0000898174us-gaap:EquitySecuritiesMember2020-03-31

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 June 30, 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~~ Missouri						43-1627032
(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

RGA

New York Stock Exchange

6.20% Fixed-To-Floating Rate Subordinated Debentures due 2042

RZA

New York Stock Exchange

5.75% Fixed-To-Floating Rate Subordinated Debentures due 2056

RZB

New York Stock Exchange

As of ~~October~~July 31, ~~2017, 64,404,061~~2021, 67,996,937 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	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Income (Unaudited) three and six months June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) three and six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) three and six months ended June 30, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) six months ended June 30, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements (Unaudited):	8
	1. Business and Basis of Presentation	8
	2. Earnings Per Share	8
	3. Equity	9
	4. Investments	11
	5. Derivative Instruments	20
	6. Fair Value of Assets and Liabilities	26
	7. Segment Information	33
	8. Commitments, Contingencies and Guarantees	35
	9. Income Tax	36
	10. Employee Benefit Plans	37
	11. Reinsurance	37
	12. Policy Claims and Benefits	38
	13. Financing Activities	38
	14. New Accounting Standards	38
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
3	Quantitative and Qualitative Disclosures About Market Risk	70
4	Controls and Procedures	70

	PART II – OTHER INFORMATION

1	Legal Proceedings	71
1A	Risk Factors	71
2	Unregistered Sales of Equity Securities and Use of Proceeds	71
6	Exhibits	71
	Index to Exhibits	72
	Signatures	73

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

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2017			December 31, 2016				June 30, 2021		December 31, 2020
	(Dollars in thousands, except share data)							(Dollars in millions, except share data)
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 $52,797 and $49,548; allowance for credit losses of $16 and $20)							Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,797 and $49,548; allowance for credit losses of $16 and $20)	$	58,287	$	56,735
Equity securities, at fair value							Equity securities, at fair value	147		132
Mortgage loans on real estate (net of allowance for credit losses of $45 and $64)							Mortgage loans on real estate (net of allowance for credit losses of $45 and $64)	6,481		5,787
Policy loans	1,340,146			1,427,602			Policy loans	1,254		1,258
Funds withheld at interest	6,020,336			5,875,919			Funds withheld at interest	7,049		5,432
Short-term investments	80,582			76,710			Short-term investments	184		227
Other invested assets	1,532,523			1,591,940			Other invested assets	2,924		2,829
Total investments	49,677,658			44,841,318			Total investments	76,326		72,400
Cash and cash equivalents	1,204,590			1,200,718			Cash and cash equivalents	3,254		3,408
Accrued investment income	420,111			347,173			Accrued investment income	525		511
Premiums receivable and other reinsurance balances	2,411,777			1,930,755			Premiums receivable and other reinsurance balances	3,102		2,842
Reinsurance ceded receivables	779,118			683,972			Reinsurance ceded receivables	1,093		983
Deferred policy acquisition costs	3,315,237			3,338,605			Deferred policy acquisition costs	3,622		3,616
Other assets	885,540			755,338			Other assets	1,022		896
Total assets	$	58,694,031		$	53,097,879		Total assets	$	88,944	$	84,656
Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Future policy benefits	$	21,084,562		$	19,581,573		Future policy benefits	$	33,761	$	31,453
Interest-sensitive contract liabilities	16,370,090			14,029,354			Interest-sensitive contract liabilities	26,161		23,276
Other policy claims and benefits	4,899,367			4,263,026			Other policy claims and benefits	6,795		6,413
Other reinsurance balances	415,692			388,989			Other reinsurance balances	531		598
Deferred income taxes	3,180,545			2,770,640			Deferred income taxes	2,699		3,263
Other liabilities	1,061,352			1,041,880			Other liabilities	2,057		1,340

Long-term debt	2,788,480			3,088,635			Long-term debt	3,173		3,573
Collateral finance and securitization notes	796,825			840,700			Collateral finance and securitization notes	323		388
Total liabilities	50,596,913			46,004,797			Total liabilities	75,500		70,304
Commitments and contingent liabilities (See Note 8)							Commitments and contingent liabilities (See Note 8)	0		0
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
Preferred stock – par value $0.01 per share, 10,000,000 shares authorized, no shares issued or outstanding							Preferred stock – par value $0.01 per share, 10,000,000 shares authorized, no shares issued or outstanding	0		0
Common stock – par value $0.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at June 30, 2021 and December 31, 2020							Common stock – par value $0.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at June 30, 2021 and December 31, 2020	1		1
Additional paid-in capital	1,865,699			1,848,611			Additional paid-in capital	2,430		2,406
Retained earnings	5,712,590			5,199,130			Retained earnings	8,531		8,148
Treasury stock, at cost - 14,769,487 and 14,835,256 shares	(1,107,719		)	(1,094,779		)
Treasury stock, at cost – 17,313,661 and 17,353,697 shares							Treasury stock, at cost – 17,313,661 and 17,353,697 shares	(1,559)		(1,562)
Accumulated other comprehensive income	1,625,757			1,139,329			Accumulated other comprehensive income	4,041		5,359
Total stockholders’ equity	8,097,118			7,093,082			Total stockholders’ equity	13,444		14,352
Total liabilities and stockholders’ equity	$	58,694,031		$	53,097,879		Total liabilities and stockholders’ equity	$	88,944	$	84,656

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

Table of Contents

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended September 30,					Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
	2017			2016		2017			2016				2021		2020		2021		2020
Revenues:	(Dollars in thousands, except per share data)											Revenues:	(Dollars in millions, except per share data)
Net premiums	$	2,489,797		$	2,251,758	$	7,335,944		$	6,755,708		Net premiums	$	3,098	$	2,790	$	6,012	$	5,609
Investment income, net of related expenses	556,918			489,727		1,589,820			1,414,659			Investment income, net of related expenses	759		645		1,571		1,239
Investment related gains (losses), net:
Other-than-temporary impairments on fixed maturity securities	(390		)	—		(20,980		)	(34,663		)
Other investment related gains (losses), net	23,043			86,624		160,451			118,665
Total investment related gains (losses), net	22,653			86,624		139,471			84,002

Investment related gains (losses), net												Investment related gains (losses), net	112		81		414		(204)
Other revenues	75,942			72,468		218,091			197,844			Other revenues	168		90		259		166
Total revenues	3,145,310			2,900,577		9,283,326			8,452,213			Total revenues	4,137		3,606		8,256		6,810
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 benefits	2,813		2,700		6,005		5,364
Interest credited	126,099			116,848		349,068			300,602			Interest credited	218		187		364		333
Policy acquisition costs and other insurance expenses	365,424			300,962		1,064,645			940,406			Policy acquisition costs and other insurance expenses	339		290		672		538
Other operating expenses	168,417			152,556		481,279			469,875			Other operating expenses	240		188		454		383
Interest expense	36,836			43,063		108,590			96,201			Interest expense	43		42		88		83
Collateral finance and securitization expense	7,692			6,484		21,235			19,396			Collateral finance and securitization expense	2		4		5		10
Total benefits and expenses	2,805,148			2,612,977		8,396,005			7,703,810			Total benefits and expenses	3,655		3,411		7,588		6,711
Income before income taxes	340,162			287,600		887,321			748,403			Income before income taxes	482		195		668		99
Provision for income taxes	112,571			88,881		282,028			237,109			Provision for income taxes	138		37		185		29
Net income	$	227,591		$	198,719	$	605,293		$	511,294		Net income	$	344	$	158	$	483	$	70
Earnings per share:												Earnings per share:
Basic earnings per share	$	3.53		$	3.10	$	9.39		$	7.95		Basic earnings per share	$	5.06	$	2.49	$	7.11	$	1.12
Diluted earnings per share	$	3.47		$	3.07	$	9.23		$	7.87		Diluted earnings per share	$	5.02	$	2.48	$	7.06	$	1.11
Dividends declared per share	$	0.50		$	0.41	$	1.32		$	1.15

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

Table of Contents

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
Comprehensive income (loss)	(Dollars in millions)
Net income	$	344	$	158	$	483	$	70
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	19		13		49		(118)
Net unrealized investment gains (losses)	1,020		2,663		(1,367)		790

Defined benefit pension and postretirement plan adjustments	0		(5)		0		(8)
Total other comprehensive income (loss), net of tax	1,039		2,671		(1,318)		664
Total comprehensive income (loss)	$	1,383	$	2,829	$	(835)	$	734

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)


	Three months ended June 30, 2021 and 2020
	Common Stock		Additional Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total
Balance, March 31, 2021	$	1	$	2,411	$	8,235	$	(1,559)	$	3,002	$	12,090

Net income					344						344
Total other comprehensive income (loss)									1,039		1,039
Dividends to stockholders, $0.70 per share					(47)						(47)

Purchase of treasury stock							(1)				(1)
Reissuance of treasury stock			19		(1)		1				19
Balance, June 30, 2021	$	1	$	2,430	$	8,531	$	(1,559)	$	4,041	$	13,444


Balance, March 31, 2020	$	1	$	1,942	$	7,802	$	(1,574)	$	1,130	$	9,301

Net income					158						158
Total other comprehensive income (loss)									2,671		2,671
Dividends to stockholders, $0.70 per share					(43)						(43)
Issuance of common stock, net of expenses			481								481
Purchase of treasury stock							(6)				(6)
Reissuance of treasury stock			(10)		(16)		17				(9)
Balance, June 30, 2020	$	1	$	2,413	$	7,901	$	(1,563)	$	3,801	$	12,553


	Six months ended June 30, 2021 and 2020
	Common Stock		Additional Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total
Balance, December 31, 2020	$	1	$	2,406	$	8,148	$	(1,562)	$	5,359	$	14,352
Adoption of new accounting standards					0						0
Net income					483						483
Total other comprehensive income (loss)									(1,318)		(1,318)
Dividends to stockholders, $1.40 per share					(95)						(95)
Issuance of common stock, net of expenses			0								0
Purchase of treasury stock							(2)				(2)
Reissuance of treasury stock			24		(5)		5				24
Balance, June 30, 2021	$	1	$	2,430	$	8,531	$	(1,559)	$	4,041	$	13,444


Balance, December 31, 2019	$	1	$	1,937	$	7,952	$	(1,426)	$	3,137	$	11,601
Adoption of new accounting standards					(12)						(12)
Net income					70						70
Total other comprehensive income (loss)									664		664
Dividends to stockholders, $1.40 per share					(87)						(87)
Issuance of common stock, net of expenses			481								481
Purchase of treasury stock							(162)				(162)
Reissuance of treasury stock			(5)		(22)		25				(2)
Balance, June 30, 2020	$	1	$	2,413	$	7,901	$	(1,563)	$	3,801	$	12,553

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

Table of Contents

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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


	Six months ended June 30,
	2021		2020
	(Dollars in millions)
















Net cash provided by (used in) operating activities	$	2,330	$	2,579
Cash flows from investing activities:
Sales of fixed maturity securities available-for-sale	7,235		3,835
Maturities of fixed maturity securities available-for-sale	545		406
Sales of equity securities	3		180
Principal payments and sales of mortgage loans on real estate	417		283
Principal payments on policy loans	12		15
Purchases of fixed maturity securities available-for-sale	(9,885)		(4,875)
Purchases of equity securities	(1)		(21)
Cash invested in mortgage loans on real estate	(783)		(604)
Cash invested in policy loans	(8)		(6)
Cash invested in funds withheld at interest	(52)		(49)
Proceeds from sale of businesses, net of cash transferred of $43	19		0
Purchases of property and equipment	(10)		(11)
Change in short-term investments	223		(19)
Change in other invested assets	112		(158)
Net cash provided by (used in) investing activities	(2,173)		(1,024)
Cash flows from financing activities:
Dividends to stockholders	(95)		(87)
Proceeds from issuance of common stock, net	0		481
Repayment of collateral finance and securitization notes	(65)		(160)
Proceeds from long-term debt issuance	0		598
Debt issuance costs	0		(5)
Principal payments of long-term debt	(401)		(1)
Purchases of treasury stock	(2)		(162)
Exercise of stock options, net	0		1
Change in cash collateral for derivative positions and other arrangements	184		93
Deposits on universal life and other investment type policies and contracts	599		1,004
Withdrawals on universal life and other investment type policies and contracts	(520)		(429)
Net cash provided by (used in) financing activities	(300)		1,333
Effect of exchange rate changes on cash	(11)		(24)
Change in cash and cash equivalents	(154)		2,864
Cash and cash equivalents, beginning of period	3,408		1,449
Cash and cash equivalents, end of period	$	3,254	$	4,313
Supplemental disclosures of cash flow information:
Interest paid	$	85	$	80
Income taxes paid (received), net of refunds	$	185	$	(12)
Non-cash investing activities:
Transfer of invested assets	$	1,557	$	0

Sale of businesses:
Assets disposed, net of cash transferred	$	(512)	$	0
Liabilities disposed	$	504	$	0

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

Table of Contents

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, 2017~~Interim 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 condensed~~Entities 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 with~~are 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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
Earnings:
Net income	$	344	$	158	$	483	$	70
Shares:
Weighted average outstanding shares	68		63		68		63
Equivalent shares from outstanding stock options	1		1		1		1
Denominator for diluted calculation	69		64		69		64
Earnings per share:
Basic	$	5.06	$	2.49	$	7.11	$	1.12
Diluted	$	5.02	$	2.48	$	7.06	$	1.11

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

The calculation of common equivalent shares does not include the impact of ~~options having~~stock awards with a ~~strike or~~ conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. ~~For the three months ended~~ ~~September 30, 2017, 0.1~~Approximately 0.9 million and 1.3 million stock ~~options~~awards and approximately ~~0.3~~0.5 million performance contingent shares were excluded from the ~~calculation. For~~calculation of common equivalent shares during the three ~~months~~and six month periods ended ~~September~~June 30, ~~2016~~, no stock options and approximately 0.7 million performance contingent shares were excluded from the calculation. Year-to-date amounts for equivalent shares from outstanding stock options and performance contingent shares are the weighted average of the individual quarterly amounts.2021, respectively.

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3. Equity


3.	~~Equity~~

Common Stock

The changes in the number of common stock ~~shares,~~ issued, held in treasury and outstanding are as follows for the periods indicated:


	Issued	Held In Treasury	Outstanding
Balance, December 31, 2020	85,310,598	17,353,697	67,956,901

Issuance of common stock	0	0	0
Common stock acquired	0	0	0
Stock-based compensation (1)	0	(40,036)	40,036
Balance, June 30, 2021	85,310,598	17,313,661	67,996,937


							Issued	Held In Treasury	Outstanding
Balance, December 31, 2019						Balance, December 31, 2019	79,137,758	16,481,656	62,656,102
	Issued	Held In Treasury		Outstanding
Balance, December 31, 2016	79,137,758	14,835,256		64,302,502
Issuance of common stock						Issuance of common stock	6,172,840	0	6,172,840
Common stock acquired	—	208,680		(208,680	)	Common stock acquired	0	1,074,413	(1,074,413)
Stock-based compensation ⁽¹⁾	—	(274,449	)	274,449		Stock-based compensation (1)	0	(181,330)	181,330
Balance, September 30, 2017	79,137,758	14,769,487		64,368,271
Balance, June 30, 2020						Balance, June 30, 2020	85,310,598	17,374,739	67,935,859

(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.

OnIn January ~~26, 2017,~~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~~On August 3, 2021, the Company announced the lifting of the existing suspension on share repurchases. During the six months ended June 30, 2021, RGA did not repurchase any shares of common stock under this ~~new authorization, the board of directors terminated the stock repurchase authority granted in 2016.~~program. During the first ~~nine~~six months of ~~2017,~~2020, RGA repurchased ~~0.2 million~~1,074,413 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are as follows (dollars in ~~thousands)~~millions):


	Accumulated Currency Translation Adjustments		Unrealized Appreciation (Depreciation) of Investments(1)		Pension and Postretirement Benefits		Total
Balance, December 31, 2020	$	(69)	$	5,500	$	(72)	$	5,359
Other comprehensive income (loss) before reclassifications	55		(1,607)		(3)		(1,555)
Amounts reclassified to (from) AOCI	0		(154)		3		(151)
Deferred income tax benefit (expense)	(6)		394		0		388

Balance, June 30, 2021	$	(20)	$	4,133	$	(72)	$	4,041


														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, 2019													Balance, December 31, 2019	$	(92)	$	3,299	$	(70)	$	3,137
Other comprehensive income (loss) before reclassifications	23,117			671,564			(191		)	694,490			Other comprehensive income (loss) before reclassifications	(116)		1,034		(12)		906
Amounts reclassified to (from) AOCI	—			(51,407		)	4,006			(47,401		)	Amounts reclassified to (from) AOCI	0		0		2		2
Deferred income tax benefit (expense)	44,968			(204,287		)	(1,342		)	(160,661		)	Deferred income tax benefit (expense)	(2)		(244)		2		(244)
Balance, September 30, 2017	$	(104,456	)	$	1,770,903		$	(40,690	)	$	1,625,757

Balance, June 30, 2020													Balance, June 30, 2020	$	(210)	$	4,089	$	(78)	$	3,801

(1)Includes cash flow hedges of $(40) and $(49) as of June 30, 2021 and December 31, 2020, respectively, and $(74) and $(26) as of June 30, 2020 and December 31, 2019, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.

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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The following table presents the amounts of AOCI reclassifications for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (dollars in ~~thousands)~~millions):


	Amount Reclassified from AOCI
	Three months ended June 30,				Six months ended June 30,
Details about AOCI Components	2021		2020		2021		2020		Affected Line Item in Statements of Income
Net unrealized investment gains (losses):
Net unrealized gains (losses) on available-for-sale securities	$	26	$	11	$	183	$	(28)	Investment related gains (losses), net
Cash flow hedges – Interest rate	0		(1)		(2)		(1)		(1)
Cash flow hedges – Currency/Interest rate	(4)		0		(4)		0		(1)

Deferred policy acquisition costs attributed to unrealized gains and losses	19		131		(23)		29		(2)
Total	41		141		154		0
Provision for income taxes	(9)		(29)		(33)		(2)
Net unrealized gains (losses), net of tax	$	32	$	112	$	121	$	(2)
Amortization of defined benefit plan items:
Prior service cost (credit)	$	1	$	1	$	1	$	1	(3)
Actuarial gains (losses)	(3)		(2)		(4)		(3)		(3)
Total	(2)		(1)		(3)		(2)
Provision for income taxes	1		—		1		—
Amortization of defined benefit plans, net of tax	$	(1)	$	(1)	$	(2)	$	(2)

Total reclassifications for the period	$	31	$	111	$	119	$	(4)

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~~$24 million and ~~$27.1~~$(5) million in the first ~~nine~~six months of ~~2017~~2021 and ~~2016,~~2020, respectively. In the first quarter of ~~2017,~~2021, the Company granted ~~0.2 million~~200,239 stock appreciation rights at ~~$129.72~~$129.01 weighted average exercise price per share, ~~and 0.2 million~~167,883 performance contingent awards and 327,813 restricted stock units to employees. Performance contingent awards include both performance contingent shares and performance share units. Additionally, non-employee directors were granted a total of ~~7,696~~8,154 shares of common stock. As of ~~September~~June 30, ~~2017, 1.6 million~~2021, 1,633,693 share ~~options~~awards at a weighted average strike price per share of ~~$60.77~~$96.87 were vested and exercisable, with a remaining weighted average exercise period of ~~4.6~~4.4 years. As of ~~September~~June 30, ~~2017,~~2021, the total compensation cost of non-vested awards not yet recognized in the condensed consolidated financial statements was ~~$32.5~~$56 million. It is estimated that these costs will vest over a weighted average period of ~~1.2 years.~~

1.0 year.

