these instruments and are considered Level 1 in the fair value hierarchy.
Other Invested Assets – This primarily includes limited partnership interests accounted for using the cost method, structured loans, FHLB common stock, cash collateral and equity release mortgages. The fair value of limited partnership interests and other investments accounted for using the cost method is determined using the net asset value (“NAV”) of the Company’s ownership interest as provided in the financial statements of the investees. The fair value of structured loans is estimated based on a discounted cash flow analysis using discount rates applicable to each structured loan, this is considered Level 3 in the fair value hierarchy. 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 the Company’s cash collateral is considered to be the carrying value and considered to be Level 1 in the fair value hierarchy. The fair value of the Company’s equity release 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.recurring basis.
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.7.    Segment Information
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 are generally obtained from brokers and is considered Level 3 in the fair value hierarchy.

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7.Segment Information
The accounting policies of the segments are the same as those described in the Summary of SignificantNote 2 – “Significant Accounting Policies and Pronouncements” in Note 2 of the consolidated financial statements accompanyingNotes to Consolidated Financial Statements included in the 2016Company’s 2020 Annual Report. The Company measures segment performance primarily based on profit or loss from operations before income taxes. There are no intersegment reinsurance transactions and the Company does not have any material long-lived assets.
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.
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The Company has geographic-based and business-based operational segments. Geographic-based operations are further segmented into traditional and financial solutions businesses. Information related to revenues, income (loss) before income taxes and total assets of the Company for each reportable segment are summarized below (dollars in thousands).millions):
 Three months ended March 31,
Revenues:20212020
U.S. and Latin America:
Traditional$1,637 $1,533 
Financial Solutions318 139 
Total1,955 1,672 
Canada:
Traditional343 296 
Financial Solutions26 24 
Total369 320 
Europe, Middle East and Africa:
Traditional457 407 
Financial Solutions146 78 
Total603 485 
Asia Pacific:
Traditional647 667 
Financial Solutions104 68 
Total751 735 
Corporate and Other441 (8)
Total$4,119 $3,204 
 Three months ended March 31,
Income (loss) before income taxes:20212020
U.S. and Latin America:
Traditional$(338)$(62)
Financial Solutions83 (15)
Total(255)(77)
Canada:
Traditional24 23 
Financial Solutions6 3 
Total30 26 
Europe, Middle East and Africa:
Traditional(68)17 
Financial Solutions60 30 
Total(8)47 
Asia Pacific:
Traditional41 24 
Financial Solutions28 (25)
Total69 (1)
Corporate and Other350 (91)
Total$186 $(96)
Assets:March 31, 2021December 31, 2020
U.S. and Latin America:
Traditional$20,208 $20,071 
Financial Solutions24,426 25,433 
Total44,634 45,504 
Canada:
Traditional4,937 4,682 
Financial Solutions12 13 
Total4,949 4,695 
Europe, Middle East and Africa:
Traditional4,855 4,763 
Financial Solutions6,845 7,292 
Total11,700 12,055 
Asia Pacific:
Traditional8,289 8,197 
Financial Solutions6,682 4,299 
Total14,971 12,496 
Corporate and Other8,556 9,906 
Total$84,810 $84,656 
31
  Three months ended September 30, Nine months ended September 30,
Revenues: 2017 2016 2017 2016
U.S. and Latin America:        
Traditional $1,521,383
 $1,444,917
 $4,532,584
 $4,339,737
Financial Solutions 264,170
 276,135
 834,992
 620,117
Total 1,785,553
 1,721,052
 5,367,576
 4,959,854
Canada:        
Traditional 281,095
 280,959
 814,643
 827,871
Financial Solutions 12,430
 12,359
 36,240
 34,897
Total 293,525
 293,318
 850,883
 862,768
Europe, Middle East and Africa:        
Traditional 360,972
 289,070
 1,024,978
 880,346
Financial Solutions 77,041
 99,752
 230,435
 248,485
Total 438,013
 388,822
 1,255,413
 1,128,831
Asia Pacific:        
Traditional 561,660
 427,647
 1,628,419
 1,299,417
Financial Solutions 16,932
 19,037
 55,368
 56,153
Total 578,592
 446,684
 1,683,787
 1,355,570
Corporate and Other 49,627
 50,701
 125,667
 145,190
Total $3,145,310
 $2,900,577
 $9,283,326
 $8,452,213
  Three months ended September 30, Nine months ended September 30,
Income (loss) before income taxes: 2017 2016 2017 2016
U.S. and Latin America:        
Traditional $160,512
 $77,081
 $281,066
 $239,609
Financial Solutions 89,118
 102,714
 299,689
 196,672
Total 249,630
 179,795
 580,755
 436,281
Canada:        
Traditional 28,789
 34,275
 80,953
 97,679
Financial Solutions 4,472
 1,160
 12,489
 3,880
Total 33,261
 35,435
 93,442
 101,559
Europe, Middle East and Africa:        
Traditional 15,421
 8,515
 40,751
 14,233
Financial Solutions 30,953
 43,786
 91,776
 96,679
Total 46,374
 52,301
 132,527
 110,912
Asia Pacific:        
Traditional 26,564
 19,822
 121,574
 95,464
Financial Solutions (229) 7,549
 11,020
 16,029
Total 26,335
 27,371
 132,594
 111,493
Corporate and Other (15,438) (7,302) (51,997) (11,842)
Total $340,162
 $287,600
 $887,321
 $748,403

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Assets: September 30, 2017 December 31, 2016
U.S. and Latin America:    
Traditional $18,707,824
 $18,140,825
Financial Solutions 16,101,746
 13,712,106
Total 34,809,570
 31,852,931
Canada:    
Traditional 4,177,125
 3,846,682
Financial Solutions 88,609
 85,405
Total 4,265,734
 3,932,087
Europe, Middle East and Africa:    
Traditional 2,978,701
 2,559,124
Financial Solutions 4,094,518
 3,876,131
Total 7,073,219
 6,435,255
Asia Pacific:    
Traditional 4,750,652
 3,968,081
Financial Solutions 1,187,514
 676,281
Total 5,938,166
 4,644,362
Corporate and Other 6,607,342
 6,233,244
Total $58,694,031
 $53,097,879
8.    Commitments, Contingencies and Guarantees
Commitments
Funding of Investments
The Company’s commitments to fund investments as of September 30, 2017March 31, 2021 and December 31, 20162020, are presented in the following table (dollars in thousands)millions):
 September 30, 2017 December 31, 2016
Limited partnership interests and real estate joint ventures$349,157
 $332,169
Commercial mortgage loans75,492
 126,248
Bank loans and private placements51,479
 58,318
Equity release mortgages156,777
 130,324
March 31, 2021December 31, 2020
Limited partnership interests and joint ventures$713 $678 
Mortgage loans on real estate163 199 
Bank loans and private placements269 194 
Lifetime mortgages55 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. Investments in limited partnership interests and real estate joint ventures are carried at cost or reported using the equity method and included in other invested assets in the condensed consolidated balance sheets. Bank loans and private placements are carried at fair value and included in fixed maturity securities available-for-sale. Equity release mortgages are carried at unpaid principal balances, net
The Company has a liability for expected credit losses associated with unfunded commitments of any amortized premium or discountapproximately $1 million and valuation allowance$2 million as of March 31, 2021 and December 31, 2020, which is included in other invested assets.liabilities on the Company’s condensed consolidated balance sheets.
Contingencies
Litigation
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.
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 Support
Certain RGA through wholly-owned subsidiaries hashave 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 partiesIn addition, certain subsidiaries have recourse to RGA should the subsidiary failalso committed to provide capital support to a third party, in exchange for a fee, by agreeing to assume real estate leases in the required funding,

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however, asa severe and prolonged decline in the commercial lease market. Upon assumption of September 30, 2017,a lease, the Company would recognize a right to use asset and lease obligation. As of March 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 September 30, 2017March 31, 2021 (dollars in millions):
Commitment PeriodMaximum Potential Obligation
2034$1,243 
20352,458 
20363,599 
20372,850 
20382,300 
203911,351 
20463,000 

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Commitment Period:Maximum Potential Obligation
2023$500.0
2033450.0
20342,000.0
20351,314.2
20362,932.0
20375,750.0
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Other Guarantees
RGA has issued guarantees to third parties on behalf of its subsidiaries for the payment of amounts due under certain 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. Additionally, 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 forof any legally offsetting amounts due from the guaranteed party are reflected on the Company’s condensed consolidated balance sheets in future policy benefits. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related to 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 September 30, 2017March 31, 2021 and December 31, 20162020, are reflected in the following table (dollars in thousands)millions):
March 31, 2021December 31, 2020
Treaty guarantees$2,023 $1,934 
Treaty guarantees, net of assets in trust1,092 961 
Securities borrowing and repurchase arrangements134 133 
9.    Income Tax
 September 30, 2017 December 31, 2016
Treaty guarantees$936,032
 $902,216
Treaty guarantees, net of assets in trust810,870
 780,786
Securities borrowing and repurchase arrangements295,285
 263,820
Financing arrangements100,602
 119,073
Lease obligations1,895
 2,428

9.Income Tax
Provision forFor the three months ended March 31, 2021, the Company recorded income tax expense differed fromof $47 million on pre-tax income of $186 million, or an effective tax rate of 25.3%. The increase to the amounts computed by applyingeffective tax rate over the U.S. federalstatutory income tax statutory rate of 35.0% to pre-tax income as a21% was primarily the result of income earned in jurisdictions with tax rates higher than the following forU.S., global intangible low-taxed income (“GILTI”) and Subpart F income primarily generated from earnings in Canada and the United Kingdom (“UK”). For the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Tax provision at U.S. statutory rate $119,057
 $100,660
 $310,562
 $261,941
Increase (decrease) in income taxes resulting from:        
Foreign tax rate differing from U.S. tax rate (3,635) (2,335) (14,049) (14,617)
Differences in tax bases in foreign jurisdictions 2,126
 (7,078) (14,633) (21,567)
Deferred tax valuation allowance (2,501) 4,411
 11,627
 13,698
Amounts related to tax audit contingencies 299
 (3,979) (873) (175)
Corporate rate changes (1,139) —
 (2,332) —
Subpart F 64
 1,779
 1,390
 3,212
Foreign tax credits 1,230
 (1,934) (834) (2,655)
Equity compensation excess benefit (2,762) —
 (7,226) —
Return to provision adjustments 452
 (1,996) 133
 (2,227)
Other, net (620) (647) (1,737) (501)
Total provision for income taxes $112,571
 $88,881
 $282,028
 $237,109
Effective tax rate 33.1% 30.9% 31.8% 31.7%

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TableMarch 31, 2020, the Company recorded income tax benefit of Contents


$(8) million on pre-tax loss of $(96) million, or an effective tax rate of 8.9%. The effective tax rate foron the third quarter of 2017pre-tax loss was lower than the U.S. Statutory rate of 35.0%21% primarily as a result of income generatedearned in non-U.S. jurisdictions with lower tax rates higher than the U.S. The first nine months of 2017 also includes a reductionand tax expense related to differences inuncertain tax bases in foreign jurisdictions and a tax benefit from the filing of amended returns,positions, which was partially offset with aby valuation allowance established related to amended return filings. The third quarter of 2016 effective tax rate was lower than the U.S. Statutory rate of 35.0% primarily as a result of effectively settling an uncertain tax position during the quarter and adjustments related to the filing of the US Federal Income tax return. The first nine months of 2016 effective tax rate was lower than the U.S. Statutory rate of 35.0% primarily as a result of tax benefits from incomereleases in non-U.S. jurisdictions with lower tax rates than the U.S.various jurisdictions.
10.    Employee Benefit Plans
The components of net periodic benefit costs,cost, included in other operating expenses on the Company’s condensed consolidated statements of income, for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 were as follows (dollars in thousands)millions):
 Pension BenefitsOther Benefits
 Three months ended March 31,Three months ended March 31,
 2021202020212020
Service cost$4 $3 $1 $0 
Interest cost1 2 0 1 
Expected return on plan assets(2)(2)0 0 
Amortization of prior service cost (credit)0 0 0 0 
Amortization of prior actuarial losses1 1 0 0 
Net periodic benefit cost$4 $4 $1 $1 
33
  Pension Benefits Other Benefits
  Three months ended September 30, Three months ended September 30,
  2017 2016 2017 2016
Service cost $2,699
 $2,479
 $465
 $131
Interest cost 1,314
 1,168
 459
 408
Expected return on plan assets (1,554) (1,285) —
 —
Amortization of prior service cost 85
 76
 (675) (467)
Amortization of prior actuarial loss 1,081
 1,040
 580
 137
Settlements 256
 —
 —
 —
Net periodic benefit cost $3,881
 $3,478
 $829
 $209
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  Pension Benefits Other Benefits
  Nine months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Service cost $8,098
 $7,437
 $1,907
 $2,162
Interest cost 3,943
 3,503
 1,589
 1,694
Expected return on plan assets (4,662) (3,854) —
 —
Amortization of prior service cost 254
 229
 (986) (467)
Amortization of prior actuarial loss 3,244
 3,121
 1,494
 1,370
Settlements 769
 —
 —
 —
Net periodic benefit cost $11,646
 $10,436
 $4,004
 $4,759
11.    Reinsurance
The Company has made $5.0 million in pension contributions during the first nine months of 2017 and expects to make total pension contributions between $5.0 million and $10.0 million in 2017.
11.Reinsurance
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. Consequently, allowances would be established for amounts deemed uncollectible. At September 30, 2017March 31, 2021 and December 31, 2016,2020, no allowances were deemed necessary. The Company regularly evaluates the financial condition of the insurance companies from which it assumes and to which it cedes reinsurance.
Retrocessions are arranged through the Company’s retrocession pools for amounts in excess of the Company’s retention limit. As of September 30, 2017 and DecemberMarch 31, 2016,2021, 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.

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The following table presents information for the Company’s reinsurance ceded receivable assets, including the respective amount and A.M. Best rating for each reinsurer representing in excess of five percent of the total as of September 30, 2017 andMarch 31, 2021 or December 31, 20162020 (dollars in thousands)millions):
 September 30, 2017 December 31, 2016March 31, 2021December 31, 2020
Reinsurer A.M. Best Rating Amount % of Total Amount % of TotalReinsurerA.M. Best RatingAmount% of TotalAmount% of Total
Reinsurer A A+ $291,115
 37.4
 $240,894
 35.2%Reinsurer AA+$463 42.5 %$420 42.7 %
Reinsurer B A+ 203,584
 26.1
 183,881
 26.9
Reinsurer BA+222 20.4 216 22.0 
Reinsurer C A+ 65,528
 8.4
 68,832
 10.1
Reinsurer CA78 7.2 64 6.5 
Reinsurer D A++ 40,860
 5.2
 36,202
 5.3
Reinsurer DA++66 6.1 55 5.6 
Reinsurer E A+ 40,387
 5.2
 35,484
 5.2
Reinsurer EA+49 4.5 46 4.7 
Other reinsurers 137,644
 17.7
 118,679
 17.3
Other reinsurers211 19.3 182 18.5 
Total $779,118
 100.0% $683,972
 100.0%Total$1,089 100.0 %$983 100.0 %
Included in the total reinsurance ceded receivables balance were $268.1$216 million and $242.0$278 million of claims recoverable, of which $0.9$11 million and $4.0$10 million were in excess of 90 days past due, as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
12.    Policy Claims and Benefits
Rollforward of Claims and Claim Adjustment Expenses
The liability for unpaid claims is reported in future policy benefits and other policy claims and benefits on the Company’s condensed consolidated balance sheets. Activity associated with unpaid claims is summarized below (dollars in millions):
Three months ended March 31,
20212020
Balance at beginning of year$7,556 $6,786 
Less: reinsurance recoverable(641)(564)
Net balance at beginning of year6,915 6,222 
Incurred:
Current year4,097 2,838 
Prior years(59)11 
Total incurred4,038 2,849 
Payments:
Current year(164)(131)
Prior years(3,196)(2,342)
Total payments(3,360)(2,473)
Other changes:
Interest accretion10 9 
Foreign exchange adjustments(51)(283)
Total other changes(41)(274)
Net balance at end of period7,552 6,324 
Plus: reinsurance recoverable732 580 
Balance at end of period$8,284 $6,904 
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
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12.New Accounting Standards

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.
13.    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 Codification™. 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 condensed consolidated financial statements.
Adoption of New Accounting Standards
Stock Compensation