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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 ~~sector~~type as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


June 30, 2021:	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total
Available-for-sale:
Corporate	$	33,687	$	11	$	3,465	$	137	$	37,004	63.4	%
Canadian government	3,303		0		1,602		2		4,903		8.4
RMBS	1,323		0		60		6		1,377		2.4
ABS	3,467		0		36		21		3,482		6.0
CMBS	1,774		1		102		6		1,869		3.2
U.S. government	1,295		0		47		24		1,318		2.3
State and political subdivisions	1,206		0		144		6		1,344		2.3
Other foreign government	6,742		4		317		65		6,990		12.0
Total fixed maturity securities	$	52,797	$	16	$	5,773	$	267	$	58,287	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:	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total
Available-for-sale:
Corporate	$	31,963	$	17	$	4,356	$	94	$	36,208	63.9	%
Canadian government	3,145		0		1,995		0		5,140		9.1
RMBS	1,735		0		84		2		1,817		3.2
ABS	3,099		0		35		42		3,092		5.4
CMBS	1,790		3		102		21		1,868		3.3
U.S. government	1,242		0		196		1		1,437		2.5
State and political subdivisions	1,237		0		157		4		1,390		2.4
Other foreign government	5,337		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~~June 30, ~~2017~~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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):

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	September 30, 2017				December 31, 2016					June 30, 2021				December 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	$	125	$	135	$	148	$	162
Fixed maturity securities received as collateral	n/a		461,237		n/a		300,925		Fixed maturity securities received as collateral	n/a		1,881		n/a		1,784
Assets in trust held to satisfy collateral requirements	14,598,404		15,598,457		12,135,258		12,874,370		Assets in trust held to satisfy collateral requirements	27,929		30,749		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 ~~which~~that limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk from single issuers greater than 10% of the Company’s stockholders’ equity included the securities disclosed below, as of

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June 30, 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, ~~2016~~2020 (dollars in ~~thousands)~~millions).


	June 30, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Government of Japan	$	2,890	$	2,879	$	1,493	$	1,491
Canadian province of Quebec	1,372		2,315		1,303		2,474
Canadian province of Ontario	1,097		1,477		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 Ontario 932,872
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~~as of June 30, ~~2017~~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-backed~~Structured securities are shown separately in the table below, as they are not due at a single maturity date.


	Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
Available-for-sale:					Available-for-sale:
Due in one year or less	$	910,821	$	915,586	Due in one year or less	$	1,143	$	1,150
Due after one year through five years	7,339,134		7,618,692		Due after one year through five years	8,350		8,887
Due after five years through ten years	9,581,912		10,090,704		Due after five years through ten years	10,565		11,518
Due after ten years	11,438,508		13,069,565		Due after ten years	26,175		30,004
Asset and mortgage-backed securities	4,619,593		4,687,195
Structured securities					Structured securities	6,564		6,728
Total	$	33,889,968	$	36,381,742	Total	$	52,797	$	58,287

Corporate Fixed Maturity Securities

The tables below show the major ~~industry types~~sectors of the Company’s corporate fixed maturity holdings as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


June 30, 2021:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	12,479	$	13,627	36.8	%
Industrial	17,032		18,749		50.7
Utility	4,176		4,628		12.5

Total	$	33,687	$	37,004	100.0	%

December 31, 2020:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	11,785	$	13,236	36.6	%
Industrial	16,274		18,435		50.9
Utility	3,904		4,537		12.5
Total	$	31,963	$	36,208	100.0	%

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 %

Table of Contents

~~Other-Than-Temporary~~Allowance 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 ~~2016~~Company’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 ~~debt~~fixed 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 forth~~presents the ~~amount~~rollforward of ~~pre-tax~~the allowance for credit ~~loss impairments on~~losses in fixed maturity securities ~~held~~ by type for the ~~Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI,~~six months ended June 30, 2021 and ~~the corresponding changes in such amounts~~2020 (dollars in ~~thousands)~~millions):


	Six months ended June 30, 2021
	Corporate		CMBS		Other Foreign Government		Total
Balance, beginning of period	$	17	$	3	$	0	$	20
Credit losses recognized on securities for which credit losses were not previously recorded	2		1		4		7

Reductions for securities sold during the period	(8)		(2)		0		(10)
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period	0		(1)		0		(1)

Balance, end of period	$	11	$	1	$	4	$	16


	Three months ended September 30,				Nine months ended September 30,							Six months ended June 30, 2020
	2017		2016		2017			2016				Corporate		CMBS		Other Foreign Government		Total
Balance, beginning of period	$	3,677	$	6,974	$	6,013		$	7,284		Balance, beginning of period	$	0	$	0	$	0	$	0
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	—		—		(2,336		)	(310		)
Credit losses recognized on securities for which credit losses were not previously recorded											Credit losses recognized on securities for which credit losses were not previously recorded	40		0		2		42
Reductions for securities sold during the period											Reductions for securities sold during the period	(8)		0		(1)		(9)
Balance, end of period	$	3,677	$	6,974	$	3,677		$	6,974		Balance, end of period	$	32	$	0	$	1	$	33

Unrealized Losses for Fixed Maturity ~~and Equity~~ Securities Available-for-Sale

The following table presents the total gross unrealized losses for the ~~1,165~~1,223 and ~~1,535~~877 fixed maturity ~~and equity~~ securities as of ~~September~~June 30, ~~2017~~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					June 30, 2021				December 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%	$	213	79.8	%	$	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 months	2		0.7		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 greater	52		19.5		22		11.2
Total	$	163,210	100.0	%	$	374,857	100.0	%	Total	$	267	100.0	%	$	197	100.0	%

Table of ~~an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features.~~Contents

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~~June 30, ~~2017~~2021 and December 31, ~~2016, respectively~~2020 (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.


	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
June 30, 2021:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	2,596	$	79	$	168	$	6	$	2,764	$	85
Canadian government	24		2		—		—		24		2
RMBS	261		5		21		1		282		6
ABS	800		4		754		5		1,554		9
CMBS	0		0		24		1		24		1
U.S. government	364		24		0		0		364		24
State and political subdivisions	95		2		29		4		124		6
Other foreign government	1,630		37		561		23		2,191		60
Total investment grade securities	5,770		153		1,557		40		7,327		193
Below investment grade securities:
Corporate	258		42		168		10		426		52


ABS	24		1		15		11		39		12
CMBS	0		0		43		5		43		5

Other foreign government	66		3		16		2		82		5
Total below investment grade securities	348		46		242		28		590		74
Total fixed maturity securities	$	6,118	$	199	$	1,799	$	68	$	7,917	$	267

~~Table of Contents~~

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

~~Table of Contents~~


	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2020:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	930	$	29	$	70	$	5	$	1,000	$	34
Canadian government	—		—		—		—		—		—
RMBS	294		2		0		0		294		2
ABS	1,096		17		570		11		1,666		28
CMBS	160		6		0		0		160		6
U.S. government	27		1		0		0		27		1
State and political subdivisions	66		1		16		3		82		4
Other foreign government	973		27		0		0		973		27
Total investment grade securities	3,546		83		656		19		4,202		102
Below investment grade securities:
Corporate	375		49		81		11		456		60


ABS	20		13		4		1		24		14
CMBS	91		15		0		0		91		15

Other foreign government	36		3		28		3		64		6
Total below investment grade securities	522		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~~tables 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.

Table of Contents

Investment Income and Investment Related Gains (Loss), Net – Accounting Correction

During the first quarter of 2021, the Company reclassified approximately $92 million of pre-tax unrealized gains from AOCI to investment income, net of related expenses associated with investments in limited partnerships and private equity funds for which it utilizes the equity method of accounting. The unrealized gains should have been recognized directly in investment income in the same prior periods they were reported by the investees. In addition, the Company recorded approximately $70 million of pre-tax gains in investment related gains (losses), net, associated with investments in limited partnerships considered to be investment companies in order to adjust the carrying value from cost less impairments to a fair value approach, using the net asset value (“NAV”) per share or its equivalent. Had the adjustments been recorded in the years they were reported by the investees, the Company estimates it would have recognized approximately $102 million, $(2) million, $1 million and $10 million of pre-tax income (loss) in the years ended December 31, 2020, 2019, 2018 and 2017, respectively.

Investment Income, Net of Related Expenses

Major categories of investment income, net of related expenses, consist of the following (dollars in ~~thousands)~~millions):


	Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
	2017			2016			2017			2016				2021		2020		2021		2020
Fixed maturity securities available-for-sale	$	359,157		$	325,089		$	1,039,392		$	961,096		Fixed maturity securities available-for-sale	$	516	$	474	$	1,011	$	954
Equity securities													Equity securities	1		1		3		3
Mortgage loans on real estate	50,040			39,802			138,829			121,494			Mortgage loans on real estate	73		66		139		133
Policy loans	15,404			15,391			45,870			47,897			Policy loans	13		14		27		29
Funds withheld at interest	102,144			104,609			327,089			273,482			Funds withheld at interest	95		69		179		122
Short-term investments and cash and cash equivalents	1,977			1,752			5,266			6,265			Short-term investments and cash and cash equivalents	0		2		1		6
Other invested assets	47,595			21,138			90,488			57,896			Other invested assets	87		41		261		36
Investment income	576,317			507,781			1,646,934			1,468,130			Investment income	785		667		1,621		1,283
Investment expense	(19,399		)	(18,054		)	(57,114		)	(53,471		)	Investment expense	(26)		(22)		(50)		(44)
Investment income, net of related expenses	$	556,918		$	489,727		$	1,589,820		$	1,414,659		Investment income, net of related expenses	$	759	$	645	$	1,571	$	1,239

Investment Related Gains (Losses), Net

Investment related gains (losses), net, consist of the following (dollars in ~~thousands)~~millions):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Fixed maturity securities available-for-sale:
Impairments and change in allowance for credit losses	$	5	$	0	$	3	$	(34)
Gain on investment activity	53		46		220		73
Loss on investment activity	(30)		(46)		(43)		(54)
Net gains (losses) on equity securities	20		8		23		(15)
Other impairment losses and change in mortgage loan allowance for credit losses	3		(22)		21		(35)
Change in fair value of certain limited partnership investments and other, net	32		8		143		17
Net gains (losses) on derivatives	29		87		47		(156)
Total investment related gains (losses), net	$	112	$	81	$	414	$	(204)

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 activity 19,522
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, net 14,534
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.

Table of Contents

Securities Borrowing, Lending and ~~Other~~Repurchase 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, securities received and cash received as of ~~September~~June 30, ~~2017~~ ~~and~~ ~~December 31, 2016~~ ~~(dollars in thousands).~~

September 30, 2017 December 31, 2016

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
Borrowed securities $ 360,475
$ 379,101
$ 263,820
$ 279,186
Securities lending:
Securities loaned 117,219
121,958
74,389
73,625
Securities received n/a
120,000
n/a
80,000
Repurchase program/reverse repurchase program:
Securities pledged 491,824
512,613
476,531
499,891
Securities received n/a
522,354
n/a
515,200

~~The Company also held cash collateral for securities lending and the repurchase program/reverse repurchase programs of $38.5 million and $28.8 million at September 30, 2017~~2021 and December 31, ~~2016, respectively.~~2020 (dollars in millions).


	June 30, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	318	$	360	$	118	$	161
Securities lending:
Securities loaned	94		103		94		105
Securities received	n/a		102		n/a		102
Repurchase program/reverse repurchase program:
Securities pledged	877		919		653		711
Securities received	n/a		670		n/a		669
Cash received	n/a		207		n/a		0

~~Table~~No cash or securities have been pledged by the Company for its securities borrowing and lending programs as of ~~Contents~~

June 30, 2021 and December 31, 2020.

The following ~~table presents~~tables present information on the Company’s securities lending and repurchase/reverse repurchase transactions as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020, respectively (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.


	June 30, 2021
	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	$	0	$	0	$	0	$	103	$	103
Total	0		0		0		103		103
Repurchase/reverse repurchase transactions:
Corporate	0		0		0		411		411





Other foreign government	0		0		220		288		508


Total	0		0		220		699		919
Total transactions	$	0	$	0	$	220	$	802	$	1,022

Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table									$	979
Amounts related to agreements not included in offsetting disclosure									$	43

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
Other 2,447
—
—
—
2,447
Total 2,447
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, 2020
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30 – 90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate	$	0	$	0	$	0	$	105	$	105
Total	0		0		0		105		105
Repurchase/reverse repurchase transactions:
Corporate	0		0		0		417		417


Other foreign government	0		0		0		294		294

Total	0		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

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
Other 1,246
—
—
—
1,246
Total 1,246
—
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

Table of Contents

The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase ~~programs.~~programs excluding any cash received or paid. After the effect of offsetting, ~~the net amount~~there was no liability presented on the ~~condensed~~ consolidated balance ~~sheets was a liability~~sheet as of ~~$7.9 million and $5.5 million of September~~June 30, ~~2017~~2021 and December 31, ~~2016, respectively.~~2020. As of ~~September~~June 30, ~~2017 and December 31, 2016,~~2021, the Company recognized payables resulting from cash received as collateral associated with a repurchase/reverse repurchase ~~agreement~~agreement. As of December 31, 2020, the Company did not have payables resulting from cash received as ~~discussed above.~~collateral associated with repurchase/reverse repurchase agreements. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements.

~~Table of Contents~~

Mortgage Loans on Real Estate

~~Mortgage loans represented approximately 8.7% and 8.4%~~As of ~~the Company’s total investments as of September~~June 30, ~~2017 and December 31, 2016. The Company makes~~2021, mortgage loans ~~on income producing properties that are~~were geographically ~~diversified~~dispersed throughout the U.S. with the largest ~~concentration being~~concentrations in ~~the state of~~Texas (13.5%), California ~~which represented 21.2%~~(13.4%) and ~~22.1% of mortgage~~Washington (8.1%), in addition to loans ~~on real estate as of~~ ~~September 30, 2017~~secured 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.~~allowance for credit losses.

The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type ~~is as follows~~ as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


	June 30, 2021				December 31, 2020
Property type:	Carrying Value		% of Total		Carrying Value		% of Total
Office	$	1,733	26.5	%	$	1,702	29.0	%
Retail	2,036		31.2		1,711		29.3
Industrial	1,388		21.2		1,210		20.6
Apartment	897		13.7		808		13.8
Other commercial	483		7.4		430		7.3
Recorded investment	6,537		100.0	%	5,861		100.0	%
Unamortized balance of loan origination fees and expenses	(11)				(10)
Allowance for credit losses	(45)				(64)
Total mortgage loans on real estate	$	6,481			$	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~~June 30, ~~2017~~2021 and December 31, ~~2016~~ ~~are as follows~~2020 (dollars in ~~thousands)~~millions):


	September 30, 2017				December 31, 2016					June 30, 2021				December 31, 2020
	Recorded Investment		% of Total		Recorded Investment		% of Total			Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,086,700	25.1	%	$	822,073	21.7	%	Due within five years	$	2,585	39.6	%	$	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 years	2,845		43.5		2,768		47.3
Due after ten years	913,184		21.1		861,575		22.8		Due after ten years	1,107		16.9		817		13.9
Total	$	4,333,997	100.0	%	$	3,783,207	100.0	%	Total	$	6,537	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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


	Recorded Investment
	Debt Service Ratios						Construction Loans
	>1.20x		1.00x – 1.20x		<1.00x				Total		% of Total
June 30, 2021:
Loan-to-Value Ratio
0% – 59.99%	$	3,053	$	274	$	65	$	24	$	3,416	52.2	%
60% – 69.99%	2,110		200		42		0		2,352		36.0
70% – 79.99%	503		36		16		0		555		8.5
80% or greater	193		0		21		0		214		3.3
Total	$	5,859	$	510	$	144	$	24	$	6,537	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 %

Table of Contents


	Recorded Investment
	Debt Service Ratios						Construction Loans
	>1.20x		1.00x – 1.20x		<1.00x				Total		% 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 greater	189		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 %

~~None~~The following table sets forth credit quality grades by year of origination of the ~~payments due to the Company on its~~Company’s recorded investment in mortgage loans ~~were delinquent~~ as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020 (dollars in millions):


	Recorded Investment
	Year of Origination
	2021		2020		2019		2018		2017		Prior		Total
June 30, 2021:
Internal credit quality grade:
High investment grade	$	491	$	406	$	569	$	468	$	304	$	1,686	$	3,924
Investment grade	263		366		474		371		399		580		2,453
Average	6		0		0		39		18		57		120
Watch list	0		0		0		0		0		4		4
In or near default	0		0		0		0		0		36		36
Total	$	760	$	772	$	1,043	$	878	$	721	$	2,363	$	6,537


	Recorded Investment
	Year of Origination
	2020		2019		2018		2017		2016		Prior		Total
December 31, 2020:
Internal credit quality grade:
High investment grade	$	411	$	616	$	493	$	336	$	574	$	1,008	$	3,438
Investment grade	352		496		399		407		249		368		2,271
Average	0		0		0		19		37		55		111
Watch list	0		0		0		0		0		4		4
In or near default	0		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 June 30, 2021 and December 31, 2020 (dollars in millions):


	June 30, 2021		December 31, 2020
Current	$	6,522	$	5,846
31 – 60 days past due	15		15



Total	$	6,537	$	5,861

Table of Contents

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related ~~valuation allowances~~allowance for credit losses as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


	June 30, 2021		December 31, 2020
Mortgage loans:
Individually measured for impairment	$	36	$	37
Collectively measured for impairment	6,501		5,824
Recorded investment	$	6,537	$	5,861
Allowance for credit losses:
Individually measured for impairment	$	0	$	0
Collectively measured for impairment	45		64
Total allowance for credit losses	$	45	$	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

~~Information~~The following table presents information regarding the Company’s ~~loan valuation allowances~~allowance for credit losses for mortgage loans ~~for the three and nine months ended~~ ~~September 30, 2017~~ ~~and 2016 is as follows~~ (dollars in ~~thousands)~~millions):


	Six months ended June 30,
		2021		2020
Balance, beginning of period		$	64	$	12
Adoption of new accounting standard, see Note 14		0		14
Change in allowance for credit losses		(19)		30
Balance, end of period		$	45	$	56

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

~~Table of Contents~~

~~Information~~The following table presents information regarding the portion of the Company’s mortgage loans that were impaired as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016 is as follows~~2020 (dollars in ~~thousands)~~millions):


	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2021:
Impaired mortgage loans with no allowance for credit losses recorded	$	36	$	36	$	0	$	36
Impaired mortgage loans with allowance for credit losses recorded	0		0		0		0
Total impaired mortgage loans	$	36	$	36	$	0	$	36
December 31, 2020:
Impaired mortgage loans with no allowance for credit losses recorded	$	37	$	37	$	0	$	37
Impaired mortgage loans with allowance for credit losses recorded	0		0		0		0
Total impaired mortgage loans	$	37	$	37	$	0	$	37

The Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in millions):
	Three months ended June 30,
	2021				2020
	Average Recorded Investment(1)		Interest Income		Average Recorded Investment(1)		Interest Income
Impaired mortgage loans with no allowance for credit losses recorded	$	36	$	1	$	17	$	0

Total impaired mortgage loans	$	36	$	1	$	17	$	0

	Six months ended June 30,
	2021				2020
	Average Recorded Investment(1)		Interest Income		Average Recorded Investment(1)		Interest Income
Impaired mortgage loans with no allowance for credit losses recorded	$	36	$	1	$	17	$	0

Total impaired mortgage loans	$	36	$	1	$	17	$	0

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance

Carrying
Value
September 30, 2017:
Impaired mortgage loans with no valuation allowance recorded $ 6,427
$ 5,856
$ —
$ 5,856
Impaired mortgage loans with valuation allowance recorded —
—
—
—
Total impaired mortgage loans $ 6,427
$ 5,856
$ —
$ 5,856
December 31, 2016:
Impaired mortgage loans with no valuation allowance recorded $ 2,758
$ 2,216
$ —
$ 2,216
Impaired mortgage loans with valuation allowance recorded —
—
—
—
Total impaired mortgage loans $ 2,758
$ 2,216
$ —
$ 2,216

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):
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,
2017 2016

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 valuation allowance recorded
—
—
5,459
—
Total impaired mortgage loans $ 3,062
$ 100
$ 10,146
$ 324

(1)Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

Table of Contents

The Company did not acquire any impaired mortgage loans during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020. The Company had no mortgage loans that were on a nonaccrual status at ~~September~~as of June 30, ~~2017~~2021 and December 31, ~~2016~~.2020. During the six months ended June 30, 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. During 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%~~ ~~of the Company’s total investments as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively, the~~The majority of ~~which~~policy loans are associated with one client. These policy loans present no credit risk ~~because~~as the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. The Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

~~Funds withheld at interest comprised approximately~~ ~~12.1%~~ ~~and~~ ~~13.1%~~As of ~~the Company’s total investments as~~June 30, 2021, $4.7 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.~~two clients. For reinsurance agreements written on ~~a modified coinsurance~~modco basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at ~~interest 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.

~~Table of Contents~~

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 ~~are~~is included in ~~other~~Other in the table below. The ~~fair value option was elected~~allowance for ~~contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify~~credit losses for ~~presentation and reporting as separate accounts. Other invested assets represented approximately 3.1% and 3.6% of the Company’s total investments~~lifetime mortgages as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, was $1 million and $2 million, respectively. Carrying values of these assets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are as follows (dollars in ~~thousands)~~millions):


	June 30, 2021		December 31, 2020
Limited partnership interests and real estate joint ventures	$	1,611	$	1,367
Lifetime mortgages	958		935
Derivatives	146		140
FVO contractholder-directed unit-linked investments	54		289
Other	155		98
Total other invested assets	$	2,924	$	2,829

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

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, forward bond purchase commitments, 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.

Table of Contents

Summary of Derivative Positions

Derivatives, except for embedded derivatives, ~~and longevity and mortality swaps,~~ are ~~carried on the Company’s condensed consolidated balance sheets~~included 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 coinsurance~~modco 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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


		June 30, 2021						December 31, 2020
	Primary Underlying Risk	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	Interest rate	$	1,089	$	74	$	1	$	1,084	$	93	$	1
Financial futures	Equity	254		0		0		258		0		0
Foreign currency swaps	Foreign currency	150		0		6		150		0		18
Foreign currency forwards	Foreign currency	459		1		4		347		4		2
CPI swaps	CPI	607		19		11		612		11		19
Credit default swaps	Credit	1,893		36		1		1,517		13		0
Equity options	Equity	479		23		0		395		29		0
Synthetic GICs	Interest rate	16,489		0		0		16,644		0		0


Embedded derivatives in:
Modco or funds withheld arrangements		0		124		0		0		58		0
Indexed annuity products		0		0		726		0		0		752
Variable annuity products		0		0		154		0		0		155
Total non-hedging derivatives		21,420		277		903		21,007		208		947
Derivatives designated as hedging instruments:
Interest rate swaps	Foreign currency/Interest rate	920		5		27		802		3		24
Foreign currency swaps	Foreign currency	193		3		1		234		8		1
Foreign currency forwards	Foreign currency	1,327		9		24		1,255		10		15
Forward bond purchase commitments	Interest rate	369		7		0		0		0		0
Total hedging derivatives		2,809		24		52		2,291		21		40
Total derivatives		$	24,229	$	301	$	955	$	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.

Table of Contents

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~~June 30, ~~2017~~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.

~~Table of Contents~~


Type of Fair Value Hedge	Hedged Item	Gains (Losses) Recognized for Derivatives		Gains (Losses) Recognized for Hedged Items
		Investment Related Gains (Losses)
For the three months ended June 30, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(2)	$	2
For the three months ended June 30, 2020:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	15	$	(13)
For the six months ended June 30, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(2)	$	3
For the six months ended June 30, 2020:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(8)	$	2

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~~tables present 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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (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 June 30,
	2021		2020
Balance, beginning of period	$	(71)	$	(87)
Gains deferred in other comprehensive income (loss)	29		12

Amounts reclassified to investment income	0		0
Amounts reclassified to interest expense	2		1
Balance, end of period	$	(40)	$	(74)

	Six months ended June 30,
	2021		2020
Balance, beginning of period	$	(49)	$	(26)
Gains (losses) deferred in other comprehensive income (loss)	5		(49)

Amounts reclassified to investment income	0		0
Amounts reclassified to interest expense	4		1
Balance, end of period	$	(40)	$	(74)

As of ~~September~~June 30, ~~2017, the~~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 ~~earnings~~interest expense during the next twelve ~~months are approximately $(0.4) million. This expectation is based on~~months. For the ~~anticipated interest payments on hedged investments in fixed maturity securities that will occur over~~same 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.

Table of Contents

The following table presents the ~~effective portion~~effect 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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (dollars in ~~thousands)~~millions):


Derivative Type	Gain (Loss) Deferred in AOCI		Gain (Loss) Reclassified into Income from AOCI
			Investment Income		Interest Expense
For the three months ended June 30, 2021:
Interest rate	$	29	$	0	$	(2)
Foreign currency/interest rate	0		0		0
Total	$	29	$	0	$	(2)
For the three months ended June 30, 2020:
Interest rate	$	(1)	$	0	$	(1)
Foreign currency/interest rate	13		0		0

Total	$	12	$	0	$	(1)

For the six months ended June 30, 2021:
Interest rate	$	6	$	0	$	(4)
Foreign currency/interest rate	(1)		0		0

Total	$	5	$	0	$	(4)
For the six months ended June 30, 2020:
Interest rate	$	(36)	$	0	$	(1)
Foreign currency/interest rate	(13)		0		0

Total	$	(49)	$	0	$	(1)

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~~six months ended ~~September~~June 30, ~~2017~~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.

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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (dollars in ~~thousands)~~millions):


	Derivative Gains (Losses) Deferred in AOCI
	Three months ended June 30,				Six months ended June 30,
Type of NIFO Hedge	2021		2020		2021		2020
Foreign currency swaps	$	(2)	$	(6)	$	(3)	$	9
Foreign currency forwards	(10)		(34)		(24)		46
Total	$	(12)	$	(40)	$	(27)	$	55

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~~$112 million and ~~$161.6~~$139 million at ~~September~~June 30, ~~2017~~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.

~~Table~~ There were no sales or substantial liquidations of ~~Contents~~

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.

Table of Contents

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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 is as follows (dollars in ~~thousands)~~millions):


		Three months ended June 30,
Type of Non-hedging Derivative	Income Statement Location of Gain (Loss)	2021		2020
Interest rate swaps	Investment related gains (losses), net	$	33	$	3
Financial futures	Investment related gains (losses), net	(9)		(48)
Foreign currency swaps	Investment related gains (losses), net	3		3
Foreign currency forwards	Investment related gains (losses), net	(1)		1
CPI swaps	Investment related gains (losses), net	3		26
Credit default swaps	Investment related gains (losses), net	12		17
Equity options	Investment related gains (losses), net	(11)		(25)


Subtotal		30		(23)
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	16		1

Indexed annuity products	Interest credited	(13)		(7)
Variable annuity products	Investment related gains (losses), net	(17)		107
Total non-hedging derivatives		$	16	$	78

		Six months ended June 30,
Type of Non-hedging Derivative	Income Statement Location of Gain (Loss)	2021		2020
Interest rate swaps	Investment related gains (losses), net	$	(37)	$	109
Financial futures	Investment related gains (losses), net	(19)		(4)
Foreign currency swaps	Investment related gains (losses), net	12		(10)
Foreign currency forwards	Investment related gains (losses), net	(9)		(2)
CPI swaps	Investment related gains (losses), net	21		(14)
Credit default swaps	Investment related gains (losses), net	32		(7)
Equity options	Investment related gains (losses), net	(21)		28


Subtotal		(21)		100
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	66		(229)

Indexed annuity products	Interest credited	1		(1)
Variable annuity products	Investment related gains (losses), net	1		(21)
Total non-hedging derivatives		$	47	$	(151)

Gain (Loss) for the three 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 $ 641
$ 4,122
Financial futures Investment related gains (losses), net (8,890 ) (11,677 )
Foreign currency forwards Investment related gains (losses), net 24
507
CPI swaps Investment related gains (losses), net 220
76
Credit default swaps Investment related gains (losses), net 4,137
6,672
Equity options Investment related gains (losses), net (8,295 ) (13,648 )
Longevity swaps Other revenues 3,334
8,921
Mortality swaps Other revenues (132 ) (400 )
Subtotal (8,961 ) (5,427 )
Embedded derivatives in:
Modified coinsurance or funds withheld arrangements Investment related gains (losses), net 23,044
49,078
Indexed annuity products Interest credited (13,133 ) (20,104 )
Variable annuity products Investment related gains (losses), net (6,205 ) 7,988
Total non-hedging derivatives $ (5,255 ) $ 31,535

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

Table of Contents

~~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.

~~Table of Contents~~

Credit ~~Default Swaps~~Derivatives

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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


	June 30, 2021					December 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	$	34	$	715	12.4	$	11	$	287	15.0

Subtotal	34		715		12.4	11		287		15.0
BBB+/BBB/BBB-
Single name credit default swaps	1		181		2.0	2		232		1.6
Credit default swaps referencing indices	0		988		3.4	0		988		3.9
Subtotal	1		1,169		3.2	2		1,220		3.5
BB+/BB/BB-
Single name credit default swaps	0		9		0.5	0		10		0.7

Subtotal	0		9		0.5	0		10		0.7
Total	$	35	$	1,893	6.7	$	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 against~~enforceable master netting arrangements and reported as a ~~drop~~net 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 improvement~~nets 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 Derivatives~~arrangements.

The Company has ~~certain~~elected to include all derivatives, except embedded derivatives, ~~which~~in the table below, irrespective of whether they are ~~required~~subject to an enforceable master netting arrangement or a similar agreement. See Note 4 – “Investments” for information regarding the Company’s securities borrowing, lending, and repurchase/reverse repurchase programs.

The following table provides information relating to the netting of the Company’s derivative instruments as of June 30, 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
June 30, 2021:
Derivative assets	$	177	$	(31)	$	146	$	(36)	$	(100)	$	10
Derivative liabilities	75		(31)		44		(121)		(48)		(125)
December 31, 2020:
Derivative assets	$	171	$	(31)	$	140	$	(30)	$	(98)	$	12
Derivative liabilities	80		(31)		49		(146)		(47)		(144)

(1)Includes initial margin posted to a central clearing partner.

The Company may be ~~separated from their host~~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 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

~~Table of Contents~~

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. The~~accrued interest of non-collateralized derivative contracts in an asset position at the reporting date. As of June 30, 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 adjustment~~OTC 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 2016~~others 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 income 7,515
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

Table of Contents

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.

~~Table of Contents~~

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 ~~which~~that 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 measure~~For 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 of~~Assets 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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are summarized below (dollars in ~~thousands)~~millions):


June 30, 2021:			Fair Value Measurements Using:
	Total		Level 1		Level 2		Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate	$	37,004	$	0	$	33,796	$	3,208
Canadian government	4,903		0		4,903		0
RMBS	1,377		0		1,375		2
ABS	3,482		0		2,896		586
CMBS	1,869		0		1,804		65
U.S. government	1,318		1,198		107		13
State and political subdivisions	1,344		0		1,336		8
Other foreign government	6,990		0		6,949		41
Total fixed maturity securities – available-for-sale	58,287		1,198		53,166		3,923
Equity securities	147		84		0		63
Funds withheld at interest – embedded derivatives and other	206		0		0		206
Cash equivalents	1,167		1,152		15		0
Short-term investments	166		1		165		0
Other invested assets:
Derivatives	146		0		146		0








FVO contractholder-directed unit-linked investments	54		0		54		0

Other	53		0		53		0
Total other invested assets (1)	253		0		253		0

Total	$	60,226	$	2,435	$	53,599	$	4,192
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives	$	880	$	0	$	0	$	880
Other liabilities:
Derivatives	44		0		44		0








Total	$	924	$	0	$	44	$	880

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

~~Table of Contents~~

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.

~~Table of Contents~~

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.

~~Table of Contents~~

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 from~~using the ~~tables presented.~~

~~Equity Securities~~ ~~– Equity securities consist principally~~net 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.

~~Table of Contents~~

~~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 estimate~~June 30, 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 $493 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.

Table of Contents


December 31, 2020:			Fair Value Measurements Using:
	Total		Level 1		Level 2		Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate	$	36,208	$	0	$	33,179	$	3,029
Canadian government	5,140		0		5,140		0
RMBS	1,817		0		1,814		3
ABS	3,092		0		2,896		196
CMBS	1,868		0		1,813		55
U.S. government	1,437		1,312		111		14
State and political subdivisions	1,390		0		1,381		9
Other foreign government	5,783		0		5,766		17
Total fixed maturity securities – available-for-sale	56,735		1,312		52,100		3,323
Equity securities	132		79		0		53
Funds withheld at interest – embedded derivatives and other	114		0		0		114
Cash equivalents	1,478		1,478		0		0
Short-term investments	197		32		150		15
Other invested assets:
Derivatives	140		0		140		0








FVO contractholder-directed unit-linked investments	289		224		65		0


Total other invested assets	429		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:
Derivatives	49		0		49		0










Total	$	956	$	0	$	49	$	907

~~The actuarial assumptions used in the fair value~~

Table of ~~longevity~~Contents

Quantitative Information Regarding Internally – Priced Assets 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.Liabilities

The following table presents quantitative information about significant unobservable inputs used in Level 3 fair value measurements that are developed internally by the Company as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


	Estimated Fair Value				Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	June 30, 2021		December 31, 2020				June 30, 2021	December 31, 2020
Assets:
Corporate	$	45	$	37	Market comparable securities	Liquidity premium	1%	0-1% (1%)
						EBITDA Multiple	5.0x-7.0x (5.9x)	5.2x-11.2x (7.1x)
ABS	78		87		Market comparable securities	Liquidity premium	1-18% (5%)	1-18% (1%)
U.S. government	13		14		Market comparable securities	Liquidity premium	0-1% (1%)	0-1% (1%)


Equity securities	10		10		Market comparable securities	EBITDA Multiple	6.3x-10.6x (7.9x)	6.9x-10.6x (7.9x)
Funds withheld at interest – embedded derivatives	124		58		Total return swap	Mortality	0-100% (3%)	0-100% (3%)
						Lapse	0-35% (16%)	0-35% (13%)
						Withdrawal	0-5% (3%)	0-5% (3%)
						CVA	0-5% (0%)	0-5% (1%)
						Crediting rate	1-4% (2%)	2-4% (2%)


Liabilities:
Interest-sensitive contract liabilities – embedded derivatives – indexed annuities	726		752		Discounted cash flow	Mortality	0-100% (3%)	0-100% (3%)
						Lapse	0-35% (16%)	0-35% (13%)
						Withdrawal	0-5% (3%)	0-5% (3%)
						Option budget projection	1-4% (2%)	2-4% (2%)
Interest-sensitive contract liabilities – embedded derivatives – variable annuities	154		155		Discounted cash flow	Mortality	0-100% (2%)	0-100% (2%)
						Lapse	0-25% (4%)	0-25% (4%)
						Withdrawal	0-7% (5%)	0-7% (5%)
						CVA	0-5% (1%)	0-5% (1%)
						Long-term volatility	0-27% (14%)	0-27% (13%)

Table of Contents

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 agencies 23,251
24,488
Market comparable securities Liquidity premium 0-1% (1%)
0-1%  (1%)
State and political subdivisions 4,544
4,670
Market comparable securities     Liquidity premium 1 % 1 %
Funds withheld at interest- embedded derivatives 84,325
(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 swaps 37,827
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 annuities 821,821
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 annuities 168,119
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 swaps 1,683
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 ~~were~~are primarily the result of the Company obtaining observable pricing information or a third party pricing quotation that appropriately reflects the fair value of those assets and liabilities. ~~In addition, certain transfers out~~

For further information on the Company’s valuation processes, see Note 6 – “Fair Value of ~~Level 3 were also due~~Assets and Liabilities” in the Notes to ~~ratings upgrades~~Consolidated 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 June 30, 2021:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives & other		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	3,101	$	16	$	388	$	22	$	54	$	11	$	176	$	(857)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Investment income, net of related expenses	2		0		0		0		0		0		(1)		0
Investment related gains (losses), net	2		0		0		0		10		0		16		(17)