In March 2016, the FASB updated the general accounting principal for Stock Compensation which changed how companies account for certain aspects of share-based payment awards to employees. The updated guidance requires excess tax benefits and deficiencies from share-based payment awards be recorded in income tax expense in the income statement. Previously, excess tax benefits and deficiencies were recognized in shareholders’ equity or deferred taxes on the balance sheet depending on the tax situation of the Company. In addition, the updated guidance also changes the accounting for forfeitures and statutory tax withholding requirements, as well as the classification in the statement of cash flows. The new standard generally requires a modified retrospective transition through a cumulative-effect adjustment as of the beginning of the period of adoption, with certain provisions requiring either a prospective or retrospective transition. The Company adopted the new guidance on January 1, 2017. Upon adoption, the Company recognized excess tax benefits of approximately $17.7 million in deferred tax assets that were previously not recognized in a cumulative-effect adjustment increasing retained earnings by $17.7 million. The Company also recorded excess tax benefits of approximately $2.8 million and $7.2 million in the provision for income taxes for the three and nine months ended September 30, 2017, respectively. The number of weighted average diluted shares outstanding were also adjusted to exclude excess tax benefits from the assumed proceeds in the diluted shares calculation resulting in an immaterial increase in the number of dilutive shares outstanding. The Company also elected to continue estimating forfeitures for purposes of recognizing share-based compensation. Other aspects of the adoption of the updated guidance did not have a material impact to the Company’s financial statements.
Future Adoption of New Accounting Standards
Financial Instruments
In January 2016, the FASB amended the general accounting principle for Financial Instruments, effective for the Company January 1, 2018. The amendment revises the accounting related to (1) the classification and measurement of investments in equity securities, (2) the presentation of certain fair value changes for financial liabilities measured at fair value, (3) certain disclosure requirements associated with the fair value of financial instruments. The new guidance should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The adoption of this amendment is not expected to have a material impact on the Company’s financial statements; however, it could result in net income volatility depending on the composition of the Company’s investment portfolio and changes in the fair value of equity securities.
In June 2016, the FASB amended the existing impairment guidance of Financial Instruments. The amendment adds to U.S. GAAP an impairment model, known as current expected credit loss (“CECL”) model that is based on expected losses rather than incurred

DescriptionDate of AdoptionEffect on the Consolidated Financial Statements
Standards adopted:
Financial Instruments – Credit Losses
This guidance adds to U.S. GAAP an impairment model, known as 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

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.
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
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.
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 away from the London Interbank Offered Rate (“LIBOR”). 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
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.
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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 as allowances rather than reduction to the amortized cost of the securities. This guidance is effective for the Company January 1, 2020, with early adoption permitted. The guidance will be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements.
Leases
In February 2016, the FASB issued guidance which will replace most existing lease accounting guidance. The new standard, based on the principle that entities should recognize assets and liabilities arising from leases, does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. The new standard’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term of operating lease arrangements. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, the new standard expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients. This guidance is effective for the Company January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements.
Income Taxes
In October 2016, the FASB amended the general accounting principal for Income Taxes, effective for the Company January 1, 2018. The amendment requires entities to recognize the tax consequences of intercompany asset transfers, except for inventory, at the transaction date. Current GAAP prohibits entities from recognizing the income tax consequences from intercompany asset transfers. The seller defers any net tax effect, and the buyer is prohibited from recognizing a deferred tax asset on the difference between the newly created tax basis of the asset in its tax jurisdiction and its financial statement carrying amount as reported in the condensed consolidated financial statements. The amendment requires entities to recognize these tax consequences in the period in which the transfer occurred. There will be an immediate effect on earnings if the tax rates in the seller’s and buyer’s tax jurisdictions are different. This amendment will be applied using a modified retrospective transition method with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The adoption of this amendment will not have a material impact on the Company’s condensed consolidated financial statements.
Derivative and Hedging
In August 2017, the FASB updated the general accounting principal for Derivatives and Hedging. The updated guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting in current GAAP related to the assessment of hedge effectiveness. The updated guidance is effective for the Company January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of this amending on its condensed consolidated financial statements.


DescriptionAnticipated Date of AdoptionEffect on the Consolidated Financial Statements
Standards not yet adopted:
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. The new guidance will be effective for annual and interim reporting periods beginning January 1, 2023. Below are the most significant areas of change:

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 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.
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. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
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.
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. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
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.
Market risk benefits The Company will adopt this guidance on a retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
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.
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. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
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ITEM 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, future financial performance and growth potential of the Company. TheForward-looking statements often contain words and phrases such as “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe,”“believe” and other similar expressions also are intended to identify forward-looking statements.expressions. Forward-looking statements are inherentlybased 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.
Numerous important factorsThe 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,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, (2) the impairment of other financial institutions and its effect on the Company’s business, (3) requirements to post collateral or make payments due to declines in market value of assets subject to the Company’s collateral arrangements, (4) the fact that the determination of allowances and impairments taken on the Company’s investments is highly subjective, (5) adverse changes in mortality, morbidity, lapsation or claims experience, (6) 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) inadequate risk analysisaction 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 underwriting, (8)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, (9)(10) the availabilityimpairment of other financial institutions and cost of collateral necessary for regulatory reservesits effect on the Company’s business, (11) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and capital, (10)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, (11)(13) market or economic conditions that adversely affect the Company’s ability to make timely sales of investment securities, (12)(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, (13) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (14) adverse litigation or arbitration results, (15) the adequacyfact that the determination of reserves, resourcesallowances and accurate information relating to settlements, awards and terminated and discontinued lines of business,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) competitive factors and competitors’ responses to the Company’s initiatives, (18) the success of the Company’s clients, (19) successful execution of the Company’s entry into new markets, (20) successful development and introduction of new products and distribution opportunities, (21) the Company’s ability to successfully integrate acquired blocks of business and entities, (22) action by regulators who have authority over the Company’s reinsurance operations in the jurisdictions in which it operates, (23) 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, (24)(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, (25)(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 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 its subsidiaries, or its business, (27)(28) the effecteffects of the Company’s status as an insurance holding companyTax Cuts and regulatory restrictions on its ability to pay principalJobs Act of 2017 may be different than expected and interest on its debt obligations, and (28)(29) other risks and uncertainties described in this document and in the Company’s other filings with the SEC.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 obligationsobligation 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” in the 20162020 Annual Report.Report, as may be supplemented by Item 1A – “Risk Factors” in the Company’s subsequent Quarterly Reports on Form 10-Q.
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Overview
The Company is one ofamong the leading global providers of life reinsurers in North America based on premiumsreinsurance and the amountfinancial solutions, with $3.4 trillion of life reinsurance in force providing traditional reinsurance and financial solutions to its clients.assets of $84.8 billion as of March 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 financial reinsurance.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.
Historically, the Company’s primary business has been traditional life reinsurance, which involves reinsuring life insurance policies that are often in force for the remaining lifetime of the underlying individuals insured, with premiums earned typically over a

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period of 10 to 30 years. To a lesser extent, the Company also reinsures health business typically reinsured for one to three years. 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 insureds, and the exercise of recapture options by ceding companies. The Company has expanded its financial solutions business, including significant asset-intensive and longevity risk transactions, which 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.
As is customary in the reinsurance business, clients continually update, refine, and revise reinsurance information provided to the Company. Such revised information is used by the Company in preparation of its condensed consolidated financial statements and the financial effects resulting from the incorporation of revised data are reflected in the current period.
Segment Presentation
The Company has geographic-based and business-based operational segments. Geographic-based operations are further segmented into traditional and financial solutions businesses. 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 premiumrevenue 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. Although reasonably predictable over a period of years, segment claims experience can be volatile over shorter periods. See “Results of Operations by Segment” below for further information about the Company’s segments.
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Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the condensed consolidated financial statements could change significantly.
Management believes the critical accounting policies relating to the following areas are most dependent on the application of estimates and assumptions:
    Premiums receivable;
    Deferred acquisition costs;
    Liabilities for future policy benefits and incurred but not reported claims;
    Valuation of investments and impairments to specific investments;
    Valuation of embedded derivatives; and
    Income taxes.
A discussion of each of the critical accounting policies may be found in the Company’s 2020 Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”
ConsolidatedCritical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the condensed consolidated financial statements could change significantly.
Management believes the critical accounting policies relating to the following areas are most dependent on the application of estimates and assumptions:
    Premiums receivable;
    Deferred acquisition costs;
    Liabilities for future policy benefits and incurred but not reported claims;
    Valuation of investments and impairments to specific investments;
    Valuation of embedded derivatives; and
    Income taxes.
A discussion of each of the critical accounting policies may be found in the Company’s 2020 Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Revenues: (Dollars in thousands, except per share data)
Net premiums $2,489,797
 $2,251,758
 $7,335,944
 $6,755,708
Investment income, net of related expenses 556,918
 489,727
 1,589,820
 1,414,659
Investment related gains (losses), net 22,653
 86,624
 139,471
 84,002
Other revenues 75,942
 72,468
 218,091
 197,844
Total revenues 3,145,310
 2,900,577
 9,283,326
 8,452,213
Benefits and Expenses:        
Claims and other policy benefits 2,100,680
 1,993,064
 6,371,188
 5,877,330
Interest credited 126,099
 116,848
 349,068
 300,602
Policy acquisition costs and other insurance expenses 365,424
 300,962
 1,064,645
 940,406
Other operating expenses 168,417
 152,556
 481,279
 469,875
Interest expense 36,836
 43,063
 108,590
 96,201
Collateral finance and securitization expense 7,692
 6,484
 21,235
 19,396
Total benefits and expenses 2,805,148
 2,612,977
 8,396,005
 7,703,810
 Income before income taxes
 340,162
 287,600
 887,321
 748,403
Provision for income taxes 112,571
 88,881
 282,028
 237,109
Net income $227,591
 $198,719
 $605,293
 $511,294
Earnings per share:        
Basic earnings per share $3.53
 $3.10
 $9.39
 $7.95
Diluted earnings per share $3.47
 $3.07
 $9.23
 $7.87
Dividends declared per share $0.50
 $0.41
 $1.32
 $1.15

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Consolidated income before income taxes increased $52.6 million, or 18.3%, and $138.9 million, or 18.6%, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The increase in income for third quarter of 2017 was primarily due to improved mortality experience in the U.S. operations, increased investment income, new business growth in the Europe, Middle East and Africa (“EMEA”) and Asia Pacific operations and lower interest expense. The increase in income for the first nine months of 2017 was primarily due to improved mortality experience in the U.S., EMEA and Asia Pacific operations and increased investment income, partially offset by higher interest expense. The increases in investment income are discussed below and the changes in interest expense for the third quarter and first nine months are discussed within the Corporate and Other section. Foreign currency fluctuations resulted in an increase (decrease) in income before income taxes by $2.0 million and $(7.4) million for the third quarter and first nine months of 2017, as compared to the same periods in 2016.
The Company recognizes in consolidated income, any changes in the fair value of embedded derivatives on modco or funds withheld treaties, equity-indexed annuity treaties (“EIAs”) and variable annuity products. The combined changes in these three types of embedded derivatives, after adjustment for deferred acquisition costs and retrocession, resulted in a decrease in consolidated income before income taxes of $8.9 million in the third quarter of 2017 and an increase of $218.2 million in the first nine months of 2017, respectively, as compared to the same periods in 2016. This fluctuation does not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, management believes it is helpful to distinguish between the effects of changes in these embedded derivatives, net of related hedging activity and deferred acquisition costs, and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited. The individual effect on income before income taxes for these three types of embedded derivatives is as follows:

The change in the value of embedded derivatives related to 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 unrealized gains and losses associated with these embedded derivatives, after adjustment for deferred acquisition costs, resulted in a decrease in income before income taxes of $3.3 million in the third quarter of 2017 and an increase of $53.3 million in the first nine months of 2017, as compared to the same periods in 2016.
Changes in risk-free rates used in the fair value estimates of embedded derivatives associated with EIAs affect the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with EIAs, after adjustment for deferred acquisition costs and retrocession, increased income before income taxes by $0.1 million and $20.0 million in the third quarter and first nine months of 2017, respectively, as compared to the same periods in 2016.
The change in the Company’s liability for variable annuities associated with guaranteed minimum living benefits affects the amount of unrealized gains and losses the Company recognizes. The unrealized gains and losses associated with guaranteed minimum living benefits, after adjustment for deferred acquisition costs, resulted in a decrease in income before income taxes of $5.7 million in the third quarter of 2017 and an increase of $144.9 million in the first nine months of 2017, as compared to the same periods in 2016. After consideration of the change in fair value of freestanding derivatives used to hedge this liability, income before income taxes decreased by $2.2 million in the third quarter of 2017 and increased by $6.9 million in the first nine months of 2017, as compared to the same periods in 2016.
Consolidated net premiums increased $238.0 million, or 10.6%, and $580.2 million, or 8.6%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016, primarily due to growth in life reinsurance in force. Foreign currency fluctuations resulted in an increase (decrease) in net premiums of $18.3 million and $(17.3) million for the third quarter and first nine months of 2017, as compared to the same periods in 2016. Consolidated assumed life insurance in force increased to $3,297.9 billion as of September 30, 2017 from $3,082.8 billion as of September 30, 2016 due to new business production and in force transactions. The Company added new business production, measured by face amount of insurance in force, of $90.7 billion and $81.3 billion during the third quarter of 2017 and 2016, respectively, and $304.8 billion and $296.4 billion during the first nine months of 2017 and 2016, respectively. Foreign currency fluctuations contributed $43.6 billion to the increase in assumed life insurance in force from September 30, 2016. Management believes industry consolidation, regulatory changes and the established practice of reinsuring mortality and morbidity risks should continue to provide opportunities for growth, albeit at rates less than historically experienced in some markets.
Consolidated investment income, net of related expenses, increased $67.2 million, or 13.7%, and $175.2 million, or 12.4%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. Market value changes related to the Company’s funds withheld at interest investment associated with the reinsurance of certain EIAs increased (decreased) investment income by $(1.3) million and $73.3 million in the third quarter and first nine months of 2017, respectively, as compared to the same periods in 2016. The effect on investment income of the EIA's market value changes is substantially offset by a corresponding change in interest credited to policyholder account balances resulting in an insignificant effect on net income.
Also contributing to the increase in investment income is a larger average invested asset base, excluding spread related business, partially offset by a decrease in the average investment yield. Average invested assets at amortized cost, excluding spread related business, for the nine months ended September 30, 2017 totaled $25.1 billion, a 9.4% increase over September 30, 2016. The

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average yield earned on investments, excluding spread related business, was 4.81% and 4.43% for the third quarter of 2017 and 2016, respectively, and 4.61% and 4.53% for the first nine months ended September 30, 2017 and 2016, respectively. The average yield will vary from quarter to quarter and year to year depending on a number of variables, including the prevailing interest rate and credit spread environment, prepayment fees and make-whole premiums, changes in the mix of the underlying investments and cash balances, and the timing of dividends and distributions on certain investments. The third quarter of 2017, in particular, benefited from a higher level of bond make-whole premiums and distributions from joint ventures and limited partnerships. A continued low interest rate environment is expected to put downward pressure on this yield in future reporting periods.
Total investment related gains (losses), net changed favorably (unfavorably) by $(64.0) million and $55.5 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. A significant portion of theses variances in the third quarter and first nine months are due to changes in the value of embedded derivatives related to reinsurance treaties written on a modco or funds withheld basis, reflecting the impact of changes in interest rates and credit spreads on the calculation of fair value. During the third quarter and first nine months of 2017, the favorable (unfavorable) changes in the value of these embedded derivatives was $(26.0) million and $73.1 million respectively, as compared to the same periods in 2016. Impairments on fixed maturity securities decreased by $13.7 million in the first nine months of 2017, as compared to the same period in 2016. See Note 4 - “Investments” and Note 5 - “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for additional information on the impairment losses and derivatives.
The effective tax rate on a consolidated basis was 33.1% and 30.9% for the third quarter 2017 and 2016, respectively, and 31.8% and 31.7% for the first nine months of 2017 and 2016, respectively. The effective tax rate for the third quarter of 2017 was lower than the U.S. Statutory rate of 35% primarily as a result of income generated in non-U.S. jurisdictions with lower tax rates than the U.S. The first nine months of 2017 also includes a reduction related to differences in tax bases in foreign jurisdictions and a tax benefit from the filing of amended returns, which was partially offset with a valuation allowance established related to amended return filings. The effective tax rate for the third quarter of 2016 was lower than the U.S. Statutory rate of 35.0% primarily as a result of effectively settling an uncertain tax position during the quarter and adjustments related to the filing of the US Federal Income tax return. The first nine months of 2016 effective tax rate was lower than the U.S. Statutory rate of 35.0% primarily as a result of tax benefits from income in non-U.S. jurisdictions with lower tax rates than the U.S.

Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the condensed consolidated financial statements could change significantly.
Management believes the critical accounting policies relating to the following areas are most dependent on the application of estimates and assumptions:
Premiums receivable;
Deferred acquisition costs;
Liabilities for future policy benefits and incurred but not reported claims;
Valuation of investments and other-than-temporary impairments to specific investments;
Valuation of embedded derivatives; and
Income taxes.
A discussion of each of the critical accounting policies may be found in the Company’s 20162020 Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”

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, successful rollout of the vaccination programs globally, country-specific circumstances, measures by public and private institutions, and COVID-19’s impact on all other causes of death. In addition, clients’ ability to write new business in this environment may result in a slowdown in the Company’s new business temporarily; however, much of the Company’s premiums and other revenues are contractually recurring for many years to come.
The ultimate amount and timing of claims the Company will experience as a result of the COVID-19 pandemic will be dependent 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. 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.
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. Although it varies from country to country, the overall financial impact of COVID-19 on the Company is currently projected to be within the range of previous estimates for the same level of general population deaths as there continues to be significant differences between general and insured population mortality. The U.S. is the key driver of mortality claim costs followed by the UK, Canada and South Africa. For the three month period ended March 31, 2021, the Company estimates it has incurred approximately $485 million of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $358 million of that amount being associated with the U.S. and Latin America Traditional segment. 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:
•$15 million to $25 million in the U.S.;
•$4 million to $6 million in the UK; and
•$10 million to $15 million in Canada.
While the global financial markets stabilized since the beginning of the pandemic, they continue to be in a state of uncertainty due to COVID-19 mandated economic shutdowns and historically large and rapid central bank and fiscal policies meant to offset the economic impact of the pandemic. The economic weakness and 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
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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 continue. The Company’s offices worldwide are at a minimum adhering to local government 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 a reduction in new business volumes from slower sales, 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 RGA’s consolidated Own Risk and Solvency Assessment.
Results from Operations – 2021 compared to 2020
The following table summarizes net income for the periods presented.
For the three months ended March 31,
(Dollars in millions, except per share data)202120202021 vs 2020
Revenues:
Net premiums$2,914 $2,819 $95 
Investment income, net of related expenses812 594 218 
Investment related gains (losses), net:
Impairments and change in allowance for credit losses on fixed maturity securities(2)(34)32 
Other investment related gains (losses), net304 (251)555 
Total investment related gains (losses), net302 (285)587 
Other revenues91 76 15 
Total revenues4,119 3,204 915 
Benefits and Expenses:
Claims and other policy benefits3,192 2,664 528 
Interest credited146 146 — 
Policy acquisition costs and other insurance expenses333 248 85 
Other operating expenses214 195 19 
Interest expense45 41 4 
Collateral finance and securitization expense3 6 (3)
Total benefits and expenses3,933 3,300 633 
 Income (loss) before income taxes
186 (96)282 
Provision for income taxes47 (8)55 
Net income (loss)$139 $(88)$227 
Earnings per share:
Basic earnings per share$2.04 $(1.41)$3.45 
Diluted earnings per share$2.03 $(1.41)$3.44 
The increase in income for the three months ended March 31, 2021 was primarily the result of:
•A one-time adjustment of $162 million, pretax, associated with prior periods that includes $92 million, pretax, to correct the accounting for equity method limited partnerships to reflect unrealized gains in investment income, net of
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related expenses that were previously included in accumulated other comprehensive income, and a $70 million, pretax, 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.
•$144 million, pretax, of capital gains included in other investment related gains (losses), net associated with portfolio repositioning.
•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment related gains by $50 million for the three month period ended March 31 2021, compared to a decrease of $230 million for the three month period ended March 31, 2020.
•The increases in investment income and investment related gains (losses), net were partially offset by unfavorable mortality claims, primarily in the U.S. and Latin America and EMEA segments.
•As discussed in the “Impacts of the COVID-19 Pandemic” above, the Company estimates it has incurred approximately $485 million, pretax, of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $358 million, pretax, in the U.S. and Latin America segment.
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency exchange fluctuation did not have a material impact on income before taxes for the three months ended March 31, 2021. 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 growth in life reinsurance in force. Consolidated assumed life insurance in force increased to $3,428.6 billion as of March 31, 2021, from $3,412.4 billion as of March 31, 2020, due to new business production and in force transactions offset by an increase in lapses and mortality claims in the current period, primarily attributable to the increased claims as result of the ongoing COVID-19 pandemic. The Company added new business production, measured by face amount of insurance in force, of $77.9 billion, and $94.8 billion during the three months ended March 31, 2021 and 2020, respectively.
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 the aforementioned accounting correction associated with equity method limited partnerships, in addition to an increase in the average invested asset base and yield:
•The average invested assets at amortized cost, excluding spread related business, totaled $33.4 billion and $29.7 billion in 2021 and 2020, respectively.
•The average yield earned on investments, excluding spread related business, was 5.67% and 4.08% for the three-month periods ended March 31, 2021 and 2020, respectively.
A continued low interest rate environment, in addition to higher cash and cash equivalents balances held by the Company during the COVID-19 pandemic, is expected to put downward pressure on this yield in future reporting periods. 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, including unrealized gains and losses on certain limited partnerships, will also vary from year to year and can be highly variable based on equity-market performance, 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) is primarily attributable to the following:
•During the three months ended March 31, 2021, the Company incurred $2 million of impairments and change in allowance for credit losses on fixed maturities compared to $34 million during the first three months of 2020.
•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment related gains (losses) by $50 million for the three month period ended March 31 2021, compared to a decrease of $230 million for the three month period ended March 31, 2020.
•During the three months ended March 31, 2021, the Company repositioned its portfolio generating capital gains of $144 million.
•Unrealized gains of $104 million, including the previously mentioned correction of $70 million due to the change in fair value of certain cost method limited partnerships were recognized during the first three months of 2021.
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The effective tax rate on a consolidated basis was 25.3% and 8.9% for the three months ended March 31, 2021 and 2020, respectively. 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, equity index annuities (“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):
Three months ended March 31,
202120202021 vs. 2020
Modco/Funds withheld:
Unrealized gains (losses)$50 $(230)$280 
Deferred acquisition costs/retrocession(17)113 (130)
Net effect33 (117)150 
EIAs:
Unrealized gains (losses)29 (12)41 
Deferred acquisition costs/retrocession(15)8 (23)
Net effect14 (4)18 
Guaranteed minimum benefit riders:
Unrealized gains (losses)19 (128)147 
Related freestanding derivatives, net of deferred acquisition costs costs/retrocession(54)164 (218)
Net effect(35)36 (71)
Total net effect after freestanding derivatives$12 $(85)$97 
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Results of Operations by Segment

U.S. and Latin America Operations
The U.S. and Latin America operations include business generated by itsthe Company’s offices in the U.S., Mexico and Brazil. The offices in Mexico and Brazil provide services to clients in other Latin American countries. 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 reinsurancemortality risk, health and long-term care and to a lesser extent, group health and long-term care reinsurance. The Financial Solutions segment consists of Asset-Intensive and Financial Reinsurance.Capital Solutions. Asset-Intensive within the Financial Solutions segment providesincludes coinsurance of annuities and corporate-owned life insurance policies and to a lesser extent, also issues fee-based synthetic guaranteed investment contracts, which include investment-only, stable value contracts. Financial ReinsuranceCapital 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, these transactions do not qualify as reinsurance under GAAP, due to the low-risk nature of the transactions, sotherefore only the related net fees are reflected in other revenues on the condensed consolidated statements of income.
For the three months ended September 30, 2017:   Financial Solutions  
(dollars in thousands)   Asset-Intensive 
Financial
Reinsurance
 Total U.S. and Latin America
  Traditional 
Revenues:        
Net premiums $1,327,181
 $6,423
 $—
 $1,333,604
Investment income, net of related expenses 191,904
 188,176
 2,984
 383,064
Investment related gains (losses), net (1,503) 12,832
 —
 11,329
Other revenues 3,801
 26,899
 26,856
 57,556
Total revenues 1,521,383
 234,330
 29,840
 1,785,553
Benefits and expenses:        
Claims and other policy benefits 1,118,401
 11,959
 —
 1,130,360
Interest credited 20,673
 94,120
 —
 114,793
Policy acquisition costs and other insurance expenses 189,291
 54,441
 5,674
 249,406
Other operating expenses 32,506
 6,684
 2,174
 41,364
Total benefits and expenses 1,360,871
 167,204
 7,848
 1,535,923
Income before income taxes $160,512
 $67,126
 $21,992
 $249,630
         
For the three months ended September 30, 2016:   Financial Solutions  
(dollars in thousands)   Asset-Intensive 
Financial
Reinsurance
 Total U.S. and Latin America
  Traditional 
Revenues:        
Net premiums $1,277,491
 $5,369
 $—
 $1,282,860
Investment income, net of related expenses 167,898
 167,683
 1,038
 336,619
Investment related gains (losses), net (3,394) 59,661
 —
 56,267
Other revenues 2,922
 23,417
 18,967
 45,306
Total revenues 1,444,917
 256,130
 20,005
 1,721,052
Benefits and expenses:        
Claims and other policy benefits 1,131,507
 18,927
 —
 1,150,434
Interest credited 20,628
 86,742
 —
 107,370
Policy acquisition costs and other insurance expenses 184,766
 56,497
 3,492
 244,755
Other operating expenses 30,935
 5,232
 2,531
 38,698
Total benefits and expenses 1,367,836
 167,398
 6,023
 1,541,257
Income before income taxes $77,081
 $88,732
 $13,982
 $179,795

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For the nine months ended September 30, 2017:   Financial Solutions  
(dollars in thousands)   Asset-Intensive 
Financial
Reinsurance
 Total U.S. and Latin America
  Traditional 
Revenues:        
Net premiums $3,966,842
 $18,186
 $—
 $3,985,028
Investment income, net of related expenses 554,612
 553,286
 6,501
 1,114,399
Investment related gains (losses), net (192) 103,229
 —
 103,037
Other revenues 11,322
 76,324
 77,466
 165,112
Total revenues 4,532,584
 751,025
 83,967
 5,367,576
Benefits and expenses:        
Claims and other policy benefits 3,538,958
 53,998
 —
 3,592,956
Interest credited 61,800
 260,941
 —
 322,741
Policy acquisition costs and other insurance expenses 556,476
 176,305
 17,234
 750,015
Other operating expenses 94,284
 19,883
 6,942
 121,109
Total benefits and expenses 4,251,518
 511,127
 24,176
 4,786,821
Income before income taxes $281,066
 $239,898
 $59,791
 $580,755
         
For the nine months ended September 30, 2016:   Financial Solutions  
(dollars in thousands)   Asset-Intensive 
Financial
Reinsurance
 Total U.S. and Latin America
  Traditional 
Revenues:        
Net premiums $3,819,280
 $17,250
 $—
 $3,836,530
Investment income, net of related expenses 515,159
 462,579
 6,031
 983,769
Investment related gains (losses), net (6,376) 7,940
 —
 1,564
Other revenues 11,674
 70,806
 55,511
 137,991
Total revenues 4,339,737
 558,575
 61,542
 4,959,854
Benefits and expenses:        
Claims and other policy benefits 3,400,614
 58,267
 —
 3,458,881
Interest credited 62,873
 217,736
 —
 280,609
Policy acquisition costs and other insurance expenses 544,129
 113,919
 9,145
 667,193
Other operating expenses 92,512
 16,772
 7,606
 116,890
Total benefits and expenses 4,100,128
 406,694
 16,751
 4,523,573
Income before income taxes $239,609
 $151,881
 $44,791
 $436,281
Income before income taxes increased by $69.8 million, or 38.8%, and $144.5 million, or 33.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increase infollowing table summarizes income before income taxes for the third quarterCompany’s U.S. and Latin America operations for the periods presented:
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$1,432 $1,385 $47 
Investment income, net of related expenses465 395 70 
Investment related gains (losses), net— (167)167 
Other revenues58 59 (1)
Total revenues1,955 1,672 283 
Benefits and expenses:
Claims and other policy benefits1,800 1,420 380 
Interest credited131 148 (17)
Policy acquisition costs and other insurance expenses231 137 94 
Other operating expenses48 44 4 
Total benefits and expenses2,210 1,749 461 
Income (loss) before income taxes$(255)$(77)$(178)
The increase in loss before income taxes was primarily due to strong mortality experiencethe result of a significant increase in claims and other policy benefits in the U.S. Traditional segmentsegment. Partially offsetting the increase in losses was the impact of embedded derivatives in U.S. Financial Solutions as well as higher variable investment income. The increase was offset somewhat by a decrease in investment relatedincome, primarily generated from unrealized gains in the Financial Solutions segment.U.S. Traditional segment’s investments in limited partnerships. The significant increase in income before income taxes for the first nine months is the result of several factors, including changes in the value of the embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld,claims was primarily related to an increase in investment related capital gainslarge and additional variable investment income.non-large claim frequency within the individual mortality business. While the cause of death is not yet available for all claims, the Company believes the excess claim costs are primarily attributable to COVID-19.

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Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$1,419 $1,373 $46 
Investment income, net of related expenses207 161 46 
Investment related gains (losses), net6 (7)13 
Other revenues5 6 (1)
Total revenues1,637 1,533 104 
Benefits and expenses:
Claims and other policy benefits1,740 1,367 373 
Interest credited17 19 (2)
Policy acquisition costs and other insurance expenses182 175 7 
Other operating expenses36 34 2 
Total benefits and expenses1,975 1,595 380 
Income (loss) before income taxes$(338)$(62)$(276)
Key metrics:
Life insurance in force$1,610.2 billion$1,618.4 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)122.6 %99.6 %
Policy acquisition costs and other insurance expenses as a percentage of net premiums12.8 %12.7 %
Other operating expenses as a percentage of net premiums2.5 %2.5 %
The U.S. and Latin America Traditional segment provides life and health reinsurance to clients for a variety of products through yearly renewable term, coinsurance and modco agreements. These reinsurance arrangements may involve either facultative or automatic agreements.
Incomeincrease in loss before income taxes for the U.S. and Latin America Traditional segment increased by $83.4 million, or 108.2%, and $41.5 million, or 17.3%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increase in the third quarter is primarily due to favorable mortality experience as compared to same period in 2016 and higher variable investment income. The favorable mortality experience was driven by both a lower number and average size of large claims. The increase in income for the first nine months was primarily due to higher variable investment.unfavorable claims experience within the Individual Mortality business.
NetRevenues
•The increase in net premiums increased $49.7 million, or 3.9%, and $147.6 million, or 3.9%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases werewas primarily due to expected organic premium growth.growth as well as new sales. The segment added new individual life business production, measured by face amount of insurance in force, of $24.8$28.5 billion and $19.7$34.0 billion forduring the third quarterthree months ended March 31, 2021 and $75.1 billion and $93.0 billion for the first nine months of 2017 and 2016,2020, respectively.
Net•The increase in net investment income increased $24.0 million, or 14.3%, and $39.5 million, or 7.7%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases werewas primarily due to higher variable investment income. Investment relatedincome associated with investments in limited partnerships and private equity funds primarily generated from unrealized gains (losses), net increased $1.9 millionin the underlying investments.
Benefits and $6.2 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.expenses

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Claims and other policy benefits as a percentage of net premiums (“loss ratios”) were 84.3% and 88.6% for the third quarter and 89.2% and 89.0%, for the nine months ended September 30, 2017 and 2016, respectively. •The decreaseincrease in the loss ratio for the third quarter of 2017,three months ended March 31, 2021, as compared to the same period in 20162020, was primarily due to favorableunfavorable large and non-large claims experience in the individual mortality experience, specifically the lower number and average sizeline of large claims. For the first nine months of 2017, as comparedbusiness, attributed primarily to the same period in 2016, mortality experience was relatively consistent.
Interest credited expense decreased $1.1COVID-19 pandemic. As explained above, while the cause of death is not yet available for all claims, the Company estimates that approximately $358 million or 1.7%,of excess claims for the ninethree months ended September 30, 2017, as comparedMarch 31, 2021, were attributable to the same periodCOVID-19.

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Financial Solutions
For the three months ended March 31,202120202021 vs 2020
Asset-IntensiveCapital SolutionsTotalAsset-IntensiveCapital SolutionsTotalAsset-IntensiveCapital SolutionsTotal
(dollars in millions)
Revenues:
Net premiums$13 $— $13 $12 $— $12 $1 $— $1 
Investment income, net of related expenses257 1 258 233 1 234 24 — 24 
Investment related gains (losses), net(6)— (6)(160)— (160)154 — 154 
Other revenues26 27 53 28 25 53 (2)2 — 
Total revenues290 28 318 113 26 139 177 2 179 
Benefits and expenses:
Claims and other policy benefits60 — 60 53 — 53 7 — 7 
Interest credited114 — 114 129 — 129 (15)— (15)
Policy acquisition costs and other insurance expenses47 2 49 (38)— (38)85 2 87 
Other operating expenses9 3 12 7 3 10 2 — 2 
Total benefits and expenses230 5 235 151 3 154 79 2 81 
Income before income taxes$60 $23 $83 $(38)$23 $(15)$98 $— $98 
Asset-Intensive Reinsurance
The increase in 2016. Interest credited in this segment relates to amounts credited on cash value products which also have a significant mortality component. Incomeincome before income taxes is affected by the spread between the investment income and the interest credited on the underlying products.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 14.3% and 14.5% for the third quarter and 14.0% and 14.2% for the nine months ended September 30, 2017 and 2016, respectively. While these ratios are expected to remain in a predictable range, they may fluctuate from period to period due to varying allowance levels within coinsurance-type arrangements. In addition, the amortization pattern of previously capitalized amounts, which are subject to the form of the reinsurance agreement and the underlying insurance policies, may vary. Also, the mix of first year coinsurance business versus yearly renewable term business can cause the percentage to fluctuate from period to period
Other operating expenses, as a percentage of net premiums remained constant at 2.4% and 2.4% for the third quarter and 2.4% and 2.4% first nine months of 2017 and 2016, respectively. The expense ratio tends to fluctuate only slightly from period to period due to the maturity and scale of this segment.
Financial Solutions - Asset-Intensive Reinsurance
Asset-Intensive reinsurance within the U.S. and Latin America Financial SolutionsSolutions’ Asset-intensive segment was primarily involves assumingdue to higher investment risk within underlying annuitiesrelated gains (losses), net in coinsurance portfolios and corporate-owned life insurance policies. Mostthe increase in fair value of these agreements are coinsurance, coinsurance with the embedded derivatives related to modco/funds withheld or modco. treaties.
The Company recognizes profits or lossesinvested asset base supporting this segment decreased to $23.2 billion as of March 31, 2021, from $23.9 billion as of March 31, 2020.
•The decrease in the asset base was primarily fromdue to the spread betweenrun off of existing inforce blocks and fewer blocks reinsured..
•As of March 31, 2021 and 2020, $3.2 billion and $3.4 billion, respectively, of the investment income earned and theinvested assets were funds withheld at interest, credited on the underlying deposit liabilities, incomeof which greater than 90% was associated with longevity risk, and fees associated with variable annuity account values and guaranteed investment contracts.one client.
Impact of certain derivatives: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 equity-indexed annuitiesEIAs 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.