Interest credited	0		0		0		0		0		0		0		(13)

Included in other comprehensive income	49		0		5		0		0		0		0		0
Other revenues	0		0		0		0		0		0		0		0
Purchases(1)	317		25		262		0		0		0		16		(13)
Sales(1)	(19)		0		(2)		0		(1)		0		0		0
Settlements(1)	(269)		0		(24)		(1)		0		(10)		(1)		20
Transfers into Level 3	25		0		24		0		0		0		0		0
Transfers out of Level 3	0		0		0		0		0		(1)		0		0
Fair value, end of period	$	3,208	$	41	$	653	$	21	$	63	$	0	$	206	$	(880)
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	$	(1)	$	0
Investment related gains (losses), net	0		0		0		0		9		0		16		(19)
Other revenues	0		0		0		0		0		0		0		0

Interest credited	0		0		0		0		0		0		0		(33)
Included in other comprehensive income	51		0		5		0		0		0		0		0

Table of Contents


For the six months ended June 30, 2021:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives & other		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-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 expenses	3		0		0		0		0		0		(6)		0
Investment related gains (losses), net	1		0		0		0		11		0		66		1

Interest credited	0		0		0		0		0		0		0		1

Included in other comprehensive income	(33)		(1)		4		0		0		0		1		0
Other revenues	0		0		0		0		0		0		0		0
Purchases(1)	540		25		428		0		0		0		32		(17)
Sales(1)	(20)		0		(2)		0		(1)		0		0		0
Settlements(1)	(341)		0		(85)		(2)		0		(10)		(1)		42
Transfers into Level 3	29		0		54		0		0		0		0		0
Transfers out of Level 3	0		0		0		0		0		(5)		0		0
Fair value, end of period	$	3,208	$	41	$	653	$	21	$	63	$	0	$	206	$	(880)
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	$	2	$	0	$	0	$	0	$	0	$	0	$	(6)	$	0
Investment related gains (losses), net	(1)		0		0		0		10		0		66		(3)
Other revenues	0		0		0		0		0		0		0		0

Interest credited	0		0		0		0		0		0		0		(41)
Included in other comprehensive income	(31)		(1)		4		0		0		0		1		0

Transfers from Level 1 to Level 2 are due to the lack of observable market data when pricing these securities, while transfers from Level 2 to Level 1 are due to an increase in the availability of market observable data in an active market. There were no transfers between Level 1 and Level 2 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):


For the three months ended June 30, 2020:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	2,197	$	15	$	144	$	25	$	56	$	1	$	(109)	$	(1,042)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Investment income, net of related expenses	0		0		0		0		0		0		0		0
Investment related gains (losses), net	(14)		0		0		0		3		0		1		106

Interest credited	0		0		0		0		0		0		0		(7)

Included in other comprehensive income	112		2		17		0		0		0		0		0
Other revenues	0		0		0		0		0		0		0		0
Purchases(1)	79		0		15		0		3		5		0		(8)
Sales(1)	(18)		0		(3)		0		0		0		0		0
Settlements(1)	(44)		0		(18)		(1)		0		(1)		0		21
Transfers into Level 3	0		0		0		0		0		0		0		0
Transfers out of Level 3	(4)		0		(2)		0		0		0		0		0
Fair value, end of period	$	2,308	$	17	$	153	$	24	$	62	$	5	$	(108)	$	(930)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Investment related gains (losses), net	(15)		0		0		0		3		0		1		103
Other revenues	0		0		0		0		0		0		0		0

Interest credited	0		0		0		0		0		0		0		(27)
Included in other comprehensive income	111		2		16		0		0		0		0		0

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

Table of Contents


For the six months ended June 30, 2020:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-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 expenses	1		0		0		0		0		0		0		0
Investment related gains (losses), net	(25)		0		0		0		(4)		0		(229)		(22)

Interest credited	0		0		0		0		0		0		0		(1)

Included in other comprehensive income	(3)		1		(10)		1		0		0		0		0
Other revenues	0		0		0		0		0		0		0		0
Purchases(1)	310		0		24		0		3		5		0		(19)
Sales(1)	(62)		0		(4)		0		0		0		0		0
Settlements(1)	(96)		0		(31)		(2)		0		(1)		0		42
Transfers into Level 3	1		0		21		0		0		0		0		0
Transfers out of Level 3	(4)		(704)		(55)		0		(14)		(1)		0		0
Fair value, end of period	$	2,308	$	17	$	153	$	24	$	62	$	5	$	(108)	$	(930)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Investment related gains (losses), net	(26)		0		0		0		(4)		0		(229)		(27)
Other revenues	0		0		0		0		0		0		0		0

Interest credited	0		0		0		0		0		0		0		(43)
Included in other comprehensive income	(29)		1		(11)		1		0		0		0		0

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 ) —

~~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 )

~~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.

(1)The ~~tables below provide a summary of~~amount reported within purchases, sales and settlements is the ~~changes~~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 ~~fair value of Level 3 assets and liabilities for~~ the ~~three and nine~~ ~~months ended~~ ~~September 30, 2016, as well as~~same period are excluded from the ~~portion of gains or losses included in income for~~rollforward. The Company had no issuances during 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):~~period.

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 )

~~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 )

~~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.

~~Table of Contents~~

Nonrecurring Fair Value Measurements

The ~~following table presents information for~~Company has certain assets ~~measured~~subject to measurement at ~~estimated~~ fair value on a nonrecurring basis, ~~during~~in periods subsequent to their initial recognition if they are determined to be impaired. During the ~~periods presented~~six months ended June 30, 2021 and ~~still held~~2020, 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 ~~amounts~~values and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis, as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (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.

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.

Table of Contents


June 30, 2021:	Carrying Value (1)		Estimated Fair Value		Fair Value Measurement Using:
					Level 1		Level 2		Level 3		NAV
Assets:
Mortgage loans on real estate	$	6,481	$	6,744	$	0	$	0	$	6,744	$	0
Policy loans	1,254		1,254		0		1,254		0		0
Funds withheld at interest	6,825		7,169		0		0		7,169		0
Cash and cash equivalents	2,087		2,087		2,087		0		0		0
Short-term investments	18		18		18		0		0		0
Other invested assets	1,133		1,141		6		84		1,051		0
Accrued investment income	525		525		0		525		0		0
Liabilities:
Interest-sensitive contract liabilities	$	21,274	$	22,983	$	0	$	0	$	22,983	$	0

Long-term debt	3,173		3,455		0		0		3,455		0
Collateral finance and securitization notes	323		292		0		0		292		0

December 31, 2020:	Carrying Value (1)		Estimated Fair Value		Fair Value Measurement Using:
					Level 1		Level 2		Level 3		NAV
Assets:
Mortgage loans on real estate	$	5,787	$	6,167	$	0	$	0	$	6,167	$	0
Policy loans	1,258		1,258		0		1,258		0		0
Funds withheld at interest	5,292		5,676		0		0		5,676		0
Cash and cash equivalents	1,930		1,930		1,930		0		0		0
Short-term investments	30		30		30		0		0		0
Other invested assets	1,482		1,601		5		89		1,018		489
Accrued investment income	511		511		0		511		0		0
Liabilities:
Interest-sensitive contract liabilities	$	18,106	$	19,683	$	0	$	0	$	19,683	$	0
Long-term debt	3,573		3,901		0		0		3,901		0
Collateral finance and securitization notes	388		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.

~~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.7. Segment Information

~~Table of Contents~~


7.	~~Segment Information~~

The accounting policies of the segments are the same as those described in ~~the Summary of~~ Note 2 – “Significant Accounting Policies and Pronouncements” in ~~Note 2 of~~ the ~~consolidated financial statements accompanying~~Notes to Consolidated Financial Statements included in the ~~2016~~Company’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.

Table of Contents

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 June 30,				Six months ended June 30,
Revenues:	2021		2020		2021		2020
U.S. and Latin America:
Traditional	$	1,816	$	1,642	$	3,453	$	3,175
Financial Solutions	433		323		751		462
Total	2,249		1,965		4,204		3,637
Canada:
Traditional	366		311		709		607
Financial Solutions	26		22		52		46
Total	392		333		761		653
Europe, Middle East and Africa:
Traditional	459		371		916		778
Financial Solutions	139		136		285		214
Total	598		507		1,201		992
Asia Pacific:
Traditional	653		636		1,300		1,303
Financial Solutions	104		75		208		143
Total	757		711		1,508		1,446
Corporate and Other	141		90		582		82
Total	$	4,137	$	3,606	$	8,256	$	6,810


										Three months ended June 30,				Six months ended June 30,
	Three months ended September 30,				Nine months ended September 30,
Revenues:	2017		2016		2017		2016
Income (loss) before income taxes:									Income (loss) before income taxes:	2021		2020		2021		2020
U.S. and Latin America:									U.S. and Latin America:
Traditional	$	1,521,383	$	1,444,917	$	4,532,584	$	4,339,737	Traditional	$	135	$	(158)	$	(203)	$	(220)
Financial Solutions	264,170		276,135		834,992		620,117		Financial Solutions	186		117		269		102
Total	1,785,553		1,721,052		5,367,576		4,959,854		Total	321		(41)		66		(118)
Canada:									Canada:
Traditional	281,095		280,959		814,643		827,871		Traditional	32		44		56		67
Financial Solutions	12,430		12,359		36,240		34,897		Financial Solutions	4		4		10		7
Total	293,525		293,318		850,883		862,768		Total	36		48		66		74
Europe, Middle East and Africa:									Europe, Middle East and Africa:
Traditional	360,972		289,070		1,024,978		880,346		Traditional	(12)		16		(80)		33
Financial Solutions	77,041		99,752		230,435		248,485		Financial Solutions	83		98		143		128
Total	438,013		388,822		1,255,413		1,128,831		Total	71		114		63		161
Asia Pacific:									Asia Pacific:
Traditional	561,660		427,647		1,628,419		1,299,417		Traditional	(12)		47		29		71
Financial Solutions	16,932		19,037		55,368		56,153		Financial Solutions	31		26		59		1
Total	578,592		446,684		1,683,787		1,355,570		Total	19		73		88		72
Corporate and Other	49,627		50,701		125,667		145,190		Corporate and Other	35		1		385		(90)
Total	$	3,145,310	$	2,900,577	$	9,283,326	$	8,452,213	Total	$	482	$	195	$	668	$	99

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

Table of Contents


Assets:	June 30, 2021		December 31, 2020
U.S. and Latin America:
Traditional	$	20,760	$	20,071
Financial Solutions	29,272		25,433
Total	50,032		45,504
Canada:
Traditional	5,017		4,682
Financial Solutions	8		13
Total	5,025		4,695
Europe, Middle East and Africa:
Traditional	5,058		4,763
Financial Solutions	6,419		7,292
Total	11,477		12,055
Asia Pacific:
Traditional	8,664		8,197
Financial Solutions	6,814		4,299
Total	15,478		12,496
Corporate and Other	6,932		9,906
Total	$	88,944	$	84,656

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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 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 loans 75,492
126,248
Bank loans and private placements 51,479
58,318
Equity release mortgages 156,777
130,324


	June 30, 2021		December 31, 2020
Limited partnership interests and joint ventures	$	867	$	678
Mortgage loans on real estate	175		199
Bank loans and private placements	541		194
Lifetime mortgages	46		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 discount~~approximately $1 million and ~~valuation allowance~~$2 million as of June 30, 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.

Table of Contents

Guarantees

Statutory Reserve Support

Certain RGA ~~through wholly-owned~~ subsidiaries ~~has~~have committed to provide statutory reserve support to third parties, in exchange for a fee, by funding loans if certain defined events occur. Such statutory reserves are required under the U.S. Valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX for term life insurance policies and Regulation A-XXX for universal life secondary guarantees). ~~The third parties~~In addition, certain subsidiaries have ~~recourse to RGA should the subsidiary fail~~also 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,~~

~~Table~~event of ~~Contents~~

~~however, as~~a severe and prolonged decline in the commercial lease market. Upon assumption of ~~September~~a lease, the Company would recognize a right to use asset and lease obligation. As of June 30, ~~2017,~~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~~June 30, ~~2017~~2021 (dollars in millions):


Commitment Period:	Maximum Potential Obligation		Commitment Period:	Maximum Potential Obligation
2023	$	500.0
2033	450.0
2034	2,000.0		2034	$	1,243
2035	1,314.2		2035	2,444
2036	2,932.0		2036	3,599
2037	5,750.0		2037	2,850
2038			2038	2,300
2039			2039	11,350
2046			2046	3,000

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 ~~for~~of 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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are reflected in the following table (dollars in ~~thousands)~~millions):


	June 30, 2021		December 31, 2020
Treaty guarantees	$	2,104	$	1,934
Treaty guarantees, net of assets in trust	1,133		961
Securities borrowing and repurchase arrangements	136		133

9. Income Tax

September 30, 2017 December 31, 2016
Treaty guarantees $ 936,032
$ 902,216
Treaty guarantees, net of assets in trust 810,870
780,786
Securities borrowing and repurchase arrangements 295,285
263,820
Financing arrangements 100,602
119,073
Lease obligations 1,895
2,428


9.	~~Income Tax~~

~~Provision for income tax expense differed from the amounts computed by applying the U.S. federal income tax statutory rate of 35.0% to pre-tax income as a result of the following for~~For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, the effective tax rate on pre-tax income was 28.5% 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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27.6%, respectively. The Company’s effective tax rate for the ~~third quarter~~three and six months ended June 30, 2021 differed from the U.S. statutory rate of ~~2017 was lower~~21% primarily due to income earned in jurisdictions with tax rates higher than the U.S. ~~Statutory~~, state income taxes, and the effect of the enacted UK corporate tax rate increase on the remeasurement of deferred taxes.

For the three and six months ended June 30, 2020, the effective tax rate on pre-tax income was 18.9% and 28.6%, respectively. The Company’s effective tax rate for both tax periods differed from the U.S. statutory income tax rate of ~~35.0%~~21% 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~~benefits from differences in ~~tax~~ bases in foreign jurisdictions, ~~and a tax benefit from~~increases to the ~~filing of amended returns, which was partially offset with a~~ valuation allowance, ~~established~~return to provision adjustments and accruals 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~~positions.

Table 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.Contents

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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were as follows (dollars in ~~thousands)~~millions):


	Pension Benefits				Other Benefits
	Three months ended June 30,				Three months ended June 30,
	2021		2020		2021		2020
Service cost	$	5	$	4	$	1	$	1
Interest cost	1		1		1		1
Expected return on plan assets	(3)		(3)		0		0
Amortization of prior service cost (credit)	0		0		(1)		(1)
Amortization of prior actuarial losses	2		1		1		1
Net periodic benefit cost	$	5	$	3	$	2	$	2


	Pension Benefits				Other Benefits
	Six months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Service cost	$	9	$	7	$	2	$	1
Interest cost	2		3		1		2
Expected return on plan assets	(5)		(5)		0		0
Amortization of prior service cost (credit)	0		0		(1)		(1)
Amortization of prior actuarial losses	3		2		1		1
Net periodic benefit cost	$	9	$	7	$	3	$	3

11. Reinsurance

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

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

~~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~~June 30, ~~2017~~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~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, 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.~~

~~Table of Contents~~

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~~June 30, ~~2017 and~~2021 or December 31, ~~2016~~2020 (dollars in ~~thousands)~~millions):


		September 30, 2017				December 31, 2016						June 30, 2021				December 31, 2020
Reinsurer	A.M. Best Rating	Amount		% of Total		Amount		% of Total		Reinsurer	A.M. Best Rating	Amount		% of Total		Amount		% of Total
Reinsurer A	A+	$	291,115	37.4		$	240,894	35.2	%	Reinsurer A	A+	$	476	43.5	%	$	420	42.7	%
Reinsurer B	A+	203,584		26.1		183,881		26.9		Reinsurer B	A+	225		20.6		216		22.0
Reinsurer C	A+	65,528		8.4		68,832		10.1		Reinsurer C	A	67		6.1		64		6.5
Reinsurer D	A++	40,860		5.2		36,202		5.3		Reinsurer D	A++	66		6.0		55		5.6
Reinsurer E	A+	40,387		5.2		35,484		5.2		Reinsurer E	A+	50		4.6		46		4.7
Other reinsurers		137,644		17.7		118,679		17.3		Other reinsurers		209		19.2		182		18.5
Total		$	779,118	100.0	%	$	683,972	100.0	%	Total		$	1,093	100.0	%	$	983	100.0	%

Included in the total reinsurance ceded receivables balance were ~~$268.1~~$254 million and ~~$242.0~~$278 million of claims recoverable, of which ~~$0.9~~$15 million and ~~$4.0~~$10 million were in excess of 90 days past due, as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

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~~12.~~	~~New Accounting Standards~~

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):


	Six Months Ended June 30,
	2021		2020
Balance, beginning of period	$	7,556	$	6,786
Less: reinsurance recoverable	(641)		(564)
Net balance, beginning of period	6,915		6,222
Incurred:
Current year	7,631		5,740
Prior years	(122)		59
Total incurred	7,509		5,799
Payments:
Current year	(2,747)		(1,332)
Prior years	(4,358)		(3,903)
Total payments	(7,105)		(5,235)
Other changes:
Interest accretion	20		18
Foreign exchange adjustments	(38)		(142)
Total other changes	(18)		(124)

Net balance, end of period	7,302		6,662
Plus: reinsurance recoverable	674		633
Balance, end of period	$	7,976	$	7,295

Incurred claims associated with prior periods are primarily due to events, related to long-duration business, which were incurred in prior periods but were reported in the current period, and to a lesser extent, the development of short-duration business claims for prior years being different than were anticipated when the liabilities for unpaid claims were originally estimated. These trends have been considered in establishing the current year liability for unpaid claims.

13. Financing Activities

On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face amount of $600 million. This security has been registered with the Securities and Exchange Commission. The net proceeds were approximately $593 million and were used in part to repay the Company’s $400 million 5.000% Senior Notes that matured in June 2021, and the remainder was used for general corporate purposes. Capitalized issue costs were approximately $5 million.

14. 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

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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.


Description	Date of Adoption	Effect on the Consolidated Financial Statements
Standards adopted:
Financial Instruments – Credit Losses This guidance adds to U.S. GAAP an impairment model, known as 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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Description	Anticipated Date of Adoption	Effect 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 is 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. ~~The~~Forward-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 ~~inherently~~based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements are not a guarantee of future performance and are subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.

~~Numerous important factors~~The effects of the COVID-19 pandemic and the response thereto on economic conditions, the financial markets and insurance risks, and the resulting effects on the Company’s financial results, liquidity, capital resources, financial metrics, investment portfolio and stock price, could cause actual results and events to differ materially from those expressed or implied by forward-looking statements. Additionally, numerous other important factors (whether related to, resulting from or exacerbated by the COVID-19 pandemic or otherwise) could also cause results and events to differ materially from those expressed or implied by forward-looking statements, including, without ~~limitation,~~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 analysis~~action by regulators who have authority over the Company’s reinsurance operations in the jurisdictions in which it operates, (8) the effect of the Company parent’s status as an insurance holding company and ~~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 ~~availability~~impairment of other financial institutions and ~~cost of collateral necessary for regulatory reserves~~its 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 ~~adequacy~~fact that the determination of ~~reserves, resources~~allowances 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 ~~effect~~effects of the ~~Company’s status as an insurance holding company~~Tax Cuts and ~~regulatory restrictions on its ability to pay principal~~Jobs 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 ~~obligations~~obligation to update these forward-looking statements, even though the Company’s situation may change in the future. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to see Item 1A – “Risk Factors” in the ~~2016~~2020 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 of~~among the leading global providers of life ~~reinsurers in North America based on premiums~~reinsurance and ~~the amount~~financial solutions, with $3.5 trillion of life reinsurance in force ~~providing traditional reinsurance~~ and ~~financial solutions to its clients.~~assets of $88.9 billion as of June 30, 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 ~~premium~~revenue levels can be significantly influenced by currency fluctuations, large transactions, mix of business and reporting practices of ceding companies, and therefore may fluctuate from period to period. 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, allowance for credit losses 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.”

~~Consolidated~~Critical Accounting Policies

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, allowance for credit losses and impairments to specific investments;

Valuation of embedded derivatives; and

Income taxes.

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

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, allowance for credit losses 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 ~~2016~~2020 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, the Company’s clients’ ability to write new business in this environment may result in a slowdown in 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. The U.S. is the key driver of mortality claim costs followed by the UK, India, South Africa and Canada. For the six month period ended June 30, 2021, the Company estimates it has incurred approximately $595 million of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $352 million of that amount being associated with the U.S. and Latin America Traditional segment. The Company has updated the range of COVID-19 mortality claim cost estimates relative to the level of general population deaths. The U.S. range was lowered reflecting developing data and go forward expectations. The ranges for the UK and Canada were widened, reflective of our experience as well as the expectation that a lower number of COVID-19 general population deaths will result in more variability in the relationship to claims costs. The Company estimates that every additional 10,000 population deaths in the U.S., UK, or Canada as a result of COVID-19 would result in the following corresponding excess mortality claims of approximately:

•$10 million to $20 million in the U.S.;

•$4 million to $8 million in the UK; and

•$10 million to $20 million in Canada.

While the global financial markets have 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.


	Three months ended June 30,						Six months ended June 30,
	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:	(Dollars in millions, except per share data)
Net premiums	$	3,098	$	2,790	$	308	$	6,012	$	5,609	$	403
Investment income, net of related expenses	759		645		114		1,571		1,239		332




Investment related gains (losses), net	112		81		31		414		(204)		618
Other revenues	168		90		78		259		166		93
Total revenues	4,137		3,606		531		8,256		6,810		1,446
Benefits and Expenses:
Claims and other policy benefits	2,813		2,700		113		6,005		5,364		641
Interest credited	218		187		31		364		333		31
Policy acquisition costs and other insurance expenses	339		290		49		672		538		134
Other operating expenses	240		188		52		454		383		71
Interest expense	43		42		1		88		83		5
Collateral finance and securitization expense	2		4		(2)		5		10		(5)
Total benefits and expenses	3,655		3,411		244		7,588		6,711		877
Income before income taxes	482		195		287		668		99		569
Provision for income taxes	138		37		101		185		29		156
Net income	$	344	$	158	$	186	$	483	$	70	$	413
Earnings per share:
Basic earnings per share	$	5.06	$	2.49	$	2.57	$	7.11	$	1.12	$	5.99
Diluted earnings per share	$	5.02	$	2.48	$	2.54	$	7.06	$	1.11	$	5.95

Three months ended June 30, 2021 compared to three months ended June 30, 2020

The increase in income for the three months ended June 30, 2021, was primarily the result of:

•An increase in investment income and investment related gains (losses), net primarily due to an increase in variable investment income.

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•An increase in income before taxes generated by the Company’s Financial Solutions business in the U.S. and UK.

•Improved mortality experience in the U.S. and Latin America Traditional segment.

•The increase in income before taxes was partially offset by unfavorable mortality claims in the EMEA, Canada and Asia Pacific segments.

Six months ended June 30, 2021 compared to six months ended June 30, 2020

The increase in income for the six months ended June 30, 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 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.

•$177 million, pretax, of capital gains included in other investment related gains (losses), net associated with portfolio repositioning.

•Changes in fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment related gains by $66 million for the six month period ended June 30, 2021, compared to a decrease of $229 million for the six month period ended June 30, 2020.

•The increases in investment income and investment related gains (losses), net were partially offset by unfavorable claims, primarily in the EMEA and U.S. and Latin America segments.

•As discussed in the “Impacts of the COVID-19 Pandemic” above, the Company estimates it has incurred approximately $595 million, pretax, of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $352 million, pretax, in the U.S. and Latin America segment.

Foreign currency fluctuations can result in variances in financial statement line items. Foreign currency increased income before taxes for the three and six month periods ended June 30, 2021, by $14 million and $18 million, respectively, primarily due to the strengthening of the Great British Pound and Canadian Dollar compared to the U.S. Dollar.

Premiums and business growth

The increase in premiums during the three and six month period ended June 30, 2021, is primarily due to growth in life reinsurance in force. Consolidated assumed life insurance in force increased to $3,471.7 billion as of June 30, 2021, from $3,457.8 billion as of June 30, 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 a result of the ongoing COVID-19 pandemic. The Company added new business production, measured by face amount of insurance in force, of $220.9 billion, and $210.9 billion during the six months ended June 30, 2021 and 2020, respectively.

Investment income, net of related expenses and investment related gains (losses), net

The increase in investment income, net of related expenses is primarily attributable to the aforementioned accounting correction associated with equity method limited partnerships recorded in the first quarter of 2021, in addition to an increase in the average invested asset base and yield:

•The average invested assets at amortized cost, excluding spread business, totaled $33.3 billion for the six months ended June 30, 2021, compared to $30.0 billion for the six months ended June 30, 2020.

•The average yield earned on investments, excluding spread related business, was 4.64% and 4.07% for the three month period ended June 30, 2021 and 2020, respectively, and 5.15% and 4.07% for the six months ended June 30, 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 and 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.

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The increase in investment related gains (losses), net is primarily attributable to the following:

•During the three and six months ended June 30, 2021, the Company repositioned its portfolio generating capital gains of $23 million and $177 million, respectively.

•There were no material impairments or changes in allowance for credit losses on fixed maturities during the three months ended June 30, 2021 or June 30, 2020. During the six months ended June 30, 2021, the Company recognized a reduction of $3 million of impairments and change in allowance for credit losses on fixed maturities compared to an increase of $34 million during the first six months of 2020.

•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment related gains (losses), net by $16 million and $66 million for the three and six month period ended June 30, 2021, respectively, compared to an increase (decrease) of $1 million and $(229) million for the three and six month period ended June 30, 2020.

•Unrealized gains of $48 million and $155 million, including the previously mentioned correction recorded in the first quarter of 2021 of $70 million due to the change in fair value of certain cost method limited partnerships were recognized during the three and six month periods ended June 30, of 2021.

The effective tax rate on a consolidated basis was 28.5% and 18.9% for the three months ended June 30, 2021 and 2020, respectively, and 27.6% and 28.6% for the six months ended June 30, 2021 and 2020, respectively. See Note 9 – “Income Tax” in the Notes to Condensed Consolidated Financial Statements for additional information on the Company’s consolidated effective tax rates.

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 June 30,						Six Months Ended June 30,
	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Modco/Funds withheld:
Unrealized gains (losses)	$	16	$	1	$	15	$	66	$	(229)	$	295
Deferred acquisition costs/retrocession	(7)		2		(9)		(23)		115		(138)
Net effect	9		3		6		43		(114)		157
EIAs:
Unrealized gains (losses)	3		(7)		10		33		(19)		52
Deferred acquisition costs/retrocession	(1)		2		(3)		(17)		10		(27)
Net effect	2		(5)		7		16		(9)		25
Guaranteed minimum benefit riders:
Unrealized gains (losses)	(16)		107		(123)		1		(21)		22
Related freestanding derivatives, net of deferred acquisition costs/retrocession	20		(70)		90		(33)		94		(127)
Net effect	4		37		(33)		(32)		73		(105)
Total net effect after freestanding derivatives	$	15	$	35	$	(20)	$	27	$	(50)	$	77

Table of Contents

Results of Operations by Segment

U.S. and Latin America Operations

The U.S. and Latin America operations include business generated by ~~its~~the 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 reinsurance~~mortality 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 ~~provides~~includes 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 Reinsurance~~Capital Solutions within the Financial Solutions segment primarily involves assisting ceding companies in meeting applicable regulatory requirements by enhancing the ceding companies’ financial strength and regulatory surplus position through relatively low risk reinsurance and other transactions. Typically, 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.~~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

~~Table of Contents~~

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~~The following table summarizes income before income taxes ~~increased by $69.8 million, or 38.8%, and $144.5 million, or 33.1%,~~ for the ~~three~~Company’s U.S. and ~~nine months ended September 30, 2017, as compared to~~Latin America operations for the ~~same~~ periods ~~in 2016.~~ presented:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	1,593	$	1,469	$	124	$	3,025	$	2,854	$	171
Investment income, net of related expenses	509		420		89		974		815		159
Investment related gains (losses), net	31		22		9		31		(145)		176
Other revenues	116		54		62		174		113		61
Total revenues	2,249		1,965		284		4,204		3,637		567
Benefits and expenses:
Claims and other policy benefits	1,439		1,607		(168)		3,239		3,027		212
Interest credited	200		157		43		331		305		26
Policy acquisition costs and other insurance expenses	238		204		34		469		341		128
Other operating expenses	51		38		13		99		82		17
Total benefits and expenses	1,928		2,006		(78)		4,138		3,755		383
Income before income taxes	$	321	$	(41)	$	362	$	66	$	(118)	$	184

The increase in income before income taxes ~~for the third quarter was primarily due to strong mortality experience~~ in the second quarter of 2021 was the result of a nine percent decrease in claims and other policy benefits in the U.S. Traditional segment, strong performance from Financial Solutions related to both experience gains, an increase in transaction and other fees, as well as higher variable investment ~~income. The increase was offset somewhat by a decrease~~income from real estate joint ventures and unrealized gains from investments in ~~investment related gains in the Financial Solutions segment.~~limited partnerships. The increase in income before income taxes for the first ~~nine~~six months of 2021 is also attributable to the ~~result~~impact of ~~several factors, including changes~~embedded derivatives in U.S. Financial Solutions. Partially offsetting the six month increase were realized capital losses compared to realized capital gains in 2020 and significantly higher claims in U.S. Mortality Markets. The significant increase in claims in the ~~value of~~U.S. Mortality Markets during the ~~embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld,~~first six months compared to the same period in 2020 was primarily related to an increase in ~~investment related capital gains~~large and ~~additional variable investment income.~~non-large claim frequency within the individual mortality business in the first three months of 2021 as compared to the same period in 2020. 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.

Table of Contents

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2021			2020			2021 vs 2020		2021			2020			2021 vs 2020
Revenues:
Net premiums	$	1,578		$	1,454		$	124	$	2,997		$	2,827		$	170
Investment income, net of related expenses	233			177			56		440			338			102
Investment related gains (losses), net	1			7			(6)		7			—			7
Other revenues	4			4			—		9			10			(1)
Total revenues	1,816			1,642			174		3,453			3,175			278
Benefits and expenses:
Claims and other policy benefits	1,418			1,558			(140)		3,158			2,925			233
Interest credited	18			18			—		35			37			(2)
Policy acquisition costs and other insurance expenses	206			195			11		388			370			18
Other operating expenses	39			29			10		75			63			12
Total benefits and expenses	1,681			1,800			(119)		3,656			3,395			261
Income (loss) before income taxes	$	135		$	(158)		$	293	$	(203)		$	(220)		$	17
Key metrics:
Life insurance in force									$1,619.4 billion			$1,620.5 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	89.9		%	107.2		%			105.4		%	103.5		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	13.1		%	13.4		%			12.9		%	13.1		%
Other operating expenses as a percentage of net premiums	2.5		%	2.0		%			2.5		%	2.2		%

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.

~~Income~~increase in income before income taxes in the second quarter for the U.S. and Latin America Traditional segment ~~increased~~was primarily the result of a nine percent decrease in claims in the U.S. Mortality Market primarily due to lower claims attributable to COVID-19 or COVID-19 related factors and an increase in investment income. The decrease in the loss before income taxes for six months ended June 30, 2021, as compared the same period in 2020 is primarily attributable an increase in investment income partially offset by ~~$83.4 million,~~an increase in claims attributable to COVID-19 or ~~108.2%, and $41.5 million, or 17.3%,~~COVID-19 related factors.

Revenues

•The increase in net premiums for the three and ~~nine months~~six month periods ended ~~September~~June 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 months2021, was primarily due to ~~higher variable investment.~~

~~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,~~organic growth as ~~compared to the same periods in 2016. The increases were primarily due to expected organic premium growth.~~well as new sales. The segment added new ~~individual~~ life business production, measured by face amount of insurance in force, of ~~$24.8~~$35.7 billion and ~~$19.7~~$25.3 billion during the second quarter of 2021 and 2020, respectively, and $64.2 and $59.3 billion during the first six months of 2021 and 2020, respectively. Also contributing to the premium growth was the restructure and extension of an existing transaction and the partial recapture of a retroceded block of individual life business.

•The increase in net investment income for the ~~third quarter and $75.1 billion and $93.0 billion for the first nine months of 2017 and 2016, respectively.~~

~~Net investment income increased $24.0 million, or 14.3%, and $39.5 million, or 7.7%, for the~~ three and ~~nine~~ ~~months~~six month periods ended ~~September~~June 30, ~~2017, as compared to the same periods in 2016. The increases were~~2021, was primarily due to higher variable investment ~~income. Investment related~~income associated with investments in limited partnerships and private equity funds primarily generated from unrealized gains ~~(losses), net increased $1.9 million~~in the underlying investments and ~~$6.2 million for the three~~higher variable investment income from real estate joint ventures.

Benefits and ~~nine months ended September 30, 2017, as compared to the same periods in 2016.~~expenses

~~Table of Contents~~

~~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 decrease in the loss ratio for the ~~third quarter of 2017,~~three months ended June 30, 2021, as compared to the same period in ~~2016~~2020, was primarily due to favorable claims experience in the individual mortality ~~experience, specifically~~line of business, attributed primarily to fewer claims from COVID-19 or COVID-19 related factors than in 2020. The increase in the ~~lower number and average size of large claims. For~~loss ratio for the ~~first nine~~six months ~~of 2017,~~ended June 30, 2021, as compared to the same period in ~~2016,~~2020, was primarily due to unfavorable large and non-large claims experience in the individual mortality ~~experience was relatively consistent.~~

~~Interest credited expense decreased $1.1~~line of business, attributed to the COVID-19 pandemic. As explained above, while the cause of death is not yet available for all claims, the Company estimates that approximately $352 million ~~or 1.7%,~~of excess claims for the ~~nine~~six months ended ~~September~~June 30, ~~2017, as compared~~2021, were attributable to COVID-19.

•The increase in other operating expenses for the ~~same period~~three and six months ended June 30, 2021, was primarily due to an increase in ~~2016. Interest credited in this segment relates to amounts credited on cash value products which also have a significant mortality component. Income~~incentive compensation expense.

Table of Contents

Financial Solutions


For the three months ended June 30,	2021						2020						2021 vs 2020
	Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total
(dollars in millions)
Revenues:
Net premiums	$	15	$	—	$	15	$	15	$	—	$	15	$	—	$	—	$	—
Investment income, net of related expenses	276		—		276		241		2		243		35		(2)		33
Investment related gains (losses), net	30		—		30		15		—		15		15		—		15
Other revenues	85		27		112		24		26		50		61		1		62
Total revenues	406		27		433		295		28		323		111		(1)		110
Benefits and expenses:
Claims and other policy benefits	21		—		21		49		—		49		(28)		—		(28)
Interest credited	182		—		182		139		—		139		43		—		43
Policy acquisition costs and other insurance expenses	32		—		32		7		2		9		25		(2)		23
Other operating expenses	8		4		12		7		2		9		1		2		3
Total benefits and expenses	243		4		247		202		4		206		41		—		41
Income before income taxes	$	163	$	23	$	186	$	93	$	24	$	117	$	70	$	(1)	$	69


For the six months ended June 30,	2021						2020						2021 vs 2020
	Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total
(dollars in millions)
Revenues:
Net premiums	$	28	$	—	$	28	$	27	$	—	$	27	$	1	$	—	$	1
Investment income, net of related expenses	533		1		534		474		3		477		59		(2)		57
Investment related gains (losses), net	24		—		24		(145)		—		(145)		169		—		169
Other revenues	111		54		165		52		51		103		59		3		62
Total revenues	696		55		751		408		54		462		288		1		289
Benefits and expenses:
Claims and other policy benefits	81		—		81		102		—		102		(21)		—		(21)
Interest credited	296		—		296		268		—		268		28		—		28
Policy acquisition costs and other insurance expenses	79		2		81		(31)		2		(29)		110		—		110
Other operating expenses	17		7		24		14		5		19		3		2		5
Total benefits and expenses	473		9		482		353		7		360		120		2		122
Income before income taxes	$	223	$	46	$	269	$	55	$	47	$	102	$	168	$	(1)	$	167

Asset-Intensive Reinsurance

The increase 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 ~~Solutions~~Solutions’ Asset-intensive segment for the three months ended June 30, 2021 was primarily ~~involves assuming~~due to an increase in transaction and other fees, favorable policyholder experience including impacts from COVID-19 and higher investment ~~risk within underlying annuities~~related gains (losses), net in coinsurance and ~~corporate-owned life insurance policies. Most of these agreements are coinsurance, coinsurance with~~ funds withheld ~~or modco.~~portfolios. The ~~Company recognizes profits or losses~~increase for the six months ended June 30, 2021, was also due to the net increase in fair value of the embedded derivatives.