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(dollars in millions)Three months ended March 31,
 20212020
Revenues:
Total revenues$290 $113 
Less:
Embedded derivatives – modco/funds withheld treaties44 (222)
Guaranteed minimum benefit riders and related free standing derivatives(64)74 
Revenues before certain derivatives310 261 
Benefits and expenses:
Total benefits and expenses230 151 
Less:
Embedded derivatives – modco/funds withheld treaties17 (113)
Guaranteed minimum benefit riders and related free standing derivatives(29)38 
Equity-indexed annuities(14)4 
Benefits and expenses before certain derivatives256 222 
Income before income taxes:
Income (loss) before income taxes60 (38)
Less:
Embedded derivatives – modco/funds withheld treaties27 (109)
Guaranteed minimum benefit riders and related free standing derivatives(35)36 
Equity-indexed annuities14 (4)
Income before income taxes and certain derivatives$54 $39 
(dollars in thousands) Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Revenues:        
Total revenues $234,330
 $256,130
 $751,025
 $558,575
Less:        
Embedded derivatives – modco/funds withheld treaties 24,539
 52,540
 107,039
 40,174
Guaranteed minimum benefit riders and related free standing derivatives (17,058) (12,647) (20,935) (24,710)
Revenues before certain derivatives 226,849
 216,237
 664,921
 543,111
Benefits and expenses:        
Total benefits and expenses 167,204
 167,398
 511,127
 406,694
Less:        
Embedded derivatives – modco/funds withheld treaties 11,481
 34,226
 51,008
 31,206
Guaranteed minimum benefit riders and related free standing derivatives (5,379) (3,135) (6,565) (3,439)
Equity-indexed annuities 481
 549
 (13,603) 6,449
Benefits and expenses before certain derivatives 160,621
 135,758
 480,287
 372,478
Income before income taxes:        
Income before income taxes 67,126
 88,732
 239,898
 151,881
Less:        
Embedded derivatives – modco/funds withheld treaties 13,058
 18,314
 56,031
 8,968
Guaranteed minimum benefit riders and related free standing derivatives (11,679) (9,512) (14,370) (21,271)
Equity-indexed annuities (481) (549) 13,603
 (6,449)
Income before income taxes and certain derivatives $66,228
 $80,479
 $184,634
 $170,633
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 these embedded derivatives on funds withheld at interest associated with treaties written on a modco or funds withheld basis 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 ninethree months ended September 30, 2017March 31, 2021 and 2016.2020.
The change in fair value of the embedded derivatives -related to modco/funds withheld treaties, net of deferred acquisition costs increased (decreased) income before income taxes by $13.1$27 million and $18.3$(109) million for the third quarter and $56.0 million and $9.0 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. The increases in income for the third quarter of 2016 and 2017 were primarily due to tightening credit spreads. The increase in income for the ninethree months ended September 30, 2017March 31, 2021, was primarily due to tightening credit spreads. The decrease in income for the nine months ended September 30, 2016 was primarily due to shifts in the yield curve.spreads, partially offset by higher risk free interest rates.
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. The change in fair value of the embedded derivatives on guaranteed minimum benefits are net of an increase (decrease) in investment related gains (losses), net of $(55) million and $99 million for the three months ended March 31, 2021 and 2020, respectively, associated with 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 nine months ended September 30, 2017 and 2016.adjustment.
The change in fair value of the guaranteed minimum benefits, after allowing for changes in the associated free standing derivatives, decreasedincreased (decreased) income before income taxes by $11.7$(35) million and $9.5$36 million for the third quarter and $14.4 million and $21.3 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. The decrease in income for all periodsthe three months ended March 31, 2021, was primarily due to a reduction in the annual updatecredit valuation adjustment which has the impact of best estimate actuarial assumptions to account for lower policyholder lapse experience.increasing the fair value of the guaranteed minimum benefit liability.
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 (decreased) income before income taxes by $(0.5)$14 million and $(0.5)by $(4) million for the third quarter and $13.6 million and $(6.4) million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively.  The decreases in income for the third quarter of 2017 and 2016 were primarily due to shifts in the yield curve. The increase in income for the first ninethree months of 2017ended March 31, 2021, was primarily due to declining long-terman increase in risk free interest rates. The decrease in income forrates which has the first nine monthsimpact of 2016 was primarily due to increasing short-term interest rates.

lowering the fair value of the liability.
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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 calculations 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.
Discussion and analysis before certain derivatives:derivatives
•Income before income taxes and certain derivatives decreased by $14.3 million and increased by $14.0$15 million for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016.2020. The decrease in the third quarterincrease was primarily due to lowerthe impact from improved equity market performance and higher investment related gains (losses), net of the corresponding impact to deferred acquisition costs, associated within coinsurance and funds withheld portfolios, which was partially offset by favorable policyholder experience in payout annuities. Funds withheld capital gains (losses) are reported in investment income. The increase in the first nine months was primarily due to favorable policyholder experience in payout annuities and higher variable investment income.portfolios.
•Revenue before certain derivatives increased by $10.6 million and $121.8$49 million for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016.2020. The increase in the thirdfirst quarter of 2021 was primarily due to the impact to investment income from a new coinsurance transaction in 2017 which was partially offset by lower investment related gains (losses) associated with coinsurance and funds withheld portfolios. The increase in the first nine months was primarily due to the changeincreases in fair value of equity options associated with the reinsurance of certain EIAs and higher investment related gains (losses) associated with, net in coinsurance and funds withheld 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 $24.9 million and $107.8$34 million for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same period in 2016.2020. The increase in the thirdcurrent quarter was primarily due to the impact to interest credited of a new coinsurance transaction in 2017 and the corresponding impact to deferred acquisition costs from investment related gains (losses) in coinsurance and funds withheld portfolios. The increase in the first nine months was primarily due to higher interest credited associated with the reinsurance of EIAs and the corresponding impactdue to deferred acquisition costs from investment related gains (losses) in coinsurance and funds withheld portfolios.improved equity market performance. The effect on interest credited related to equity options is substantially offset by a corresponding changeincrease in investment income.
The invested asset base supporting this segment increased to $15.5 billion as of September 30, 2017 from $13.2 billion as of September 30, 2016. The increase in the asset base was due primarily to the aforementioned new coinsurance transaction in 2017. As of September 30, 2017, $4.1 billion of the invested assets were funds withheld at interest, of which greater than 90% is associated with one client.Capital Solutions
Financial Solutions - Financial Reinsurance
Financial Reinsurance withinIncome before income taxes for the U.S. and Latin America Financial Solutions segment income before income taxes consists primarily of net fees earned on financial reinsurance transactions. Additionally, a portion of theCapital Solutions’ business is brokered business in which the Company does not participate in the assumption of risk. The fees earned from financial reinsurance contracts and brokered business are reflected in other revenues, and the fees paid to retrocessionaires are reflected in policy acquisition costs and other insurance expenses.
Income before income taxes increased $8.0 million, or 57.3%, and $15.0 million, or 33.5%, for the three and nine months ended September 30, 2017,March 31, 2021, was consistent with the three months ended March 31, 2020, as compared to the same periods in 2016. The increases were primarily due to growth infrom new transactions and organic growth on existing transactions which was partially offset by the termination of certain agreements.
At September 30, 2017 and 2016, the amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $12.6 billion and $7.9 billion, respectively. The increase was primarily due to new transactions, as well as 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.

•As of March 31, 2021 and 2020, the amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $22.0 billion and $18.1 billion, respectively.
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Canada Operations
The Company conducts reinsurance business in Canada primarily through RGA Canada, which assists clients with capital management activity and mortality and morbidity risk management. The Canada operations are primarily engaged in Traditional reinsurance, which consists mainly of traditional individual life reinsurance, as well asand 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 financial reinsurance.capital solutions.
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$303 $281 $22 
Investment income, net of related expenses60 50 10 
Investment related gains (losses), net2 (12)14 
Other revenues4 1 3 
Total revenues369 320 49 
Benefits and expenses:
Claims and other policy benefits284 240 44 
Interest credited— — — 
Policy acquisition costs and other insurance expenses45 45 — 
Other operating expenses10 9 1 
Total benefits and expenses339 294 45 
Income (loss) before income taxes$30 $26 $4 
(dollars in thousands)Three months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total Canada Traditional Financial Solutions Total Canada
Net premiums$225,841
 $9,874
 $235,715
 $231,154
 $9,946
 $241,100
Investment income, net of related expenses51,593
 1,120
 52,713
 45,239
 1,037
 46,276
Investment related gains (losses), net2,380
 —
 2,380
 3,832
 —
 3,832
Other revenues1,281
 1,436
 2,717
 734
 1,376
 2,110
Total revenues281,095
 12,430
 293,525
 280,959
 12,359
 293,318
Benefits and expenses:           
Claims and other policy benefits193,978
 7,170
 201,148
 175,618
 10,567
 186,185
Interest credited6
 —
 6
 8
 —
 8
Policy acquisition costs and other insurance expenses50,023
 221
 50,244
 61,019
 285
 61,304
Other operating expenses8,299
 567
 8,866
 10,039
 347
 10,386
Total benefits and expenses252,306
 7,958
 260,264
 246,684
 11,199
 257,883
Income before income taxes$28,789
 $4,472
 $33,261
 $34,275
 $1,160
 $35,435
(dollars in thousands)Nine months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total Canada Traditional Financial Solutions Total Canada
Net premiums$662,983
 $28,598
 $691,581
 $686,724
 $29,089
 $715,813
Investment income, net of related expenses140,929
 3,515
 144,444
 134,121
 1,649
 135,770
Investment related gains (losses), net8,821
 —
 8,821
 7,757
 —
 7,757
Other revenues1,910
 4,127
 6,037
 (731) 4,159
 3,428
Total revenues814,643
 36,240
 850,883
 827,871
 34,897
 862,768
Benefits and expenses:           
Claims and other policy benefits566,227
 21,888
 588,115
 524,497
 29,005
 553,502
Interest credited15
 —
 15
 17
 —
 17
Policy acquisition costs and other insurance expenses143,302
 571
 143,873
 178,178
 1,002
 179,180
Other operating expenses24,146
 1,292
 25,438
 27,500
 1,010
 28,510
Total benefits and expenses733,690
 23,751
 757,441
 730,192
 31,017
 761,209
Income before income taxes$80,953
 $12,489
 $93,442
 $97,679
 $3,880
 $101,559
Income before income taxes decreased by $2.2 million, or 6.1%, and $8.1 million, or 8.0%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. •The decrease in income for the third quarter and first nine months is primarily due to unfavorable traditional individual life mortality experience compared to favorable experience in the same periods in 2016, partially offset by favorable experience on longevity business in the current year. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in income before income taxes of $1.7 million and $1.6 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Traditional Reinsurance
Income before income taxes for the Canada Traditional segment decreased by $5.5 million, or 16.0%, and $16.7 million, or 17.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decrease in income before income taxes for the third quarter and first ninethree months ended March 31, 2021, as compared to the same period in 2020 is primarily due to unfavorable traditional individual life mortality experience compared to favorable experienceincreases in net premiums in the same periodsCanada Traditional segment and investment related gains. These increases are mostly offset by increased claims and other policy benefits associated with the COVID-19 pandemic.
•While foreign currency fluctuations can result in 2016. Foreign currency exchange fluctuationsvariances in the financial statement line items, fluctuation in the Canadian dollar resulteddid not result in ana material change in income before income taxes for the three months ended March 31, 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$280 $260 $20 
Investment income, net of related expenses60 49 11 
Investment related gains (losses), net2 (12)14 
Other revenues1 (1)2 
Total revenues343 296 47 
Benefits and expenses:
Claims and other policy benefits266 220 46 
Interest credited— — — 
Policy acquisition costs and other insurance expenses45 45 — 
Other operating expenses8 8 — 
Total benefits and expenses319 273 46 
Income (loss) before income taxes$24 $23 $1 
Key metrics:
Life insurance in force$460.1 billion$389.5 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)95.0 %84.6 %
Policy acquisition costs and other insurance expenses as a percentage of net premiums16.1 %17.3 %
Other operating expenses as a percentage of net premiums2.9 %3.1 %
The increase in income before income taxes of $1.5 million and $1.4 million for the three and nine months ended September 30, 2017,March 31, 2021, is primarily due to increases in net premiums and investment related gains (losses), net, offset by less favorable individual life mortality experience as compared to the same periods in 2016.2020.

Revenues
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•The segment added new life business production, measured by face amount of insurance in force, of $14.2 billion, and $12.2 billion during the first three months of 2021 and 2020, respectively.
Net premiums decreased $5.3 million, or 2.3%, and $23.7 million, or 3.5%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. •The decreasesincrease in net premiums wereinvestment income was primarily due to an anticipated decrease in creditor premiums of $21.0 million and $60.4 million for the third quarter and first nine months, respectively. These decreases were partially offset by an increase in traditional individual life business premiums from annually increasing premium rates on yearly renewable term treaties and favorable foreign currency exchange fluctuation. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in net premiums of approximately $9.0 million and $7.0 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Netincreased variable investment income increased $6.4 million, or 14.0%, and $6.8 million, or 5.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases in investment income for the third quarter and the first nine months were primarily the result of an increase in the invested asset base due to growth in the underlying business volume andpartially offset by a decline in interest rates. The change in investment related gains (losses) is primarily attributable to an increase in investment yields from a higher levelthe fair value of variable investment income. Foreign currency exchange fluctuation in the Canadian dollar resulted in an increase in net investment income of approximately $2.1 million and $1.7 million for the three and nine months ended September 30, 2017, as comparedcredit default derivatives due to the same periods in 2016.tightening of credit spreads.
Other revenues increased by $0.5 millionBenefits and $2.6 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. expenses
•The increase in other revenues for the third quarter of 2017 is primarily due to foreign currency exchange fluctuations. The increase in other revenues for the first nine months of 2017 is primarily due to fee income from the recapture of a previously assumed block of individual life business during the second quarter of 2017.
Loss ratios for this segment were 85.9% and 76.0% for the third quarter and 85.4% and 76.4% for the nine months ended September 30, 2017 and 2016, respectively. The increases in the loss ratio for the three and nine months of 2017,ended March 31, 2021, as compared to the same periodsperiod in 2016, are2020, was primarily due to unfavorable traditional life mortality experience compared to favorableclaims experience in the same periods in 2016 and a decrease in creditorindividual mortality line of business, premiums. Loss ratiosattributed primarily to the COVID-19 pandemic. While the cause of death is not yet available for the traditional individual life mortality business were 99.5% and 94.4% for the third quarter and 98.7% and 93.4% for the first nine months ended September 30, 2017 and 2016, respectively. Historically, the loss ratio increased primarily as the result of several large permanent level premium in force blocks assumed in 1997 and 1998. These blocks are mature blocks of long-term permanent level premium business in which mortality as a percentage of net premiums is expected to be higher than historical ratios. The nature of permanent level premium policies requiresall claims, the Company to set up actuarial liabilities and invest the amounts received inestimates that approximately $26 million of excess of early-year claims costs to fund claims in later years when premiums, by design, continue to be level as compared to expected increasing mortality or claim costs. As such, investment income becomes a more significant component of profitability of these in force blocks. Excluding creditor business, claims and other policy benefits, as a percentage of net premiums and investment income were 77.7% and 73.7% for the third quarter and 77.7% and 73.5% for the nine months ended September 30, 2017 and 2016, respectively.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 22.1% and 26.4% for the third quarter and 21.6% and 25.9% for the nine months ended September 30, 2017 and 2016, respectively. Overall, while these ratios are expected to remain in a predictable range, they may fluctuate from period to period due to varying allowance levels and product mix. The decrease for the third quarter and first nine months reflects a lower level of creditor business which typically has a higher level of acquisition costs. In addition, the amortization patterns of previously capitalized amounts, which are subject to the form of the reinsurance agreement and the underlying insurance policies, may vary.
Other operating expenses decreased $1.7 million, or 17.3%, and $3.4 million, or 12.2%, for the three and nine months ended September 30, 2017, as comparedMarch 31, 2021, were attributable to the same periods in 2016, primarily due to a decrease in corporate overhead expenses. Other operating expenses as a percentage of net premiums were 3.7% and 4.3% for the third quarter and 3.6% and 4.0% for the nine month periods ended September 30, 2017 and 2016, respectively.COVID-19 or COVID-19 related factors.
Financial Solutions Reinsurance
Income before income taxes increased by $3.3 million and $8.6 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$23 $21 $2 
Investment income, net of related expenses— 1 (1)
Investment related gains (losses), net— — — 
Other revenues3 2 1 
Total revenues26 24 2 
Benefits and expenses:
Claims and other policy benefits18 20 (2)
Interest credited— — — 
Policy acquisition costs and other insurance expenses— — — 
Other operating expenses2 1 1 
Total benefits and expenses20 21 (1)
Income (loss) before income taxes$6 $3 $3 
The increases in income for both the three and nine month periods are primarily due to favorable experience on longevity business in the current-year periods. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in income before income taxes was primarily a result of $0.2 millionfavorable mortality experience on longevity business for both the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016.2020.
Net premiums decreased $0.1 million, or 0.7%, and $0.5 million, or 1.7%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in net premiums of approximately $0.4 million for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Net investment income increased $0.1 million and $1.9 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016 primarily due to an increase in the invested asset base.