The invested asset base supporting this segment increased to $26.7 billion as of June 30, 2021, from $23.5 billion as of June 30, 2020.

•The increase in the asset base was primarily due to growth from new transactions.

•As of June 30, 2021 and 2020, $4.8 billion and $3.1 billion, respectively, of the ~~spread between the investment income earned and the~~invested assets were funds withheld at interest, ~~credited on the underlying deposit liabilities, income~~of which greater than 90% was associated with ~~longevity risk, and fees associated with variable annuity account values and guaranteed investment contracts.~~two clients.

Table of Contents

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 annuities 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.


(dollars in millions)	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Revenues:
Total revenues	$	406	$	295	$	696	$	408
Less:
Embedded derivatives – modco/funds withheld treaties	14		(7)		59		(230)
Guaranteed minimum benefit riders and related free standing derivatives	—		39		(65)		113
Revenues before certain derivatives	392		263		702		525
Benefits and expenses:
Total benefits and expenses	243		202		473		353
Less:
Embedded derivatives – modco/funds withheld treaties	6		(2)		23		(115)
Guaranteed minimum benefit riders and related free standing derivatives	(4)		2		(33)		40
Equity-indexed annuities	(2)		5		(16)		9
Benefits and expenses before certain derivatives	243		197		499		419
Income before income taxes:
Income before income taxes	163		93		223		55
Less:
Embedded derivatives – modco/funds withheld treaties	8		(5)		36		(115)
Guaranteed minimum benefit riders and related free standing derivatives	4		37		(32)		73
Equity-indexed annuities	2		(5)		16		(9)
Income before income taxes and certain derivatives	$	149	$	66	$	203	$	106

~~Table of Contents~~

(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 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~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~~$8 million and ~~$18.3~~$(5) million for the ~~third~~second quarter and ~~$56.0~~$36 million and ~~$9.0~~$(115) million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~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 ~~nine~~second quarter was primarily due to amortization of the underlying investments within the funds withheld. The increase in income for the six months ended ~~September~~June 30, ~~2017~~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.

Table of Contents

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~~Changes in fair values of the embedded derivatives on guaranteed minimum benefits are net of an increase (decrease) in investment related gains (losses), net of $(8) million and $29 million for the second quarter and $(63) million and $127 million for the six months ended June 30, 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, ~~decreased~~increased (decreased) income before income taxes by ~~$11.7~~$4 million and ~~$9.5~~$37 million for the ~~third~~second quarter and ~~$14.4~~$(32) million and ~~$21.3~~$73 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The increase in income for the three months ended June 30, 2021, was primarily due to favorable hedging impacts. The decrease in income for ~~all periods~~the six months ended June 30, 2021, was primarily due to a decrease in the ~~annual update~~credit 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, net of related impact on deferred acquisition expenses.

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)~~$2 million and ~~$(0.5)~~$(5) million for the ~~third~~second quarter and ~~$13.6~~$16 million and ~~$(6.4)~~$(9) million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~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 nine~~six months of ~~2017~~2021 was primarily due to ~~declining long-term~~an increase in risk free interest ~~rates. The decrease in income for~~rates which has the ~~first nine months~~impact of ~~2016 was primarily due to increasing short-term interest rates.~~

~~Table~~lowering the fair value of ~~Contents~~

the liability.

The changes in derivatives discussed above are considered unrealized by management and do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to, interest rate movements (including benchmark rates and credit spreads), credit valuation adjustments, implied volatility and equity market performance, all of which are factors in the 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:

•Income before income taxes and certain derivatives ~~decreased~~increased by ~~$14.3~~$83 million and ~~increased by $14.0~~$97 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same periods in ~~2016.~~2020. The ~~decrease in the third quarter was~~increases were primarily due to ~~lower~~an increase in transaction and other fees, favorable policyholder experience including impacts from COVID-19 and higher investment related gains (losses), net ~~of the corresponding impact to deferred acquisition costs, associated with~~in 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~~$129 million and ~~$121.8~~by $177 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, respectively, as compared to the same periods in ~~2016.~~2020. The ~~increase in the third quarter was~~increases were 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)~~revenue associated with ~~coinsurance and funds withheld portfolios. The increase in the first nine months was primarily due to the change~~recently executed transactions, increases 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~~$46 million and ~~$107.8~~$80 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same period in ~~2016.~~2020. The ~~increase~~increases in the ~~third~~second 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~~six months ~~was~~were primarily due to higher interest credited associated with the reinsurance of EIAs due to improved equity market performance and ~~the corresponding impact to deferred acquisition costs from investment related gains (losses) in coinsurance and funds withheld portfolios.~~benefits associated with recently executed transactions. The effect on interest credited related to equity options is substantially offset by a corresponding ~~change~~increase 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 within~~Income 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 the~~Capital 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~~decreased $1 million, or ~~57.3%~~4.2%, and ~~$15.0~~$1 million, or ~~33.5%~~2.1%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2021, as compared to the same periods in ~~2016.~~2020. The ~~increases~~decreases were primarily due to the termination of transactions, partially offset by 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.

•At June 30, 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 $22.3 billion and $19.4 billion, respectively.

Table of Contents

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 as~~and to a lesser extent creditor, group life and health, critical illness and disability reinsurance. Creditor insurance covers the outstanding balance on personal, mortgage or commercial loans in the event of death, disability or critical illness and is generally shorter in duration than traditional individual life insurance. The Canada Financial Solutions segment consists of longevity and ~~financial reinsurance.~~capital solutions.


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	324	$	274	$	50	$	627	$	555	$	72
Investment income, net of related expenses	63		50		13		123		100		23
Investment related gains (losses), net	—		6		(6)		2		(6)		8
Other revenues	5		3		2		9		4		5
Total revenues	392		333		59		761		653		108
Benefits and expenses:
Claims and other policy benefits	298		233		65		582		473		109
Interest credited	—		—		—		—		—		—
Policy acquisition costs and other insurance expenses	47		43		4		92		88		4
Other operating expenses	11		9		2		21		18		3
Total benefits and expenses	356		285		71		695		579		116
Income before income taxes	$	36	$	48	$	(12)	$	66	$	74	$	(8)

(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 expenses 51,593
1,120
52,713
45,239
1,037
46,276
Investment related gains (losses), net 2,380
—
2,380
3,832
—
3,832
Other revenues 1,281
1,436
2,717
734
1,376
2,110
Total revenues 281,095
12,430
293,525
280,959
12,359
293,318
Benefits and expenses:
Claims and other policy benefits 193,978
7,170
201,148
175,618
10,567
186,185
Interest credited 6
—
6
8
—
8
Policy acquisition costs and other insurance expenses 50,023
221
50,244
61,019
285
61,304
Other operating expenses 8,299
567
8,866
10,039
347
10,386
Total benefits and expenses 252,306
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 expenses 140,929
3,515
144,444
134,121
1,649
135,770
Investment related gains (losses), net 8,821
—
8,821
7,757
—
7,757
Other revenues 1,910
4,127
6,037
(731 ) 4,159
3,428
Total revenues 814,643
36,240
850,883
827,871
34,897
862,768
Benefits and expenses:
Claims and other policy benefits 566,227
21,888
588,115
524,497
29,005
553,502
Interest credited 15
—
15
17
—
17
Policy acquisition costs and other insurance expenses 143,302
571
143,873
178,178
1,002
179,180
Other operating expenses 24,146
1,292
25,438
27,500
1,010
28,510
Total benefits and expenses 733,690
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 nine months is primarily due to unfavorable traditional individual life mortality experience compared to favorable experience in the same periods in 2016. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in income before income taxes of $1.5 million and $1.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same periods in ~~2016.~~

~~Table of Contents~~

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 decreases in net premiums were2020, is primarily due to ~~an anticipated decrease in creditor premiums of $21.0 million~~increased claims and ~~$60.4 million for~~other policy benefits associated with the ~~third quarter and first nine months, respectively.~~COVID-19 pandemic. These ~~decreases were~~increases are partially offset by an increase in ~~traditional individual life business~~net premiums ~~from annually increasing premium rates on yearly renewable term treaties~~in the Canada Traditional segment and ~~favorable~~investment income.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a $4 million increase in income before income taxes for both the three and six months ended June 30, 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency ~~exchange fluctuation. Foreign currency exchange fluctuations~~fluctuations.

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2021			2020			2021 vs 2020		2021			2020			2021 vs 2020
Revenues:
Net premiums	$	301		$	254		$	47	$	581		$	514		$	67
Investment income, net of related expenses	63			50			13		123			99			24
Investment related gains (losses), net	—			6			(6)		2			(6)			8
Other revenues	2			1			1		3			—			3
Total revenues	366			311			55		709			607			102
Benefits and expenses:
Claims and other policy benefits	277			216			61		543			436			107
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	46			42			4		91			87			4
Other operating expenses	11			9			2		19			17			2
Total benefits and expenses	334			267			67		653			540			113
Income (loss) before income taxes	$	32		$	44		$	(12)	$	56		$	67		$	(11)
Key metrics:
Life insurance in force									$468.3 billion			$409.2 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	92.0		%	85.0		%			93.5		%	84.8		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	15.3		%	16.5		%			15.7		%	16.9		%
Other operating expenses as a percentage of net premiums	3.7		%	3.5		%			3.3		%	3.3		%

The decrease in ~~the Canadian dollar resulted in an increase in net premiums of approximately $9.0 million and $7.0 million~~income before income taxes for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, as~~2021, is primarily due to unfavorable individual life mortality experience compared to the same ~~periods~~period in ~~2016.~~2020, partially offset by an increase in investment income.

~~Net~~

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Revenues

•The segment added new life business production, measured by face amount of insurance in force, of $8.5 billion and $9.1 billion for the second quarter of 2021 and 2020, respectively, and $22.7 billion, and $21.3 billion during the first six months of 2021 and 2020, respectively.

•The increase in net investment income ~~increased $6.4 million, or 14.0%, and $6.8 million, or 5.1%,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, as compared~~2021, was primarily due to ~~the same periods in 2016. The increases in~~increased variable 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 ~~and~~partially offset by a decline in interest rates.

•The decrease in investment related gains (losses), net in the second quarter of 2021 is primarily attributable to an increase in ~~investment yields from a higher level~~the fair value of ~~variable investment income. Foreign currency exchange fluctuation~~credit default derivatives in the ~~Canadian dollar resulted~~second quarter of 2020 due to a significant tightening 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~~credit spreads, compared to ~~the same periods~~an immaterial change in ~~2016.~~

Other revenues increased by $0.5 million and $2.6 million for the three and nine months ended September 30, 2017, as compared to the same periods in 2016. 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 businesscredit spreads during the second quarter of ~~2017.~~

~~Loss ratios for this segment were 85.9% and 76.0%~~2021. The increase for the ~~third quarter and 85.4% and 76.4% for the nine~~six months ended ~~September~~June 30, ~~2017~~2021, is due to a modest increase in the fair value of credit default derivatives during the first six months of 2021, compared to a decrease in the fair value of credit default derivatives during the first six months of 2020 due to the significant widening of credit spreads in the first quarter of 2020.

Benefits and ~~2016, respectively.~~ expenses

•The ~~increases~~increase in the loss ratio for the three and ~~nine~~six months ~~of 2017,~~ended June 30, 2021, as compared to the same periods in ~~2016, are~~2020, was primarily due to unfavorable ~~traditional life mortality experience compared to favorable~~claims experience in the ~~same periods in 2016 and a decrease in creditor~~individual mortality line of business, ~~premiums. Loss ratios~~attributed primarily to the COVID-19 pandemic. While the cause of death is not yet available for all claims, the Company estimates that approximately $49 million of excess claims 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~~six months ended ~~September~~June 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 expected2021, were attributable to be higher than historical ratios. The nature of permanent level premium policies requires the Company to set up actuarial liabilities and invest the amounts received in excess of early-year claims costs to fund claims in later years when premiums, by design, continue to be level as compared to expected increasing mortalityCOVID-19 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 compared 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 related factors.

Financial Solutions Reinsurance


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	23	$	20	$	3	$	46	$	41	$	5
Investment income, net of related expenses	—		—		—		—		1		(1)
Investment related gains (losses), net	—		—		—		—		—		—
Other revenues	3		2		1		6		4		2
Total revenues	26		22		4		52		46		6
Benefits and expenses:
Claims and other policy benefits	21		17		4		39		37		2
Interest credited	—		—		—		—		—		—
Policy acquisition costs and other insurance expenses	1		1		—		1		1		—
Other operating expenses	—		—		—		2		1		1
Total benefits and expenses	22		18		4		42		39		3
Income (loss) before income taxes	$	4	$	4	$	—	$	10	$	7	$	3

Income before income taxes ~~increased by $3.3 million and $8.6 million~~was flat for the ~~three and nine months ended September 30, 2017, as~~second quarter of 2021 compared to the same ~~periods~~period in ~~2016.~~2020. 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 ~~of $0.2 million for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016.~~

~~Net premiums decreased $0.1 million, or 0.7%, and $0.5 million, or 1.7%,~~ for the ~~three and nine~~first six months ~~ended September 30, 2017, as compared to~~of 2021 is primarily the ~~same periods in 2016. Foreign currency exchange fluctuations in the Canadian dollar resulted in an increase in net premiums~~result of ~~approximately $0.4 million for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016.~~favorable mortality experience on longevity business.

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.

Table of Contents

~~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 includes~~operations 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 Emirates~~Kingdom (“~~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.


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	517	$	409	$	108	$	1,034	$	852	$	182
Investment income, net of related expenses	74		79		(5)		142		126		16
Investment related gains (losses), net	2		16		(14)		18		10		8
Other revenues	5		3		2		7		4		3
Total revenues	598		507		91		1,201		992		209
Benefits and expenses:
Claims and other policy benefits	456		314		142		1,000		701		299
Interest credited	2		16		(14)		1		(1)		2
Policy acquisition costs and other insurance expenses	28		33		(5)		59		64		(5)
Other operating expenses	41		30		11		78		67		11
Total benefits and expenses	527		393		134		1,138		831		307
Income before income taxes	$	71	$	114	$	(43)	$	63	$	161	$	(98)

(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 expenses 14,727
30,892
45,619
13,067
33,187
46,254
Investment related gains (losses), net —
1,192
1,192
—
8,159
8,159
Other revenues 2,034
5,663
7,697
489
11,388
11,877
Total revenues 360,972
77,041
438,013
289,070
99,752
388,822
Benefits and expenses:
Claims and other policy benefits 285,071
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 expenses 35,751
327
36,078
14,133
(304 ) 13,829
Other operating expenses 24,729
7,638
32,367
24,659
4,925
29,584
Total benefits and expenses 345,551
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 expenses 41,032
88,602
129,634
38,556
95,288
133,844
Investment related gains (losses), net 7
8,225
8,232
5
8,623
8,628
Other revenues 4,206
13,799
18,005
2,975
18,466
21,441
Total revenues 1,024,978
230,435
1,255,413
880,346
248,485
1,128,831
Benefits and expenses:
Claims and other policy benefits 846,476
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 expenses 66,263
1,070
67,333
46,465
226
46,691
Other operating expenses 71,488
22,911
94,399
74,306
16,414
90,720
Total benefits and expenses 984,227
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 decreases 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~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same periods in ~~2016.~~ 2020, were primarily due to unfavorable mortality experience mainly from the impact of COVID-19. These decreases were partially offset by increases in net premiums.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency exchange fluctuations resulted in an increase in income before income taxes of $6 million for the three and six months ended June 30, 2021, as compared to the same periods in 2020. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2021			2020			2021 vs 2020		2021			2020			2021 vs 2020
Revenues:
Net premiums	$	433		$	352		$	81	$	871		$	742		$	129
Investment income, net of related expenses	24			18			6		44			37			7
Investment related gains (losses), net	—			—			—		—			—			—
Other revenues	2			1			1		1			(1)			2
Total revenues	459			371			88		916			778			138
Benefits and expenses:
Claims and other policy benefits	414			301			113		883			635			248
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	27			32			(5)		56			62			(6)
Other operating expenses	30			22			8		57			48			9
Total benefits and expenses	471			355			116		996			745			251
Income (loss) before income taxes	$	(12)		$	16		$	(28)	$	(80)		$	33		$	(113)
Key metrics:
Life insurance in force									$861.4 billion			$772.8 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	95.6		%	85.5		%			101.4		%	85.6		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	6.2		%	9.1		%			6.4		%	8.4		%
Other operating expenses as a percentage of net premiums	6.9		%	6.3		%			6.5		%	6.5		%

Table of Contents

Income before income taxes decreased for the three and six months ended June 30, 2021, as compared to the same periods in 2020. The decreases were the result of poor mortality experience, primarily due to the impact of COVID-19. The decreases in both periods were partially offset by increases in net premiums.

Revenues

•The increase in net premiums for the three and six months ended June 30, 2021, as compared to the same periods in 2020, 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 $87.8 billion and $65.1 billion during the second quarter of 2021 and 2020, respectively, and $115.4 billion, and $98.0 billion during the six months ended June 30, 2021, and the same period in 2020, respectively.

Benefits and expenses

•The increase in the loss ratio for the second quarter and first six months of 2021 is due to unfavorable mortality experience primarily attributable to COVID-19. While the cause of death is not available for all claims, the Company estimates that approximately $130 million of excess claims for the six months ended June 30, 2021, were attributable to COVID-19 or COVID-19 related factors.

•The decrease in the ratio of policy acquisition costs and other insurance expense to net premium in the second quarter and first six months of 2021 is due to an overall increase in premiums and transactions with lower or no acquisition costs.

•The increase in other operating expenses for the three and six months ended June 30, 2021, was primarily due to an increase in incentive compensation expense.

Financial Solutions


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	84	$	57	$	27	$	163	$	110	$	53
Investment income, net of related expenses	50		61		(11)		98		89		9
Investment related gains (losses), net	2		16		(14)		18		10		8
Other revenues	3		2		1		6		5		1
Total revenues	139		136		3		285		214		71
Benefits and expenses:
Claims and other policy benefits	42		13		29		117		66		51
Interest credited	2		16		(14)		1		(1)		2
Policy acquisition costs and other insurance expenses	1		1		—		3		2		1
Other operating expenses	11		8		3		21		19		2
Total benefits and expenses	56		38		18		142		86		56
Income (loss) before income taxes	$	83	$	98	$	(15)	$	143	$	128	$	15

The decrease in income before income taxes for the ~~third~~second quarter ~~was~~of 2021 compared to the same period in 2020 is primarily due to ~~lower payout annuity~~decreases in investment income, ~~partially offset by favorable mortality experience.~~net of related expenses and investment related gains (losses), net. The increase in income before income taxes for the first ~~nine~~six months of 2021 was primarily due to ~~favorable individual mortality~~new business activity and ~~longevity experience. Foreign currency exchange fluctuations resulted~~investment related gains on the investments supporting the segment’s payout annuity business.

Revenues

•The increase in ~~an increase (decrease) in income before income taxes of $0.8 million and $(8.5) million~~net premiums for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same periods in ~~2016.~~2020 was primarily due to increased volumes of closed longevity block business.

~~Table of Contents~~

~~Traditional Reinsurance~~

~~Income before~~•The decrease in net investment 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~~and increase for six month ended June 30, ~~2017~~,2021, as compared to the same periods in ~~2016~~. 2020 was primarily related to decreases and increases in income associated with unit-linked policies which fluctuate with market performance and is offset by a decrease in interest credited.

•The decrease and increase in ~~income~~investment related gains (losses), net for the ~~third quarter~~three and six month periods, respectively, 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.~~

~~Net 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.

~~A portion~~fair market value 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~~CPI swap derivatives 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.future inflation expectations.

~~Policy acquisition costs~~Benefits 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 due to lower corporate overhead expense timing 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, partially offset by an increase in premiums from new transactions. Foreign currency exchange fluctuations increased (decreased) 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.

~~Table of Contents~~

~~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 period 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 decrease in the third quarter and first nine months was primarily due to the aforementioned new longevity retrocession treaty that cedes longevity risk to third parties, net of an increase in claims and other policy benefits ~~from new transactions. Foreign currency exchange fluctuations resulted~~was the result of increased volumes of closed longevity block business.

Table of Contents

•The increase in benefits and expenses was partially offset by a decrease in ~~claims and other policy benefits of approximately $9.6 million for the nine months ended September 30, 2017, as compared~~interest credited primarily attributable to the ~~same period~~sale of Leidsche, the Company’s subsidiary located 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.~~Netherlands that issued unit-linked products. Interest credited in this segment relates to amounts credited to the ~~contractholders~~contract holders of unit-linked products. This amount will fluctuate according to ~~contractholder~~contract 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 in some markets, group risks.~~


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	664	$	638	$	26	$	1,326	$	1,348	$	(22)
Investment income, net of related expenses	65		48		17		126		92		34
Investment related gains (losses), net	15		15		—		26		(18)		44
Other revenues	13		10		3		30		24		6
Total revenues	757		711		46		1,508		1,446		62
Benefits and expenses:
Claims and other policy benefits	620		546		74		1,184		1,163		21
Interest credited	15		11		4		30		24		6
Policy acquisition costs and other insurance expenses	52		39		13		106		102		4
Other operating expenses	51		42		9		100		85		15
Total benefits and expenses	738		638		100		1,420		1,374		46
Income before income taxes	$	19	$	73	$	(54)	$	88	$	72	$	16

(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 expenses 23,858
10,556
34,414
21,273
5,827
27,100
Investment related gains (losses), net —
758
758
—
6,108
6,108
Other revenues 871
5,599
6,470
1,923
6,359
8,282
Total revenues 561,660
16,932
578,592
427,647
19,037
446,684
Benefits and expenses:
Claims and other policy benefits 442,358
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 expenses 55,891
653
56,544
4,157
1,482
5,639
Other operating expenses 36,847
3,372
40,219
38,553
2,921
41,474
Total benefits and expenses 535,096
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

~~Table of Contents~~

(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 expenses 68,105
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 revenues 2,724
17,087
19,811
4,580
18,809
23,389
Total revenues 1,628,419
55,368
1,683,787
1,299,417
56,153
1,355,570
Benefits and expenses:
Claims and other policy benefits 1,221,091
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 expenses 180,007
4,111
184,118
116,432
4,436
120,868
Other operating expenses 105,747
10,472
116,219
109,661
10,727
120,388
Total benefits and expenses 1,506,845
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

Income 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 periods in 2016. •The decrease in income before income taxes for the ~~third quarter was~~three months ended June 30, 2021, is primarily due to ~~an increase~~unfavorable claims experience in ~~policy lapses on a financial solutions closed block of business in Japan~~Asia compared to the prior period, partially offset by ~~favorable results~~continued growth of Financial Solutions Reinsurance in ~~the traditional segment.~~Asia. The increase in income before income taxes for the first ~~nine~~six months ~~was~~is primarily ~~due~~attributable to ~~higher~~increases in investment income, ~~from offices in Asia driven~~net and investment related gains (losses), net partially offset by ~~business growth, most notably in Hong Kong and Southeast Asia. The prior-year period also included poor~~unfavorable claims experience in ~~Australia. The third quarter of 2016 also included a higher level of benefit expense associated with~~Asia compared to the ~~timing of client reporting on one large treaty in Hong Kong.~~ prior period.

•Foreign currency ~~exchange~~fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in ~~a decrease to~~an increase (decrease) in income before income taxes ~~totaling approximately $0.8~~of $(1) million and ~~$0.3~~$1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, as compared to the same periods in ~~2016.~~2020. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Table of Contents

Traditional Reinsurance

~~Income~~


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2021			2020			2021 vs 2020		2021			2020			2021 vs 2020
Revenues:
Net premiums	$	616		$	607		$	9	$	1,225		$	1,243		$	(18)
Investment income, net of related expenses	34			27			7		67			54			13
Investment related gains (losses), net	—			—			—		(1)			—			(1)
Other revenues	3			2			1		9			6			3
Total revenues	653			636			17		1,300			1,303			(3)
Benefits and expenses:
Claims and other policy benefits	578			514			64		1,096			1,069			27
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	41			34			7		84			83			1
Other operating expenses	46			41			5		91			80			11
Total benefits and expenses	665			589			76		1,271			1,232			39
Income (loss) before income taxes	$	(12)		$	47		$	(59)	$	29		$	71		$	(42)
Key metrics:
Life insurance in force									$516.1 billion			$649.5 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	93.8		%	84.7		%			89.5		%	86.0		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	6.7		%	5.6		%			6.9		%	6.7		%
Other operating expenses as a percentage of net premiums	7.5		%	6.8		%			7.4		%	6.4		%

The decrease in income before income taxes ~~increased by $6.7 million, or 34.0%, and $26.1 million, or 27.4%,~~is primarily the result of net unfavorable claims experience in Asia, primarily in India. The decrease for the first six months is also the result of year to date decreases in net premiums in Australia.

Table of Contents

Revenues

•The increase in net premiums for the three months ended June 30, 2021 as compared to the same period in 2020 is primarily the due to new business production partially offset by a reduction in premiums in Australia. Premiums for the first six months of 2021 was primarily due to premium reductions in Australia group business as a result of the non-renewal of two large group treaties effective June 30, 2020.

•The segment added new life business production, measured by face amount of insurance in force, of $10.9 billion and $16.6 billion during the second quarter of 2021 and 2020, respectively, and $18.5 billion, and $32.3 billion during the six months ended June 30, 2021 and 2020, respectively, due to new business production and in force transactions offset by lapses, recaptures and non-renewal of two large group treaties in Australia.

Benefits and expenses

•The increases in the loss ratio for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2021, as compared to the same periods in ~~2016~~. The increases in income before income taxes are 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 totaling approximately $1.0 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%, for the three and nine months ended September 30, 2017, as compared 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 offered 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.~~

~~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~~2020, 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.

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 improvedunfavorable claims experience in ~~Australia compared to~~Asia. While the ~~prior year.~~

~~Table~~cause of ~~Contents~~

~~Policy acquisition costs and other insurance expenses as a percentage~~death is not yet available for all claims, the Company estimates that approximately $63 million of ~~net premiums~~claims, of which approximately $57 million were ~~10.4% and 1.0%~~incurred in India, for the ~~third quarter and 11.6% and 9.4% for the nine~~six months ended ~~September~~June 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~~2021, were attributable 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,~~COVID-19 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.COVID-19 related factors.

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~~.


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	48	$	31	$	17	$	101	$	105	$	(4)
Investment income, net of related expenses	31		21		10		59		38		21
Investment related gains (losses), net	15		15		—		27		(18)		45
Other revenues	10		8		2		21		18		3
Total revenues	104		75		29		208		143		65
Benefits and expenses:
Claims and other policy benefits	42		32		10		88		94		(6)
Interest credited	15		11		4		30		24		6
Policy acquisition costs and other insurance expenses	11		5		6		22		19		3
Other operating expenses	5		1		4		9		5		4
Total benefits and expenses	73		49		24		149		142		7
Income (loss) before income taxes	$	31	$	26	$	5	$	59	$	1	$	58

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~~second quarter ~~and first nine months were~~was primarily due to higher lapses from policies of the aforementioned closed block of 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~~continued growth in the ~~invested asset base. Foreign currency exchange fluctuations resulted in an~~business. The increase in ~~net investment~~ income ~~of approximately $0.2 million and $0.4 million~~before income taxes for the ~~three~~first six months of 2021 was due to favorable fluctuations in the fair value of derivatives and ~~nine months ended September 30, 2017, as compared to the same periods~~continued growth and favorable experience on existing asset-intensive business 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, the~~Asia. 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~~$3.2 billion for the six months ended June 30, 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%,~~Revenues

•The increase in net premiums for the second quarter is attributable to a higher contribution from single premium asset-intensive transactions in the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~,2021, as compared to the same ~~periods~~period in ~~2016.~~ 2020.

•The increase in investment related gains (losses), net for the ~~third quarter was~~six month period ended June 30, 2021, is primarily due to ~~higher lapses from policies of the aforementioned closed block of business in Japan. The decrease~~favorable fluctuations in the ~~first nine months~~fair value of credit default and CPI swap derivatives due to tightening credit spreads and higher future inflation expectations.

Benefits and expenses

•The increase in claims and other policy benefits in the second quarter is ~~attributable to lower lapses~~the result of an increase in reserves from ~~policies from a closed block of business~~single 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~~June 30, ~~2017~~,2021, as compared to the same ~~periods~~period 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,

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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.


(dollars in millions)	Three months ended June 30,						Six months ended June 30,
	2021		2020		2021 vs 2020		2021		2020		2021 vs 2020
Revenues:
Net premiums	$	—	$	—	$	—	$	—	$	—	$	—
Investment income, net of related expenses	48		48		—		206		106		100
Investment related gains (losses), net	64		22		42		337		(45)		382
Other revenues	29		20		9		39		21		18
Total revenues	141		90		51		582		82		500
Benefits and expenses:
Claims and other policy benefits	—		—		—		—		—		—
Interest credited	1		3		(2)		2		5		(3)
Policy acquisition costs and other insurance income	(26)		(29)		3		(54)		(57)		3
Other operating expenses	86		69		17		156		131		25
Interest expense	43		42		1		88		83		5
Collateral finance and securitization expense	2		4		(2)		5		10		(5)
Total benefits and expenses	106		89		17		197		172		25
Income (loss) before income taxes	$	35	$	1	$	34	$	385	$	(90)	$	475

(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 )

~~Loss 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~~income before income taxes for the ~~third quarter~~three and ~~the first nine months~~six month periods ended June 30, 2021, is primarily due to ~~decreased net investment related gains, decreased other~~an increase in total revenues and ~~higher other operating expenses~~ partially offset by ~~increased~~an increase in other operating expenses.

•The increase in net investment ~~income.~~

~~Total revenues decreased by $1.1 million, or 2.1%, and $19.5 million, or 13.4%,~~income for the ~~three and nine~~first six months ~~ended September 30, 2017, as compared~~of 2021 includes a reclassification of approximately $92 million of pre-tax unrealized gains on certain limited partnerships, for which the Company uses the equity method of accounting, from AOCI to net investment income. 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 quarter is primarily due to a $5.3 million decrease~~increase in investment related gains (losses), net largely caused by an increase in other-than-temporary impairments on fixed maturity securities and other impairment charges of $3.2 million. The third quarter decrease was partially offset by a $7.6 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~~six months ended ~~September~~June 30, ~~2017, as compared~~2021, includes $27 million and $131 million, respectively, of changes in the carrying value of investments in limited partnerships considered to be investment companies. $70 million of the changes in the carrying value recognized in the first quarter relates to an adjustment to the ~~same periods~~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 ~~2016.~~prior periods. The remaining increase for the three and six months ended June 30, 2021, is attributable to gains on sales of ~~total benefits and expenses~~fixed maturity securities, a decrease in the ~~third quarter is primarily~~allowance for credit losses on mortgage loans as a result of assumption updates due to ~~a $13.2 million~~the improving view of the impact of the COVID-19 pandemic, and changes in the fair value of derivatives and equity securities.

•The increase in other operating expenses ~~primarily related to compensation~~for the three and ~~consulting expenses, partially offset by a reduction in interest expense of $6.2 million. The increase in total benefits and expenses in the first nine~~six months ended June 30, 2021, 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 primarily due to the issuance of $800.0 million in long-term debt in June 2016, which was partially offset by the repayment 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.incentive compensation expense.

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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 subsidiaries~~the 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,~~ the Company has multiple liquidity alternatives available based on market conditions and the amount and timing

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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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, was ~~4.61%~~5.15%, 8108 basis points ~~above~~higher compared to 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, primarily attributable to an increase in variable investment income in the current year. 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 decreased from $7.4 billion at December 31, 2020, to $5.8 billion at June 30, 2021. Similarly, gross unrealized losses increased from ~~$2,246.5~~$197 million at December 31, ~~2016~~2020, to ~~$2,651.5~~$267 million at ~~September~~June 30, ~~2017. Gross unrealized losses decreased from $374.9 million at December 31, 2016 to $163.2 million at September 30, 2017.~~2021.

The Company continues to be in a position to hold any investment security showing an unrealized loss until recovery, provided it remains comfortable with the credit of the issuer. As indicated above, gross unrealized gains on ~~investment~~fixed maturity securities of ~~$2,651.5 million~~$5.8 billion remain well in excess of gross unrealized losses of ~~$163.2~~$267 million as of ~~September~~June 30, ~~2017.~~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):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Interest and dividend income	$	32	$	183	$	64	$	408
Interest expense	51		50		103		100
Capital contributions to subsidiaries	3		18		7		33
Issuance of unaffiliated debt	—		598		—		598
Dividends to shareholders	47		43		95		87
Issuance of common stock, net of expenses	—		481		—		481
Purchase of treasury stock	2		—		2		153

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Interest expense $ 44,697
$ 50,826
$ 132,018
$ 119,700
Capital contributions to subsidiaries 10,000
46,002
28,500
87,002
Dividends to shareholders 32,271
26,288
85,086
74,034
Interest and dividend income 23,635
227,819
75,916
283,712
Issuance of unaffiliated debt —
—
—
799,984


	June 30, 2021		December 31, 2020
Cash and invested assets	$	611	$	1,308

September 30, 2017 December 31, 2016
Cash and invested assets $ 862,480
$ 1,443,755

See Item 15, Schedule II -– “Condensed Financial Information of the Registrant” in the ~~2016~~2020 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 ~~2016~~2020 Annual Report. ~~Under current tax laws, should~~As U.S. Tax Reform generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, the Company ~~repatriate such earnings, it may be subject~~does 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. RGA’s current share repurchase program, which was approved by the board of directors in January ~~2017,~~2019, authorizes the repurchase of up to ~~$400.0~~$400 million of common stock. On August 3, 2021, the Company announced the lifting of the existing suspension on share repurchases. The pace of repurchase activity depends on

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various factors such as the level of available cash, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock price.

Details underlying dividend and share repurchase program activity were as follows (in ~~thousands,~~millions, except share data):


	Six months ended June 30,
	2021		2020
Dividends to shareholders	$	95	$	87
Purchase of treasury stock (1)	—		153
Total amount paid to shareholders	$	95	$	240

Number of treasury shares purchased (1)	—		1,074,413
Average price per share	$	—	$	142.05

Nine months ended September 30,
2017 2016
Dividends to shareholders $ 85,086
$ 74,034
Repurchases of treasury stock 26,897
116,522
Total amount paid to shareholders $ 111,983
$ 190,556

Number of shares repurchased 208,680
1,356,892
Average price per share $ 128.89
$ 85.87
(1) Excludes shares utilized to execute and settle certain stock incentive awards.

On June 5, 2020, the Company completed a public offering of 6,172,840 shares of common stock, $0.01 par value per share, at a public offering price of $81.00 per share. The Company received net proceeds of approximately $481 million. The Company granted the underwriters an option to purchase from the Company, within 30 days after the underwriting Agreement dated June 2, 2020, up to an additional 925,926 shares of common stock at the offering price of $81.00 per share. The underwriters’ option was not exercised and expired on July 2, 2020. The Company utilized the net proceeds of the offering for general corporate purposes.

In ~~October 2017,~~July 2021, RGA’s board of directors declared a quarterly dividend of ~~$0.50~~$0.73 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~~cross-acceleration covenants, which would make outstanding borrowings immediately payable in the event of a material uncured covenant default under any of the agreements, including, but not limited to, non-payment of indebtedness when due for an amount in excess of ~~$100.0 million,~~the amounts set forth in those agreements, bankruptcy proceedings, or any other event ~~which~~that results in the acceleration of the maturity of indebtedness.

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~,2020, the Company had ~~$2.8~~$3.2 billion and ~~$3.1~~$3.6 billion, respectively, in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of June 30, 2021 and December 31, 2020, the average net interest rate on long-term debt outstanding was 4.48% and 4.54%, respectively. 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.

On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face amount of $600 million. This security has been registered with the Securities and Exchange Commission. The net proceeds were approximately $593 million and were used in part to repay the Company’s $400 million 5.000% senior notes due in the second quarter of 2021, and the remainder was used for general corporate purposes. Capitalized issue costs were approximately $5 million.

The Company enters into derivative agreements with counterparties that reference either the Company’s debt rating or its financial strength rating. If either rating is downgraded in the future, it could trigger certain terms in the Company’s derivative agreements, which could negatively affect overall liquidity. For the majority of the Company’s derivative agreements, there is a termination event ~~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 ~~expires~~matures in ~~September 2019.~~August 2023. As of ~~September~~June 30, ~~2017~~,2021, the Company had no cash borrowings outstanding and ~~$97.2~~$21 million in issued, but undrawn, letters of credit under this facility. ~~As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, the average interest rate on short-term and long-term debt outstanding was 5.15% and 5.16%, respectively.~~

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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 12twelve months.

Credit and Committed Facilities

At ~~September~~June 30, ~~2017,~~2021, the Company maintained an ~~$850.0~~$850 million syndicated revolving credit facility and certain committed letter of credit facilities aggregating ~~$1,349.1 million.~~to $1.1 billion. See Note 13 -– “Debt” in the Notes to Consolidated Financial Statements in the ~~2016~~2020 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~~June 30, ~~2017,~~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~~June 30, ~~2017,~~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 ~~concern~~concerns with respect to these cash inflows relates to the risk of default by debtors and interest rate volatility. The Company manages these risks very closely. See “Investments” and “Interest Rate Risk” below.