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Claims and other policy benefits decreased $3.4 million, or 32.1%, and $7.1 million, or 24.5%, for the three and nine months ended September 30, 2017 as compared to the same periods in 2016. The decreases for the third quarter and first nine months are primarily due to favorable experience on longevity business.
Europe, Middle East and Africa Operations
The Europe, Middle East and Africa (“EMEA”) segment includesoperations include business primarily generated by its offices principally in the United Kingdom (“UK”), South Africa, France, Germany, Ireland, Italy, the Middle East, the Netherlands, Poland, South Africa, Spain and the United Arab EmiratesKingdom (“UAE”UK”). EMEA 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 three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$517 $443 $74 
Investment income, net of related expenses68 47 21 
Investment related gains (losses), net16 (6)22 
Other revenues2 1 1 
Total revenues603 485 118 
Benefits and expenses:
Claims and other policy benefits544 387 157 
Interest credited(1)(17)16 
Policy acquisition costs and other insurance expenses31 31 — 
Other operating expenses37 37 — 
Total benefits and expenses611 438 173 
Income (loss) before income taxes$(8)$47 $(55)
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(dollars in thousands)Three months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total EMEA Traditional Financial Solutions Total EMEA
Net premiums$344,211
 $39,294
 $383,505
 $275,514
 $47,018
 $322,532
Investment income, net of related expenses14,727
 30,892
 45,619
 13,067
 33,187
 46,254
Investment related gains (losses), net—
 1,192
 1,192
 —
 8,159
 8,159
Other revenues2,034
 5,663
 7,697
 489
 11,388
 11,877
Total revenues360,972
 77,041
 438,013
 289,070
 99,752
 388,822
Benefits and expenses:           
Claims and other policy benefits285,071
 35,648
 320,719
 241,763
 45,805
 287,568
Interest credited—
 2,475
 2,475
 —
 5,540
 5,540
Policy acquisition costs and other insurance expenses35,751
 327
 36,078
 14,133
 (304) 13,829
Other operating expenses24,729
 7,638
 32,367
 24,659
 4,925
 29,584
Total benefits and expenses345,551
 46,088
 391,639
 280,555
 55,966
 336,521
Income before income taxes$15,421
 $30,953
 $46,374
 $8,515
 $43,786
 $52,301
(dollars in thousands)Nine months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total EMEA Traditional Financial Solutions Total EMEA
Net premiums$979,733
 $119,809
 $1,099,542
 $838,810
 $126,108
 $964,918
Investment income, net of related expenses41,032
 88,602
 129,634
 38,556
 95,288
 133,844
Investment related gains (losses), net7
 8,225
 8,232
 5
 8,623
 8,628
Other revenues4,206
 13,799
 18,005
 2,975
 18,466
 21,441
Total revenues1,024,978
 230,435
 1,255,413
 880,346
 248,485
 1,128,831
Benefits and expenses:           
Claims and other policy benefits846,476
 108,381
 954,857
 745,342
 126,252
 871,594
Interest credited—
 6,297
 6,297
 —
 8,914
 8,914
Policy acquisition costs and other insurance expenses66,263
 1,070
 67,333
 46,465
 226
 46,691
Other operating expenses71,488
 22,911
 94,399
 74,306
 16,414
 90,720
Total benefits and expenses984,227
 138,659
 1,122,886
 866,113
 151,806
 1,017,919
Income before income taxes$40,751
 $91,776
 $132,527
 $14,233
 $96,679
 $110,912
Income•The decrease in income before income taxes decreased by $5.9 million, or 11.3%, and increased by $21.6 million, or 19.5%, for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016. 2020 was primarily due to unfavorable mortality experience due to the COVID-19 pandemic partially offset by an increase in net premiums, investment income and investment related gains.
•While foreign currency fluctuations can result in variances in the financial statement line items, fluctuations in foreign currency did not have a material impact on income before income taxes for the three months ended March 31, 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$438 $390 $48 
Investment income, net of related expenses20 19 1 
Investment related gains (losses), net— — — 
Other revenues(1)(2)1 
Total revenues457 407 50 
Benefits and expenses:
Claims and other policy benefits469 334 135 
Interest credited— — — 
Policy acquisition costs and other insurance expenses29 30 (1)
Other operating expenses27 26 1 
Total benefits and expenses525 390 135 
Income (loss) before income taxes$(68)$17 $(85)
Key metrics:
Life insurance in force$830.8 billion$763.1 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)107.1 %85.6 %
Policy acquisition costs and other insurance expenses as a percentage of net premiums6.6 %7.7 %
Other operating expenses as a percentage of net premiums6.2 %6.7 %
The decrease in income before income taxes for the third quarter wasthree months ended March 31, 2021, as compared to the same period in 2020 is primarily due to lower payout annuity incomeunfavorable mortality experience, partially offset by favorablean increase in net premiums.
Revenues
•The increase in net premiums was due to an in increase in business volume on new and existing treaties.
•The segment added new life business production, measured by face amount of insurance in force, of $27.6 billion, and $32.9 billion during the three months ended March 31, 2021, and the same period in 2020, respectively.
Benefits and expenses
•The increase in the loss ratio for the first three months of 2021 is due to unfavorable mortality experience. experience primarily attributable to COVID-19. While the cause of death is not available for all claims, the Company estimates that approximately $98 million of excess claims for the three months ended March 31, 2021, were attributable to COVID-19 or COVID-19 related factors.
Financial Solutions
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$79 $53 $26 
Investment income, net of related expenses48 28 20 
Investment related gains (losses), net16 (6)22 
Other revenues3 3 — 
Total revenues146 78 68 
Benefits and expenses:
Claims and other policy benefits75 53 22 
Interest credited(1)(17)16 
Policy acquisition costs and other insurance expenses2 1 1 
Other operating expenses10 11 (1)
Total benefits and expenses86 48 38 
Income (loss) before income taxes$60 $30 $30 
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The increase in income before income taxes for the first ninethree months was primarily due to favorable individual mortalitynew business activity and longevity experience. Foreign currency exchange fluctuations resulted in an increase (decrease) in income before income taxes of $0.8 million and $(8.5) million forinvestment related gains on the three and nine months ended September 30, 2017, as compared toinvestments supporting the same periods in 2016.segment’s payout annuity business.

Revenues
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Traditional Reinsurance
Income before income taxes increased by $6.9 million, or 81.1%, and $26.5 million, or 186.3%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. •The increase in income for the third quarter was primarily due to favorable mortality experience. The increases in income before income taxes for the first nine months was primarily due to business growth and favorable individual mortality experience partially offset by unfavorable morbidity experience. Foreign currency exchange fluctuations resulted in an increase (decrease) in income before income taxes of $0.7 million and $(0.5) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Netnet premiums increased $68.7 million, or 24.9%, and $140.9 million, or 16.8%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increase in the three and nine months was primarily due to increased business volumes most notably in the UAE, Italy and South Africa related to new treaties in 2017 and favorable growth from existing treaties. Foreign currency exchange fluctuations increased (decreased) net premiums by approximately $7.3 million and $(27.8) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.of closed longevity block business.
A portion of the net premiums for the segment, in each period presented, relates to reinsurance of critical illness coverage, primarily in the UK. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Net premiums earned from this coverage totaled $49.0 million and $49.5 million for the third quarter and $144.2 million and $157.0 million for the first nine months of 2017 and 2016, respectively.
Net investment income increased $1.7 million, or 12.7%, and $2.5 million, or 6.4%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. •The increases were primarily due to an increase in the invested asset base related to increased business volumes. Foreign currency exchange fluctuations resulted in an increase (decrease) in net investment income of approximately $0.4 million and $(0.8) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Loss ratios for this segment were 82.8% and 87.7% for the third quarter and 86.4% and 88.9% for the first nine months ended September 30, 2017 and 2016, respectively. The decreases in loss ratios were primarily due to changes in the mix of business in the third quarter of 2017 reflecting increased volumes of new business with lower loss ratios, but with higher commissions. These higher commissions are reflected in the increases of 2017 policy acquisition cost ratios below.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 10.4% and 5.1% for the third quarter and 6.8% and 5.5% for the first nine months ended September 30, 2017 and 2016, respectively. The increases in policy acquisition cost ratios are due primarily to changes in the mix of business in the third quarter of 2017 reflecting increased volumes of new business with higher commissions.
Other operating expenses increased $0.1 million, or 0.3%, and decreased $2.8 million, or 3.8%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decrease in the first nine months was primarily duerelated to lower corporate overhead expense timinghigher income associated with unit-linked policies which fluctuate with market performance and the effect of foreign currency exchange fluctuations. Foreign currency exchange fluctuations resulted in an increase (decrease) in operating expenses of approximately $0.8 million and $(0.4) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. Other operating expenses as a percentage of net premiums totaled 7.2% and 9.0% for the third quarter and 7.3% and 8.9% for the first nine months ended September 30, 2017 and 2016, respectively.
Financial Solutions Reinsurance
Income before income taxes decreased by $12.8 million, or 29.3%, and $4.9 million, or 5.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases in income before income taxes were primarily due to payout annuity experience normalizing after a particularly positive 2016, partly offset by favorable longevity business results. Foreign currency exchange fluctuations resulted in an increase (decrease) in income before income taxes totaling $0.1 million and $(7.9) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Net premiums decreased by $7.7 million, or 16.4%, and $6.3 million, or 5.0%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases in net premiums were due to a new retrocession treaty, executed for risk management purposes effective in the first quarter of 2017, which cedes longevity risk to third parties, partiallyis offset by an increase in premiums from new transactions. Foreign currency exchange fluctuations increased (decreased)interest credited.
•The increase in net premiums by approximately $0.1 million and $(10.5) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.

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Net investment income decreased $2.3 million, or 6.9%, and $6.7 million, or 7.0%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases in investment income for the third quarter was due to decreases in both investment yields and the invested asset base, while the decrease for the nine-month periodrelated gains was primarily due to foreign currency exchange fluctuations. Foreign currency exchange fluctuations resulted in an increase (decrease) in net investment income of approximately $0.1 million and $(7.3) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Other revenues decreased by $5.7 million, or 50.3%, and $4.7 million, or 25.3%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases in other revenues were due to experience from a longevity swap normalizing after a particularly positive 2016.
Claims and other policy benefits decreased $10.2 million, or 22.2%, and $17.9 million, or 14.2%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreaseincreases in the third quarterfair market value of derivatives.
Benefits and first nine months was primarily due to the aforementioned new longevity retrocession treaty that cedes longevity risk to third parties, net of anexpenses
•The increase in claims and other policy benefits is the result of increased volumes of closed longevity block business and some unfavorable experience from new transactions. Foreign currency exchange fluctuations resultedpayout annuity business.
•The increase in a decreasebenefits and expenses is also related to an increase in claims and other policy benefits of approximately $9.6 million for the nine months ended September 30, 2017, as compared to the same period in 2016.
Interest credited expense decreased by $3.1 million, or 55.3%, and $2.6 million, or 29.4%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.interest credited. Interest credited in this segment relates to amounts credited to the contractholderscontract holders of unit-linked products. This amount will fluctuate according to contractholdercontract holder investment selections, equity returns and interest rates. The effect on interest credited related to unit-linked products is substantially offset by a corresponding change in investment income.
Other operating expenses increased $2.7 million, or 55.1%, and $6.5 million, or 39.6%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases are primarily due to increased administration costs related to longevity transactions and are offset partially by the effect of foreign currency exchange fluctuations. Foreign currency exchange fluctuations resulted in an increase (decrease) in operating expenses of approximately $0.2 million and $(1.0) million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Asia Pacific Operations
The Asia Pacific operations include business generated by its offices principally in Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand, Singapore, South Korea and Taiwan. 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. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks and
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$662 $710 $(48)
Investment income, net of related expenses61 44 17 
Investment related gains (losses), net11 (33)44 
Other revenues17 14 3 
Total revenues751 735 16 
Benefits and expenses:
Claims and other policy benefits564 617 (53)
Interest credited15 13 2 
Policy acquisition costs and other insurance expenses54 63 (9)
Other operating expenses49 43 6 
Total benefits and expenses682 736 (54)
Income (loss) before income taxes$69 $(1)$70 
•The increase in some markets, group risks.

(dollars in thousands)Three months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total Asia Pacific Traditional Financial Solutions Total Asia Pacific
Net premiums$536,931
 $19
 $536,950
 $404,451
 $743
 $405,194
Investment income, net of related expenses23,858
 10,556
 34,414
 21,273
 5,827
 27,100
Investment related gains (losses), net—
 758
 758
 —
 6,108
 6,108
Other revenues871
 5,599
 6,470
 1,923
 6,359
 8,282
Total revenues561,660
 16,932
 578,592
 427,647
 19,037
 446,684
Benefits and expenses:           
Claims and other policy benefits442,358
 6,110
 448,468
 365,115
 3,777
 368,892
Interest credited—
 7,026
 7,026
 —
 3,308
 3,308
Policy acquisition costs and other insurance expenses55,891
 653
 56,544
 4,157
 1,482
 5,639
Other operating expenses36,847
 3,372
 40,219
 38,553
 2,921
 41,474
Total benefits and expenses535,096
 17,161
 552,257
 407,825
 11,488
 419,313
Income (loss) before income taxes$26,564
 $(229) $26,335
 $19,822
 $7,549
 $27,371

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(dollars in thousands)Nine months ended September 30,
 2017 2016
Revenues:Traditional Financial Solutions Total Asia Pacific Traditional Financial Solutions Total Asia Pacific
Net premiums$1,557,590
 $2,094
 $1,559,684
 $1,233,222
 $4,936
 $1,238,158
Investment income, net of related expenses68,105
 24,662
 92,767
 61,601
 18,086
 79,687
Investment related gains (losses), net—
 11,525
 11,525
 14
 14,322
 14,336
Other revenues2,724
 17,087
 19,811
 4,580
 18,809
 23,389
Total revenues1,628,419
 55,368
 1,683,787
 1,299,417
 56,153
 1,355,570
Benefits and expenses:           
Claims and other policy benefits1,221,091
 14,170
 1,235,261
 977,860
 15,487
 993,347
Interest credited—
 15,595
 15,595
 —
 9,474
 9,474
Policy acquisition costs and other insurance expenses180,007
 4,111
 184,118
 116,432
 4,436
 120,868
Other operating expenses105,747
 10,472
 116,219
 109,661
 10,727
 120,388
Total benefits and expenses1,506,845
 44,348
 1,551,193
 1,203,953
 40,124
 1,244,077
Income before income taxes$121,574
 $11,020
 $132,594
 $95,464
 $16,029
 $111,493
Incomeincome before income taxes decreased by $1.0 million, or 3.8%, and increased by $21.1 million, or 18.9%, for the three and nine months ended September 30, 2017, as compared to the same periodsperiod in 2016. The decrease2020 was the result of favorable claims experience across the segment as compared to the prior year, as well as income from new business growth within the Financial Solutions business.
•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a $2 million increase in income before income taxes forduring the third quarter was due to an increase in policy lapses on a financial solutions closed blockthree months ended March 31, 2021. Unless otherwise stated, all amounts discussed below are net of business in Japan partially offset by favorable results in the traditional segment. foreign currency fluctuations.
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Traditional Reinsurance
For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$609 $636 $(27)
Investment income, net of related expenses33 27 6 
Investment related gains (losses), net(1)— (1)
Other revenues6 4 2 
Total revenues647 667 (20)
Benefits and expenses:
Claims and other policy benefits518 555 (37)
Interest credited— — — 
Policy acquisition costs and other insurance expenses43 49 (6)
Other operating expenses45 39 6 
Total benefits and expenses606 643 (37)
Income (loss) before income taxes$41 $24 $17 
Key metrics:
Life insurance in force$521.0 billion$635.6 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)85.1 %87.3 %
Policy acquisition costs and other insurance expenses as a percentage of net premiums7.1 %7.7 %
Other operating expenses as a percentage of net premiums7.4 %6.1 %
The increase in income before income taxes foris primarily the first nine monthsresult of net favorable claims experience across the segment, partially offset by a decrease in net premiums.
Revenues
•The decrease in net premiums was primarily due to higher income from officespremium reductions in Asia drivenAustralia 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 $7.6 billion, and $15.7 billion during the three months ended March 31, 2021 and 2020, respectively, due to new business growth, most notablyproduction and in Hong Kongforce transactions offset by lapses, recaptures and Southeast Asia. The prior-year period also included poor claims experiencenon-renewal of two large group treaties in Australia.
Benefits and expenses
•The third quarter of 2016 also included a higher level of benefit expense associated withdecrease in the timing of client reporting on one large treaty in Hong Kong. Foreign currency exchange fluctuations resulted in a decrease to income before income taxes totaling approximately $0.8 million and $0.3 millionloss ratio for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016.
Traditional Reinsurance
Income before income taxes increased by $6.7 million, or 34.0%, and $26.1 million, or 27.4%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases in income before income taxes are2020 was primarily due to higher income from offices in Asia driven by business growth. Foreign currency exchange fluctuations resulted in a decrease to income before income taxes totalingfavorable claims experience across the segment. While the cause of death is not yet available for all claims, the Company estimates that approximately $1.0$5 million and $0.4 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Net premiums increased by $132.5 million, or 32.8%, and $324.4 million, or 26.3%,of claims for the three and nine months ended September 30, 2017, as comparedMarch 31, 2021, were attributable to the same periods in 2016. The increases were driven by both new and existing business written throughout the segment. Foreign currency exchange fluctuations resulted in an increase in net premiums of approximately $1.0 million and $14.2 million for the three and nine months of 2017, as compared to the same periods in 2016.
A portion of the net premiums for the segment, in each period presented, relates to reinsurance of critical illness coverage. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Reinsurance of critical illness in the segment is offeredCOVID-19 or COVID-19 related factors, primarily in South Korea, Australia and Hong Kong. Net premiums earned from this coverage totaled $158.6 million and $100.6 million for the third quarter and $474.8 million and $312.3 million for the first nine months ended September 30, 2017 and 2016, respectively.India.
Net investment income increased $2.6 million, or 12.2%, and $6.5 million, or 10.6%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increases were primarily due to a higher invested asset base. Foreign currency exchange fluctuations resulted in an increase in net investment income of approximately $0.5 million and $1.3 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.Financial Solutions
Other revenues decreased by $1.1 million, or 54.7%, and $1.9 million, or 40.5%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. These variances are primarily due to gains and losses related to foreign currency transactions.
Loss ratios for this segment were 82.4% and 90.3% for the third quarter and 78.4% and 79.3% for the first nine months ended September 30, 2017 and 2016, respectively. The decreases in the loss ratios for the third quarter and first nine months of 2017 were primarily due to improved claims experience in Australia compared to the prior year.

For the three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$53 $74 $(21)
Investment income, net of related expenses28 17 11 
Investment related gains (losses), net12 (33)45 
Other revenues11 10 1 
Total revenues104 68 36 
Benefits and expenses:
Claims and other policy benefits46 62 (16)
Interest credited15 13 2 
Policy acquisition costs and other insurance expenses11 14 (3)
Other operating expenses4 4 — 
Total benefits and expenses76 93 (17)
Income (loss) before income taxes$28 $(25)$53 
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Policy acquisition costs and other insurance expenses as a percentage of net premiums were 10.4% and 1.0% for the third quarter and 11.6% and 9.4% for the nine months ended September 30, 2017 and 2016, respectively. The third quarter 2016 included the affect of adjustments associated with client reporting on one large treaty in Hong Kong. These percentages fluctuate due to timing of client company reporting, premium refunds, variations in the mixture of business and the relative maturity of the business.In addition, as the segment grows, renewal premiums, which have lower allowances than first-year premiums, represent a greater percentage of the total net premiums.
Other operating expenses decreased $1.7 million, or 4.4%, and $3.9 million, or 3.6%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016 mainly due to the timing of travel and consultant expenditures. Other operating expenses as a percentage of net premiums totaled 6.9% and 9.5% for the third quarter and 6.8% and 8.9% for the first nine months ended September 30, 2017 and 2016, respectively. The timing of premium flows and the level of costs associated with the entrance into and development of new markets within the segment may cause other operating expenses as a percentage of net premiums to fluctuate over periods of time.
Financial Solutions Reinsurance
Income before income taxes decreased by $7.8 million and $5.0 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases in income before income taxes are primarily due to lower income from higher lapses on policies of the aforementioned closed block of business in Japan. Foreign currency exchange fluctuations resulted in an increase in income before income taxes of approximately $0.1 million for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Net premiums decreased $0.7 million or 97.4%, and $2.8 million, or 57.6%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The decreases for the third quarter and first nine months wereis primarily due to higher lapses from policiesfavorable fluctuations in the fair value of the aforementioned closed block ofderivatives and continued growth and favorable experience on existing asset-intensive business in Japan. Foreign currency exchange fluctuations had a negligible effect on net premiums for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Net investment income increased $4.7 million, or 81.2%, and $6.6 million, or 36.4%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016 mainly due to growth in the invested asset base. Foreign currency exchange fluctuations resulted in an increase in net investment income of approximately $0.2 million and $0.4 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016.
Other revenues decreased by $0.8 million, or 12.0%, and $1.7 million, or 9.2%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. At September 30, 2017 and 2016, theAsia. The amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures was $2.4$1.6 billion and $1.0$3.8 billion for the three months ended March 31, 2021 and 2020, respectively. Fees earned from this business can vary significantly depending on the size, complexity and timing of the transactions and the timing of their completion and, therefore, can fluctuate from period to period.
Claims and other policy benefits increased by $2.3 million, or 61.8%, and decreased by $1.3 million, or 8.5%, forRevenues
•The decrease in net premiums is attributable to a lower contribution from single premium asset-intensive transactions in the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016. 2020.
•The increase in the third quarter wasinvestment related gains (losses), net is primarily due to favorable fluctuations in the fair value of derivatives due to tightening credit spreads and higher lapses from policies of the aforementioned closed block of business in Japan. future inflation expectations.
Benefits and expenses
•The decrease in claims and other policy benefits is the first nine months is attributable toresult of a lower lapsesreserve impact from policies from a closed block of businesssingle premium asset-intensive transactions in Japan.
Other operating expenses increased by $0.5 million, or 15.4%, and decreased by $0.3 million, or 2.4%, for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the same periodsperiod in 2016, respectively. The timing of premium flows and the level of costs associated with the entrance into and development of new markets within the segment may cause other operating expenses to fluctuate over periods of time.2020.

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Corporate and Other
Corporate and Other revenues primarily include investment income from unallocated invested assets, and investment related gains and losses.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.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 industry.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 three months ended March 31,
(dollars in millions)202120202021 vs 2020
Revenues:
Net premiums$— $— $— 
Investment income, net of related expenses158 58 100 
Investment related gains (losses), net273 (67)340 
Other revenues10 1 9 
Total revenues441 (8)449 
Benefits and expenses:
Claims and other policy benefits— — — 
Interest credited1 2 (1)
Policy acquisition costs and other insurance income(28)(28)— 
Other operating expenses70 62 8 
Interest expense45 41 4 
Collateral finance and securitization expense3 6 (3)
Total benefits and expenses91 83 8 
Loss before income taxes$350 $(91)$441 
(dollars in thousands) Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Revenues:        
Net premiums $23
 $72
 $109
 $289
Investment income, net of related expenses 41,108
 33,478
 108,576
 81,589
Investment related gains (losses), net 6,994
 12,258
 7,856
 51,717
Other revenues 1,502
 4,893
 9,126
 11,595
Total revenues 49,627
 50,701
 125,667
 145,190
Benefits and expenses:        
Claims and other policy benefits (15) (15) (1) 6
Interest credited 1,799
 622
 4,420
 1,588
Policy acquisition costs and other insurance income (26,848) (24,565) (80,694) (73,526)
Other operating expenses 45,601
 32,414
 124,114
 113,367
Interest expense 36,836
 43,063
 108,590
 96,201
Collateral finance and securitization expense 7,692
 6,484
 21,235
 19,396
Total benefits and expenses 65,065
 58,003
 177,664
 157,032
Income (loss) before income taxes $(15,438) $(7,302) $(51,997) $(11,842)
LossThe increase in income before income taxes increased by $8.1 million, or 111.4% and $40.2 million, or 339.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increase in loss before income taxes for the third quarter and the first nine months is primarily due to decreasedan increase in total revenues.
Revenues
•The increase in net investment relatedincome includes a reclassification of approximately $92 million of pre-tax unrealized gains decreased other revenues and higher other operating expenses partially offset by increasedon certain limited partnerships, for which the Company uses the equity method of accounting, from AOCI to net investment income.
Total revenues decreased by $1.1 million, or 2.1%, and $19.5 million, or 13.4%, for the three and nine months ended September 30, 2017, as compared to The unrealized gains should have been recognized directly in net investment income in the same prior periods in 2016.they were reported as earnings by the investees. The decrease for the third quarterremaining increase is primarilyattributable to higher investment income on Corporate invested assets due to a $5.3 million decreasehigher asset base and higher yield.
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•The increase in investment related gains (losses), net, largely caused byincludes $104 million of changes in the carrying value of investments in limited partnerships considered to be investment companies, $70 million of which relates to an adjustment to the carrying value from cost less impairments to a fair value approach, using the net asset value (“NAV”) per share or its equivalent, which should have been recognized in prior periods. The remaining increase in other-than-temporary impairmentsis attributable to gains on sales of fixed maturity securities and other impairment charges of $3.2 million. The third quarter decrease was partially offset by a $7.6$144 million, increase in investment income related to an increase in unallocated invested assets and higher investment yields, primarily due to a higher level of variable investment income. The decrease for the first nine months is primarily due to a decrease of $43.9 million in investment related gains (losses), net, mainly related to an increase in other-than-temporary impairments on fixed maturity securities and other impairment charges of $12.9 million and a reduction in net gains on the sale of investments of $25.2 million. The decrease for the first nine months was partially offset by an increase of $27.0 million in investment income related to an increase in unallocated invested assets and higher investment yields, primarily due to a higher level of variable investment income.
Total benefits and expenses increased by $7.1 million, or 12.2%, and $20.6 million, or 13.1%, for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. The increase of total benefits and expenses in the third quarter is primarily due tovaluation allowance on mortgage loans, as a $13.2 million increase in other operating expenses, primarily related to compensation and consulting expenses, partially offset by a reduction in interest expenseresult of $6.2 million. The increase in total benefits and expenses in the first nine months was primarily due to an increase in interest expense and other operating expenses offset by an increase in other insurance income, related to the offset to capital charges allocated to the operating segments. The increase in interest expense in the first nine months is primarilyassumption updates due to the issuanceimproving view of $800.0 millionthe impact of the COVID-19 pandemic, and favorable changes in long-term debt in June 2016, which was partially offset by the repaymentfair value of $300.0 million of long-term debt in 2017, and a lower reduction in tax-related interest expense primarily resulting from settlement with the taxing authority in 2016.derivatives.

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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 RGA, Inc. and its subsidiariesthe Company under various scenarios that include the potential risk of early recapture of reinsurance treaties, market events and higher than expected claims.claims associated with the pandemic. Given the uncertainty associated with the COVID-19 pandemic and the related volatility in the financial markets, the Company continues to maintain a higher cash and cash equivalent balance than its historical balances. 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,see “the COVID-19 Pandemic” for more information, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These alternatives include borrowings under committed credit facilities, secured borrowings, the ability to issue long-term debt, preferred securities or common equity and, if necessary, the sale of invested assets subject to market conditions.
Current Market Environment
The current interest rate environment in select markets, primarily the U.S. and Canada, continues to negatively affect the Company’s earnings. However, the Company’s average investment yield, excluding spread business, has begun to increase, which for the ninethree months ended September 30, 2017March 31, 2021, was 4.61%5.67%, 8159 basis points above the same period in 2016.2020. The increase in average yield is primarily attributable to the aforementioned accounting correction associated with equity method limited partnerships, and an increase in the average invested asset base and overall yield. 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. Gross unrealized gains on fixed maturity and equity securities available-for-sale increaseddecreased from $2,246.5 million$7.4 billion at December 31, 20162020, to $2,651.5 million$4.7 billion at September 30, 2017. GrossMarch 31, 2021, due to tightening credit spreads. Additionally, gross unrealized losses decreasedincreased from $374.9 million$0.2 billion at December 31, 20162020, to $163.2 million$0.5 billion at September 30, 2017.March 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 investmentfixed maturity securities of $2,651.5 million$4.7 billion remain well in excess of gross unrealized losses of $163.2 million$0.5 billion as of September 30, 2017.March 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 expansion efforts, RGA will continue to be dependent upon these sources of liquidity. The following tables provide comparative information for RGA (dollars in thousands)millions):
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 Three months ended September 30, Nine months ended September 30,Three months ended March 31,
 2017 2016 2017 2016 20212020
Interest expense $44,697
 $50,826
 $132,018
 $119,700
Interest expense$52 $50 
Capital contributions to subsidiaries 10,000
 46,002
 28,500
 87,002
Capital contributions to subsidiaries4 15 
Dividends to shareholders 32,271
 26,288
 85,086
 74,034
Dividends to shareholders48 44 
Repurchases of treasury stockRepurchases of treasury stock— 153 
Interest and dividend income 23,635
 227,819
 75,916
 283,712
Interest and dividend income32 226 
Issuance of unaffiliated debt —
 —
 —
 799,984
  September 30, 2017 December 31, 2016
Cash and invested assets $862,480
 $1,443,755
 March 31, 2021December 31, 2020
Cash and invested assets$1,176 $1,308 
See Item 15, Schedule II -– “Condensed Financial Information of the Registrant” in the 20162020 Annual Report for additional financial information related to RGA.

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The undistributed earnings of substantially all of the Company’s foreign subsidiaries have been reinvested indefinitely in those non-U.S. operations, as described in Note 9 -– “Income Tax” ofin the Notes to Consolidated Financial Statements in the 20162020 Annual Report. Under current tax laws, shouldAs U.S. Tax Reform generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, the Company repatriate such earnings, it may be subjectdoes not expect to additional U.S.incur material income taxes and foreign withholding taxes.if these funds are repatriated.
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, isit 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 currentboard of directors authorized a share repurchase program which was approved by the board of directors in January 2017, authorizes the repurchase offor up to $400.0$400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. On May 6, 2020, the Company announced that it has suspended stock repurchases until further notice. The resumption and 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 thousands,millions, except share data):
Nine months ended September 30,Three months ended March 31,
2017 201620212020
Dividends to shareholders$85,086
 $74,034
Dividends to shareholders$48 $44 
Repurchases of treasury stock26,897
 116,522
Repurchases of common stockRepurchases of common stock— 153 
Total amount paid to shareholders$111,983
 $190,556
Total amount paid to shareholders$48 $197 
   
Number of shares repurchased208,680
 1,356,892
Number of shares repurchased— 1,074,413 
Average price per share$128.89
 $85.87
Average price per share$— $142.05 
In October 2017,April 2021, RGA’s board of directors declared a quarterly dividend of $0.50$0.70 per share. 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 3 -– “Equity” in the Notes to Condensed Consolidated Financial Statements for information on the Company’s share repurchase program.
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 $3.5$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-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 $100.0 million,the amounts set forth in those agreements, bankruptcy proceedings, or any other event whichthat results in the acceleration of the maturity of indebtedness.
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As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had $2.8$3.6 billion, and $3.1 billion, respectively, in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of March 31, 2021 and December 31, 2020, the average interest rate on long-term debt outstanding was 4.54%. 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, available liquidity at the holding company, and the Company’s ability to raise additional funds.
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 at the Company’s option, 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 $850.0$850 million in cash and obtain letters of credit in multiple currencies on aits revolving credit facility that expiresmatures in September 2019.August 2023. As of September 30, 2017,March 31, 2021, the Company had no cash borrowings outstanding and $97.2$21 million in issued, but undrawn, letters of credit under this facility. As
On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face amount of September 30, 2017$600 million. This security has been registered with the Securities and December 31, 2016,Exchange Commission. The net proceeds were approximately $593 million and will be used in part to repay the average interest rate on short-termCompany’s $400 million 5.00% Senior Notes due in 2021, and long-term debt outstanding was 5.15% and 5.16%, respectively.

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the remainder will be used for general corporate purposes. Capitalized issue costs were approximately $5 million.
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 12 months.
Credit and Committed Facilities
At September 30, 2017,March 31, 2021, the Company maintained an $850.0$850 million syndicated revolving credit facility and certainin addition to committed letter of credit facilities aggregating $1,349.1 million.$1.2 billion. See Note 13 -– “Debt” in the Notes to Consolidated Financial Statements in the 20162020 Annual Report for further information about these 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 similar to those described in the “Debt” discussion above. At September 30, 2017,March 31, 2021, there were approximately $133.4$23 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 September 30, 2017,March 31, 2021, $1.5 billion in letters of credit from various banks were outstanding, but undrawn, backing reinsurance between the various subsidiaries of 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 concernconcerns 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 include selling short-term investments or fixed maturity securities and drawing funds under a revolving credit facility, under which the Company had availability of $752.8$829 million as of September 30, 2017.March 31, 2021. The Company also has $1.1 billion$349 million of funds available through collateralized borrowings from the FHLB as of September 30, 2017.March 31, 2021. As of September 30, 2017,March 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 “Summary of Significant– “Significant Accounting Policies”Policies and Pronouncements” in the Notes to Consolidated Financial Statements in the 20162020 Annual Report). 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
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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 recent action to increase cash and cash equivalents along with its current sources of liquidity are adequate to meet its cash requirements for the next 12 months.