Additional sources of liquidity to meet unexpected cash outflows in excess of operating cash inflows and current cash and equivalents on hand ~~include selling short-term investments or fixed maturity securities and~~also includes drawing funds under a revolving credit facility, under which the Company had availability of ~~$752.8~~$829 million as of ~~September~~June 30, ~~2017.~~2021. The Company also has ~~$1.1 billion~~$419 million of funds available through collateralized borrowings from the FHLB as of ~~September~~June 30, ~~2017.~~2021. As of ~~September~~June 30, ~~2017,~~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 ~~2016~~2020 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 experienced any difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future performance of such retrocessionaires nor to the recoverability of future claims. The Company’s management believes its cash and cash equivalents along with its current sources of liquidity are adequate to meet its cash requirements for the next ~~12 months.~~

twelve months, despite the uncertainty associated with the pandemic.

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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 six months ended June 30,
		2021		2020
		(Dollars in millions)
Sources:
	Net cash provided by operating activities	$	2,330	$	2,579

	Proceeds from issuance of common stock, net	—		481
	Proceeds from long-term debt issuance	—		598
	Exercise of stock options, net	—		1
	Change in cash collateral for derivative positions and other arrangements	184		93
	Cash provided by changes in universal life and other
	investment type policies and contracts	79		575

	Total sources	2,593		4,327

Uses:
	Net cash used in investing activities	2,173		1,024
	Dividends to stockholders	95		87
	Repayment of collateral finance and securitization notes	65		160
	Debt issuance costs	—		5
	Principal payments of long-term debt	401		1

	Purchases of treasury stock	2		162





	Effect of exchange rate changes on cash	11		24
	Total uses	2,747		1,463
Net change in cash and cash equivalents		$	(154)	$	2,864

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, net 4,450
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 contracts 438,774
487,808
Effect of exchange rate changes on cash 43,699
25,436
Total sources 1,591,422
2,369,601

Uses:
Net cash used in investing activities 1,056,334
2,247,406
Dividends to stockholders 85,086
74,034
Repayment of collateral finance and securitization notes 56,637
60,971
Debt issuance costs —
9,026
Principal payments of long-term debt 301,927
1,850
Purchases of treasury stock 41,360
121,896
Change in cash collateral for derivatives and other arrangements 46,206
—
Total uses 1,587,550
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 other material changes in the Company’s contractual obligations from those ~~previously reported.~~reported in the 2020 Annual Report, except for the following:

•The Company’s contractual obligations associated with interest sensitive liabilities increased from $37.1 billion at December 2020 to $41.7 billion as of June 30, 2021, primarily due to a large asset-intensive transaction completed in the second quarter. The majority of the payments due under these commitments are expected to occur beyond five years.

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•The Company’s contractual obligations associated with limited partnerships and other investment related commitments increased from $1.1 billion at December 2020 to $1.8 billion as of June 30, 2021, primarily due to an increase in new investment opportunities in the current period. The majority of the payments due under these commitments are expected to occur within the next twelve months.

Asset / Liability Management

The Company actively manages its cash and invested assets using an approach that is intended to balance quality, diversification, asset/liability matching, liquidity and investment return. The goals of the investment process are to optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a cash flow and duration basis.

The Company has established target asset portfolios for ~~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-term investments) was ~~$1,285.2 million~~$3.4 billion and ~~$1,277.4 million~~$3.6 billion at ~~September~~June 30, ~~2017~~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 liabilities~~related 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~~$84 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~~June 30, ~~2017~~2021 and December 31, ~~2016, respectively,~~2020, which is included in ~~interest sensitive~~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 six 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. 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~~$79.6 billion and ~~$46.0~~$75.8 billion ~~at September~~as of June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively, as illustrated below (dollars in ~~thousands)~~millions):


	June 30, 2021		% of Total		December 31, 2020		% of Total
Fixed maturity securities, available-for-sale	$	58,287	73.2	%	$	56,735	74.8	%
Equity securities	147		0.2		132		0.2
Mortgage loans on real estate	6,481		8.1		5,787		7.6
Policy loans	1,254		1.6		1,258		1.7
Funds withheld at interest	7,049		8.9		5,432		7.2
Short-term investments	184		0.2		227		0.3
Other invested assets	2,924		3.7		2,829		3.7
Cash and cash equivalents	3,254		4.1		3,408		4.5
Total cash and invested assets	$	79,580	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 June 30,								Six months ended June 30,
	2021			2020			Increase/ (Decrease)		2021			2020			Increase/ (Decrease)
Average invested assets at amortized cost	$	33,587		$	30,420		$	3,167	$	33,266		$	29,923		$	3,343
Net investment income	$	383		$	305		$	78	$	846		$	604		$	242
Annualized investment yield (ratio of net investment income to average invested assets at amortized cost)	4.64		%	4.07		%	57 bps		5.15		%	4.07		%	108 bps
VII (included in net investment income)	$	78		$	16		$	62	$	240		$	19		$	221
Annualized investment yield excluding VII (ratio of net investment income, excluding VII, to average invested assets, excluding assets with only VII, at amortized cost)	3.84		%	3.99		%	(15) bps		3.82		%	4.09		%	(27) bps

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 income 305,632
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

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Investment yield increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, in comparison to the same ~~period~~periods in the prior year, primarily due to increased variable income from ~~bond make-whole premiums~~limited partnerships and ~~limited partnership and~~real estate joint ~~venture investments, both of~~ventures, which are included in other invested assets on the condensed consolidated balance sheets. Investment yield excluding variable investment income decreased for the three and six months ended June 30, 2021, in comparison to the same periods 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 equity~~these securities ~~and the other-than-temporary impairments in AOCI~~ by ~~sector~~type as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020.

The ~~Company’s~~Company holds various types of fixed maturity securities ~~are invested primarily in~~available-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 ~~government~~government-sponsored enterprises (“Other foreign government”). RMBS, ABS, and CMBS are collectively “structured securities.” As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, approximately ~~95.7%~~93.9% 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 5.2% and 5.6% of the total fixed maturity securities as of June 30, 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%~~63.4% and ~~61.1%~~63.9% of total fixed maturity securities as of ~~September~~June 30, ~~2017~~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 ~~industry~~sector types, which comprise the corporate fixed maturity holdings ~~at September~~as of June 30, ~~2017~~2021 and December 31, ~~2016.~~

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2020.

As of ~~September~~June 30, ~~2017,~~2021, the Company’s investments in Canadian ~~and Canadian provincial~~ government securities represented ~~11.0%~~8.4% of the fair value of total fixed maturity securities compared to ~~11.4%~~9.1% of the fair value of total fixed ~~maturity securities at~~maturities 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 a~~Moody’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).

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 ~~security~~securities portfolio, ~~at September~~as of June 30, ~~2017~~2021 and December 31, ~~2016~~2020 was as follows (dollars in ~~thousands)~~millions):


		June 30, 2021						December 31, 2020
NAIC Designation	Rating Agency Designation	Amortized Cost		Estimated Fair Value		% of Total		Amortized Cost		Estimated Fair Value		% of Total
1	AAA/AA/A	$	31,394	$	34,862	59.8	%	$	29,770	$	34,589	60.9	%
2	BBB	17,948		19,896		34.1		16,440		18,751		33.1
3	BB	2,575		2,683		4.6		2,480		2,588		4.6
4	B	686		678		1.2		713		697		1.2
5	CCC and lower	179		159		0.3		131		102		0.2
6	In or near default	15		9		—		14		8		—
	Total	$	52,797	$	58,287	100.0	%	$	49,548	$	56,735	100.0	%

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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~~as of June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (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


	June 30, 2021						December 31, 2020
	Amortized Cost		Estimated Fair Value		% of Total		Amortized Cost		Estimated Fair Value		% of Total
RMBS:
Agency	$	623	$	667	9.9	%	$	686	$	744	11.0	%
Non-agency	700		710		10.5		1,049		1,073		15.8
Total RMBS	1,323		1,377		20.4		1,735		1,817		26.8
ABS:
Collateralized loan obligations (“CLOs”)	1,722		1,720		25.6		1,707		1,689		24.9
ABS, excluding CLOs	1,745		1,762		26.2		1,392		1,403		20.7
Total ABS	3,467		3,482		51.8		3,099		3,092		45.6
CMBS	1,774		1,869		27.8		1,790		1,868		27.6
Total	$	6,564	$	6,728	100.0	%	$	6,624	$	6,777	100.0	%

The ~~residential mortgage-backed securities include~~Company’s RMBS portfolio includes agency-issued pass-through securities and collateralized mortgage obligations. ~~A majority of the agency-issued~~Agency-issued pass-through securities are guaranteed or otherwise supported by the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, or the Government National Mortgage Association. The principal risks inherent in holding ~~mortgage-backed securities~~RMBS are prepayment and extension risks, which will affect the timing of when cash will be received and are dependent on the level of mortgage interest rates. Prepayment risk is the unexpected increase in principal payments from the expected, primarily as a result of owner refinancing. Extension risk relates to the unexpected slowdown in principal payments from the expected. In addition, non-agency ~~mortgage-backed securities~~RMBS face credit risk should the borrower be unable to pay the contractual interest or principal on their obligation. The Company monitors its mortgage-backed securities to mitigate exposure to the cash flow uncertainties associated with these risks.

~~Asset-backed securities include credit card~~The 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 securities~~ABS 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 ~~which~~that include excess spread, over-collateralization and subordination. Capital market risks include general level of interest rates and the liquidity for these securities in the marketplace.

The Company’s CMBS portfolio primarily consists of large pool securitizations that are diverse by property type, borrower and geographic dispersion. The principal risks in holding CMBS are structural and credit risks. Structural risks include the securities’ cash flow priority in the capital structure and the inherent prepayment sensitivity of the underlying collateral. Credit risks include the adequacy and ability to realize proceeds from the collateral. The Company focuses on investment grade rated tranches that provide additional credit support beyond the equity protection in the underlying loans. These assets are viewed as an attractive alternative to other fixed income asset classes.

As of June 30, 2021 and December 31, 2020, the Company had $267 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 impairment~~allowance for credit losses in the amount that the fair value ~~are written down~~is 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 June 30, 2021, totaling approximately $9 million. For the six months ended June 30, 2021, the Company decreased its allowance for credit losses on its commercial mortgage loan portfolio by approximately $19 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. For the six months ended June 30, 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 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. As of June 30, 2021 and December 31, 2020, the Company’s recorded investment in mortgage loans, gross of unamortized deferred loan origination fees and expenses and allowance for credit losses, were distributed geographically as follows (dollars in millions):


	June 30, 2021				December 31, 2020
	Recorded Investment		% of Total		Recorded Investment		% of Total
U.S. Region:
West	$	2,361	36.1	%	$	2,253	38.5	%
South	2,235		34.2		2,040		34.8
Midwest	1,204		18.4		1,027		17.5
Northeast	410		6.3		277		4.7
Subtotal - U.S.	6,210		95.0		5,597		95.5
Canada	208		3.2		188		3.2
United Kingdom	117		1.8		76		1.3
Other	2		—		—		—
Total	$	6,537	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 2016~~Company’s 2020 Annual Report for ~~additional information. The table below summarizes other-than-temporary impairments~~information regarding the Company’s policy for allowance for credit losses 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 securities 889
—
889
—
Other impairment losses 1,469
15
7,776
2,178
Change in mortgage loan provision 977
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~~information regarding allowance for credit losses 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 of~~necessitates the ~~underlying credit and the extent and duration of a decline in value. The Company’s credit analysis~~recording of an ~~investment~~allowance for credit losses includes ~~determining~~an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. 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 investment related (gains) losses, net, for impairments and changes in allowance for credit losses on fixed maturity securities, other impairment ~~review process,~~losses and changes in the ~~duration~~mortgage loan allowance for credit losses for the three and ~~severity~~six months ended June 30, 2021 and 2020 (dollars in millions).


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020

Impairments and change in allowance for credit losses on fixed maturity securities	$	(5)	$	—	$	(3)	$	34
Other impairment losses and changes in provision	(1)		5		(2)		5
Change in mortgage loan allowance for credit losses	(2)		17		(19)		30
Total	$	(8)	$	22	$	(24)	$	69

Table of ~~an unrealized loss position~~Contents

The decrease in mortgage loan allowance for ~~equity~~credit losses for the six months ended June 30, 2021, was primarily due to the updated outlook from the COVID-19 pandemic. The impairments and change in allowance for credit losses on fixed maturity securities ~~are given greater weight and consideration given~~for the ~~lack~~six months ended June 30, 2020, were primarily related to high-yield securities as a result of ~~contractual cash flows and~~ the ~~deferability features of these securities.~~uncertainty in the global markets due to the COVID-19 pandemic. In addition, the increase in mortgage loan allowance for credit losses for the six months ended June 30, 2020, was primarily due to the 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 ~~values~~value 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 ~~market~~estimated fair value has remained below amortized cost as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020.

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the Company classified approximately ~~5.9%~~6.7% 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 securities~~strip 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, ~~repurchase~~lending, 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 %

~~Table of Contents~~

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, the~~The majority of ~~which~~policy 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 the~~The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance. Ceding companies with funds withheld at interest had an average financial strength rating of “A” ~~at September~~as of June 30, ~~2017~~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, ~~FVO~~fair 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~~June 30, ~~2017~~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~~as of June 30, ~~2017~~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 by~~date. As of June 30, 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~~$18 million.

Table of ~~the derivative contracts.~~Contents

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. 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-~~

~~Table of Contents~~

~~traded~~exchange-traded futures are affected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties. See Note 5 -– “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for more information regarding the Company’s derivative instruments.

~~Enterprise Risk Management~~

~~RGA maintains~~The Company holds $958 million and $935 million, of lifetime mortgages, net of allowance for credit losses, as of June 30, 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 June 30, 2021 and 2020, respectively, and $26 million and $20 million in interest income earned on lifetime mortgages for the six months ended June 30, 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 reporting~~home equity loan by allowing the ~~Company’s risks on an aggregated basis; facilitating monitoring~~borrower to ~~ensure~~utilize the ~~Company’s risks remain within its appetites and limits; and ensuring, on an ongoing basis, that RGA’s ERM objectives are met. This includes ensuring proper risk controls are~~equity 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”) Committee~~amount 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.

~~Table of Contents~~


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.

~~Table of Contents~~

~~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 based~~dependent 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 in~~home at the ~~event~~time of origination, the borrower's age and interest rate. Unlike a ~~hypothetical change in~~home equity loan, no payment of principal or interest ~~rates. Interest rate cash flow risk exposure~~ is ~~measured using interest rate sensitivity analysis to determine~~required 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 portion~~death of the ~~Company’s operating expenses consists~~borrower or sale of ~~salaries, which~~the home. Lifetime mortgages may also be either fully funded at origination, or the borrower can request periodic funding similar to a line of credit. Lifetime mortgages are subject to ~~wage increases at least partly affected by the~~risks, including market, credit, interest rate, ~~of inflation.~~liquidity, operational, reputational and legal risks.

~~Table of Contents~~

~~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.

~~Table of Contents~~

~~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.

~~Table of Contents~~

~~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 —~~14 – “New Accounting Standards” in the Notes to Condensed Consolidated Financial Statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

~~There has~~Market 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 June 30, 2021, there have been no ~~significant change~~material changes in the Company’s ~~quantitative or qualitative aspects of~~economic exposure to market risk ~~during~~or the ~~quarter~~Company’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 in~~December 31, 2020, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” filed with the ~~2016 Annual Report. See “Item 2 – Management’s Discussion~~Securities and ~~Analysis of Financial Condition and Results of Operations – Market and Credit Risk”, which is included herein, for additional information.~~Exchange Commission.

~~Table of Contents~~

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~~June 30, ~~2017,~~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 our workforce began working remotely in March 2020. These changes to the working environment did not have a material effect on our 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.

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

ITEM 1A. Risk Factors

There ~~were~~have been no material changes from the risk factors previously disclosed in the ~~2016~~Company’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~~June 30, ~~2017:~~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
April 1, 2021 – April 30, 2021	—	$	—	—	$	167,573,148
May 1, 2021 – May 31, 2021	845	$	126.86	—	$	167,573,148
June 1, 2021 – June 30, 2021	124	$	115.80	—	$	167,573,148

(1)RGA had no repurchases of common stock under its share repurchase program for April, May and June 2021. The Company net settled – issuing 2,414 and 2,095 shares from treasury and repurchased from recipients 845 and 124 shares in May and June 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 August 3, 2021, the Company announced the lifting of the existing suspension on share repurchases. The pace of repurchase activity depends on various factors such as the level of available cash, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock price..

ITEM 6. Exhibits

See index to exhibits.

Table of Contents

INDEX TO EXHIBITS



Exhibit Number		Description

~~Exhibit~~ ~~Number~~3.1		~~Description~~

~~3.1~~	Amended and Restated Articles of Incorporation, effective as of May 21, 2020, incorporated by reference to Exhibit ~~3.1 of~~3.1(i) to Current Report on Form 8-K filed ~~November 25, 2008.~~on May 22, 2020.

3.2		Amended and Restated Bylaws, effective as of May 23, 2018, incorporated by reference to Exhibit ~~3.1 of~~3.2 to Current Report on Form 8-K filed ~~July 18, 2014.~~on May 24, 2018.

10.1		Amendment to the Reinsurance Group of America, Incorporated Flexible Stock Plan, effective May 19, 2021, incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 20, 2021.

10.2		Amendment to the Reinsurance Group of America, Incorporated Flexible Stock Plan for Directors, effective May 19, 2021, incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on May 20, 2021.

10.3		Reinsurance Group of America, Incorporated Phantom Stock Plan for Directors, as amended and restated effective May 19, 2021, incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on May 20, 2021.

31.1		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.

31.2		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.

32.1		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.

32.2		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.

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

~~101.INS~~101.SCH		~~XBRL Instance Document~~

~~101.SCH~~	XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101).

Table of Contents

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, 2017~~August 5, 2021	By:	/s/ Anna Manning
		Anna Manning
		President & Chief Executive Officer
		(Principal Executive Officer)
Date: ~~November 2, 2017~~August 5, 2021	By:	/s/ Todd C. Larson
		Todd C. Larson
		Senior Executive Vice President & Chief Financial Officer
		(Principal Financial and Accounting Officer)



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, 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	%



								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		)



	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



	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	)



	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



	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



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



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		)	—



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		)	—



	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		)	—



	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	%