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months, despite the uncertainty associated with the pandemic.
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:
For the three months ended March 31,
20212020
(Dollars in millions)
Sources:
Net cash provided by operating activities2,366 2,207 
Exercise of stock options, net— 1 
Change in cash collateral for derivative positions and other arrangements— 51 
Cash provided by changes in universal life and other
investment type policies and contracts— 475 
Total sources2,366 2,734 
Uses:
Net cash used in investing activities2,492 1,096 
Dividends to stockholders48 44 
Repayment of collateral finance and securitization notes42 19 
Principal payments of long-term debt1 1 
Purchases of treasury stock1 156 
Change in cash collateral for derivative positions and other arrangements25 — 
Cash used for changes in universal life and other
investment type policies and contracts26 — 
Effect of exchange rate changes on cash17 47 
Total uses2,652 1,363 
Net change in cash and cash equivalents(286)1,371 
  For the nine months ended September 30,
  2017 2016
  (Dollars in thousands)
Sources:   
 Net cash provided by operating activities$1,104,499
 $1,019,872
 Proceeds from long-term debt issuance—
 799,984
 Exercise of stock options, net4,450
 11,752
 Change in cash collateral for derivative positions and other arrangements—
 24,749
 Cash provided by changes in universal life and other   
 investment type policies and contracts438,774
 487,808
 Effect of exchange rate changes on cash43,699
 25,436
 Total sources1,591,422
 2,369,601
     
Uses:   
 Net cash used in investing activities1,056,334
 2,247,406
 Dividends to stockholders85,086
 74,034
 Repayment of collateral finance and securitization notes56,637
 60,971
 Debt issuance costs—
 9,026
 Principal payments of long-term debt301,927
 1,850
 Purchases of treasury stock41,360
 121,896
 Change in cash collateral for derivatives and other arrangements46,206
 —
 Total uses1,587,550
 2,515,183
Net change in cash and cash equivalents$3,872
 $(145,582)
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 payments 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 maturities of invested assets, sales 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.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 RGA debt and equity securities, and deposit funds associated with universal life and other investment type policies and contracts. The principal cash outflows come from repayments of debt, 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.
Contractual Obligations
There were no material changes in the Company’s contractual obligations from those previously reported.reported in the 2020 Annual Report.
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.
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The Company has established target asset portfolios for each major insurance product,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.

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The Company’s asset-intensive products are primarily supported by investments in fixed maturity securities reflected on the Company’s balance sheet 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.
The Company’s liquidity position (cash and cash equivalents and short-termshort term investments) was $1,285.2 million$3.3 billion and $1,277.4 million$3.6 billion at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Cash and cash equivalents includes cash collateral received from derivative counterparties of $174.1 million and $254.5 million as of September 30, 2017 and December 31, 2016, respectively. This unrestricted cash collateral is included in cash and cash equivalentsGiven the uncertainty associated with the COVID-19 pandemic and the obligation to return it is included in other liabilitiesrelated volatility in the Company’s condensed consolidated balance sheets.financial markets, the Company has increased its liquidity position. Liquidity needs are determined from valuation analyses conducted by operational units and are driven by product portfolios. Periodic evaluations of demand liabilities and short-term liquid assets are designed to adjust specific portfolios, as well as their durations and maturities, in response to anticipated liquidity needs.
See “Securities Borrowing, Lending and Other” in Note 4 -– “Investments” in the Notes to Condensed 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’s 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 $67.9$86 million of FHLB common stock, which is included in other invested assets on the Company’s condensed consolidated balance sheets. Membership provides the Company access to borrowing arrangements (“advances”) and funding agreements, discussed below, with the FHLB. The Company did not have any advances from the FHLB at September 30, 2017 and December 31, 2016. The Company’s average outstanding balance of advances was $8.2 million and $17.0 million during the third quarter and the first nine months of 2017, respectively, and was $0.5 million and $29.5 million during the third quarter and the first nine months of 2016, respectively. Interest on advances is reflected in interest expense on the Company’s condensed consolidated statements of income.
In addition, the Company has also 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 $1.1$1.8 billion at September 30, 2017March 31, 2021 and December 31, 2016, respectively,2020, which is included in interest sensitive contract liabilities on the Company’s condensed 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.
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Investments
Management of Investments
The Company’s investment and derivative strategies involve matching the characteristics of its reinsurance products and other obligations and to seek 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, security and derivative strategies within an asset/liability management and disciplined risk management framework. 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.

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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 Condensed Consolidated Financial Statements for additional information regarding the Company’s investments.
Effects of COVID-19
Credit markets continued to recover during the first three months of 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. During the quarter, the Company decreased its valuation allowance on its commercial mortgage loan portfolio by approximately $17 million to reflect the updated outlook from the COVID-19 pandemic. 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.
Portfolio Composition
The Company had total cash and invested assets of $50.9$75.5 billion and $46.0$75.8 billion at September 30, 2017as of March 31, 2021 and December 31, 2016,2020, respectively, as illustrated below (dollars in thousands)millions):
March 31, 2021% of TotalDecember 31, 2020% of Total
Fixed maturity securities, available-for-sale$56,426 74.7 %$56,735 74.8 %
Equity securities135 0.2 132 0.2 
Mortgage loans on real estate6,001 7.9 5,787 7.6 
Policy loans1,253 1.7 1,258 1.7 
Funds withheld at interest5,459 7.2 5,432 7.2 
Short-term investments157 0.2 227 0.3 
Other invested assets2,983 4.0 2,829 3.7 
Cash and cash equivalents3,122 4.1 3,408 4.5 
Total cash and invested assets$75,536 100.0 %$75,808 100.0 %
  September 30, 2017 % of Total December 31, 2016 % of Total
Fixed maturity securities, available-for-sale $36,381,742
 71.5% $32,093,625
 69.6%
Mortgage loans on real estate 4,322,329
 8.5
 3,775,522
 8.2
Policy loans 1,340,146
 2.6
 1,427,602
 3.1
Funds withheld at interest 6,020,336
 11.8
 5,875,919
 12.8
Short-term investments 80,582
 0.2
 76,710
 0.2
Other invested assets 1,532,523
 3.0
 1,591,940
 3.5
Cash and cash equivalents 1,204,590
 2.4
 1,200,718
 2.6
Total cash and invested assets $50,882,248
 100.0% $46,042,036
 100.0%
Investment Yield
The following table presents consolidated average invested assets 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). The table excludes spread related business. 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 (dollars in thousands).liabilities.
 Three months ended March 31,
 20212020  Increase/  
  (Decrease)
Average invested assets at amortized cost$33,367 $29,728 $3,639 
Net investment income$463 $299 $164 
Annualized investment yield (ratio of net investment income to average invested assets at amortized cost)5.67 %4.08 %159 bps
VII (included in net investment income)$162 $3 $159 
Annualized investment yield excluding VII (ratio of net investment income, excluding VII, to average invested assets, excluding assets with only VII, at amortized cost)3.79 %4.19 %(40) bps
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 Three months ended September 30, Nine months ended September 30,
 2017 2016 
  Increase/  
  (Decrease)  
 2017 2016 
  Increase/  
  (Decrease)  
Average invested assets at amortized cost$25,887,338
 $24,128,430
 7.3% $25,136,119
 $22,982,245
 9.4%
Net investment income305,632
 263,111
 16.2% 863,724
 777,157
 11.1%
Investment yield (ratio of net investment income to average invested assets)4.81% 4.43% 38 bps
 4.61% 4.53% 8 bps


Investment yield increased for the three and nine months ended September 30, 2017March 31, 2021, in comparison to the same period in the prior year, primarily due to increased variable income from bond make-whole premiumslimited partnerships and limited partnership andreal estate joint venture investments, both ofventures, which are included in other invested assets on the condensed consolidated balance sheets. Investment yield excluding variable investment income decreased for the three months ended March 31, 2021, in comparison to the same period in the prior year, primarily due to the continued low interest rate environment.
Fixed Maturity and Equity Securities Available-for-Sale
See “Fixed Maturity and Equity Securities Available-for-Sale” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables that provide the amortized cost, allowance for credit losses, unrealized gains and losses and estimated fair value of fixed maturity and equitythese securities and the other-than-temporary impairments in AOCI by sectortype as of September 30, 2017March 31, 2021 and December 31, 2016.2020.
The Company’sCompany holds various types of fixed maturity securities are invested primarily inavailable-for-sale and classifies them as corporate bonds, mortgage-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 governmentgovernment-sponsored enterprises (“Other foreign government”). RMBS, ABS, and CMBS are collectively “structured securities.” As of September 30, 2017March 31, 2021 and December 31, 2016,2020, approximately 95.7%93.7% and 95.0%94.0%, respectively, 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 March 31, 2021 and December 31, 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 Company holds floating rate investments to match specific floating rate liabilities primarily reflected in the condensed 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 61.9%62.5% and 61.1%63.9% of total fixed maturity securities as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. See “Corporate Fixed Maturity Securities” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables showing the major industrysector types, which comprise the corporate fixed maturity holdings at September 30, 2017as of March 31, 2021 and December 31, 2016.

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2020.
As of September 30, 2017,March 31, 2021, the Company’s investments in Canadian and Canadian provincial government securities represented 11.0%8.3% of the fair value of total fixed maturity securities compared to 11.4%9.1% of the fair value of total fixed maturity securities atmaturities as of December 31, 2016.2020. These assets are primarily high quality, long duration provincial strips,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. See “Fixed Maturity and Equity Securities Available-for-Sale” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables showing the various sectors as of September 30, 2017 and December 31, 2016.
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 those assigned by S&P. In instances where aMoody’s, S&P rating is not available the Company references the rating provided by Moody’s and in the absence of both the Company will assign equivalent ratings based on information from the NAIC. The NAIC assigns securities quality ratings and uniform valuations called “NAIC Designations” which are used by insurers when preparing their U.S. statutory filings.Fitch. Structured securities (mortgage-backed and asset-backed 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).
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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 securitysecurities portfolio, at September 30, 2017as of March 31, 2021 and December 31, 20162020 was as follows (dollars in thousands)millions):
  March 31, 2021December 31, 2020
NAIC
  Designation  		Rating Agency
Designation		Amortized Cost Estimated
Fair Value		% of Total     Amortized Cost Estimated
Fair Value		% of Total     
1AAA/AA/A$31,323 $34,096 60.4 %$29,770 $34,589 60.9 %
2BBB17,402 18,799 33.3 16,440 18,751 33.1 
3BB2,622 2,704 4.8 2,480 2,588 4.6 
4B695 669 1.2 713 697 1.2 
5CCC and lower170 145 0.3 131 102 0.2 
6In or near default17 13 — 14 8 — 
Total$52,229 $56,426 100.0 %$49,548 $56,735 100.0 %
    September 30, 2017 December 31, 2016
NAIC
  Designation  
 
Rating Agency
Designation
 Amortized Cost  
Estimated
Fair Value
 % of Total      Amortized Cost  
Estimated
     Fair  Value     
 % of Total     
1 AAA/AA/A $22,095,642
 $23,989,873
 66.0% $19,813,653
 $21,369,081
 66.5%
2 BBB 10,233,331
 10,792,989
 29.7
 8,834,469
 9,162,483
 28.5
3 BB 1,107,086
 1,143,449
 3.1
 944,839
 955,735
 3.0
4 B 360,643
 374,478
 1.0
 414,087
 411,138
 1.3
5 CCC and lower 86,984
 74,093
 0.2
 187,744
 177,481
 0.6
6 In or near default 6,282
 6,860
 —
 16,995
 17,707
 0.1
  Total $33,889,968
 $36,381,742
 100.0% $30,211,787
 $32,093,625
 100.0%

The Company’s fixed maturity portfolio includes structured securities. The following table shows the types of structured securities the Company held at September 30, 2017as of March 31, 2021 and December 31, 20162020 (dollars in thousands)millions):
  September 30, 2017 December 31, 2016
  Amortized Cost 
Estimated
Fair Value
 Amortized Cost 
Estimated
Fair Value
Residential mortgage-backed securities:        
Agency $891,508
 $917,589
 $579,686
 $602,549
Non-agency 753,871
 761,716
 678,353
 676,027
Total residential mortgage-backed securities 1,645,379
 1,679,305
 1,258,039
 1,278,576
Commercial mortgage-backed securities 1,293,296
 1,313,322
 1,342,440
 1,363,654
Asset-backed securities 1,680,918
 1,694,568
 1,443,822
 1,429,344
Total $4,619,593
 $4,687,195
 $4,044,301
 $4,071,574
 March 31, 2021December 31, 2020
Amortized CostEstimated
Fair Value		% of TotalAmortized CostEstimated
Fair Value		% of Total
RMBS:
Agency$659 $701 10.7 %$686 $744 11.0 %
Non-agency877 890 13.4 1,049 1,073 15.8 
Total RMBS1,536 1,591 24.1 1,735 1,817 26.8 
ABS:
Collateralized loan obligations (“CLOs”)1,603 1,593 24.2 1,707 1,689 24.9 
ABS, excluding CLOs1,553 1,558 23.7 1,392 1,403 20.7 
Total ABS3,156 3,151 47.9 3,099 3,092 45.6 
CMBS1,774 1,840 28.0 1,790 1,868 27.6 
Total$6,466 $6,582 100.0 %$6,624 $6,777 100.0 %
The residential mortgage-backed securities includeCompany’s RMBS portfolio includes agency-issued pass-through securities and collateralized mortgage obligations. A majority of the agency-issuedAgency-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 mortgage-backed securitiesRMBS 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 mortgage-backed securitiesRMBS 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.
Asset-backed securities include credit cardThe Company’s ABS portfolio primarily consists of CLOs, single-family rentals, container leasing, railcar leasing, aircraft and automobile receivables, student loans, home equity loans and collateralized debt obligations (primarily collateralized loan obligations).loans. The Company owns floating rate securities that represent approximately

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14.0% and 12.9% of the total fixed maturity securities at September 30, 2017 and December 31, 2016, respectively. These investments have a higher degree of income variability than the other fixed income holdings in the portfolio due to the floating rate nature of the interest payments. The Company holds these investments to match specific floating rate liabilities primarily reflected in the condensed consolidated balance sheets as collateral finance notes, as well as to enhance asset management strategies. In addition to the risks associated with floating rate securities, principal risks in holding asset-backed securitiesABS are structural, credit, and 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 whichthat 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 March 31, 2021 and December 31, 2020, the Company had $490 million and $197 million, respectively, of gross unrealized losses related to its fixed maturity securities. The Company monitors its fixed maturity and equity securities to determine impairments in value and evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the market value has been below amortized cost, compliance with covenants, general market and industry sector conditions, current intent and ability to hold securities, and various other subjective factors. Based on management’s judgment, securities determined to have expected credit losses will record an other-than-temporary impairmentallowance for credit losses in the amount that the fair value are written downis less than the amortized cost.
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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 fair value. Condensed 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 March 31, 2021, totaling approximately $10 million. For the quarter ended March 31, 2021, the Company decreased its valuation allowance on its commercial mortgage loan portfolio by approximately $17 million to reflect the updated outlook from the COVID-19 pandemic.  The Company continues to monitor and evaluate the impact of COVID-19 pandemic on its investment portfolio and is working closely with its borrowers to evaluate any short-term cash flow issues. For the three months ended March 31, 2021, the Company modified the payment terms of one commercial mortgage loan, with a carrying value of approximately $10 million in response to COVID-19. For the year ended December 31, 2020, the Company modified the payments terms of approximately 52 commercial mortgage loans, with a carrying value of approximately $660 million 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 was 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.
As of March 31, 2021 and December 31, 2020, the Company’s mortgage loans, gross of unamortized deferred loan origination fees and expenses and valuation allowances, were distributed geographically as follows (dollars in millions):
 March 31, 2021December 31, 2020
Recorded
Investment		% of TotalRecorded
Investment		% of Total
U.S. Region:
West$2,317 38.3 %$2,253 38.5 %
South2,097 34.6 2,040 34.8 
Midwest1,055 17.4 1,027 17.5 
Northeast287 4.7 277 4.7 
Subtotal - U.S.5,756 95.0 5,597 95.5 
Canada194 3.2 188 3.2 
United Kingdom108 1.8 76 1.3 
Total$6,058 100.0 %$5,861 100.0 %
See “Investments – Other-than-Temporary Impairment”“Allowance for Credit Losses and Impairments” in Note 2 – “Summary“Significant Accounting Policies and Pronouncements” of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in the 2016Company’s 2020 Annual Report for additional information. The table below summarizes other-than-temporary impairmentsinformation regarding the Company’s policy for valuation allowances and changes in the mortgage loan provision for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands).
 Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Impairment losses on available-for-sale securities:       
Fixed maturity securities$390
 $—
 $20,980
 $34,663
Equity securities889
 —
 889
 —
Other impairment losses1,469
 15
 7,776
 2,178
Change in mortgage loan provision977
 247
 1,444
 (67)
Total$3,725
 $262
 $31,089
 $36,774
The fixed maturity impairments for the three and nine months ended September 30, 2017 and 2016 were largely related to high-yield corporate securities. The equity impairments for the three and nine months ended September 30, 2017 were related to an equity position received as part of a debt restructuring. In addition, other impairment losses for the three and nine months ended September 30, 2017 and 2016 are primarily due to impairments on limited partnerships.
At September 30, 2017 and December 31, 2016, the Company had $163.2 million and $374.9 million, respectively, of gross unrealized losses related to its fixed maturity and equity securities. The distribution of the gross unrealized losses related to these securities is shown below.
  September 30, 2017 December 31, 2016
Sector:    
Corporate securities 59.6% 61.6%
Canadian and Canada provincial governments 1.5
 0.9
Residential mortgage-backed securities 5.1
 3.6
Asset-backed securities 3.1
 6.4
Commercial mortgage-backed securities 3.3
 2.1
State and political subdivisions 3.7
 3.3
U.S. government and agencies 19.0
 16.8
Other foreign government, supranational and foreign government-sponsored enterprises 4.7
 5.3
Total 100.0% 100.0%
Industry:    
Finance 15.3% 20.1%
Asset-backed 3.1
 6.4
Industrial 40.1
 32.9
Mortgage-backed 8.4
 5.7
Government 28.9
 26.3
Utility 4.2
 8.6
Total 100.0% 100.0%

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mortgage loans.
See “Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale”“Mortgage Loans on Real Estate” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for a table that presents the total gross unrealized lossesinformation regarding valuation allowances and impairments.
Impairments and Allowance for fixed maturity and equity securities at September 30, 2017 and December 31, 2016, respectively, where the estimated fair value had declined and remained below amortized cost by less than 20% or more than 20%.Credit Losses
The Company’s determination of whether a decline in value is other-than-temporary includes analysis ofnecessitates the underlying credit and the extent and duration of a decline in value. The Company’s credit analysisrecording of an investmentallowance for credit losses includes determiningan 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. InSee “Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2020 Annual Report for additional information. The table below summarizes impairments and changes in allowance for credit losses on fixed maturity securities, other impairment review process,losses and changes in the durationmortgage loan provision for the three months ended March 31, 2021 and severity2020 (dollars in millions).
Three months ended March 31,
20212020
Impairments and change in allowance for credit losses$2 $34 
Other impairment losses and changes in provision(1)— 
Change in mortgage loan provision(17)13 
Total$(16)$47 
The change in mortgage loan provision for the three months ended March 31, 2021, was primarily due to a decrease in the mortgage loan valuation allowance to reflect the updated outlook from the COVID-19 pandemic. The impairments and change in allowance for credit losses on fixed maturity securities for the three months ended March 31, 2020, were primarily related to high-yield securities as a result of the uncertainty in the global markets due to the COVID-19 pandemic. In addition, the change
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in mortgage loan provision for the three months ended March 31, 2020, was primarily due to an unrealized loss position for equity securities are given greater weight and consideration givenincrease in the lack of contractual cash flows andmortgage loan valuation allowance to reflect the deferability features of these securities.estimated impact from the COVID-19 pandemic.
See “Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables that present the estimated fair valuesvalue and gross unrealized losses including other-than-temporary impairment losses reported in AOCI, for fixed maturity and equity securities that have estimated fair values below amortized cost by class and grade, security, as well as the length of time the related marketestimated fair value has remained below amortized cost as of September 30, 2017March 31, 2021 and December 31, 2016.2020.
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company classified approximately 5.9%6.3% and 6.9%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 Condensed Consolidated Financial Statements for additional information). These securities primarily consist of private placement corporate securities, bank loans, and Canadian provincial strips, below investment grade mortgage-backed securities and subprime asset-backed securitiesstrip bonds with inactive trading markets.
See “Securities Borrowing, Lending and Other”Repurchase Agreements” in Note 4 -– “Investments” in the Notes to Condensed Consolidated Financial Statements for information related to the Company’s securities borrowing, repurchaselending, and repurchase/reverse repurchase programs.
Mortgage Loans on Real Estate
Mortgage loans represented approximately 8.5% and 8.2% of the Company’s cash and invested assets as of September 30, 2017 and December 31, 2016, respectively. The Company’s mortgage loan portfolio consists of U.S. and Canada based investments primarily in commercial offices, light industrial properties and retail locations. The mortgage loan portfolio is diversified by geographic region and property type. Additional information on geographic concentration and property type can be found under “Mortgage Loans on Real Estate” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements.
As of September 30, 2017 and December 31, 2016, the Company’s mortgage loans, gross of unamortized deferred loan origination fees and expenses and valuation allowances, were distributed geographically as follows (dollars in thousands):
  September 30, 2017 December 31, 2016
  
Recorded
Investment
 % of Total 
Recorded
Investment
 % of Total
U.S. Region:        
Pacific $1,304,056
 30.1
 $1,112,636
 29.4%
South Atlantic 858,474
 19.8
 782,509
 20.7
Mountain 688,609
 15.9
 615,915
 16.3
East North Central 529,007
 12.2
 422,512
 11.2
West North Central 305,894
 7.1
 318,212
 8.4
West South Central 359,680
 8.3
 317,194
 8.4
Middle Atlantic 107,453
 2.5
 92,683
 2.4
East South Central 97,379
 2.2
 57,216
 1.5
New England 9,191
 0.2
 9,346
 0.2
Subtotal - U.S. 4,259,743
 98.3
 3,728,223
 98.5
Canada 74,254
 1.7
 54,984
 1.5
Total $4,333,997
 100.0% $3,783,207
 100.0%

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Valuation allowances on mortgage loans are established based upon inherent losses expected by management to be realized in connection with future dispositions or settlement of mortgage loans, including foreclosures. The valuation allowances are established after management considers, among other things, the value of underlying collateral and payment capabilities of debtors. Any subsequent adjustments to the valuation allowances will be treated as investment gains or losses. See “Mortgage Loans on Real Estate” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for information regarding valuation allowances and impairments.
Policy Loans
Policy loans comprised approximately 2.6% and 3.1% of the Company’s cash and invested assets as of September 30, 2017 and December 31, 2016, respectively, theThe majority of whichpolicy loans are associated with one client. These policy loans present no credit risk because 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
Funds withheld at interest comprised approximately 11.8% and 12.8% of the Company’s cash and invested assets as of September 30, 2017 and December 31, 2016, respectively. 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 condensed 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. Additionally, under certain treaties theThe 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” at September 30, 2017as of March 31, 2021 and December 31, 2016.2020. Certain ceding companies maintain segregated portfolios for the benefit of the Company.
Other Invested Assets
Other invested assets include equity securities, limited partnership interests, joint ventures (other than operating joint ventures), structured loans,lifetime mortgages, derivative contracts, FVOfair value option (“FVO”) contractholder-directed unit-linked investments, and FHLB common stock and equity release mortgages. Other invested assets represented approximately 3.0% and 3.5% of the Company’s cash and invested assets as of September 30, 2017 and December 31, 2016, respectively.stock. See “Other Invested Assets” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for a table that presents the carrying value of the Company’s other invested assets by type as of September 30, 2017March 31, 2021 and December 31, 2016.2020.
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 both exchange-traded, centrally cleared, and customized over-the-counter derivative financial instruments.
See Note 5 -– “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for a table that presents the notional amounts and fair value of investment related derivative instruments held at September 30, 2017as of March 31, 2021 and December 31, 2016.2020.
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 plus or minus any collateral posted or held bydate. As of March 31, 2021, the Company. The Company had no net credit exposure related to its derivative contracts, excluding futures and mortality swaps, at September 30, 2017 and December 31, 2016, as the net amount of collateral pledged to the Company from counterparties exceeded the fair value of the derivative contracts.$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
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payment to be made by one counterparty to another at each due date and upon termination. Certain of the Company’s OTC derivatives are cleared derivatives, which are bilateral transactions between the Company and a counterparty where the transactions are cleared through a clearinghouse, such that each derivative counterparty is only exposed to the default of the clearinghouse. As exchange-

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tradedexchange-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 Condensed Consolidated Financial Statements for more information regarding the Company’s derivative instruments.
Enterprise Risk Management
RGA maintainsThe Company holds $958 million and $935 million, of lifetime mortgages, net of valuation allowances, as of March 31, 2021 and December 31, 2020, respectively, in beneficial interests in lifetime mortgages in the UK. Investment income includes $13 million and $10 million in interest income earned on lifetime mortgages for the three months ended March 31, 2021 and 2020, 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 dedicated Enterprise Risk Management (“ERM”) function that is responsible for analyzing and reportinghome equity loan by allowing the Company’s risks on an aggregated basis; facilitating monitoringborrower to ensureutilize 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 areequity in place; risks are effectively identified, assessed, and managed; and key risks to which the Company is exposed are disclosed to appropriate stakeholders.their home as collateral. 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 standing committees. The Finance, Investments, and Risk Management (“FIRM”) Committeeamount of the Board oversees the management of the Company’s ERM program and policies. The FIRM receives regular reports and assessments which 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”) leads the dedicated ERM function. The CRO reports to the Chief Executive Officer (“CEO”) and has direct access to the Board through the FIRM Committee with formal reporting occurring quarterly. The CROloan is supported by a network of Business Unit Chief Risk Officers and Risk Management Officers throughout the business who are responsible for the analysis and management of risks within their scope. A Lead Risk Management Officer 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 is made up of senior management executives, including the CEO, the Chief Financial Officer (“CFO”), and the Chief Operating 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 known, new 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 risks areas including the identification, assessments, and management of known, new 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, risk committee chairs attend 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:
1.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.
2.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.

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3.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.
4.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.
5.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 FIRM 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 mitigants 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 which 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” of the 2016 Annual Report.
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.
Insurance Risk Assessment and Pricing
The Company has developed extensive expertise in assessing insurance risks which 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 which is closely monitored. Analysis and experience studies derived from this database help form the basis for the Company’s pricing assumptions which 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 which includes periodic pricing audits.
Risk Transfer
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.
Individual Exposure Retrocession
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 $8.0 million of coverage per individual life. In certain limited situations the Company has retained more than $8.0 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 $8.0 million per individual life.


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Catastrophic Excess Loss Retrocession
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 $20.0 million of catastrophic loss exposure per agreement and to retrocede up to $30.0 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.
Catastrophe Coverage
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 baseddependent on the Company’s perceived value of such protection. The current policy covers events involving 8 or more insured deaths from a single occurrence and covers $100.0 million of claims in excess of the Company’s $25.0 million deductible.
Managing Retained Exposure
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 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 interest income. The Company manages its exposure to interest rates principally by managing the relative matching of the cash flows of its liabilities and assets.
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 fairappraised value of the Company’s financial instruments inhome at the eventtime of origination, the borrower's age and interest rate. Unlike a hypothetical change inhome equity loan, no payment of principal or interest rates. Interest rate cash flow risk exposure is measured using interest rate sensitivity analysis to determinerequired until the Company’s variability in cash flows in the event of a hypothetical change in interest rates.
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 portiondeath of the Company’s operating expenses consistsborrower or sale of salaries, whichthe 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 wage increases at least partly affected by therisks, including market, credit, interest rate, of inflation.liquidity, operational, reputational and legal risks.

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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.
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 currency principally by currency matching invested assets with the underlying liabilities to the extent possible. The Company has in place net investment hedges for a portion of its investments in its Canadian operations to reduce excess exposure to these currencies. Translation differences resulting from translating foreign subsidiary balances to U.S. dollars are reflected in stockholders’ equity on the condensed 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.
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
Alternative investments are investments in non-traditional asset classes that primarily back the Company’s capital and surplus. The Company generally restricts the alternative investments portfolio to non-liability supporting assets: that is, free surplus. Alternative investments generally encompass: 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.
Fixed Indexed Annuities
The Company reinsures fixed indexed annuities (“FIAs”). Credits for FIAs 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.

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Variable Annuities
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 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 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 of September 30, 2017 and December 31, 2016.
(dollars in millions) September 30, 2017 December 31, 2016
No guaranteed minimum benefits $940
 $731
GMDB only 180
 58
GMIB only 23
 5
GMAB only 25
 28
GMWB only 1,361
 1,334
GMDB / WB 340
 335
Other 33
 19
Total variable annuity account values $2,902
 $2,510
Fair value of liabilities associated with living benefit riders $168
 $185
Credit Risk
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
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. Because 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 Condensed Consolidated Financial Statements for additional information on credit risk related to derivatives.
Counterparty Risk
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
The 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. Substantially higher than expected surrenders and/or lapses could result in inadequate in force business to recover cash paid out for acquisition costs.

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Collection Risk
For clients and retrocessionaires, this 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 RGA.
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, RGA’s insurance subsidiaries retrocede amounts in excess of their retention to certain other RGA insurance subsidiaries. External retrocessions are arranged through the Company’s retrocession pools for amounts in excess of its retention. As of September 30, 2017, 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 given 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.
Aggregate Counterparty Limits
In addition to investment credit limits and counterparty limits, there are aggregate counterparty risk limits which 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 or negative earnings and a potential reduction in enterprise value, and/or the ability to conduct business due to insufficient financial capacity. Collateral, financing, liquidity and tax risks are important to the operations of the Company and its ability to meet obligations with its clients, shareholders and regulators.
Operational Risk
Operational risk is the risk of lower or negative earnings and a potential reduction in enterprise value caused by the inadequacy or failure of internal processes, people and systems, or from the adverse impact of external events or actors. The Company regularly monitors the risks related to human capital, fraud, business conduct and governance, disruption of operations, business operations and privacy and security related matters. 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.
Strategic Risk
Strategic risk is the risk of lower or negative earnings and a potential reduction in enterprise value related to the planning, implementation, and management of the Company’s business plans and strategies. This includes the risks associated with the global environment in which it operates; future law and regulation changes; political and sovereign risks; and relationships with key external parties.
New Accounting Standards
See Note 12 —13 – “New Accounting Standards” in the Notes to Condensed Consolidated Financial Statements.


ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk
There hasMarket risk is the risk of fluctuations in the value of financial instruments as a result of absolute or relative changes in interest rates, foreign currency exchange rates, equity prices or commodity prices. To varying degrees, the Company products and services, and the investment activities supporting them, generate exposure to market risk. The market risk incurred, and the Company’s strategies for managing this risk, vary by product.  As of March 31, 2021, there have been no significant changematerial changes in the Company’s quantitative or qualitative aspects ofeconomic exposure to market risk duringor the quarterCompany’s Enterprise Risk Management function from December 31, 2020, a description of which may be found in its Annual Report on Form 10-K, for the year ended September 30, 2017 from that disclosed inDecember 31, 2020, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” filed with the 2016 Annual Report. See “Item 2 – Management’s DiscussionSecurities and Analysis of Financial Condition and Results of Operations – Market and Credit Risk”, which is included herein, for additional information.Exchange Commission.

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ITEM 4.  Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective.
There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2017,March 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 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.
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PART II - OTHER INFORMATION
ITEM 1.  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 1A.  Risk Factors
There werehave been no material changes from the risk factors previously disclosed in the 2016Company’s 2020 Annual Report.
ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes RGA’s repurchase activity of its common stock during the quarter ended September 30, 2017:March 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 (1)
Maximum Number (or
Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under
the Plan or Program
January 1, 2021 –
January 31, 2021		8,600 $111.17 — $167,573,148 
February 1, 2021 –
February 29, 2021		3,834 $114.24 — $167,573,148 
March 1, 2021 –
March 31, 2021		1,355 $128.09 — $167,573,148 
(1)RGA had no repurchases of common stock under its share repurchase program during January, February and March 2021. The Company net settled – issuing 24,675, 14,015 and 3,441 shares from treasury and repurchasing from recipients 8,600, 3,834 and 1,355 shares in January, February and March 2021, respectively, in settlement of income tax withholding requirements incurred by the recipients of equity incentive awards.
  
Total Number of Shares
Purchased (1)
 
Average Price Paid per   
Share
 
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs (1)
 
Maximum Number (or
Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under
the Plan or Program
July 1, 2017 -
July 31, 2017		 1,320
 $131.02
 —
 $400,000,000
August 1, 2017 -
August 31, 2017		 25,841
 $140.23
 —
 $400,000,000
September 1, 2017 -
September 30, 2017		 209,344
 $128.91
 208,680
 $373,103,074
(1)RGA repurchased 208,680 shares of common stock under its share repurchase program for $26.9 million during September 2017. The Company net settled - issuing 3,190, 65,078 and 2,648 shares from treasury and repurchasing from recipients 1,320, 25,841 and 664 shares in July, August and September, respectively, in settlement of income tax withholding requirements incurred by the recipients of an equity incentive award.
On January 26, 2017,24, 2019, RGA’s board of directors authorized a share repurchase program with no expiration date, for up to $400.0$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 2016.2017. On May 6, 2020, the Company announced that it has suspended stock repurchases until further notice. The resumption and 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.
ITEM 6.  Exhibits
See index to exhibits.

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INDEX TO EXHIBITS
 
Exhibit
Number		Description
Exhibit
Number3.1(i)
Description
3.1
Amended and Restated Articles of Incorporation, effective as of May 21, 2020, incorporated by reference to Exhibit 3.1 of3.1(i) to Current Report on Form 8-K filed November 25, 2008.on May 22, 2020 (File No. 1-11848)
Amended and Restated Bylaws,Certificate of Designation Termination, effective as of May 21, 2020, incorporated by reference to Exhibit 3.1 of3.1(ii) to Current Report on Form 8-K filed July 18, 2014.on May 22, 2020 (File No. 1-11848)
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 2002.2002
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 2002.2002
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 2002.2002
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 2002.2002
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
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XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101).



* Represents a management contract or compensatory plan or arrangement
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SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Reinsurance Group of America, Incorporated
 
 
Date: November 2, 2017May 7, 2021By: /s/ Anna Manning
Anna Manning
President & Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
Date: November 2, 2017May 7, 2021By:/s/ Todd C. Larson
Todd C. Larson
Senior Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)


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